Every statute needs an enforcement engine, and the segregated accounts company (SAC) regime chose its engine deliberately: the personal balance sheet of the director. Where most corporate law sanctions the company and lets individuals shelter behind the veil, the SAC model inverts the design at its most sensitive point — disclosure. A SAC that fails to tell the world what it is, and which account it is dealing through, exposes its directors personally to the counterparty on that transaction, notwithstanding anything the documents say. This seventh instalment of The Segregated Advantage™ series examines why the regime is built that way, exactly how the liability works under the regional model on which Jamaica’s Segregated Accounts Companies Act, 2024 is based, the narrow escape routes the statute leaves open, and the compliance architecture a well-advised board puts in place before the first transaction is signed.
Why Directors Carry the Wall
The logic begins with the bargain at the heart of the vehicle. Articles 2 and 4 of this series showed that the SAC’s statutory ring-fence binds strangers: creditors who never agreed to limited recourse nevertheless find their claims confined to a single account’s assets. A rule that powerful is tolerable only if everyone dealing with the company can know, before they deal, that the walls exist and which compartment they are standing in. Disclosure is therefore not administrative housekeeping in this regime — it is the moral price of the ring-fence. And because a duty of that importance cannot be left to a corporate fine that the general account would absorb, the statute aims its sanction where decisions are actually made: at the directors, personally. It is one of the clearest examples in Caribbean company law of liability being engineered as an incentive system rather than a punishment.
The Disclosure Trinity
The duty itself has three limbs, each simple to state and unforgiving in practice. First, the company must inform any person with whom it enters into a transaction that it is a segregated accounts company. Second, where the transaction relates to a segregated account, it must identify or specify that account for the purposes of the transaction — the counterparty is entitled to know not merely that walls exist, but which room the deal lives in. Third, the company must include a reference to its registration under the Act on its letterhead and its contracts, so that the structural fact travels with every document the company emits. The first limb protects the market at large; the second makes the recourse rules of Article 4 operable; the third makes forgetting difficult. Together they explain the naming requirement met at the gateway in Article 5 — “SAC” in the company’s name is the disclosure duty’s first word.
The Trigger and the Consequence
Now the mechanism. Personal liability attaches where two conditions meet. The company fails to inform a person that he is transacting with a SAC, and that person is otherwise unaware — and has no reasonable grounds to believe — that he is; or the company fails to identify the relevant segregated account, and the person has no reasonable basis of knowing which account he is transacting with. Where either failure occurs, the directors incur personal liability to that person in respect of the transaction — and the statute adds the words that should focus every board’s attention: notwithstanding any provision to the contrary in the relevant governing instrument or contract. No drafting shields the directors from this one; the duty sits above the documents.
Notice what the counterparty-awareness condition does and does not do. A sophisticated lender whose own diligence revealed the SAC structure, or whose documents named the account, cannot manufacture a directors’ claim from a missing recital — awareness or reasonable grounds to believe defeats the trigger. But the burden of that protection runs the wrong way for comfort: it invites an argument about what the counterparty knew, on facts assembled after the relationship has soured. The only genuinely safe harbour is the one the board controls — disclosure so systematic that the question never arises.
Escape Routes, Narrow by Design
The statute leaves the exposed director three doors, and none of them is wide. The first is indemnity: unless the governing instrument provides otherwise, a director held personally liable has a right of indemnity against the assets of the general account — but the right evaporates if the director was fraudulent, reckless, negligent or acted in bad faith. Negligence is the word to dwell on. A director who simply failed to notice that the standard-form contracts omitted the SAC reference may find that the very carelessness which created the liability also disqualifies the indemnity.
The second door is the court. A director may be relieved of all or part of the liability if he satisfies the court that he ought fairly to be relieved, on one of two grounds: that he was unaware of the circumstances and, in being unaware, was neither fraudulent, reckless, negligent nor in bad faith; or that he expressly objected and exercised such rights as he had — by voting power or otherwise — to try to prevent the failure. The second ground rewards the dissenting director who put the objection on the record, a point with direct consequences for minute-taking. Where the court grants relief, it may order that the liability be met instead from a specified segregated account or the general account — the loss is relocated, not erased. The third door is closed and locked from the outside: any provision in the articles, a governing instrument or any contract that purports to indemnify directors for the conduct that disqualifies them — fraud, recklessness, negligence, bad faith — is simply void. The regime anticipated the workaround and legislated against it.
Beyond Disclosure: The Director’s Wider Exposure
Disclosure liability is the sharpest edge, but not the only one, and a board briefing should map the full surface. Directors carry the continuing statutory duty, examined in Article 4, to keep each account’s assets and liabilities separate and separately identifiable from every other account’s and the general account’s — the administrative wall on which the legal wall depends. On a conversion of a trading company, at least two directors must sign the statutory declaration of assets, liabilities, intended accounts and solvency described in Article 5 — and the general offence provision makes a statement or declaration made with knowledge or reasonable grounds to believe it is false, deceptive or misleading in a material particular punishable, under the Bahamian benchmark, by a fine of $50,000, two years’ imprisonment, or both. The same penalty attaches to officers who, in a capital reduction, wilfully conceal a creditor entitled to object or misrepresent the nature or amount of a claim. Each year, at least two directors must sign the annual declaration certifying the company’s compliance with the Act — filed by 31 January under the regional model — converting compliance from an assumption into an annual, signed, personal assertion. And directors sitting on both sides of internal transactions between accounts enjoy the conflicts safe harbour of Article 4 only where the interest is disclosed in writing and the governing instrument authorises the dealing or a majority of the account’s owners consent: the safe harbour is papered, or it is absent.
Building the Board’s Compliance Architecture
What does mastery of this discipline look like in practice? It is unglamorous, checklist-shaped, and worth every hour. Standard documents are audited once, then locked: letterhead, e-mail footers, engagement letters, purchase orders and every contract template carry the SAC reference before the first transaction, so the third limb of the trinity is satisfied by default rather than by memory. Every transaction file opens with account identification: a mandatory field, not a habit, naming the segregated account (or the general account) the dealing belongs to, mirrored in the contract and in the company’s records so that the linking of Article 4 and the disclosure of this article are accomplished in the same gesture. Counterparty acknowledgements are collected — a one-line confirmation that the counterparty knows it is dealing with a SAC and knows the account — converting the awareness question from a future dispute into a present signature. Board minutes record objections by name, because the court-relief ground for the dissenting director is only as good as the record that proves the dissent. The annual declaration is prepared as the conclusion of a real compliance review, not a signature ritual, since the directors signing it are personally asserting its truth. And the board asks its insurers the question this article should prompt: how the directors’ and officers’ policy responds to statutory personal liability of exactly this kind, and to the disqualification of indemnity for negligence.
None of this is burdensome once built; all of it is ruinous to retrofit after a claim. The disclosure discipline, in the end, is the same discipline the ring-fence itself demands — precise identification, faithful records, papered authority — with the directors’ own assets as the stake. The next article turns to the moment the regime was designed for: what happens when, despite everything, a segregated account fails — receivership, the contained collapse, and the machinery that lets one account die while the platform lives.
Frequently Asked Questions
What must a SAC disclose in every transaction?
Three things: that it is a segregated accounts company; where the transaction relates to a segregated account, which account is involved; and a reference to its registration under the Act on its letterhead and contracts. The company’s own name must also include “SAC” or “Segregated Accounts Company.”
When do directors become personally liable?
When the company fails to disclose its SAC status, or fails to identify the relevant account, to a person who is otherwise unaware and has no reasonable grounds to know. The directors then incur personal liability to that person in respect of the transaction — notwithstanding anything to the contrary in the governing instrument or contract.
Can a director be indemnified for this liability?
There is a default right of indemnity out of the general account, but it is lost if the director was fraudulent, reckless, negligent or acted in bad faith — and any provision purporting to indemnify directors for that disqualifying conduct is void. Ordinary carelessness can therefore both create the liability and disqualify the indemnity.
Can the court relieve a director of personal liability?
Yes, where the director satisfies the court that he ought fairly to be relieved: either he was blamelessly unaware of the circumstances, or he expressly objected and used his powers to try to prevent the failure. The court may then direct that the liability be met from a specified account instead — which is why recorded dissent in board minutes matters.
What other personal exposures do SAC directors face?
The continuing duty to keep each account’s assets separate and identifiable; the statutory declaration on conversion of a trading company; the annual compliance declaration signed by at least two directors; offences for false or misleading statements and for concealing creditors in a capital reduction (under the Bahamian benchmark, a $50,000 fine, two years’ imprisonment, or both); and the papering requirements of the internal-transaction conflicts safe harbour.
How should a board manage this risk in practice?
Systematically: lock the SAC reference into every template before trading; make account identification a mandatory field in every transaction file; collect counterparty acknowledgements; record dissent by name in minutes; treat the annual declaration as the output of a genuine compliance review; and confirm how directors’ and officers’ insurance responds to this statutory liability.
How can Dawgen Global help?
Dawgen Global builds SAC board compliance architecture: documentation audits, account identification and disclosure protocols, board training on the statutory duties, annual declaration support, and assurance over segregation integrity. Contact [email protected] to arrange a board briefing.
Previously in the series: Article 6 — The Governing Instrument: Where SAC Protection Is Won or Lost.
Next in the series: Article 8 — When One Account Fails: Receivership, Solvency and the Genius of Contained Collapse.
This article is provided for general information and is not legal or tax advice. Specific structures should be verified against the current text of the Segregated Accounts Companies Act, 2024, its regulations, and the requirements of the relevant Jamaican regulators.
