Conflicts of Interest (Part Five - Keeping Record)
Whatever route a director takes — disclosure, recusal or resignation —what matters almost as much as the decision itself is the record.
Board Minutes
Board minutes should reflect that a conflict was identified and disclosed, the nature of the conflict, and how it was handled. Where appropriate, they should also record whether the director participated in the discussion, left the meeting, abstained from voting or took some other step. This protects the director. It protects the board. And it protects the company.
A director who discloses a conflict but later finds that the disclosure was not recorded in the minutes is in a precarious position. If the decision is subsequently challenged, an undocumented disclosure may be difficult to prove to a court, regulator or a concerned shareholder.
Conflicts Log
Minutes, however, only capture what happened at a particular meeting. Boards should also maintain a central conflicts log recording directors’ disclosed interests and the measures adopted to manage them. The log may include the date of disclosure, the nature of the interest, the matters or entities to which it relates, any restrictions placed on the director’s participation, and the date on which the disclosure was last reviewed. Properly maintained, it gives the chair, company secretary and board a reliable overview of existing conflicts and helps ensure that relevant interests are considered whenever related matters arise.
A conflicts log should not be treated as a static register completed on appointment and then forgotten. Interests develop, relationships change and transactions that once seemed remote can become relevant. The log should therefore be reviewed periodically—at least annually and whenever a material change occurs—and directors should have an ongoing obligation to provide updates promptly. The chair or company secretary should also consider the log when preparing meeting agendas so that potential conflicts can be identified and managed before papers are circulated or deliberations begin.
The minutes and the conflicts log serve related but distinct purposes. The log provides a continuing record of disclosed interests; the minutes document how a particular conflict was managed in relation to a specific matter. Neither should be treated as a substitute for the other.
Role of the Chair
Chairs have a particular responsibility here. When a director raises a conflict, the chair should ensure that it is properly considered, managed and reflected in the record. The culture around the table should make disclosure feel safe rather than stigmatised.
Because a director who is afraid to disclose a conflict will find ways to justify not disclosing it. And that is exactly how unmanaged conflicts become scandals.
Read our previous articles in this series:
