10.14 A director appointed by a participant may find they feel a conflict between acting in the interests of the JV and in the interests of the participant in circumstances where such interests are not the same. This may be particularly strong where the director is also an employee of the participant who has nominated them. This is an issue which will need careful consideration for civil servants and council officers/members who are nominated as directors and specific advice should be sought were appropriate. Where however a JV has a social purpose allied to the public sector body's statutory purpose, the risk of conflict may be ameliorated. Guidance on the duties and responsibilities of directors is available from Companies House, and this should be read by directors before they sign to accept their directorship. There are also a number of training courses to supplement and reinforce good practice.
10.15 Directors' duties of confidentiality as determined by general law and the company's articles may restrict a director who is also a civil servant from passing any information or certain types of information to the public sector body appointing him or her as a director.
10.16 As of 1 October 2008 the law on directors' conflicts of interests has been codified into the Companies Act 2006. The change widens the duty so that a director must avoid potential conflicts of interest as well as actual conflicts. All actual and potential conflicts of interest must be disclosed to the board of the JV, regardless of the circumstances. The new law, however, does provide the ability for conflicts of interest disclosed by a director of a limited company to be approved by the board of directors (excluding, of course, the directors who have the conflict), whereas the pre-October 2008 law required shareholder approval.
10.17 A JV that was incorporated before 1 October 2008 may have to change its articles to give the board the power to approve conflicts.83 If the JV is incorporated after 1 October 2008, this power is automatically incorporated in its constitution.
10.18 The constitutional documents and JV Agreement can help alleviate the concerns for a director appointed by a participant by:
● reserving certain matters (particularly those where conflicts are likely to arise) to be decided by the participants only and not by the board (see Section 10.1.2);
● imposing a restriction on a director from voting on any issue in which he/she has a conflicting interest;84 or
● by expressly allowing a director to vote on a matter in which they have a conflicting interest, provided that the nature and extent of the director's interest has been fully declared to the board.
10.19 Civil servants acting as directors/partnership administrators have no less obligations and duties and therefore are vulnerable to enforcement action by other government departments/regulatory bodies, or sometimes even their own sponsor department.
10.20 For some of the reasons set out above the issue of when it is appropriate or not for civil servants to act as directors/partnership administrators can be a difficult policy issue and it is important therefore to be aware of potential liabilities, both individually and for the body, and to seek proper legal advice and take out appropriate insurance (see Chapter 8).
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83 This only affects their interests qua the company and does not affect conflict from the parent authority perspective.
84 This is the position at common law and is also set out in the standard Table A of the articles of association.