Directors' conflict of interest

Based on the information and not going into any difficult relationship issues or voting issues, I can not see any reasons why a conflict arises, providing the company has sufficient reserves etc.  I hope this helps 

Hi Alistair

I think I'm prone to agree with Janet's company secretarial colleagues. Surely if a director is voting on a payment of a dividend to himself as shareholder that's a conflict of interest and as such needs to be authorised first under s175...no??

  Hi Monica  & Janet 

As with all these queries there is no correct answer but my thoughts are that if it is in the best interest of the Company to pay a dividend to the share holders I can not see where a conflict arises especially as a dividend payment is regarded as a normal company business in all senses and the board are aware of the individual shareholders shareholding so they have directly declared their interest and thus it is an internal interest. It would not be in the interest of the Company pay a dividend if their was insufficient reserves etc. The spirit as far as I can gather from the G100 group of Company secretaries is that interests are regarded as third party interests and where directors have multiple directorships.  If you want I will put this question to a wider audience of Company Secretaries to gauge their thoughts?  Please let me know?  

  Hi Monica  & Janet 

As with all these queries there is no correct answer but my thoughts are that if it is in the best interest of the Company to pay a dividend to the share holders I can not see where a conflict arises especially as a dividend payment is regarded as a normal company business in all senses and the board are aware of the individual shareholders shareholding so they have directly declared their interest and thus it is an internal interest. It would not be in the interest of the Company pay a dividend if their was insufficient reserves etc. The spirit as far as I can gather from the G100 group of Company secretaries is that interests are regarded as third party interests and where directors have multiple directorships.  If you want I will put this question to a wider audience of Company Secretaries to gauge their thoughts?  Please let me know?  

I have been advised as follows on this:

It is not considered to be a conflict of interest. The interests of the company and the interests of its directors/members are almost identical in these circumstances. In the circumstances described, there is no-one else with an actionable interest that needs to be protected, assuming that the company is profitable and has distributable profits available for distribution.

I have been advised as follows on this:

It is not considered to be a conflict of interest. The interests of the company and the interests of its directors/members are almost identical in these circumstances. In the circumstances described, there is no-one else with an actionable interest that needs to be protected, assuming that the company is profitable and has distributable profits available for distribution.

Thank you Gentleman, that's really interesting. Alistair, if you could put this forward as a question that would be great as I think a number of practitioners are still confused about s175 and what it actually means.

Thanks

Monica

I don't think the number of directors/shareholders matters.  I didn't mention any particular breakdown when I triggered the above advice.

One other obvious point, the Directors only recommend a dividend it is the shareholders who approve so I don't see any conflict.

I don't know if this is the right place to ask, but it is certainly a Directors' conflict of interest!

I would appreciate comments on this scenario. The Company has 2 Directors, each with a 50% shareholding. One Director actively earns fees, the other does not but is nominated CoSec (typical one-man consultancy business with consultant plus co-habiting partner). Dividends have always been paid 50/50. Cash continues to accrue. Relationship breaks down and the active Director tells Companies House that the CoSec has resigned (she has not!) and refuses to pay dividends to her. He then sets up another company doing exactly the same work with exactly the same client(s), although the existing company is not closed, and presumably accrued earnings are still technically there, even though he will have paid himself a salary plus taken loans against dividends.

Question 1 - has the active Director broken the law in telling Companies House the CoSec has resigned when she hasn't?

Question 2 - should/can the non-active Director receive unpaid dividends, and if so, how?