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A member asked almost 9 years ago

Conflict of interest as director

I sit on a company board. The directors all agree that we should outsource the IT services of the company to my personal IT business. Is this a conflict of interest if all directors are aware of my personal interest in the IT firm.

Corporations and Companies Company reporting and disclosure obligations SA AU
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Law Advisor Research Team
Law Advisor Research Team
Researchers at LawAdvisor
Hi there. If you are a director of a public company, you must notify your fellow directors of any material personal interest you have in a matter that relates to the affairs of the company. Outsourcing the IT services of the company to your personal IT business is one such example of where you have a material personal interest in a matter. Notifying the board is an important first step.
Subject to the constitution of the company or the approval of the other directors, you are not allowed to attend the directors’ meeting where the board will discuss and vote on the matter of outsourcing the IT services. This ensures that your personal interest does not influence the decision making of the board.
The board may also be required to obtain shareholder approval because the company would be providing a financial benefit to a related party, namely you and your personal IT business. However, member approval will not be required if the terms of the IT contract would be reasonable in the circumstances if the company and your IT business were dealing at arm’s length.

Suggested way forward

Your situation raises important issues about directors’ duties and related party transactions. Different rules will apply depending on whether the company is private, public and/or listed. You should consider speaking to a lawyer who can advise you on the full range of legal options that may be available to you. By pressing the “Take Action” button, LawAdvisor can help you search for experienced lawyers and obtain fee proposals for their services. Costs for legal advice and representation will vary between providers based on experience and the scope of services.

Answered over 8 years ago   Legal disclaimer

Janelle Moody
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