On 18 January 2008 the GC100 published a guidance paper on directors' conflicts of interest and the Companies Act 2006 (the 2006 Act). From 1 October 2008 a director will have a statutory duty under section 175 of the 2006 Act to avoid a situation in which he has, or can have, a conflict of interest or possible conflict of interest with the company's interests. There will be no breach of this duty if the relevant matter has been authorised by the directors. For a public company the directors can only authorise the matter if permitted to do so by the company's articles of association.
The GC100 has concluded that most companies will want to amend their articles of association to include a general power for directors to authorise conflicts. The paper sets out a summary of the 2006 Act provisions on conflicts, an explanation of changes companies might make to their articles to reflect the new conflicts provisions and guidance for directors on exercising the power to authorise conflicts including suggested procedures for authorising conflict situations and reviewing authorisations.
It is stated that the ABI has reviewed the guidance paper and the suggested amendments to articles of association. The GC100 expects that shareholders are unlikely to raise objections provided companies have an existing sound corporate governance structure, have procedures in place as suggested in the paper for ensuring that a board's powers of authorisation of conflicts are operated effectively and commit to confirming compliance with the procedures.