3 directors on multiple boards of unrelated companies

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(3) Directors on Multiple Boards of Unrelated Companies Directors may be on multiple boards as long as there is no conflict of interest between the boards, as seen in {Fitzsimmons v R} If the director is also director of a company that is related and stands to gain from a transaction this would be a conflict {Marcus Clark} (4) Nominee Directors A nominee director is one who is appointed to represent the interests of a particular person or group on the board (ie. A creditor) There can be problems if there is a divergence between the interests of the company and the interests of those whom the person is acting for Strict view adopted in {Bennetts v Board of Fire Commissioners of NSW} where the Court held that ‘ a board member must not allow himself to be compromised by looking to the interest of the group which appointed him rather than to the interest for which the board exists” T herefore the nominee director will be conflicted if he represents interests of group that appointed him C. Curing a Conflict of Interest It is possible for a conflict of interest to be cured and not be a breach if the director does certain things There is a general law approach and the statutory approach C.1 Curing a Conflict under General Law The general law sets out expectations for a director who finds themselves in a position of conflict (as determined previously) The existence of a personal interest conflicting with duties to the company can be cured by three acts: (1) Full Disclosure At the very least, the director must make full disclosure of his personal interests to the board This involves: o Making full disclosure as to the ‘nature and extent of your interest {Fitzsimmons v R per Lord Cairns} o In some situations you must advise fellow directors of the risks of the proposed dealing that you are aware of {Fitzsimmons v R per Lord Cairns} o There is no precise formula as to disclosure, but the disclosure must make the other directors “ fully informed of the real state of things” {Gray v New Augarita per Lord Radcliffe} o If the director knows that a company has financial incapacity then this is a matter which must be disclosed to the board { Permanent Building Society per Anderson J} 6
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(2) Abstaining from Voting Having made your disclosure the director must absent themselves from voting in the decision Director should abstain from voting {Imperial Mercantile v Coleman; Gray v New Augarita} Director should also not take part in contract negotiations where such negotiations would place him in a conflict {Jenkins & Enterprise Gold Mines} (3) Further Positive Steps In { ASIC v Adler, Santow J} asked in what circumstances is “ mere disclosure of a conflict and abstaining from voting… insufficient to satisfy a director’s fiduciary duty?’ Therefore the Director may be required to ‘take steps to protect the company’s interest by using such power and influence as he [has] to prevent the transaction going ahead” {Marcus Clark}
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