My co-director has stolen the company's contract—what can I do?

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Published on LexisPSL on 28/11/2013

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

  • My co-director has stolen the company's contract—what can I do?
  • Directors' duties
  • What action can be taken against a director in breach of his duties to the company?
  • Derivative actions
  • Acting early

Your client is on the board of directors of company A, which has been working for the last six months to secure a lucrative distribution agreement with company C. All seemed to be going well in the tender process but, ultimately, the contract was awarded to another entity, company B. A year later, your client discovers that one of your co-directors (Mr X) on the board of company A is a majority shareholder in company B. Your client suspects that Mr X used information he had gleaned as a director of company A to enable company B to secure the contract. What can your client do?

Directors' duties

The starting point is to consider whether Mr X's actions may constitute a breach of the duties he owes to company A as one of its directors.

All directors owe duties to the company(ies) of which they are a director. The extent of their general duties has been codified in the Companies Act 2006. See Practice Note: Directors' duties—scope, nature, interpretation and application.

One such duty is the duty of a director to avoid a situation in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company (the duty to avoid conflicts of interest). In particular, this duty applies to the exploitation of any property, information or

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