1.7. Duty to declare interest in proposed transaction or arrangement with the company (section 177): 1 October 2008
A director must declare to the other directors the nature and extent of any interest, direct or indirect, in a proposed transaction or arrangement with the company.
The section will apply to situations arising on or after 1 October 2008; the old rules will continue to apply to situations that arose before that date.
It is important to note that you do not need to be a party to the transaction for the duty to apply. An interest of another person in a contract with the company may require you to make a disclosure under this duty, if the other person's interest amounts to a direct or indirect interest on your part (e.g. if the other person is your spouse or partner).
The declaration must be made before the company enters into the transaction or arrangement. Where your declaration of interest proves to be, or becomes inaccurate or incomplete, you must make a further declaration if the company has not yet entered into the transaction or arrangement.
No declaration will be required:
• Where you are not aware of your interest or where you are not aware of the transaction or arrangement, (but please note that directors will be treated as being aware of matters of which they ought reasonably to be aware).
• If the interest cannot reasonably be regarded as likely to give rise to a conflict of interest, if your fellow directors are already aware of it, or if it concerns the terms of your service contract which have been (or are to be) considered at a board meeting or board committee.
• Where you are a sole director.
Section 177 only deals with proposed transactions or arrangements. Existing transactions and arrangements are covered by section 182 (not a "general duty" as defined by the 2006 Act), which provides that a director must declare the nature and extent of his direct or indirect interest in an existing transaction or arrangement entered into by the company, to the extent that the interest has not been declared under section 177.
If you have any question on any of those matters, or on any of the matters covered below, whether now or in the future, you should contact David Heys at Lawson-West on 0116 212 1027 or by email at dheys@lawson-west.co.uk.
