Regal (Hasting) Ltd v Gulliver (1967)

It must be noted that a director or an officer of a company can legally acquire profits so long as these profits are disclosed to the enterprise.

The fiduciary duty of the director and officer can be breached in instances when they acquire profits in a secret manner. Also, a breach can be made even if the profit may have a substantial or unsubstantial effect to the company.

It is also necessary to acknowledge if the said profit had also benefited the enterprise. This can be presented in the case of Regal (Hasting) Ltd v Gulliver (1967).

Case Facts:

Regal has a cinema in Hastings, England.

The directors of Regal want to acquire their competitors in Hasting. The directors then established a subsidiary company for the purchase of their competing cinemas.

However, the land where the competitor’s cinemas were built required £5000 as payment, but Regal does not have the financial resources to provide the amount. Regal only had £2000 pound for the payment.

Therefore, the solicitor and the directors contributed £300 to the funds of the subsidiary, making them share owners of subsidiary company. The directors and the solicitor then sold their shares of the subsidiary company.

The new directors of Regal sued the former directors, including the solicitor on the grounds that they breached their fiduciary duty, and they also want the accounts of the directors and the solicitor about the sales of their shares.

Case Issue:

Was there a breach in the fiduciary duty of the directors because they acquired personal financial benefits even if without the, Regal could have not acquired its own financial gain.

Case Decision:

The court decided that the directors of Regal have the fiduciary duty to give the new directors an account of the profit they have made when they sold their shares. This was because during that time, the directors hold a fiduciary duty to the company.

Nonetheless, the directors argued that without them, Regal would have not acquired their competitors. The court invalidated their stand by stating that the person who has gained profit must account these profits.

This is even if the profit-acquisition is not made through fraudulent act, without bona fide reasons, or only was only carried out for their benefit. Moreover, the directors could have protected themselves from this uprising by creating a resolution that they are not liable to account their profits to Regal.

In addition, the solicitor was not held accountable of giving notice about his profit because the solicitor does not have a fiduciary duty with the company.

Case Significance Regal (Hasting) Ltd v Gulliver (1967):

The case is important as it presents that officers and directors the strictness of acquiring personal profit. It is also important as the ruling suggest that the directors could have protected themselves by informing the company of their plan to sell their shares.