FLK1 · Multiple-choice practice
FLK1 Business Law — Question 36
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Jane is a director of Tech Solutions Ltd, a company that offers IT equipment and related services to other businesses. Jane recently discovered that one of Tech Solutions’ key clients, Global Corp, is looking for new software solutions. Jane also runs her own separate software company, Innovate Inc. Without informing the board of Tech Solutions, Jane approaches Global Corp on behalf of Innovate Inc. and secures a lucrative contract for her own company. She is confident that Tech Solutions Ltd would not have an interest in offering this sort of software solution to clients, so she didn’t think there was anything worth discussing internally. Which of the following statements best describes Jane’s position?
Answer and explanation
Correct answer: C. Jane has breached her duty to avoid conflicts of interest.
Under section 175 of the Companies Act 2006, a director must avoid situations in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. Jane has a fiduciary duty to act in the best interests of Tech Solutions Ltd and must avoid any conflict of interest. By securing a contract for her own company, Innovate Inc., without informing the board of Tech Solutions Ltd, Jane has placed herself in a position of conflict and failed to disclose a potential competing interest (the area of activity is not distinct). It is not up to Jane to make a determination on whether Tech Solutions would be interested, and a conflict can only be absolved via disclosure, something that has not happened in this case.
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