Part F Management, administration and regulation of companies 18: Company directors 287
Industrial Development Consultants Ltd v Cooley 1972
The facts: C was Managing Director of the company which provided consultancy services to gas
companies. A gas company was unlikely to award a particular contract to the company but C realised that,
acting personally, he might be able to obtain it. He told the board of his company that he was ill and
persuaded them to release him from his service agreement. On ceasing to be a director of the company C
obtained the contract on his own behalf. The company sued him to recover the profits of the contract.
Decision: C was accountable to his old company for his profit.
Directors will not be liable for a breach of this duty if:
The members of the company authorised their actions
The situation cannot reasonably be regarded as likely to give rise to a conflict of interest
The actions have been authorised by the other directors. This only applies if they are genuinely
independent from the transaction and:
- If the company is private – the articles do not restrict such authorisation, or
- If it is public – the articles expressly permit it.
The company explicitly rejected the opportunity they took up: Peso Silver Mines v Cropper 1966.
9.4.6 Duty not to accept benefits from third parties (s 176)
This duty prohibits the acceptance of benefits (including bribes) from third parties conferred by reason of
them being director, or doing, (or omitting to do) something as a director. Where a director accepts a
benefit that may also create or potentially create a conflict of interest, they will also be in breach of their s
175 duty.
Unlike s 175, an act which would potentially be in breach of this duty cannot be authorised by the
directors, but members do have the right to authorise it.
Directors will not be in breach of this duty if the acceptance of the benefit cannot reasonably be regarded
as likely to give rise to a conflict of interest.
9.4.7 Duty to declare interest in proposed transaction or arrangement (s 177)
Directors are required to disclose to the other directors the nature and extent of any interest, direct or
indirect, that they have in relation to a proposed transaction or arrangement with the company. Even if
the director is not a party to the transaction, the duty may apply if they are aware, or ought reasonably to
be aware, of the interest. For example, the interest of another person in a contract with the company may
require disclosure under this duty if that other person's interest is a direct or indirect interest on the part
of the director.
Directors are required to disclose their interest in any transaction before the company enters into the
transaction. Disclosure can be made by:
Written notice
General notice
Verbally at a board meeting
Disclosure to the members is not sufficient to discharge the duty. Directors must declare the nature and
extent of their interest to the other directors as well.
If the declaration becomes void or inaccurate, a further declaration should be made.
No declaration of interest is required if the director's interest in the transaction cannot reasonably be
regarded as likely to give rise to a conflict of interest.