What is a director’s duty to avoid a conflict of interest?
A consideration of the director's duty to avoid conflicts of interest, found in Section 175 of the Companies Act 2006
Under S175 of the Companies Act 2006, what is the duty to avoid conflicts of interest?
A director’s duties are incorporated within S171-S177 of the Companies Act 2006. S175 is the duty to avoid conflicts of interest. This duty is a fiduciary duty, and is wide in its scope, deeming any situation that has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company a breach of S175 (Lowry, 2012). Section 175(2) explains that this duty relates to exploitation of property, information or opportunity.
Business opportunities are a common breach of this duty, as opportunities are considered a type of ‘property’ to the company. If the director takes up the opportunity in any capacity, it is a breach of the duty (Cook v Deeks). The duty is so wide that even if the company chooses not to take up a business opportunity, it is still considered a breach if a director subsequently takes the opportunity (Regal v Gulliver). An individual with directorship in two competing companies may also breach the S175 duty, as due to the possession of inside knowledge of both companies, a potential conflict arises (London v Mashonaland).
The most common remedies for a S175 breach are an account for profits, or an injunction preventing the conflict (Lowry, 2012).
Lowry, J., Reisberg, A., (2012) Pettet’s Company Law: Company Law & Corporate Finance. Fourth Edition, Pearson Education Limited
Cook v Deeks  1 AC 554
London & Mashonaland Ltd v New Mashonaland Ltd  WN 165
Regal Ltd v Gulliver  2 AC 134
Companies Act 2006