The Role of Other Duties

Abstract

The general law duties to avoid conflicts and profits (the conflicts and profits rules) do not regulate all of the conflicts encountered by a director. In particular, where the conflict or profit involves the interests of a third party (such as a director’s spouse or family member, a creditor, a friend or a major shareholder), the duties to avoid conflicts and profits do not necessarily apply. Instead, the duties to act in good faith in the interests of the company and for proper purposes (the best interests and proper purposes rules) are engaged. It is also the duty to act in good faith in the interests of the company that regulates the conflicts faced by directors in relation to stakeholders. This chapter examines the law concerning conflicts involving third parties and the vexed topic of the interaction between directors’ duties and stakeholder interests. Stakeholders include employees, creditors, investors, suppliers, customers, local, national and global communities, and the environment as a whole. The importance of stakeholder interests (and particularly those of employees) and engagement with stakeholders has been emphasised in recent corporate governance reforms in the UK.