Tax & Accounting News

New Conflict Of Interest Law on Way for Directors

28/07/2008

Companies are being urged to make sure they are ready for new duties relating to directors’ conflicts of interest, which come into force from 1 October 2008.

The three new duties complete a code of seven directors’ duties, contained in the Companies Act 2006. The three new duties are:

• a duty to avoid conflicts of interest
• a duty to declare interests in transactions and arrangements with the company
• a duty not to accept benefits from third parties.

With time ticking away until 1 October, companies need to act now to ensure compliance with the new duties.

Public companies may need to amend their articles of association to enable board authorisation of conflicts of interest under the new provisions while private companies should be putting in place an appropriate policy to deal with conflicts of interest.

Directors will also need to consider any interests and duties they have outside the scope of their directorship, identify conflicts of interest, or potential conflicts, and consider how to deal with those conflicts.

Companies may also need to amend their policy on accepting corporate hospitality, gifts and other benefits from third parties to comply with the new duties.