A number of duties and obligations are imposed on directors in relation to conflicts of interest by CA 2006. Importantly, the duty of directors to avoid conflicts of interest (s.175) does not arise where the conflict arises in relation to a transaction or arrangement with the company (s.175(3)). Therefore the s.175 duty will not be relevant to the transactions involving a company and its directors, which you will consider during the LPC course.
Other directors’ duties, including, in particular, the duty under s.177 to declare an interest in proposed transactions or arrangements (or, in respect of existing transactions or arrangements, the requirements under s.182) will still apply in such cases.
There are also two exceptions to the conflict duties under ss.175 and 176 (duty not to accept benefits from third parties), namely:
- if the situation or benefit cannot reasonably be regarded as likely to give rise to a conflict; or
- for s.175 only, if the potential conflict is authorised by the directors (excluding the potentially conflicted director).
In addition to these, there is a further exception in s.180(2). If a transaction needs shareholder approval under CA 2006, and shareholder approval is properly obtained, it is not necessary to comply with the ss.175 and 176 duties.