|
| |
|
161 | Duty to avoid conflicts of interest |
| |
(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. |
| |
(2) | This applies in particular to the exploitation of any property, information or |
| 5 |
opportunity (and it is immaterial whether the company could take advantage |
| |
of the property, information or opportunity). |
| |
(3) | This duty does not apply to a conflict of interest arising in relation to a |
| |
transaction or arrangement with the company. |
| |
(4) | This duty is not infringed— |
| 10 |
(a) | if the situation cannot reasonably be regarded as likely to give rise to a |
| |
| |
(b) | if the matter has been authorised by the directors. |
| |
(5) | Authorisation may be given by the directors— |
| |
(a) | where the company is a private company and nothing in the company’s |
| 15 |
constitution invalidates such authorisation, by the matter being |
| |
proposed to and authorised by the directors; or |
| |
(b) | where the company is a public company and its constitution includes |
| |
provision enabling the directors to authorise the matter, by the matter |
| |
being proposed to and authorised by them in accordance with the |
| 20 |
| |
(6) | The authorisation is effective only if— |
| |
(a) | any requirement as to the quorum at the meeting at which the matter is |
| |
considered is met without counting the director in question or any |
| |
other interested director, and |
| 25 |
(b) | the matter was agreed to without their voting or would have been |
| |
agreed to if their votes had not been counted. |
| |
(7) | Any reference in this section to a conflict of interest includes a conflict of |
| |
interest and duty and a conflict of duties. |
| |
162 | Duty not to accept benefits from third parties |
| 30 |
(1) | A director of a company must not accept a benefit from a third party conferred |
| |
| |
(a) | his being a director, or |
| |
(b) | his doing (or not doing) anything as director. |
| |
(2) | A “third party” means a person other than the company, an associated body |
| 35 |
corporate or a person acting on behalf of the company or an associated body |
| |
| |
(3) | Benefits received by a director from a person by whom his services (as a |
| |
director or otherwise) are provided to the company are not regarded as |
| |
conferred by a third party. |
| 40 |
(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. |
| |
(5) | Any reference in this section to a conflict of interest includes a conflict of |
| |
interest and duty and a conflict of duties. |
| |
|
| |
|
| |
|
163 | Duty to declare interest in proposed transaction or arrangement |
| |
(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. |
| |
(2) | The declaration may (but need not) be made— |
| 5 |
(a) | at a meeting of the directors, or |
| |
(b) | by notice to the directors in accordance with— |
| |
(i) | section 170 (notice in writing), or |
| |
(ii) | section 171 (general notice). |
| |
(3) | If a declaration of interest under this section proves to be, or becomes, |
| 10 |
inaccurate or incomplete, a further declaration must be made. |
| |
(4) | Any declaration required by this section must be made before the company |
| |
enters into the transaction or arrangement. |
| |
(5) | This section does not require a declaration of an interest of which the director |
| |
is not aware or where the director is not aware of the transaction or |
| 15 |
| |
| For this purpose a director is treated as being aware of matters of which he |
| |
ought reasonably to be aware. |
| |
(6) | A director need not declare an interest— |
| |
(a) | if it cannot reasonably be regarded as likely to give rise to a conflict of |
| 20 |
| |
(b) | if, or to the extent that, the other directors are already aware of it (and |
| |
for this purpose the other directors are treated as aware of anything of |
| |
which they ought reasonably to be aware); or |
| |
(c) | if, or to the extent that, it concerns terms of his service contract that have |
| 25 |
been or are to be considered— |
| |
(i) | by a meeting of the directors, or |
| |
(ii) | by a committee of the directors appointed for the purpose under |
| |
the company’s constitution. |
| |
| 30 |
164 | Civil consequences of breach of general duties |
| |
(1) | The consequences of breach (or threatened breach) of sections 157 to 163 are the |
| |
same as would apply if the corresponding common law rule or equitable |
| |
| |
(2) | The duties in those sections (with the exception of section 160 (duty to exercise |
| 35 |
reasonable care, skill and diligence)) are, accordingly, enforceable in the same |
| |
way as any other fiduciary duty owed to a company by its directors. |
| |
165 | Cases within more than one of the general duties |
| |
| Except as otherwise provided, more than one of the general duties may apply |
| |
| 40 |
|
| |
|
| |
|
166 | Consent, approval or authorisation by members |
| |
| |
(a) | section 161 (duty to avoid conflicts of interest) is complied with by |
| |
authorisation by the directors, or |
| |
(b) | section 163 (duty to declare interest in proposed transaction or |
| 5 |
arrangement) is complied with, |
| |
| the transaction or arrangement is not liable to be set aside by virtue of any |
| |
common law rule or equitable principle requiring the consent or approval of |
| |
the members of the company. |
| |
| This is without prejudice to any enactment, or provision of the company’s |
| 10 |
constitution, requiring such consent or approval. |
| |
(2) | The application of the general duties is not affected by the fact that the case also |
| |
falls within Chapter 4 (transactions requiring approval of members), except |
| |
that where that Chapter applies and— |
| |
(a) | approval is given under that Chapter, or |
| 15 |
(b) | the matter is one as to which it is provided that approval is not needed, |
| |
| it is not necessary also to comply with section 161 (duty to avoid conflicts of |
| |
interest) or section 162 (duty not to accept benefits from third parties). |
| |
(3) | Compliance with the general duties does not remove the need for approval |
| |
under any applicable provision of Chapter 4 (transactions requiring approval |
| 20 |
| |
| |
(a) | have effect subject to any rule of law enabling the company to give |
| |
authority, specifically or generally, for anything to be done (or omitted) |
| |
by the directors, or any of them, that would otherwise be a breach of |
| 25 |
| |
(b) | where the company’s articles contain provisions for dealing with |
| |
conflicts of interest, are not infringed by anything done (or omitted) by |
| |
the directors, or any of them, in accordance with those provisions. |
| |
(5) | Otherwise, the general duties have effect (except as otherwise provided or the |
| 30 |
context otherwise requires) notwithstanding any enactment or rule of law. |
| |
167 | Modification of provisions in relation to charitable companies |
| |
(1) | In their application to a company that is a charity, the provisions of this |
| |
Chapter have effect subject to this section. |
| |
(2) | Section 161 (duty to avoid conflicts of interest) has effect as if— |
| 35 |
(a) | for subsection (3) (which disapplies the duty to avoid conflicts of |
| |
interest in the case of a transaction or arrangement with the company) |
| |
| |
“(3) | This duty does not apply to a conflict of interest arising in |
| |
relation to a transaction or arrangement with the company if or |
| 40 |
to the extent that the company’s articles allow that duty to be so |
| |
disapplied, which they may do only in relation to descriptions |
| |
of transaction or arrangement specified in the company’s |
| |
| |
(b) | for subsection (5) (which specifies how directors of a company may |
| 45 |
give authority under that section for a transaction or arrangement) |
| |
|
| |
|
| |
|
| |
“(5) | Authorisation may be given by the directors where the |
| |
company’s constitution includes provision enabling them to |
| |
authorise the matter, by the matter being proposed to and |
| |
authorised by them in accordance with the constitution.”. |
| 5 |
(3) | Section 166(2)(b) (which disapplies certain duties under this Chapter in |
| |
relation to cases excepted from requirement to obtain approval by members |
| |
under Chapter 4) applies only if or to the extent that the company’s articles |
| |
allow those duties to be so disapplied, which they may do only in relation to |
| |
descriptions of transaction or arrangement specified in the company’s articles. |
| 10 |
(4) | After section 26(5) of the Charities Act 1993 (c. 10) (power of Charity |
| |
Commission to authorise dealings with charity property etc) insert— |
| |
“(5A) | In the case of a charity that is a company, an order under this section |
| |
may authorise an act notwithstanding that it involves the breach of a |
| |
duty imposed on a director of the company under Chapter 2 of Part 10 |
| 15 |
of the Company Law Reform Act 2006 (general duties of directors).”. |
| |
(5) | This section does not extend to Scotland or Northern Ireland. |
| |
| |
Declaration of interest in existing transaction or arrangement |
| |
168 | Declaration of interest in existing transaction or arrangement |
| 20 |
(1) | Where a director of a company is in any way, directly or indirectly, interested |
| |
in a transaction or arrangement that has been entered into by the company, he |
| |
must declare the nature and extent of the interest to the other directors in |
| |
accordance with this section. |
| |
| This section does not apply if or to the extent that the interest has been declared |
| 25 |
under section 163 (duty to declare interest in proposed transaction or |
| |
| |
(2) | The declaration must be made— |
| |
(a) | at a meeting of the directors, or |
| |
(b) | by notice in writing (see section 170), or |
| 30 |
(c) | by general notice (see section 171). |
| |
(3) | If a declaration of interest under this section proves to be, or becomes, |
| |
inaccurate or incomplete, a further declaration must be made. |
| |
(4) | Any declaration required by this section must be made as soon as is reasonably |
| |
| 35 |
| Failure to comply with this requirement does not affect the underlying duty to |
| |
| |
(5) | This section does not require a declaration of an interest of which the director |
| |
is not aware or where the director is not aware of the transaction or |
| |
| 40 |
| For this purpose a director is treated as being aware of matters of which he |
| |
ought reasonably to be aware. |
| |
(6) | A director need not declare an interest under this section— |
| |
|
| |
|
| |
|
(a) | if it cannot reasonably be regarded as likely to give rise to a conflict of |
| |
| |
(b) | if, or to the extent that, the other directors are already aware of it (and |
| |
for this purpose the other directors are treated as aware of anything of |
| |
which they ought reasonably to be aware); or |
| 5 |
(c) | if, or to the extent that, it concerns terms of his service contract that have |
| |
been or are to be considered— |
| |
(i) | by a meeting of the directors, or |
| |
(ii) | by a committee of the directors appointed for the purpose under |
| |
the company’s constitution. |
| 10 |
169 | Offence of failure to declare interest |
| |
(1) | A director who fails to comply with the requirements of section 168 |
| |
(declaration of interest in existing transaction or arrangement) commits an |
| |
| |
(2) | A person guilty of an offence under this section is liable— |
| 15 |
(a) | on conviction on indictment, to a fine; |
| |
(b) | on summary conviction, to a fine not exceeding the statutory |
| |
| |
170 | Declaration made by notice in writing |
| |
(1) | This section applies to a declaration of interest made by notice in writing. |
| 20 |
(2) | The director must send the notice to the other directors. |
| |
(3) | The notice may be sent in hard copy form or, if the recipient has agreed to |
| |
receive it in electronic form, in an agreed electronic form. |
| |
(4) | The notice may be sent— |
| |
(a) | by hand or by post, or |
| 25 |
(b) | if the recipient has agreed to receive it by electronic means, by agreed |
| |
| |
(5) | Where a director declares an interest by notice in writing in accordance with |
| |
| |
(a) | the making of the declaration is deemed to form part of the proceedings |
| 30 |
at the next meeting of the directors after the notice is given, and |
| |
(b) | the provisions of section 231 (minutes of meetings of directors) apply as |
| |
if the declaration had been made at that meeting. |
| |
171 | General notice treated as sufficient declaration |
| |
(1) | General notice in accordance with this section is a sufficient declaration of |
| 35 |
interest in relation to the matters to which it relates. |
| |
(2) | General notice is notice given to the directors of a company to the effect that the |
| |
| |
(a) | has an interest (as member, officer, employee or otherwise) in a |
| |
specified body corporate or firm and is to be regarded as interested in |
| 40 |
any transaction or arrangement that may, after the date of the notice, be |
| |
made with that body corporate or firm, or |
| |
|
| |
|
| |
|
(b) | is connected with a specified person (other than a body corporate or |
| |
firm) and is to be regarded as interested in any transaction or |
| |
arrangement that may, after the date of the notice, be made with that |
| |
| |
(3) | The notice must state the nature and extent of the director’s interest in the body |
| 5 |
corporate or firm or, as the case may be, the nature of his connection with the |
| |
| |
(4) | General notice is not effective unless— |
| |
(a) | it is given at a meeting of the directors, or |
| |
(b) | the director takes reasonable steps to secure that it is brought up and |
| 10 |
read at the next meeting of the directors after it is given. |
| |
172 | Declaration of interest in case of company with sole director |
| |
(1) | Where a declaration of interest under section 168 (duty to declare interest in |
| |
existing transaction or arrangement) is required of a sole director of a company |
| |
that is required to have more than one director— |
| 15 |
(a) | the declaration must be recorded in writing, |
| |
(b) | the making of the declaration is deemed to form part of the proceedings |
| |
at the next meeting of the directors after the notice is given, and |
| |
(c) | the provisions of section 231 (minutes of meetings of directors) apply as |
| |
if the declaration had been made at that meeting. |
| 20 |
(2) | Nothing in this section affects the operation of section 215 (contract with sole |
| |
member who is also a director: terms to be set out in writing or recorded in |
| |
| |
173 | Declaration of interest in existing transaction by shadow director |
| |
(1) | The provisions of this Chapter relating to the duty under section 168 (duty to |
| 25 |
declare interest in existing transaction or arrangement) apply to a shadow |
| |
director as to a director, but with the following adaptations. |
| |
(2) | Subsection (2)(a) of that section (declaration at meeting of directors) does not |
| |
| |
(3) | In section 171 (general notice treated as sufficient declaration), subsection (4) |
| 30 |
(notice to be given at or brought up and read at meeting of directors) does not |
| |
| |
(4) | General notice by a shadow director is not effective unless given by notice in |
| |
writing in accordance with section 170. |
| |
| 35 |
Transactions with directors requiring approval of members |
| |
| |
174 | Directors’ long-term service contracts: requirement of members’ approval |
| |
(1) | This section applies to provision under which the guaranteed term of a |
| |
| 40 |
|
| |
|
| |
|
(a) | with the company of which he is a director, or |
| |
(b) | where he is the director of a holding company, within the group |
| |
consisting of that company and its subsidiaries, |
| |
| is, or may be, longer than two years. |
| |
(2) | A company may not agree to such provision unless it has been approved— |
| 5 |
(a) | by resolution of the members of the company, and |
| |
(b) | in the case of a director of a holding company, by resolution of the |
| |
| |
(3) | The guaranteed term of a director’s employment is— |
| |
(a) | the period (if any) during which the director’s employment— |
| 10 |
(i) | is to continue, or may be continued otherwise than at the |
| |
instance of the company (whether under the original agreement |
| |
or under a new agreement entered into in pursuance of it), and |
| |
(ii) | cannot be terminated by the company by notice, or can be so |
| |
terminated only in specified circumstances, or |
| 15 |
(b) | in the case of employment terminable by the company by notice, the |
| |
period of notice required to be given, |
| |
| or, in the case of employment having a period within paragraph (a) and a |
| |
period within paragraph (b), the aggregate of those periods. |
| |
(4) | If more than six months before the end of the guaranteed term of a director’s |
| 20 |
employment the company enters into a further service contract (otherwise than |
| |
in pursuance of a right conferred by or under the original contract on the other |
| |
party to it), this section applies as if there were added to the guaranteed term |
| |
of the new contract the unexpired period of the guaranteed term of the original |
| |
| 25 |
(5) | A resolution approving provision to which this section applies must not be |
| |
passed unless a memorandum setting out the proposed contract incorporating |
| |
the provision is made available to members— |
| |
(a) | in the case of a written resolution, by being sent or submitted to every |
| |
eligible member at or before the time at which the proposed resolution |
| 30 |
is sent or submitted to him; |
| |
(b) | in the case of a resolution at a meeting, by being made available for |
| |
inspection by members of the company both— |
| |
(i) | at the company’s registered office for not less than 15 days |
| |
ending with the date of the meeting, and |
| 35 |
(ii) | at the meeting itself. |
| |
(6) | No approval is required under this section on the part of the members of— |
| |
(a) | a body corporate that is not— |
| |
(i) | a company as defined in section 1 of this Act, or |
| |
(ii) | a body registered under the Companies Acts by virtue of |
| 40 |
section 694 (bodies not formed under Companies Acts but |
| |
| |
(b) | a body corporate that is a wholly-owned subsidiary of another body |
| |
| |
(7) | In this section “employment” means any employment under a director’s |
| 45 |
| |
|
| |
|