Conflicts of Interest

Question 1

CA 2006 s175, ss1, ss2, ss3

Answer 1

CA 2006 – s175 Duty to avoid conflicts of interest

ss(1) A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. Boston Deep Sea Fishing Ltd. v Ansell (1888) and Bray v Ford [1896]

ss (2) This applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity).

Ss (3) This duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company. (Eg a company director has an interest in two companies that trade, but these must be declared under ss 177 or 182). The rule is strict, and exists because of the difficulty in proving an actual conflict of interest – so assumes one if there is a possible conflict.

Question 2

CA 2006 s176 ss1, ss4

Answer 2

CA 2006 – s176 Duty not to accept benefits from third parties

Ss (1) A director of a company must not accept a benefit from a third party conferred by reason of: (a) his being a director, or (b) his doing (or not doing) anything as director.
Ss (4) This duty is not infringed if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.

Question 2

Industrial Development Consultants Ltd v Cooley 1972

Question 3

CA 2006, s177, ss1

Answer 3

CA 2006 – s177 Duty to declare interest in proposed transaction or arrangement
Ss (1) If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors.

Question 3

Rehal (Hastings) Ltd v Gulliver 1942

Question 4

Island Export Finance Ltd v Umunna 1986

Answer 4

Court held company could not claim profit on a contract it had rejected.

Question 5

Bhullar v Bhullar 2003

Answer 5

The Court of Appeal ruled that the directors should have told the company of the opportunity,

Question 6

Foster Bryant Surveying Ltd v Bryant 2007