Undisclosed Interest

An undisclosed interest in director and shareholder disputes refers to a situation where a director or shareholder has a personal or financial interest in a matter that conflicts with the company’s interests, and this interest has not been appropriately declared.

This can include situations where a director has a stake in a competing business, stands to gain personally from a company transaction, or has family members benefiting from the company’s decisions. Such undisclosed interests can create mistrust and suspicion among other shareholders and board members, leading to disputes that challenge the integrity of the company’s governance and decision-making processes.

In our experience, there are several common examples of undisclosed interests in company disputes including:

1. Personal Investments: A director or employee has a significant financial investment in a supplier or competitor but does not disclose this when the company is making decisions involving that supplier or competitor.
2. Family Relationships: A member of the company’s management team is involved in hiring or contract negotiations with a company owned or operated by a close family member, without disclosing this relationship.
3. Kickbacks or Bribes: An individual receives personal benefits, such as kickbacks or bribes, from a third party in exchange for influencing the company’s business decisions in favour of that third party.
4. Real Estate Transactions: A company officer secretly owns a piece of real estate and influences the company to enter into a lease or purchase agreement for that property, without disclosing their ownership interest.
5. Corporate Opportunities: An individual learns of a business opportunity through their role in the company (like a potential acquisition or investment) and takes advantage of it for personal gain, without informing the company.
6. Consulting or Side Businesses: An employee or director runs a consulting business or side venture that competes with or serves the company’s competitors, suppliers, or clients, without disclosing this activity to the company.
7. Board Memberships: A company executive serves on the board of another organisation where decisions made can impact both entities, and this dual role is not disclosed.

If you have concerns about undisclosed interests, please do not hesitate to call us for a Free Consultation on 0207 459 4037 today. We are here to assist you.

Yes, directors and shareholders are legally required to disclose any potential conflicts of interest to prevent any bias in decision-making.

Our legal team assists clients in understanding these obligations and ensuring compliance. For directors, we provide proactive advice on managing and declaring interests, and for shareholders, we offer support in ensuring that their rights are protected in cases of non-disclosure. If you require guidance on disclosure obligations, contact our lawyers for a Free Consultation on 0207 459 4037.

Failing to disclose an interest as a director or shareholder can have serious legal consequences. For directors, it can lead to legal action for breach of fiduciary duty, director disqualification, and potential personal liability. For the company, it could result in the invalidation of contracts and loss of shareholder trust.

Our legal team assists in mitigating these risks by providing comprehensive legal support. We represent directors facing allegations of non-disclosure, helping them to navigate the legal challenges and defend their actions. For shareholders, we pursue appropriate remedies to address the breach of duty, including compensation for any losses incurred due to the undisclosed interest.

To book a Free Consultation with our expert dispute resolution lawyers, you can call us on 0207 459 4037 or you can use our online booking form.

Undisclosed interests can significantly impact a company’s operations, leading to conflicts of interest and decision-making that may not align with the company’s best interests. These conflicts can manifest in various forms, such as directors approving contracts where they have a personal stake or making decisions that benefit them at the company’s expense.

Our legal experts specialise in identifying and resolving these conflicts. We work closely with companies to implement policies that prevent undisclosed interests and provide legal solutions when conflicts arise, ensuring that the company’s interests are protected and that all actions follow legal standards.

When a director’s undisclosed interests come to light, it often leads to allegations of breaching fiduciary duties. Such allegations are serious and can damage a director’s reputation and the company’s standing.

Our legal team provides robust defence services to directors facing these allegations, examining the circumstances of the disclosure, and crafting a strong defence strategy. We also guide shareholders in bringing forth claims against directors for breaching their fiduciary duties, ensuring that the legal process is handled efficiently and effectively to protect their interests.

Proper disclosure of interests is a critical component of corporate governance. Directors need to be transparent about their personal and financial interests to avoid conflicts. Our team assists directors in establishing processes for regular disclosure and provides advice on managing any disclosed interests.

For shareholders, we ensure that their rights are protected and that the company adheres to the highest standards of transparency and integrity. We offer guidance on legal requirements for disclosure and help implement best practices in corporate governance.

To book a Free Consultation with our expert dispute resolution lawyers, you can call us on 0207 459 4037 or you can use our online booking form.

The discovery of undisclosed interests can often occur during litigation through the process of disclosure and examination of evidence. However, more typically it is important to have:

1. Conflict of Interest Policies: Establishing robust conflict of interest policies is a first step. These policies should require regular disclosures from directors, officers, and employees about their outside interests, investments, and relationships that could potentially conflict with their duties to the company.
2. Routine Declarations: Mandating routine and regular declarations from employees and board members about their financial interests, business dealings, and other potential areas of conflict helps in early identification of undisclosed interests.
3. Whistleblower Protections: Implementing a whistleblower policy encourages employees to report any suspected undisclosed interests or unethical behaviour. Ensuring anonymity and protection from retaliation is crucial for this to be effective.
4. Audits and Financial Reviews: Regular internal and external audits can help uncover discrepancies or unusual transactions that might suggest undisclosed interests or conflicts of interest.
5. Background Checks: Conducting thorough background checks on employees, especially in senior management and sensitive positions, can reveal potential conflicts of interest.
6. Monitoring Business Relationships: Keeping a close eye on the company’s relationships with suppliers, clients, and partners can sometimes uncover undisclosed interests, especially if certain relationships or transactions seem unusually favourable without clear justification.

Our legal team is skilled in employing investigative techniques and legal discovery tools to uncover undisclosed interests. We scrutinise company records, communications, and transactions to reveal any conflicts of interest. For clients involved in litigation, our thorough approach ensures that all pertinent information is uncovered and effectively used to strengthen their case.

We offer bespoke solutions to protect your interests. Contact us for a Free Consultation to discuss how we can help you navigate these complex issues. Call us on 0207 459 4037.

Yes, shareholders can indeed take legal action against directors for failing to disclose interests. When a director neglects their duty to disclose a conflict of interest, it may constitute a breach of their fiduciary duties. Shareholders have the right to challenge such breaches to protect their interests and the integrity of the company.

Our lawyers assist shareholders in understanding their rights and the process for initiating legal action, including the possibility of a derivative action where the claim is brought on behalf of the company. We provide expert advice and representation to ensure that shareholders can effectively hold directors accountable for their non-disclosure. Contact us for a Free Consultation; call us on 0207 459 4037 or complete our online booking form.

There are certain exceptions to the duty of directors to disclose interests. These may include:

1. De Minimis Interests: If an interest is very minor or insignificant, it may not need to be disclosed. This is often judged by whether the interest could realistically influence the individual’s decisions or actions concerning the company.
2. Pre-Approved Transactions: In some cases, certain types of transactions or relationships may be pre-approved by the board or a company policy as not requiring disclosure. This typically applies to situations where there is a clear understanding that these interests do not present a meaningful conflict.
3. Common Knowledge: If an interest is already common knowledge among the board members or within the company, further disclosure might not be necessary. However, this depends on the assurance that all relevant parties are indeed aware of the interest.
4. Statutory Exemptions: Specific laws or regulations may provide exemptions for certain types of interests or under certain conditions. It is important to consult the relevant laws in your jurisdiction to understand these exemptions.
5. Board Discretion: In some cases, the board might determine that an interest does not need to be disclosed because it does not create a real conflict of interest. This decision should be made carefully and documented properly.
6. Legal Privilege: There may be situations where disclosure of certain interests is protected by legal privilege. For example, legal advice received by a director in their individual capacity might not need to be disclosed.
7. Contractual or Policy-Based Exemptions: Some companies may have specific policies or contractual agreements that define certain exemptions to the disclosure requirement. These should be crafted to ensure they do not conflict with legal obligations.

Our legal team advises directors on the scope of their disclosure obligations and assists in determining whether any exceptions apply in their situation.

If undisclosed interests are discovered, shareholders have several remedies available. These may include seeking an injunction to stop a transaction influenced by the undisclosed interest, claiming damages for losses suffered due to the breach of duty, or seeking the rescission of contracts that were entered into under the influence of the undisclosed interest.

Our lawyers guide shareholders through the legal process to obtain these remedies, ensuring their rights are protected and that appropriate compensation is secured.

An independent investigation can be a crucial step in uncovering undisclosed interests. This might involve reviewing financial records, company communications, and other relevant documents.

Our team can oversee or facilitate these investigations, working with forensic accountants and other experts as necessary. We ensure that the investigation is thorough and that all findings are accurately documented and can be used effectively in any subsequent legal proceedings.

The Articles of Association serve as a key document in a company’s governance, often including specific provisions regarding the management of conflicts of interest and procedures for their disclosure. These provisions are crucial as they outline the expectations and processes directors should follow when disclosing personal interests.

Our legal team can work closely with our corporate team to assist companies in drafting these provisions to ensure they are comprehensive and in line with legal standards. We also advise directors on adhering to these internal regulations, providing clarity on their responsibilities and the consequences of non-compliance. For shareholders, we offer guidance on how the Articles of Association can be used to enforce directors’ compliance with disclosure obligations, ensuring that the company operates with integrity and transparency.

The statute of limitations for claims related to undisclosed interests typically aligns with the general limitation periods for breach of fiduciary duty or contract in the UK, which is 6 years from the date of the breach. This period is crucial as it determines the timeframe within which legal action must be started by way of a Court claim form.

However, the concept of the date of knowledge (under section 14 of the Limitation Act) becomes particularly relevant i.e. you do not become aware of the breach until after the limitation period for example. In cases of deliberate concealment (section 32 of the Limitation Act), the statute of limitations may not start running until the claimant discovers the undisclosed interest or could reasonably have been expected to discover it. This means if a director or an officer of a company deliberately conceals their conflicting interest, the time limit for bringing a claim against them might only begin when this concealment is uncovered or should have been uncovered with reasonable diligence.

This approach ensures that individuals who conceal their conflicts of interest cannot simply rely on the passage of time to avoid legal repercussions. It also underscores the importance of vigilance and due diligence in corporate governance, as the discovery of such issues can sometimes occur many years after the initial concealment.

Yes, the presence of undisclosed interests can significantly affect the validity of company transactions or agreements. If a transaction is entered into where a director has an undisclosed conflict of interest, the transaction may be deemed void or voidable. This could lead to significant legal and financial implications for the company.

Our legal team advises on the ramifications of such conflicts on company agreements and assists in the legal processes to address and rectify these issues. We work to safeguard the company’s interests, ensuring that any agreements made under the shadow of undisclosed interests are thoroughly examined and appropriately challenged or upheld. Contact us for a consultation to discuss how we can assist you. Call us on 0207 459 4037 for a Free Consultation.

The consequences for directors who fail to disclose interests can be severe. Apart from potential personal liability for losses suffered by the company due to their breach of duty, directors may also face disqualification from serving as a director in any company for a significant period. Additionally, there are reputational risks that can impact their professional career and personal standing.

Our lawyers offer robust defence and support services to directors facing these allegations, helping them navigate the complexities of such claims. We provide strategic advice, prepare defence arguments, and represent them in legal proceedings, aiming to mitigate the consequences and protect their professional standing. Please call us for a Free Consultation on 0207 459 4037.