Module 2 · Chapter 4

Conflicts: The Packaging Contract

A company may do a deal with a director's family. The law asks the director to declare her interest and step aside, and the board to prove that the terms are fair.

≈ 11 min read 8-question test

In this chapter

  • Why a deal with a director's family goes to the board
  • The four steps: declare, stand aside, prove the price, record
  • What goes wrong if the director stays silent

4.1Conflicts of interest in one paragraph

A director has a conflict of interest when she stands to gain from the other side of a deal her company is doing. The gain may be direct, in her own pocket, or indirect, through her family. The law does not forbid the deal. It makes the interest known before the decision, and it takes the interested director out of the deciding.

Key point

A conflict is a position, not an accusation. The procedure lets a good deal with a director's family go ahead, and leaves a file that shows it was fair.

Also in this chapter

  1. Why the packaging contract went to the board
  2. A deal or a standing position: two duties
  3. Step one: declare the interest before the item
  4. Step two: leave the room
  5. Step three: prove the price is fair
  6. Step four: record it in the Conflicts Register
  7. Whether the shareholders must approve too
  8. What happens if a director stays silent
  9. Your job

Preview

The rest of this chapter opens with a free account. Every edition is free to read until 31 January. Open a free account by the end of that day and keep every edition published by then, for good. Open it from the edition home →