Directors' Duties, Conflict of Interest and Related Party Transactions
Directors' duties
CAMA 2020 codifies duties: to act in good faith in the best interests of the company, with care and skill, to avoid conflicts, not to fetter discretions, to exercise powers for proper purposes, and not to accept benefits from third parties. Directors must disclose any interest in a contract or arrangement to the board; failure makes the contract voidable and requires an account of profits.
Conflicts and related-party transactions
Self-dealing is permitted only with full disclosure and, where required, approval by disinterested directors or shareholders. Substantial related-party transactions require shareholder approval and disclosure in the annual report. Ratification by disinterested shareholders may cure a breach, but not fraud on the minority or an act beyond the company's capacity.
Worked example
A director owns a logistics company. Without telling the board, he causes the company to hire it at twice market rates. The company may rescind the contract, recover the excess profit, and sue for breach of duty. If he had disclosed and the board had approved with only disinterested directors voting, there would be no breach.
Traps
Assuming disclosure to one friendly director suffices; thinking resignation ends confidentiality duties; believing ratification is always available.