Director’s personal financial interests

If in terms of section 75(5) of the Companies Act a director of a company who has a personal financial interest in respect of a matter to be considered at a meeting of the board, or knows that a related person has a personal financial interest in the matter, the director:

1. Must disclose the interest and its general nature before the matter is considered at the meeting;
2. Must disclose to the meeting any material information relating to the matter, and known to the director;
3. My disclose any observations or pertinent insights relating to the matter if requested to do so by the other directors;
4. If present at the meeting, must leave the meeting immediately after making any disclosure contemplated in paragraph (b) or (c);
5. Must not take part in the consideration of the matter, except to the extent contemplated in paragraphs (b) and (c);
6. While absent from the meeting in terms of this subsection:
   • Is to be regarded as being present at the meeting for the purpose of determining whether sufficient directors are present to constitute the meeting; and
   • Is not to be regarded as being present at the meeting for the purpose of determining;
   • Whether a resolution has sufficient support to be adopted; and
7. Must not execute any document on behalf of the company in relation to the matter unless specifically requested or directed to do so by the board.

The above does not apply:

1. To a director of a company
   • In respect of a decision that may generally affect
     1. All of the directors of the company in their capacity as directors; or
     2. A class of persons, despite the fact that the director is one member of that
        class of persons, unless the only members of the class are the director or
        persons related or inter-related to the director; or
   • In respect of a proposal to remove that director from office; or
2. To a company or its director, if one person:
   • Holds all of the beneficial interests of all of the issued securities of the company; and
   • Is the only director of that company.

If a person is the only director of a company, but does not hold all of the beneficial interests of all of the issued securities of the company, that person may not:

1. Approve or enter into any agreement in which the person or a related person has a personal financial interest; or
2. As a director, determine any other matter in which the person or a related person has a personal financial interest, unless the agreement or determination is approved by an ordinary resolution of shareholders after the director has disclosed the nature and extent of that interest to the shareholders.

Source:  Companies  Act 2008

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.