Directors risk breaching statutory duties

From 1 October 2008, a company director will need to avoid a situation in which he has an actual or potential interest which conflicts with the interests of his company. The laws around this subject are complex and can affect the personal liabilities of a director.

For instance, a director sitting on the board of more than one company may face a conflict of interest. The director will be breaching his duties unless the company's shareholders have approved the conflict or if the articles of association allow independent directors to approve the conflict.

Jonathan Gibson, Director of PwC Legal's Company Secretarial team, explains:

"All companies should amend their articles of association before 1 October. This will enable independent directors to authorise any conflicts of interests and stop them being in breach of the new legislation."

If the articles of association are not amended then directors run the risk of breaching their new statutory duties under the Companies Act 2006. In the event that an actual conflict of interest occurs, where the correct authorisation procedures have not been followed, the company could find that the transaction in which the director had an interest becomes voidable and the director becomes personally liable.

For further information read our Company Secretarial Update.