DIrector of two directly competing companies

[lingus75]

Does anyone know whether being a Director of two competing companies in an identical industry (Even in the same city)is illegal? (Not me!) I know the contractural position of this but was wondering in a UK law capacity.

[carrera2]

It's completely legal - why did you think it wouldn't be?

[Eric Mc]

It's not illegal but it might require a disclosure under "Directors' Interests" in the accounts.

Certainly, the other shareholders should be aware of the situation and, if there genuinely was a conflict of interest in netotiating contracts with suppliers or customers, the "conflicting director" should make his position known and possibly be required to remain at arm's length from such negotiations.

Under company law, directors are required to disclose to Companies House other directorships. This information is in the public domain so anyone wanting to know of such matters would be able to view these details easily. So, as long as these measures are taken, no laws would be contravened.

[ATG]

Doubt there is specific legislation that bars this, because the problem of conflicting interests is surely already clear from his most basic responsibilities to either companies' shareholders?

[lingus75]

carrera2 said:

It's completely legal - why did you think it wouldn't be?

I was unsure as to whether it made a difference depending on the industry (In this case supplying confidential data analysis to Armed services) or it was a blanket rule across all areas of business.

[off_again]

Try just about any Siemens Group company - most directly compete with each other and the boards of the various countries have shared directors.

[Harry Flashman]

Wot tonker sed.

[JonRB]

Regardless of the company law legality, there would surely be very firm business objections from the shareholders and/or other directors of each company over a clear conflict of interests from the common director.

[lingus75]

YHM Tonker.

[cardigankid]

If I might offer a practical comment, I imagine that you can see why this is an issue. It is not a theoretical point of company law. A director is managing a company on behalf of the shareholders and to do so with an undisclosed conflicting interest would constitute fraud. If the director is quite happy to fully disclose the position to both sets of shareholders then fine, but is it not likely that one or both are likely to relieve him of his post?

I would not like to be in that position, because I think you would end up out of both, and possibly facing investigation by the Polizei as well, never mind the civil legal implications. Company A succeeds, Company B fails. Well, if you are a shareholder you sure as hell know what the problem was. (Even if it wasn't). Minefield, or Achtung Minen! as my old relations used to say.

Edited by cardigankid on Sunday 18th March 15:30

[ATG]

anonymous said:

[redacted]

Interesting. Why should a director pay any attention to the best interests of future shareholders? Or is "future shareholder" in this context limited to people who are certain to become shareholders, e.g. someone who has bought forwards?

[2 sMoKiN bArReLs]

Eric Mc said:

It's not illegal

As already mentioned above, may well be under new companies act.

[ATG]

anonymous said:

[redacted]

No, because the interests of differing shareholders may vary - i.e. the interests of one shareholder may not be the same as the next, so the directors pay attention to and owe duties to all shareholders of the company in their capacity as shareholders of that company, notwithstanding any other interests those shareholders may have.

That makes sense, but it doesn't deal with my confusion as to what is meant by a future shareholder. If someone is not a shareholder at the time that a decision is being made, why should their interest be taken into account even if they may become a shareholder in the future?

[Sharief]

Just out of interest, why would somebody do this?

Surely they would know inside information about both companies, so would in effect be a kind of double agent... So everytime one company came up with a new strategy or similar, the other company would know and counteract it straight away, cancelling it out...?

[srebbe64]

Sharief said:

Just out of interest, why would somebody do this?

Surely they would know inside information about both companies, so would in effect be a kind of double agent... So everytime one company came up with a new strategy or similar, the other company would know and counteract it straight away, cancelling it out...?

Don't confuse law with common sense - the two are unrelated. It's a difficult, albeit interesting, question. If it is illegal under recent legislation, the question then becomes 'what constitutes a direct competitor' - it's somewhat subjective when you think about it.

Edited by srebbe64 on Monday 19th March 00:02