Duties and obligations of directors

Any agreement between a company and one of its directors, either directly or indirectly, shall, subject to nullity, be submitted for prior authorisation by the board of directors after a report by the auditor.

The same applies to agreements between a company and another company, if one of the company's directors is a partner, director or manager of the company. A director who finds themselves in one of these situations must declare this to the board of directors.

The auditors present a special report to the general meeting on any of these agreements authorised by the board. The above does not apply to normal agreements relating to the company's transactions with customers.

Under penalty of absolute nullity of the contract, the directors of a company are prohibited from obtaining, in any form whatsoever, loans from the company, from being granted an overdraft on a current account or otherwise, as well as from having their commitments to third parties guaranteed or endorsed by it.

All directors are subject to general law and statutory duties relating to conflicts, misuse of position and misuse of information.  In addition, a director of a public company (and the related parties of such a director) may not be given a financial benefit by the company (or a controlled entity) without prior shareholder approval, unless one of the statutory exceptions applies.

Transactions between the company and a director usually do not require the consent of shareholders if such transactions are at arms' length (except in the first years after incorporation), unless a director is discharged from an obligation or is granted a special advantage (in which case the director – if they are also a shareholder – has no voting right).

There is an absolute requirement to disclose any personal interests when transactions with the company and a Board member arise. The company is also expected to have policies in place on how to deal with these interests. These should include excluding the interested Board members from voting on the approval of such transactions.

In the event that a director has a direct or indirect interest of a financial nature which is opposed to the interest of the company with respect to a matter or a transaction upon which the management organ has to decide, the director must give prior notice of the conflict to the other directors.

The declaration of the director as well as any justifications of the decisions taken have to be recorded in the minutes of the meeting of the other directors. The conflicted director may not take part in the deliberations (in case of a collegiate management body), nor vote, with respect to the conflicted decision or transaction.

When all directors have a conflict of interest, the decision or transaction is escalated to the general shareholders’ meeting (or the supervisory board in case of a two-tier structure with a conflict at the management board level).

In the event of failure to observe these rules: the company may claim the directors’ resolution is null; the director who neglected to inform the other directors of their conflict of interest could be found liable for the damages the company incurred; and other directors may be held jointly and severally liable, in the event they could have reasonably been aware of the conflict of interests or it was known to them and they did not ensure compliance with such rules.

Even if the conflict of interest procedure has been observed, the directors may still be held personally and jointly liable for damages suffered by the company or by third parties, if the operation or resolution approved by the directors results in an unjustified benefit for a director, to the detriment of the company.

For listed companies (and their subsidiaries), a specific regime exists for transactions of the company with 'related parties' (in the sense of IAS and IFRS, with the exception of subsidiaries) that's part of the competence of the board of directors. The procedure requires a preliminary assessment by a committee of 3 independent directors, where required assisted by experts, after which the board of directors (excluding directors that are involved in the transaction or the decision) will decide. If all directors are 'involved', the decision must be taken by the general assembly.

A director of a company shall, forthwith after becoming aware of the fact that they are interested in a transaction or proposed transaction with the company, cause to be entered into the interest register and in the event that the company has more than one director, disclose to the board of the company the full nature of the interest.

A transaction entered into by the company in which a director of the company is interested may be avoided by the company at any time before the expiration of six months after the transaction is disclosed to all the shareholders.

The general rule is that a company is prohibited from making a loan to a director of it, or from entering into any guarantee or providing any security in connection with a loan made by any person to such director.

However, the Companies Act makes the following exceptions:

• A private company may make a loan or give a guarantee or security in respect of a loan to a director of it or its holding company provided the transaction has the unanimous assent of all its members.
• A company is not prohibited from providing funds to a director to meet expenditure incurred or to be incurred by the director for the purpose of the company or for the purpose of performing their duties as an officer of the company.
• The company may make a loan to director who is engaged in the salaried employment of the company in accordance with any employee loans scheme approved by the general meeting of the company.
• A company may make a loan or give a guarantee or security in connection with a loan made by any person to a related company.
• The company may also make a loan to a director who holds salaried employment in the company or in a holding company or subsidiary of the company.
• A money lending company may advance funds to a director provided this is done in the ordinary course of business.
• Shareholders of a company may agree to advance a loan to a director if the action is deemed to be validly authorized by the company in terms of the Companies Act, notwithstanding any provision in the constitution of the company.

The Corporations Act sets out special rules for related party transactions between the company and its directors.

Closed Corporations

If a director has an interest, directly or as third-party representative, in acts or contracts involving a "significant amount" of money, those acts or contracts may only be executed, when they are:

• Known and previously approved by the board of directors. The director with the interest must abstain from participating in this decision.
• Adjusted to fair conditions similar to those that usually prevail in the market.

The bylaws may authorize these relevant acts or contracts so that they are not subject to these conditions.

These rules will be not applicable if the act or contract has been approved or ratified by an extraordinary shareholders meeting which has a quorum of two thirds of the shareholders with voting rights.

The Corporations Act assumes the director has an interest in any negotiation, act, contract or operation, where the following persons intervene in it:

• The director, their spouse or certain relatives.
• The companies in which the director is a director or owns, directly or indirectly, 10% or more of the capital.
• The companies in which any of the director's relatives specified above, are directors or own, directly or indirectly, 10% or more of the capital.
• The company's controller or any of their related persons, if the director would not have been appointed without the votes of the shares owned by the controller or their related persons.

As stated by the Corporations Act, a “significant amount” means any act or contract that exceeds 1% of the corporation's capital, provided that this act or contract exceeds the equivalent of 2,000 Unidades de Fomento (approx. USD84,000); or in any case, when it exceeds 20,000 Unidades de Fomento (approx. USD840,000).

All separate acts, contracts and operations that are executed in a period of 12 consecutive months by means of one or more similar or complementary acts, in which there is identity of parties( including related parties) or object, are presumed to constitute one single act, operation or contract.

In addition, minutes of the relevant board meeting must mention the deliberations for approving the terms and conditions of the relevant act or contract. Shareholders shall be informed of these acts or contracts in the next shareholders' meeting.

If these rules are breached, the validity of the act, contract or operation will not be affected. However, relevant sanctions may be applied and the company, the shareholders and the interested third parties, will be allowed to claim compensation for the damages caused.

Listed Corporations

Special rules and provisions apply to related party transactions in listed corporations and their affiliates.

Finally, the Corporations Act exempts some related parties' operations from the requirements and procedures established for them in the law (i.e., operations under a significant amount, customary or ordinary operations determined by the board of directors in accordance with their general habitual policy (política general de habitualidad)).

The resolutions adopted by the board of directors approving a related party transaction shall be disclosed at the next general shareholders’ meeting (Junta de Accionistas) and mention the directors that approved them.

Without the consent of all shareholders, a director may not:

• Conduct their own business in the company’s sphere of activity or business, including in favour of third parties, or act as an intermediary of the company’s business transactions for third parties.
• Be a member of the statutory body of another legal entity engaged in a similar sphere of activity or business, or a person in an equivalent position, unless such entity is within the same group as the company.
• Participate in the business carried out by another business corporation as a member with unlimited liability or as the controlling person of another entity engaged in the same or similar sphere of activity or business.

The Danish Companies Act provides that a company may solely grant loans or make assets available to directors and/or their connected persons provided that certain requirements in the act are met, unless the granted loans etc. are deemed to be in the course of a usual business transaction.

A member of the board of directors cannot participate in the decision-making process of a transaction involving an agreement either between the company and that member or between the company and a third party, if that member has a material interest in such business that may conflict with the interests of the company.

General rules (including disqualification) regarding decision making are applicable to transactions with the directors. Certain loans and collaterals to, and certain transactions with, related parties of the company need to be reported in the annual report.

French law provides that certain agreements concluded directly or through a third party between the company and one of its directors (referred to as related party transactions) must be subject to the approval of the shareholders of the company after their conclusion, upon review of a specific report from the company’s statutory auditors.

Refusal of approval by the shareholders has no consequences for the validity of the agreement:  however, the director concerned and if applicable, the shareholders having entered into the agreement may be held liable for any prejudicial consequence that the agreement may have for the company.

In addition, the bylaws may provide for additional constraints relating to the control procedure.

Certain other agreements, directly or indirectly entered into between an SAS and one of its directors are, under penalty of nullity of the relevant agreement, forbidden:

• To borrow in any form whatsoever from the company.
• To be granted an overdraft by the company, in a current account or otherwise.
• To have the company guarantee or endorse their commitments to third parties.

The same prohibition applies to the spouses, ascendants or descendants of directors and to any intermediary. However, the prohibition does not apply when the director is a legal entity.

There are no general restrictions except that any such transactions must be at arms’ lengths in order to avoid any breach of capital maintenance rules or tax implications. However, a managing director cannot participate in any decision relating to their own discharge or which would give rise to a conflict of interest such as the release of such managing director from a liability.

Unless prohibited by the constitution of the company, a director may contract with the company provided the director declares the nature and extent of their interest in the contract to the company and does not violate any of the duties of a director imposed by Act 992 by reason of their interest in the contract. Act 992 sets out the framework within which the contract between the company and the director may be approved by the board of directors.

The Companies Ordinance (CO) prohibits a private company from making a loan or quasi-loan (if the private company is a subsidiary of a public company) to, or entering into credit transaction as a creditor (if the private company is a subsidiary of a public company) for an entity connected with a director without prescribed approval of disinterested members. The CO also requires members’ approval for directors’ long-term employment (i.e. a term of employment that exceeds or may exceed three years).

In the case of kfts (limited liability companies), approval of entering into a contract between the company and a director (or his relatives) falls within the exclusive competence of the general meeting.

There is no corresponding mandatory rule for zrts (companies limited by shares) by default. However, the articles of association often contain such requirement or if the decision belongs to the board, the affected board members are usually disenfranchised (by the board rules) when voting on the approval of such contracts.

A director is not authorized to represent the company if the concerned director has any conflict of interest with the company. In such a case, the other non-conflicted director would represent the company.

Specifically for listed companies, there are certain rules for transactions carried out by a listed company with a member of its board of directors.

The Act regulates the circumstances in which directors and their connected persons (broadly, family members and connected companies or trusts) can enter into transactions with the company.  The transactions covered by these rules include long term service contracts, loans, guarantees and the disposal or acquisition of substantial assets.  Unless any exemptions apply, these transactions may only be entered into with prior shareholder approval.

OHADA company law provides that certain agreements concluded directly or through a third party between the company and one of its directors must be subject to the approval of the shareholders of the company. 

The failure to secure the shareholders’ approval has no bearing on the validity of the agreement entered into. However, the concerned director or shareholders may be held liable for any adverse consequence such an agreement might have on the company.

In addition, the articles of association may provide for additional constraints relating to the control procedure.

Some agreements, directly or indirectly entered into between a SARL or SA company and one of its directors are, under penalty of nullity, prohibited. A director must not:

• borrow in any form whatsoever from the company
• be granted an overdraft by the company, in a current account or otherwise, or
• have the company guarantee or endorse the director's commitments to third parties.

The prohibition does not apply when the director is a legal entity.

The main restrictions on directors’ transactions with the company concern the operations that can give rise to conflicts of interest (i.e. the circumstances in which an interest of directors and/or their connected persons (broadly, family members and connected companies or trusts) is in conflict with that of the company), which require directors, in general terms, to comply with certain requirements and obligations (such as disclosure to the board and abstention from the vote to implement the transaction).

If a director is to engage in transactions with the company (e.g. the director sells their own property to the company), the director needs to obtain the approval of the board of directors (or, if the company does not have a board of directors, the approval of the shareholders in a shareholders' meeting). The director must disclose all relevant facts to the board of directors (or, if relevant, shareholders) prior to their voting on the matter. The director who is to engage in the transaction is considered as having a "special interest" and such director may not participate in decision-making or make a vote on the transaction at the board of directors' meeting. After the transaction is completed, the director must make specified disclosures to the board of directors (if there is one).

Certain transactions such as acquisition of substantial non-cash assets by directors require shareholder approval. Exceptions to this include transactions on an approved securities exchange and in the case of a company in liquidation or under administration unless the liquidation is a member voluntary liquidation.

Loans, guarantees and security provided by a company to its director also require a resolution of shareholders and where the director is a director of the company's holding company, the transaction also needs to have been approved by a resolution of the members of the holding company.

Further, directors are required to declare their interest in any transaction in which they have an interest contemplated by the company.

In summary, the directors (jointly and individually) have a duty to manage the business in the best interest of the company so as to ensure financial soundness of the company taking into consideration the interest of stakeholders such as shareholders, creditors, regulators and the public.

A manager who has a financial interest in a transaction carried out other than in the ordinary course of business under normal circumstances which conflicts with the interests of the company must advise the Board accordingly and have the statement recorded in the minutes of the meeting. Such manager may not take part in the deliberations concerning that transaction.

A special report on the relevant transaction must be submitted to the shareholders at the next general meeting of the shareholders, before any vote on any other resolution.

Where, by reason of a conflicting interest, the number of managers required to validly deliberate is not met, the Board may decide to submit this specific item to the general meeting of shareholders.

Certain transactions such as competing with the company or becoming a director of a competing company, including the nature and extent of any interest of the director, requires approval of the company.

Similarly if a director who has information in their capacity as a director or employee of the company, being information that would not otherwise be available to them, they must not disclose that information to any person, or make use of or act on the information, except in any other circumstances authorised by the constitution, or approved by the company.

The approval of a company can be obtained:

• in the form of resolution which has been circulated to all the members and is signed by three-fourths of all members entitled to attend and vote at a meeting of shareholders, or
• by an ordinary resolution of the company passed at a meeting of shareholders at which neither the director concerned, nor the holder of any share in which the director is beneficially interested, either directly or indirectly, has voted as member on such resolution, or where such person has voted, such vote or votes are not counted.

The directors that have an interest in a transaction with the company must expressly disclose such conflict of interest and refrain from participating in such dealing, and they remain subject at all times to the duty of loyalty previously mentioned. Additionally, audit committees must provide to the board of directors an opinion of the Chief Executive Officer´s performance and must make the board aware of the status of the company´s audit and internal controls in case any of the high-level officials don´t disclose information regarding conflicts of interests in any transaction that the company enters into. Further, the corporate practices committee must assist the board of directors with all observations/dealings regarding the performance of the relevant directors in relation to such transactions, as well as transactions with related parties, detailing the characteristics of the significant transactions.

Transactions typically take the form of loans, long-term service agreements, and the sale or purchase of important assets. These transactions may only be made with prior shareholder consent, unless an exemption applies.

The New CCom details, strengthens and makes mandatory for all types of companies, rules concerning directors’ transactions with the company. Under the New CCom:

• the company may not grant a loan or a credit to a director, make payments on their behalf, provide a guarantee for an obligation contracted by them, or provide them with advances on remuneration exceeding one-month salary;
• a contract concluded between the company and its director, directly or through a third party, or a contract concluded by the company in which the director is an interested party, without the prior authorisation from the General Assembly, shall be null and void;
• a director who has a direct or indirect interest in a transaction or contract entered into, or which may be entered into by the company shall declare the nature and extent of such interest;
• in the case of a company that issues securities, prior authorization must be given by a resolution of the Board of Directors, in which the interested party cannot vote, with the favourable opinion of the Fiscal Council/Statutory Auditor or of the Audit Committee, as applicable, as well as with the opinion of the external auditor. (These provisions are applicable to an act or contract entered into with companies that are in group relationships with the one in which the contracting party is director); and
• in its annual report, the Board of Directors must specify any authorisations it has granted to directors, and the report of the Fiscal Council/Statutory Auditor or of the Audit Committee, as applicable, must mention the opinions given on such authorisations.

Under common law, the fiduciary relationship between companies and their directors means that contracts between a company and one or more of its directors are voidable by the company at the instance of the company. The rule is the same when the company enters into a contract with another company in which a director of the first mentioned company has an interest.  The contract may, however, be validated if the director in question properly disclosed in full their interest in the contract and the shareholders in general meeting ratified the contract.  It is also possible for the articles to authorise directors to enter into contracts with the company.

The Companies Act sets out in detail the statutory requirements where a director (or officer) has an interest in a contract entered into or proposed to be entered into by the company.  These provisions do not however replace the common law rule, which continues to apply even if the statutory provisions have been complied with.  The voidability of the contract will only be avoided if the articles permit contracts with directors or if the shareholders in general meeting have approved the contract after full disclosure by the interested director.

In essence, the statutory rules provide that:

• A director who is in any way, whether directly or indirectly, materially interested in a contract or proposed contract which is of significance in relation to a company’s business must declare their interest and to give full particulars of their interest. Interests are material and legally subject to disclosure where the director has a serious, substantial or appreciable financial interest in a contract.
• The contracts governed by the statutory disclosure requirement are those which are of significance in relation to a company’s business and which are entered into or to be entered into in pursuance of a resolution taken or to be taken at a meeting of directors of a company, or by a director of the company who either alone or together with others has been authorised by the directors of the company to enter into that contract or any contract of a similar nature.
• A declaration of interest is not effective unless it is made at or before the meeting of directors at which the question of confirming or entering into the contract is first taken into consideration and, if in writing, is read out to the meeting or each director present states in writing that they have read that declaration. The declaration can be verbal, in writing, or even tacit.
• Failure to declare such an interest is a criminal offence and, on conviction, a director may be subject to a fine, imprisonment or both.  In addition to the contract being voidable, the company can recover all profits made by the director under the contract.
• Every declaration of interest must be recorded in the minutes, failing which the company commits an offence (subject to a fine only). A register of directors' interests in contracts must also be kept.
• It is also possible for directors to make an annual, general declaration of interests by notice to the other directors.

When directors enter into a transaction with the company, a conflict of interest might arise. Pursuant to Dutch law directors cannot take part in the deliberation and decision-making process of the board if they have a personal direct or indirect conflict of interest (tegenstrijdig belang). A director has a conflict of interest when their personal interest (persoonlijk belang) is not aligned with the corporate interest (vennootschappelijk belang) of the company and as a result of which it can be reasonably questioned whether such director solely has acted in the interests of the company. If a director does not comply with the provisions on conflicts of interest, the resolution concerned is subject to voidability or nullification (in case of a decisive vote) and this member may be held personally liable towards the company. The voidability or nullification does not have an external effect towards third parties.

When a shareholder enters into a transaction with the company, Dutch law prescribes that such transaction is always recorded in writing unless the transaction is conducted within the ordinary course of business.

The Act regulates the circumstances in which directors and their connected persons (broadly, family members and connected companies or trusts) can enter into transactions with the company. The transactions covered by these rules include long‑term service contracts, loans and the disposal or acquisition of substantial assets.

Provided a director's interest in a transaction is disclosed, and the constitution of the company does not provide otherwise, “interested directors” may vote on any decision by the board.

The constitution of a company may set out specific requirements regarding how such conflicts are managed.

All disclosed directors’ interests must be recorded in the interests register of the company, and unless approved unanimously by all shareholders, shareholders have the right to require the company to establish that it received fair value under any contract in which any director is interested.

Directors must not put themselves in a position where there could be a conflict between their personal interests and their duty to the company. A director who is directly or indirectly, interested in a transaction or a proposed transaction with the company, must immediately notify the directors of such company in writing, specifying nature of their interest.

Generally, Nigerian company law regulates the circumstances under which directors or persons connected to them can enter into transactions with the company, e.g. the disposal or acquisition of substantial company property.  Unless exemptions apply, these transactions may only be entered into with prior shareholder approval.

There are certain restrictions concerning a board member’s and a general manager’s ability to transact with the company.

Neither a board member nor the general manager may participate in the discussion or decision of any matter which is of such particular importance to them or any related party that they must be deemed to have a special and prominent personal or financial interest in the matter.

Nor may a member of the board of directors or general manager participate in any decision to grant a loan or other credit to themselves or to issue security for their own debt.

Directors can only enter into agreements with companies which deal with those operations normally carried out between the company and third parties according to market conditions. The company can only grant loans to directors or grant guarantees on its behalf on similar terms and conditions to such transactions usually executed with third parties.

If the agreements, loans or guarantees do not meet these requirements, the prior approval of the board with the vote of at least two-thirds of its members is required.

The directors are jointly and severally liable to the company and third parties’ creditors for any agreements, loans or guarantees entered into or granted in violation of the above-mentioned provisions.

The Polish Commercial Companies Code regulates the way in which management board members may enter into transactions with the company. Firstly, the execution by a company of a loan agreement, credit agreement, guarantee agreement or a similar agreement with a member of the management board or for the benefit of such member requires consent of the shareholders' meeting. Secondly, in a contract between the company and a management board member, as well as in a dispute with such a member, the company must be represented by the supervisory board (if established at a given company) or a proxy appointed by a resolution of the shareholders' meeting.

Pursuant to the Portuguese Companies Code, any contracts entered into between the company and its directors, directly or through an intermediary, are null and void, if prior authorisation was not given through a resolution approved by the board of directors, in which the party in question cannot vote, and with the consent of the supervisory board. The annual report of the board of directors must specify any such authorisations that were granted and the report from the supervisory board must refer to the statements of opinion drawn up in connection with these authorisations.

Please note that the company is prohibited from granting loans or credit to directors, making payments on their behalf, providing guarantees for obligations assumed by them and granting them salary advances of more than one month.

A director should be expressly authorised in an LLC’s memorandum of association or by way of a power of attorney in order to transact in the name of an LLC. In most cases, such authority is scrutinised in Qatar depending on the nature of the transaction. Merely holding the position of director is not always sufficient in and of itself to permit a director to bind an LLC.

Unless the AoA of the company provide otherwise, the director is only allowed on their own account, to dispose of,  or acquire, assets to or from the company, having a value of more than 10% of the value of the company's net assets, with the prior approval of the GMS, under the sanction of nullity.

The Company Law does not contain similar provisions for the case of  LLCs. However, it may be construed that the same limitation  applies by analogy.

The considerations provided above in relation to the conflict of interests should also be taken into account.

A director should be expressly authorised in an LLC's articles of association or by way of a power of attorney in order to transact in the name of an LLC.

The director is prohibited from taking out loans from the company in any form whatsoever - including being granted a current account overdraft or otherwise and having the company guarantee or endorse their commitments to third parties.

Transactions which are carried out by a company, in the usual way, within the framework of its activities under normal conditions (i.e. those which are applied for similar agreements with the company in question or, possibly, in companies of the same sector), do not require the authorisation of the ordinary general assembly.

All other transactions must be submitted to the authorisation of the ordinary general meeting.

Every director or a chief executive officer of a company who is in any way, whether directly or indirectly, interested in a transaction or proposed transaction with the company shall as soon as is practicable after the relevant facts have come to their knowledge declare the nature and extent of their interest in the proposed transactions at a meeting of directors or by written notice to the company. Save as otherwise provided for in the constitution, the director shall be entitled to vote in the proposed transaction and enter into the proposed transaction.

Nonetheless, a director should also be reminded of their common law fiduciary duty to the company and must not place themselves in a situation in which there is a conflict between their duties to the company and their personal interests or their interests to others.

A director cannot:

• Conclude, in their own name or on their own account, business deals related to the company’s business activity.
• Mediate the company’s business deals for other parties.
• Participate in the business activity of another company as a shareholder with unlimited liability.
• Perform activities as a statutory body or another body of another legal entity with a similar subject of business (unless exemptions under the Slovak Commercial Code apply).

The Articles of Association of a company may stipulate further limitations.

A director or a person related to that director may transact with the company subject to full disclosure of their interests, however that director may not participate in the board's consideration of such transaction and may not vote in respect thereof if they or a related person have a personal financial interest in the matter.

If a director has or knows that a related person has a personal financial interest in a transaction or proposed transaction with the company or in a matter to be considered by the board of directors at a board meeting, the director must:

• Disclose the interest and its general nature before the matter is considered.
• Disclose any material information relating to the matter, and known to the director.
• If present at the meeting, leave the meeting immediately after making any disclosure.
• Communicate to the board at the earliest practicable opportunity, any information which comes to the director’s attention which is of importance to the company, unless the director:
  • reasonably believes that the information is immaterial to the company, generally available to the public or known by the other directors, or
  • is bound by legal or ethical obligation of confidentiality.

With the exception of usual transactions, in standard conditions and with low relevance, directors and their connected persons or companies shall not enter into transactions with the company unless a specific exemption is generally granted by the general shareholders meeting. Please note that this is the general regime. In the special regime for public listed companies (sociedad cotizada) there are some particularities.

There are certain restrictions on a board member's (and such board members' affiliates) ability to transact with the company, including conflicts of interest and loans from the company.

Conflicts of interest

A board member of a Swedish limited liability company may not participate in any stage of the decision process (preparation or decision-making) where there is a conflict of interest. The following situations, among others, constitute conflicts of interest: (i) an agreement between the board member and the company; (ii) an agreement between the company and a third party, where the board member in question has a material interest which may conflict with the interests of the company; or (iii) an agreement between the company and a legal person which the board member is entitled to represent, whether alone or together with another person.

However, there is no conflict of interest where the board member owns all of the shares in the company, whether directly or indirectly through a legal person; and in relation to the situation described at (iii), there is no conflict where the party contracting with the company is an undertaking in the same group as the company or in a group of undertakings of a corresponding nature.

Loans from the company

A Swedish limited liability company may not lend money to any board member of the company or a board member of another company within the same group. Certain affiliates of the board member are also included in this restriction, as well as legal entities controlled by the board member.

The CA and the constitutional documents regulates the circumstances in which directors and their connected persons (broadly, family members and connected companies or trusts) can enter into transactions with the company.  The transactions covered by these guidelines include long term service contracts, loans and the disposal or acquisition of substantial assets.  Unless any expenses  exemptions are stipulated, these transactions may only be entered into with prior shareholder approval.

Tunisian company legislation prohibits the company from granting credit to a manager or to shareholders who are natural persons. It is also prohibited for the company to guarantee or endorse managers' commitments to third parties.

Moreover, any agreement entered into directly or through an intermediary between the company and its manager must be the subject of a report presented to the general assembly either by the manager or by the auditor if there is one. The general assembly will rule on the report without the manager concerned being able to take part in the vote.

The law prohibits companies from making tax-free payments to directors as remuneration or otherwise and from making loss of office payments to them without shareholder approval. Transactions relating to substantial assets with directors their associates/connected persons can only be entered into after the arrangement is approved by the company. Additionally, directors have a statutory duty to declare their interest in any contract or proposed contract with the company and failure to do so may result in personal liability. The law also prohibits the grant of loans to directors, with certain exceptions applicable only to public companies.

Onshore UAE

A director should be expressly authorised in an LLC's memorandum of association or by way of a power of attorney in order to transact in the name of an LLC. In most cases, such authority is scrutinised in the UAE depending on the nature of the transaction and holding the position of director is not always sufficient in and of itself to permit a director to bind an LLC.

Dubai International Financial Centre

The DIFC Companies Law indicates that the validity of an act by a company shall not be called into question on the ground of lack of capacity by reason of anything in its articles of association or by any act of its shareholders. Without limitation to the generality of this position, a person acting in good faith when dealing with the company is not affected by any limitations in its articles of association relating to its directors’ powers to bind the company, or authorise another to bind the company.

With respect to director's transactions with the company, as above, directors must disclose the nature and extent of their personal interests in a proposed transaction or arrangement with the company before it is entered into. Directors must also declare the nature and extent of their interest in a transaction or arrangement that has already been entered into by the company as soon as reasonably practicable.

The Act regulates the circumstances in which directors and their connected persons (broadly, family members and connected companies or trusts) can enter into transactions with the company.  The transactions covered by these rules include long term service contracts, loans and the disposal or acquisition of substantial assets. Unless any exemptions apply, these transactions may only be entered into with prior shareholder approval.

The duty of loyalty requires directors to act in the best interests of the corporation and its stockholders, and not to engage in conflicted or self-interested transactions that are not in the corporation and its stockholders’ best interest. A board considering a transaction in which one or more directors has a conflict of interest can implement procedural safeguards to protect against claims of a breach of duty of loyalty. For example, the director may disclose all material facts relating to a conflict of interest and recuse themselves from the deliberations and decisions regarding the matter, the board may form a committee of directors without conflicts to negotiate and enter into the transaction, and/or the transaction may be made subject to the informed, uncoerced vote of the unconflicted stockholders.

The Companies Act provides that a transaction entered into by a company, in which a director has an interest known to the other party, may be avoided by the company within six months after the transaction is disclosed to all the shareholders.

A director is not permitted to receive financial assistance from the company unless it is done in pursuant of paying them what is owed to them, or the business is one that lends money, or the loan is to help the director buy shares in the company.