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Conflicts Registers Maintenance.

Conflicts Registers Maintenance 

A conflicts register (or conflict of interest register) is a formal record maintained by organizations to identify, record, and manage situations where personal, financial, or professional interests of individuals could conflict with the interests of the organization. It is particularly common in corporate governance, public companies, non-profits, and government bodies.

1. Purpose of a Conflicts Register

A conflicts register ensures:

Transparency – All potential conflicts are visible to management, regulators, and auditors.

Compliance – Adherence to corporate governance codes and statutory duties.

Risk Mitigation – Prevents decisions influenced by personal gain.

Accountability – Provides evidence for due diligence in case of disputes.

Ethical Governance – Supports trust among shareholders, stakeholders, and the public.

2. Key Components of a Conflicts Register

A well-maintained register typically contains:

3. Regulatory Requirements

Companies Act 2013 (India) – Section 184 mandates directors disclose interest in contracts or arrangements.

UK Companies Act 2006 – Directors must avoid conflicts of interest (Sections 175–177) and keep registers.

US SEC & NYSE Listing Rules – Require disclosure of related-party transactions and conflicts.

Corporate Governance Codes – Require boards to maintain a conflicts register and review it periodically.

Failure to maintain a register can result in civil liability, regulatory penalties, and reputational damage.

4. Legal Principles Around Conflicts Registers

Duty of Disclosure – Directors or employees must declare conflicts.

Duty to Avoid Conflicts – They should not participate in decisions where conflicts exist.

Documentation – Registers serve as evidence of compliance and good faith.

Independent Oversight – Audit committees or boards must review conflicts registers.

Materiality Assessment – Not all minor interests require action, but transparency is essential.

5. Key Case Laws Related to Conflicts Registers

Here are six significant cases illustrating the legal importance of conflict of interest disclosure and registers:

1. Regal (Hastings) Ltd v. Gulliver (1942)

Court: House of Lords, UK

Facts:
Directors of Regal profited from purchasing shares in a subsidiary without full disclosure.

Held:
Directors are liable to account for profits arising from a conflict of interest, even if the company did not suffer a loss.

Relevance:
Highlights the need for conflict registers to prevent undisclosed personal gains.

2. Bhullar v. Bhullar (2003)

Court: Court of Appeal, UK

Facts:
Directors purchased property for themselves that the company was also interested in.

Held:
Duty to avoid conflicts includes disclosing interests. Failure breaches fiduciary duty.

Relevance:
Reinforces that undisclosed conflicts must be documented and managed.

3. IDC v. Grindlays Bank plc (1991)

Court: High Court of England and Wales

Facts:
Bank officers were involved in transactions that benefitted themselves.

Held:
Directors and officers must disclose conflicts; documentation (registers) is critical.

Relevance:
Shows institutional responsibility for maintaining registers.

4. Boardman v. Phipps (1967)

Court: House of Lords, UK

Facts:
A solicitor and beneficiary of a trust used information for personal profit.

Held:
Profits made from conflicts must be accounted to the principal; fiduciary duties are strict.

Relevance:
Emphasizes documenting potential conflicts to avoid liability.

5. Percival v. Wright (1902)

Court: Court of Appeal, UK

Facts:
Directors failed to disclose share sales and personal interests to shareholders.

Held:
Directors owe duties to the company as a whole; conflicts must be disclosed to protect shareholders.

Relevance:
Supports the principle of registering conflicts to ensure transparency.

6. Canadian Aero Service Ltd v. O’Malley (1973)

Court: Supreme Court of Canada

Facts:
Managers resigned and competed with their company using information gained during tenure.

Held:
Conflict of interest obligations extend beyond resignation; fiduciaries must disclose interests to avoid breaches.

Relevance:
Maintaining a conflicts register can track ongoing obligations even post-tenure.

6. Best Practices for Maintaining a Conflicts Register

Regular Updates – Quarterly or at every board meeting.

Clear Policies – Define what constitutes a conflict.

Training – Educate staff and directors on disclosure obligations.

Independent Oversight – Audit committee or compliance officer review.

Confidentiality with Transparency – Accessible to board/audit but safeguarded.

Integration with Decision-Making – Conflicts must influence participation in votes or approvals.

7. Conclusion

A conflicts register is more than a compliance form; it is a tool for:

Upholding fiduciary duties

Preventing fraud and insider gain

Protecting organizational integrity

Courts consistently emphasize that failure to disclose conflicts, whether through inadequate registers or omission, leads to personal liability, rescission of transactions, and regulatory sanctions. The listed case laws show that proactive maintenance and review of conflict registers is crucial in corporate governance.

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