There are several duties that the directors have to perform in a company. They are required to take actions in accordance with skills, care, good faith, diligence, as well as appropriate purpose. Nevertheless, one of the significant duties of a director is to avoid conflict of interests, since the director’s position includes attending to the needs of several fiduciaries. The duty to avoid conflicts of interests is a strict application and there can be grave penalties for the company as well as the director if the duty is breached. (Australian Institute of Company Directors, 2012).The law discourages directors from being involved in situations of conflict between their personal interest and the interest to act for the benefit of the company. The duty for avoiding conflict of interest is derived from both the statutory provisions as well as the general law, in the Corporations Act 2001
Under the general law, a director has to practice the duty of avoiding the conditions, which entail conflicts amid their duty towards the Company and
• the personal interest of the director; or
• a distinct duty that they owe to a third party, which can be any other organization, which they serve as an officer or a director.
As per section 191 of the Corporations Act 2001, a company’s director is required disclose any such material personal interest that he has in any subject that relates to the company affairs (Commonwealth Consolidated Acts, n.d.).
As per section 195 of the Corporations Act 2001, a public company’s director who has a material personal interest in a concern, prohibits the director from:
(a) being there at the time the subject is being discussed; or
(b) casting vote on the subject, except if the directors who do not have personal interest undertake resolution otherwise in the director’s absence (Commonwealth Consolidated Acts, n.d.)