Constitution Clause – Directors Interest

What is a constitution clause – directors interest and when should you use it?

Directors might have a conflict of interest in several different ways.

For example, a director might be directly or indirectly involved in, or wish to be involved in, a matter that goes against the interests of the company.

Or, they could be directly or indirectly involved in, or wish to be involved in, a matter that potentially goes against the interests of a fellow director on your company’s board.

These situations could occur, for example, where a director may:

• be asking the board for a loan
• own or have a material influence over a business that your company is planning to buy from, sell to, acquire, collaborate with or sue, for example
• be a relative of or close to someone about whom the board needs to make a decision (e.g. a member of staff in respect of whom promotional or disciplinary action may be proposed)

Directors are legally obliged to ensure their interests do not come into conflict with those of the company.

The issue of interest and conflict can be dealt with in a shareholders agreement.

But it is not unusual that these issues are also included within your company constitution.

Such a clause will usually contain guidance on what might be considered a conflict and how your company has chosen to handle this kind of situation.

If you want to include clauses within your constitution to deal with interests and conflict where your current constitution does not allow for this scenario, then you will find this constitution clause template useful.

Simply incorporate these clauses within your constitution to enable you to handle this kind of situation if and when it arises.  

If you are looking for a company constitution check out our constitution template.