Why a promise made in 2024 means Gildan must bankroll its own opponents' defence
A Quebec court has ordered Gildan Activewear to advance $750,000 toward the defence costs of ten former directors it is suing for US$50 million.
The Superior Court of Quebec ruled on July 2, 2026 that the Montreal-based apparel maker must help fund the former directors' defence even as it pursues them for allegedly breaching their duties to the company. The decision sits in territory every board member, insurer, and compliance officer follows closely: when a company can withhold a director's legal bills.
Gildan, a publicly listed company that reported US$3.27 billion in revenue in 2024, is one of the world's largest makers of basic apparel. The fight traces back to a contested 2024 proxy battle - one the court described as among the most expensive of its kind in Canadian and American history - after which the entire board resigned and the company's co-founder returned as chief executive.
The ten former directors first sued Gildan in March 2025 over deferred share units they say they are owed. In November 2025, Gildan responded with a crossclaim seeking US$50 million, alleging the directors put their own interests ahead of the company's during the proxy contest and engaged in what it called a "modus operandi of reprehensible conduct." Gildan says they entered an unnecessary support agreement, pushed a rushed privatization plan, arranged a $200 million credit facility the company did not need, and approved last-minute resolutions to protect themselves. None of those allegations has been tested at trial.
Each former director had signed an indemnification agreement in April 2024 requiring Gildan to advance defence costs within five business days of a written request. When the directors sought $750,000 in late 2025, Gildan refused, arguing it should first be allowed to show the directors had acted in bad faith. The directors filed their advance-costs application on March 19, 2026.
Justice Babak Barin disagreed with Gildan. He held that under the Canada Business Corporations Act and the wording of the agreement, directors are presumed to have acted in good faith until a trial proves otherwise. Forcing a company to establish bad faith before releasing interim funding, he found, would push directors to defend a complex case out of their own pockets - the opposite of what indemnification is meant to do.
The court noted the sum was modest. The $750,000 is one percent of the US$50 million Gildan is claiming and less than three percent of roughly $26 million in deferred share units the company is still withholding from the group. Any money advanced must be repaid if the directors are later found to have acted improperly.
The takeaway for boards and their insurers is plain. A mandatory advancement clause means what it says, and a company that agrees to one cannot later withhold funding simply by leveling accusations. Gildan was ordered to pay by July 9, 2026, and the ruling stands even if the company appeals.
