Q&As

How can a company director gain authorisation to proceed in the context of a transactional or situational conflict of interest?

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Published on LexisPSL on 13/08/2019

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • How can a company director gain authorisation to proceed in the context of a transactional or situational conflict of interest?
  • Duty of disclosure—transactional conflicts of interest
  • Situational conflicts of interest

The Companies Act 2006 (CA 2006) introduced a statutory statement of directors’ duties. This statement of directors’ duties is based on and replaces the previous equitable and common law rules. However, regard is to be had to the common law rules and equitable principles in interpreting and applying the statutory duties, and they are to be interpreted in the same way as the common law rules or equitable principles.

Duty of disclosure—transactional conflicts of interest

CA 2006, ss 177 and 182 provide that if a director is interested in a proposed transaction or arrangement with the company or an existing transaction or arrangement they must declare both the nature and extent of that interest to the other directors. Subject to making such a declaration and to anything to the contrary in CA 2006 or the company’s articles of association, a director may have an interest in such a transaction or arrangement.

If there is a breach of the duty to disclose an interest in a proposed transaction, the normal principles of law and equity relating to contracts made by persons in a fiduciary position apply, so that the contract is voidable and profit derived from the contract by the director concerned would, in the event of the contract being avoided, be recoverable on behalf of the company (Hely-Hutchinson v Brayhead Ltd). CA 2006, s 177 is expressly

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