chapter  12
16 Pages

DIRECTORS’ DUTIES: CONFLICT OF INTEREST DUTIES

The dual function of the duty simply highlights the fact that management duties and conflict of interest duties are not mutually exclusive categories. Where a director acts in his own self-interest or in the interest of another person to whom he owes a duty, he will very often also be in breach of a management duty. He may have exercised a power for an improper purpose (in breach of s 171) and he is very likely to have failed to act in the way he considers, in good faith, would be most likely to promote the success of the company. The same is not true in reverse, however; there is not the same likelihood that a breach of management duty will also entail a breach of a conflict of interest duty. The essential learning point is that directors’ duties are cumulative. A single act can be evidence of breach of a number of different duties. Section 179 states clearly, ‘more than one of the general duties may apply in any given case’. Duties regulating self-interested actions by directors fall into two categories: duties in relation to conflicts of interests and duties in relation to contracting with the company. Each category contains general duties. Additional statutory provisions govern specific types of contracts directors enter into with their companies. An overview of conflict of interest duties and key statutory provisions governing company contracts with directors and persons connected with directors can be seen in Figure 12.1. In this chapter we deal with the two general duties governing directors’ conflicts of interest that do not involve company contracts before turning to the duty imposed on directors to disclose interests in company contracts and specifically regulated company contracts.