This changes existing law under which shareholders' consent is required, although this is often given in specified circumstances in a company's articles of association.
Connected persons — if any of the above situations apply to a person connected with you, e. Duty to declare interests If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with a company, he must declare the nature and extent of that interest to the other directors before entering into the transaction.
Exercise reasonable care, skill and diligence You must exercise the same care, skill and diligence that would be exercised by a reasonably diligent person with: the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as you in relation to the company the general knowledge, skill and experience that you actually possess.
There is a "safe harbour" to the effect that where a company's articles contain provision dealing with conflicts of interest, the general duties will not be breached by anything done, or omitted, by the directors in accordance with any such provision. The decision to start proceedings against a director would be made by the board or, in an insolvency situation, a liquidator.
On a proper analysis of the circumstances, consider whether there will actually be a conflict or potential for conflict with the interests of the company the situation has been pre-authorised. However, this paper focuses on the above seven general duties. The key point of this duty is that directors should not be swayed by the views of the other directors or of, say, the parent company, or allow themselves to be affected by outside interests, but should make decisions independently based on their own appreciation of the benefits and risks that may be involved.
If the board does not have the power to authorise conflicts or is otherwise unable to approve the conflict situation it could refer the matter to the shareholders for approval.
There is concern over the weight to be given to each of the six factors. To address difficulties with the previous derivative claims procedure, a claim can be brought even if the director in question has not benefited personally from the breach and it is no longer necessary for shareholders to show that the director or directors in question control the majority of the company's shares.
In the case of private companies formed before 1 Octoberdirectors can only give authorisation if the members have passed a resolution permitting directors to authorise conflicts. Misfeasance — a director can be guilty of this if he or she has misapplied or retained company assets or wrongly exercised authority.
Typical examples include cross-directorships of group companies or positions relating to the company pension scheme.