Duty to avoid conflicts of interest

Most provisions affecting directors came into effect in October 2007. However, duties relating to avoidance of conflicts and disclosure of interests came into force on 1 October 2008.
The most significant change is to give directors power to authorise certain situations where a director has a conflict of interest. The Articles of Association of a public company must contain provisions for directors to give such an authorisation. Private companies incorporated after 1 October 2008 need take no action unless their Articles contain provisions that might invalidate directors’ authorisations. Private companies incorporated before 1 October will need to pass a members resolution to approve directors’ authorisations.

Directors must not accept benefits from third parties although this duty does not apply if the benefit cannot reasonably be regarded as likely to give rise to conflicts of interest.

Directors (and/or people connected to them) must avoid situations in which they have, or can have, a direct or indirect interest that conflicts or possibly may conflict with the interests of the company. The duty applies in particular to the exploitation of property, information or opportunity, regardless of whether the company is able to take advantage of it. This duty does not apply to conflicts of interest relating to transactions or arrangements the director has with the company or if the situation cannot reasonably be regarded as likely to give rise to conflicts of interest.

Directors, who are in any way directly or indirectly interested in a proposed transaction or arrangement with the company, must declare the nature and extent of their interest to the directors and cannot vote.

Directors must declare their interests in any existing transaction or arrangement with the company. Failure to do so is a criminal offence.

Directors’ & company secretaries’ residential addresses

Directors and company secretaries will, from October 2009, be able to provide service addresses for the public register at Companies House. Access to residential addresses will be limited to certain public authorities and credit agencies. However, residential addresses already on the public register on 1 October will not be removed unless directors or company secretaries can show they are at risk of violence or intimidation.

Corporate directors & age restrictions

Companies must now have at least one director who is a natural person so that every company has at least one individual who can be held accountable for the company’s actions. Restrictions on directors over 70 years old have been removed. A minimum age for directors of 16 has been introduced.


Share Capital

Reduction in share capital

Private companies can now reduce their share capital by passing a special resolution, supported by directors’ solvency statement, instead of having to go to court. The new provisions also cover the treatment of reserves arising from reductions in share capital.

Acquisition of shares in private companies

The restrictions on financial assistance for the acquisition of shares in private companies have been repealed. Private companies may now acquire their own fully paid shares otherwise than for valuable consideration. The new provisions include other circumstances in which a private company can acquire its own shares.

Company Names

A person may object to a company’s registered name in certain circumstances, for example, a) when the name is the same as the name associated with the applicant in which he has goodwill, or b) when the name is sufficiently similar to such a name that its use in the UK would be likely to mislead by suggesting a connection between the company and the applicant. An objection must be made to the Company Names Adjudicator (appointed by the Secretary of State).

If the ground specified in a) or b) above is established, the respondent must show:

a) that the name was registered before the commencement of the activities on which the applicant relies
b) (i) is operating under the name, or
(ii) is proposing to do so and has incurred substantial start-up costs in preparation, or
(iii) was formerly operating under the name and is now dormant.
c) that the name was registered in the ordinary course of a company formation business and the company is available for sale to the applicant on the standard terms of that business.

If the application is upheld, the adjudicator can require the respondent company to change its name.

Trading Disclosures

Similar to previous disclosures but there is now a requirement to include an ‘inspection’ address, where documents/registers can be inspected if they are not kept at the Company’s registered address.

For more information about the changes to Companies Acts affecting your company and our compliance services, please call Peter Driver on 020 7608 0011.

↑ Back to Top