10.4.5 Conflicts of interest

The United Kingdom, the Netherlands and Sweden all address the way conflicts of interest should be dealt with. In the Netherlands a direct or indirect personal interest in a transaction that is opposite to the interest of the company is considered to be a conflict of interest. Sweden considers transactions between the company and the board member, and between the company and a third party in which the board member has a material interest or which he is entitled to represent to be conflicts of interest. The Dutch Civil Code and the Swedish Companies Act prohibit board members from participating further in the decision-making about such transactions. Additionally, the DCGC gives some requirements about how to act in these conflict of interest situations.

The United Kingdom approaches conflicts of interest from another angle. The British Companies Act provides three duties: a duty to avoid conflicts of interest, a duty to declare interests in proposed transactions and a duty not to accept benefits from a third party. Whereas the Netherlands and Sweden require that board members refrain from taking part in a particular transaction, the United Kingdom requires that board members avoid a conflict of interest and declare the interest to the board. However, in order to avoid the conflict of interest, he will probably need to refrain from taking part in the decision. The duty to avoid accepting benefits from third parties is not codified in the Netherlands or Sweden. However, accepting benefits from third parties ‘conferred by reason of being a director or his doing (or not doing) anything as director’ creates a conflict of interest situation as well in the Netherlands and Sweden. Conflicts of interests arising from such benefits are also covered by Dutch and Swedish provisions.

(Consideration 10.10) Conflicts of interest may have a negative effect on the independence of a supervisor. Therefore, a provision prohibiting the supervisor from taking part in transactions in which he has a conflict of interest is important. The legal frameworks in the United Kingdom, the Netherlands and Sweden all have well-developed provisions for this, which makes their precondition building blocks of independence strong.