Conflicts of Interest (Part Two - Disclosure)
When is Disclosure Required?
The short answer is: when in doubt, disclose.
But good governance requires us to be more precise than that.
Across company law, governance principles and organisation-specific conflicts policies, the central expectation is clear: a director should disclose any interest or relationship that could affect—or could reasonably be perceived to affect—their judgement on a matter before the board.
That may include a financial interest, a personal or professional relationship, a role in another organisation, or some other competing obligation. The exact legal requirements will depend on the applicable jurisdiction, the company’s constitution and its internal policies. The underlying principle, however, is transparency before participation.
Is disclosure always a formal event?
Not necessarily.
Where an interest is standing and already known—for example, a director’s role in another organisation—the chair may simply note it when the relevant agenda item arises, provided that this is consistent with the applicable law and the company’s procedures.
The fact that an interest is widely known does not make it irrelevant. Nor does it automatically amount to a conflict in every matter. What matters is whether the interest bears upon the particular issue before the board and whether it has been properly considered and recorded.
The mechanics of disclosure may therefore be proportionate. The transparency should not be optional.
Disclosure must be specific.
A vague statement that a director has “an interest” may not give the board enough information to understand or manage the conflict properly. The disclosure should explain the nature and extent of the interest with sufficient clarity to allow the board to make an informed decision about the director’s participation.
If circumstances change in a way that affects the nature, extent or seriousness of the conflict, the director should clarify or update the original disclosure. A disclosure that was adequate when first made may no longer be sufficient if the relationship deepens, the financial interest increases or the proposed transaction changes.
Nor should a general annual declaration of interests be treated as a substitute for item-specific disclosure. An annual declaration creates a useful record, but it does not excuse a director from raising the matter again when a particular transaction or decision engages that interest.
The register may tell the board that an interest exists. The director must still help the board recognise when that interest has become relevant.
Timing matters.
The disclosure should ordinarily be made before the board begins discussing the relevant matter and certainly before the director participates in any decision.
A declaration made after the director has influenced the debate—or after the decision has already been taken—is not effective disclosure. It is damage control.
Disclosure is also a continuing responsibility. Interests and relationships change, new conflicts emerge and previously disclosed interests may become relevant in new ways. Directors should therefore keep their declarations current, while the organisation should maintain an appropriate register of interests and record disclosures and decisions in the minutes.
There will, of course, be occasions when a director does not recognise a conflict until the discussion is already under way. That is human.
The right response is to pause, disclose the relevant facts and allow the chair or the board—guided by the applicable rules—to determine what should happen next. That may mean remaining for part of the discussion, withdrawing from it, abstaining from the decision or taking some other proportionate step.
The wrong response is to say nothing, continue participating and hope that no one notices.
Disclosure is not an admission of wrongdoing. It does not automatically disqualify a director from contributing, nor does it determine by itself how the conflict must be managed. It simply gives the board the information it needs to protect the integrity of its decision.
A conflict disclosed early and with sufficient specificity can usually be managed. A conflict concealed, obscured by vague language or disclosed only after the outcome is known becomes something more serious: a question not only about the decision, but about whether the board and its directors can still be trusted.
Transparency does not weaken a director’s voice. It is what gives that voice legitimacy.
Read our previous article in this series:
