FLK1 · Multiple-choice practice

FLK1 Business Law — Question 2

Question

David is a director of a private limited company. He receives a personal discount offer from one of the company’s suppliers (a travel company) for a holiday package to the Maldives. He accepts the offer and books the holiday using the company credit card. Which of the following is true?

David is not required to disclose the holiday to the other directors as it is a personal matter.
David can use the company credit card for personal expenses as long as he reimburses the company.
David is in breach of his duty to act in the best interests of the company under s.170 of the Companies Act 2006.
David is in breach of his duty to avoid conflicts of interest under s.175 of the Companies Act 2006.
David’s actions are permissible as long as the holiday does not exceed the value of £500.

Answer and explanation

Correct answer: D. David is in breach of his duty to avoid conflicts of interest under s.175 of the Companies Act 2006.

A director is required to avoid situations in which they have, or could have, a direct or indirect interest that conflicts, or may conflict, with the interests of the company (s.175, Companies Act 2006). By using the company credit card to purchase a personal holiday from a company supplier, David has put himself in a position of conflict of interest. C looks like a plausible answer but references the wrong statutory provision. The other potential answers are wrong.

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