Conflicts of interest: Duties and consequences

A FUNDAMENTAL duty of a director is to act in the best interests of the company. A key aspect of this duty is to avoid, and to deal properly and fairly in connection with matters that present conflicts of interest.

BusinessDictionary.com defines a conflict of interest as "a situation that has the potential to undermine the impartiality of a person because of the possibility of a clash between the person's self-interest and professional interest or public interest".

It is the subjective nature of this potential clash of interests that makes conflict of interest situations so difficult to deal with in practice. For this reason, as a matter of best practice, directors are advised to avoid getting into these situations in the first place.