“The consequences of being in breach of the new law can lead to civil or criminal action.”
New rules dealing with directors’ conflicts of interests will affect nearly all companies, according to lawyers, DWF.
The law came into effect from October 1 and is part of the latest raft of measures under the Companies Act 2006.
DWF says: “Every director of a company, whether private or public, and whether listed in the UK or elsewhere, has a legal obligation to comply with these new provisions, all relating to conflicts of interest which either exist or arise between a director and a company.”
Examples of conflicts can be:
- Where a director is also a director of the company’s pension trustee company or a trustee of a company’s pension scheme.
- Cross directorships, where a director is on the board of a major shareholder of the company, or actual or potential competitor, supplier or customer of the company.
- Where a director is a major shareholder of an actual or potential competitor, supplier or customer of the company.
- Where a director may wish to take up an opportunity which has been offered to, but declined by, the company.
- Where a potential acquirer approaches a director of the company and the director is offered a role with the acquirer’s group.
The consequences of being in breach of the new law can lead to civil or criminal action against directors, but with professional advice, personal liability can be avoided.