When decisions need to be taken within a company, it is possible that a director may have a conflict of interest. Consider, for example, a situation in which the company is about to enter into an agreement with a contracting party in which the director holds shares. In such a situation, the director may not take part in the decision-making process. But who actually determines whether the director has a conflict of interest? The Supreme Court has ruled on this matter. Read more here:<\/p>\n
What does the law say about conflicts of interest?<\/strong><\/p>\n Directors of a private limited company (BV) or public limited company (NV) must, in the performance of their duties, act in the interests of the company and its associated business. However, this becomes difficult when a director also has a personal interest in a decision being taken. For example, if the company is about to enter into an agreement with another party in which the director holds shares. Or if an agreement is concluded with a family member of the director.<\/p>\n Our company law provides a solution for such situations: if a director has a direct or indirect conflict of interest, Article 2:329(6) of the Dutch Civil Code stipulates that that director must not take part in the deliberations or decision-making. If this prevents a board resolution from being passed, the decision is taken by the supervisory board. If there is no supervisory board, the decision is taken by the general meeting, unless the articles of association provide otherwise.<\/p>\n Background to the case before the Supreme Court<\/strong><\/p>\n The above provision appears clear. However, it does not resolve the question of who actually decides whether a director has a conflict of interest. In a case concerning the flash delivery service Getir, the founders sat on the board as non-executive directors. The company was heading for bankruptcy. During the implementation of a rescue operation, the founders\u2019 own interests came into play: they had to \u2013 in the interests of the company \u2013 take a decision that would jeopardise their own interests.<\/p>\n The executive directors therefore chose to exclude the non-executive directors (the founders) from the decision-making process. The founders took a different view: they believed that they themselves were entitled to decide whether they actually had a conflict of interest.<\/p>\n Judgment of the Supreme Court<\/strong><\/p>\n The Supreme Court ruled against the founders and stated that, in a case such as this, where the management consists of several persons and the company has no supervisory board, it is incumbent upon the director with a potential conflict of interest to exercise the greatest possible transparency<\/em> and to disclose this potential conflict of interest to his fellow directors.<\/p>\n In the event of a difference of opinion on this matter, it is not for the director concerned to decide, but for the other directors<\/em>, to determine whether the director in question does in fact have a conflict of interest and should therefore not take part in the deliberations and decision-making on the matter in question. This also applies if the director concerned has not disclosed his potential conflict of interest to his fellow directors.<\/p>\n If the other directors consider that the director in question should not take part in the deliberations and decision-making due to a conflict of interest, they must ensure that the director in question does not, in fact, take part in the deliberations and decision-making on the matter in question.<\/p>\n