Movitex Ltd v Bulfield
The rule against conflicts of interest is a disability rather than a duty, so a company's articles can validly allow directors to have interests in transactions with the company if they disclose them.
Facts
Movitex sold some properties to companies in which some of its directors were interested. The articles of Movitex allowed directors to be interested in transactions with the company, provided that they declared their interests and did not vote on the matter. The company later challenged the transactions, arguing that the provision in the articles was void under section 205 of the Companies Act 1948, which made void any provision exempting directors from liability for breach of duty.
Legal principle
Vinelott J held that the provision in the articles was valid. He said that the rule against self dealing is not a duty imposed on directors, but a disability, which prevents a director from entering into transactions in which he has a conflicting interest unless the company consents. A provision in the articles that modifies the disability is therefore not an exemption from liability for breach of duty, and was not caught by the statute. The position is now governed by sections 175, 177 and 180 of the Companies Act 2006.
Related cases on directors' duties: conflicts of interest
- Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461
- Bhullar v Bhullar [2003] EWCA Civ 424, [2003] 2 BCLC 241
- CMS Dolphin Ltd v Simonet [2001] 2 BCLC 704
- Cook v Deeks [1916] 1 AC 554
- Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200
- Fulham Football Club Ltd v Cabra Estates plc [1994] 1 BCLC 363
- Guinness plc v Saunders [1990] 2 AC 663
- Imageview Management Ltd v Jack [2009] EWCA Civ 63, [2009] Bus LR 1034
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