The Authorising of Directors' Conflicts of Interest: Getting a Balance?

Abstract

Traditionally, courts have been concerned that fiduciaries do not place themselves in positions of conflict where their interests conflict with those for whom they should be acting, and to whom they owe duties. This concern led to the no-conflict rule, which has been applied to directors of companies for many years. The rule has been applied strictly by the courts, and any directors wanting relief from the rule have had to obtain the consent of their shareholders. Section 175 of the Companies Act 2006 now permits the board of directors to approve of a conflict. This article examines the authorisation process in section 175 that permits boards to authorise a director's conflict. The primary aims of the article are to assess whether the issues and concerns that can be identified in relation to this process are substantive and to examine whether there are any alternatives to it which could provide a fairer and better option. After undertaking this analysis, the article concludes that the present authorisation process should be retained, but with some modifications.