A conflict of interest for a company director arises when personal interests, duties to another company, or relationships influence — or could influence — their ability to act in the best interests of the company. Under the Companies Act 2006, directors must identify, disclose, and manage such conflicts properly to comply with their statutory duties and avoid legal or reputational risks.
Being a company director is not just a title — it carries fiduciary and legal duties that underpin good corporate governance. One of the most crucial responsibilities is the duty to avoid conflicts of interest.
Conflicts can occur easily: a director may hold shares in a supplier, sit on the board of a competitor, or have a relative working in a related company. Even if no wrongdoing occurs, the appearance of divided loyalty can undermine trust and expose directors to serious consequences.
In this guide, Persona Finance explains how to identify, disclose, and manage conflicts of interest — and how to stay compliant with UK company law.
The main statutory duties for directors regarding conflicts of interest are set out in the Companies Act 2006. The most relevant sections include:
Directors must avoid any situation in which they have, or can have, a direct or indirect interest that conflicts — or may conflict — with the interests of the company.
Directors must not accept any benefit (such as gifts, hospitality, or favours) given because of their position or role as a director, if it could create a conflict of loyalty.
Before the company enters into any transaction, directors must declare the nature and extent of any interest they have in it.
These duties apply to all directors, whether formally appointed, shadow, or de facto. Importantly, even a potential conflict is enough to trigger the obligation — the harm does not need to occur.
A conflict of interest arises when a director’s personal, financial, or professional interests could influence their judgment. These conflicts fall broadly into two categories:
These occur when a director’s role or position creates an ongoing risk of divided loyalty.
Examples include:
These arise when a director is personally involved in a specific deal or arrangement with the company.
Examples include:
Even indirect interests — for instance, through a spouse, family member, or trust — can create conflicts that must be disclosed.
If a director is aware of an actual or potential conflict, they must disclose it as soon as reasonably practicable.
Disclosure should be made formally to the board of directors and recorded in the meeting minutes or the company’s register of interests.
Conflicts may be authorised either by:
The authorisation must be given before the conflict affects any decision-making. Boards can also impose conditions — for example, that the conflicted director does not participate in related discussions or votes.
All disclosures and authorisations should be properly documented. A conflict register should be kept up to date and reviewed regularly. This not only ensures compliance but also protects directors from allegations of concealment.
Under Section 176, directors must not accept any benefit offered because of their directorship. This duty is designed to prevent bribery, undue influence, or subtle pressure to act in another party’s favour.
Examples of prohibited benefits include:
Reasonable hospitality or corporate gifts are acceptable only if they cannot reasonably be regarded as likely to give rise to a conflict. When in doubt, disclose it — transparency is always safer.
The consequences for breaching conflict of interest duties can be severe. A director who fails to disclose or properly manage a conflict may:
The courts have reinforced this duty in cases such as Regal (Hastings) Ltd v Gulliver (1942), where directors were held liable for profits earned through exploiting company opportunities.
Keep a permanent record of all disclosed interests, updated whenever circumstances change. This ensures transparency and simplifies compliance checks.
Check whether your company’s Articles of Association permit directors to authorise conflicts. If not, amendments may be needed to ensure flexibility.
If a conflict arises during board discussions, the director should step aside from those parts of the meeting and abstain from voting.
Having a written conflict of interest policy helps ensure that all directors understand their duties and the reporting process.
When a situation is unclear, obtain independent legal or accounting advice. Professional input can help determine whether a potential conflict exists and how best to manage it.
Yes, unless it is obvious to all directors that a director has no personal interest or benefit, it is best practice to disclose all potential conflicts.
Can a conflict be authorised after it happens?
Usually no — authorisation must occur before the conflict influences a decision. In rare cases, shareholders may ratify a past breach, but this should not be relied upon.
What if the Articles of Association prohibit authorisation?
In that case, only shareholder approval can validate the conflict. The director should not proceed without that approval.
Do these duties apply to shadow directors?
Yes. Anyone acting as a director, even informally, may be treated as one under the Companies Act and subject to the same duties.
Conflicts of interest are not always avoidable — but mishandling them is. The key is transparency, disclosure, and proper authorisation.
Directors who manage conflicts responsibly protect not only themselves but also the integrity and reputation of the business they serve.
At Persona Finance, we help company directors and business owners establish compliance frameworks, maintain conflict registers, and understand their statutory duties — so they can lead with confidence and integrity.
👉 Contact Persona Finance today to ensure your business remains compliant and your directorship risk-free.