In Fairford Water Ski Club v Cohoon & Anor  EWCA Civ 143, the Court of Appeal recently considered whether or not a company director had properly disclosed his personal interest in a contract involving another company with which he was involved.
Tim Thompson of Kangs Solicitors outlines the circumstances of the case.
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The Law | Duty of a Director | Company Director Defence Solicitors
A director is required to disclose any personal interest in a contract that is about to be entered into involving any other company in which he/she is a director.
The purpose of this requirement is to prevent any conflict of interest which may be detrimental to the company and to avoid any undisclosed and unfair secret profit being obtained.
The Companies Act 2006 states at section 177:
‘Duty to declare interest in proposed transaction or arrangement
(1) If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors.
(4) Any declaration required by this section must be made before the company enters into the transaction or arrangement.
(5) This section does not require a declaration of an interest of which the director is not aware or where the director is not aware of the transaction or arrangement in question.
For this purpose, a director is treated as being aware of matters of which he ought reasonably to be aware.
(6) A director need not declare an interest—
(a) if it cannot reasonably be regarded as likely to give rise to a conflict of interest;
(b) if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as aware of anything of which they ought reasonably to be aware); ‘
The Case In Focus | Kangs Court of Appeal Solicitors
- Mr Cohoon was a director of Fairford Water Ski Club (‘the Fairford Club’), a water-skiing club in the Cotswolds.
- Mr Cohoon also enjoyed an interest in a business named ‘WaterSports’, which provided water skiing lessons to the public on the lake at the Fairford Club.
- Although the original Board of Directors of the Fairford Club was aware of the circumstances, a change occurred in its management and, in due course, the new Management, seemingly unaware of these arrangements, issued proceedings against Mr Cohoon claiming that he had breached his duty of disclosure.
- At the original Hearing, the Judge agreed with the new Management of the Fairford Club that Mr Cohoon had breached his duty of disclosure.
- Mr Cohoon appealed to the Court of Appeal which considered all of the issues including the timing of the disclosure and where and how it had made.
- Having considered these issues, the Court of Appeal overruled the original Judge’s decision and found that Mr Cohoon had made proper disclosure to the Fairford Club.
Potential Defence | Kangs Breach of Duty Solicitors
The Companies Act 2006 states at section 1157:
‘Power of court to grant relief in certain cases
(1) If in proceedings for negligence, default, breach of duty or breach of trust against—
(a) an officer of a company
it appears to the court hearing the case that the officer or person is or may be liable but that he acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused, the court may relieve him, either wholly or in part, from his liability on such terms as it thinks fit.’
How Can We Assist? | Kangs National Criminal Defence Solicitors
Any company officer faced with any allegation of a breach of company laws and procedures should seek immediate expert guidance. The team at Kangs Solicitors helps clients facing Proceedings of this nature and other breaches of company law issues on a daily basis.
If you require assistance, please do not hesitate to contact our team through one of the undermentioned who will be happy to assist you: