Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134

Facts

• Regal (Hastings) Ltd sought to acquire two cinemas and established a subsidiary for their operation.
• The landlord required the subsidiary to maintain a minimum share capital.
• Regal was unable to supply the full capital required, so its directors, chairman, and solicitor purchased the remaining shares in the subsidiary.
• Subsequently, all subsidiary shares were sold, resulting in personal profits for the directors and others involved.
• Regal demanded that these individuals return the profits made from the share sale on the basis they were gained through their positions.

Issues

1. Whether directors are accountable to the company for profits derived by virtue of their position, even if the company itself could not have taken the opportunity.
2. Whether the absence of dishonesty, intent to harm, or actual company loss exempts directors from the duty to account for such profits.
3. Whether directors can avoid liability by obtaining valid company approval following full disclosure.

Decision

• The House of Lords held that the directors and others must repay the profits obtained from the share sale to Regal.
• The decision emphasized that the opportunity to purchase shares was acquired solely because of their positions as directors, regardless of the company’s own ability to take the opportunity.
• The directors’ motivation, integrity, or the company’s actual loss were deemed irrelevant; the key point was their duty not to use their positions for personal benefit.
• Liability could be avoided only if the company had provided fully informed approval through appropriate shareholder agreement.

Legal Principles

• Directors must account to the company for any profits made through their office or by using information or opportunities obtained via their role.
• The strict duty applies regardless of whether the company suffers any loss or the directors act without dishonesty or improper motive.
• Exceptions may exist if all relevant information is fully disclosed and valid consent is obtained from the company, typically through a shareholder resolution.
• The case serves as authority that directors’ fiduciary duties require strict loyalty and avoidance of conflicts of interest, setting a precedent for subsequent company law decisions and governance standards.

Conclusion

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 establishes that directors are strictly liable to account for profits made by virtue of their office, even absent dishonesty or company loss, unless fully informed approval is obtained; this principle remains central to the law of directors' duties and corporate governance.