Sections 175-177 relate to Directors' Duties and cover the following:
1. Duty to avoid conflicts of interest unless previously authorised; and
2. Duty not to accept benefits from third parties; and
3. Duty to disclose any interests in a proposed transaction or arrangement; and
4. Duty to disclose any interest in an existing transaction or arrangement.
What does this mean for you?
In essence, the Act is merely making Directors current common law obligations a statutory requirement. You may find, therefore, that as a Company, you wish to operate a more formal procedure regarding conflicts of interest, but it should not result in Directors having to behave any differently to the way they currently do in this respect.
Your Directors, however, must bear in mind that these statutory duties are the personal responsibility of each of them personally and not the Company. Only Directors can be aware of any actual or potential conflicts and they must keep these under review and notify the relevant individuals within the Company of any changes in this respect.
1. Duty to Avoid Conflicts of Interest
A Director must avoid any "situation" in which he has or may have a direct or indirect interest conflicting with that of the Company.
Directors' involvement can, however, be authorised by the Board of Directors provided that:
(a) There is nothing in the Company's Articles of Association preventing Directors from authorising the potential conflict; and
(b) The Director(s) concerned is/are not permitted to be included in the quorum or the vote authorising the particular conflict.
It would be advisable for you to ensure that your Company's current Articles of Association and internal procedures deal with the following:
(a) The Board of Directors are permitted to authorise conflicts
(b) That the Director(s) involved are not permitted to be included in a quorum or vote taken with regard to the conflict; and
(c) There are adequate measures in place to ensure that any such authorisations are recorded clearly in minutes of meetings.
2. Duty not to Accept Benefits from Third Parties
Directors must not accept any personal benefit from any third party being offered to them because:
(a) they are a Director; or
(b) they do something, or do not do something, as a Director.
In essence this brings us back to age old question "when is a bribe not a bribe?"
Our advice is that you should ensure that all your Directors report to the Board of Directors any personal benefit offered or accepted and that this be recorded in the minutes of the meeting.
3. Duty to Disclose an Interest in a Proposed Transaction or Arrangement
All Directors are already required to disclose any interest in a proposed transaction or arrangement whether direct or indirect and this is extended to "connected persons".
However, there is now a statutory requirement on Directors to declare any interests to the Company and it is suggested that this should be done by way of notice or by way of a formal declaration to the Board of Directors and recorded in the minutes.
4. Duty to Disclose any Interest in an Existing Transaction or Arrangement
This duty is part of the duty set out under point 3 above and also crosses into the realms of the duty set out in point 1 above.
All Directors should be notified and reminded that they are required to keep the Company up to date with details of their interests in particular transactions and if during the particular transaction or arrangement the potential conflict or interest changes in any way , they must notify the Board of Directors accordingly.
All Directors must also be made aware that it will be a criminal offence to fail to declare an interest in an existing transaction or arrangement. You may wish to consider the Company's current procedures for such notifications and the way that they are recorded.
In order to satisfy the requirements of the statutory duties, we suggest the you should keep the following key words in mind:
- Awareness
- Transparency
- Record
0 comments:
Post a Comment