Company directors in The Bahamas may have conflicts of interest that influence their decisions relating to their company. The term “conflict of interest” refers to a situation in which a director may derive a personal benefit, or a benefit to another company with which the director is associated, because of a decision made or action taken in the director's professional capacity for the company. For example, a director choosing to grant a construction contract for building his company's new office to a construction company owned by the director creates a conflict of interest.
Company directors and officers who either have a material contract (proposed or actual) with their company personally or are also directors or officers of another company that has a material contract with the first company must disclose their interests in writing to the companies. Companies Act, Section 107(1). If the contract was (1) approved by the company directors and (2) reasonable and fair to the company at the time it was approved, then the contract is not void or voidable just because the conflicted director was present at the meeting of directors where the contract was authorised. Companies Act, Section 108. See also International Business Companies Act, Sections 112, 113.
Directors with conflicts of interest regarding a material contract must disclose these conflicts at the meeting at which a proposed contract is first considered. If at the time of the meeting the director was not then interested in a proposed contract, he must disclose his interest at the first meeting after he becomes interested. If the director becomes interested after a contract is made, then he must disclose his interest at the first meeting after he becomes interested. If a person who is interested in a contract later becomes a director of the company, then he must disclose his interest at the first meeting after he becomes a director. Companies Act, Section 107(2).
However, if a director or officer fails to disclose his interest in a material contract, the court may set aside the contract (find that the contract was not properly made). The company or one of its members may apply to the court for an order setting it aside. The court will consider whether an intelligent and honest man in the position of a director of the company concerned, could, in the existing circumstances have reasonably believed that the transactions were for the benefit of the company. Charterbridge Corporation Limited v Lloyds Bank Limited & Another  1 Ch 62, 74; Commissioner of Taxpayer Audit and Assessment v Cigarette Co of Jamaica Limited (In Liquidation)  1 WLR 1794.
To find out more about conflicts of interest, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.