Nothing To Declare? New Insights On Disclosing Director's Interests In Company Contracts

• Published date: 22 October 2021
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Contracts and Commercial Law
• Law Firm: Matheson
• Author: Ms Emma Doherty, Jamie Calnan and Jade Du Berry

Irish company law¹ requires all directors of Irish companies to disclose the nature of his or her interest, whether direct or indirect, in a contract or a proposed contract to a meeting of the company's board of directors. The requirement applies to any contract to be entered into by a company which could reasonably give rise to a conflict of interest.

The recent English Court of Appeal decision in Fairford Water Ski Club v Cohoon & Anor² ("Fairford") provides key insights on the factors to be taken into account by directors when determining whether such a declaration should be made, as well as practical steps to discharge the obligation. Fairford is likely to provide persuasive guidance for the Irish courts in respect of any analysis of the relevant provisions as it considered the applicable UK equivalent provision (at the time of the facts of the case)³.

The facts in Fairford

Fairford centres on a dispute concerning a management services agreement (the "MSA") entered into between Fairford Water Ski Club (the "Club") and Craig Cohoon Watersports ("Watersports") in May 2007.

The Club owned a lake with surrounding land, which it used to run a members' club for water skiing and related activities. Watersports operated a water ski school and shop at the lake. Mr Craig Cohoon was both a partner in Watersports and a director of the Club. The Club changed management in 2017 and commenced an action for damages against Mr Cohoon, alleging that he breached his duties as director.

The claim at the centre of Fairford related to the repayment of fees totalling '350,000 paid by the Club to Watersports under the MSA for managing the land between 2007 and 2017. The Club alleged that there was no agreement between the Club and Watersports for the payments to be made and that they constituted unauthorised payments made by Mr Cohoon. The lower court held that, although there was in fact an agreement, the Club was entitled to recover the management fees as Mr Cohoon failed to adequately declare the nature of his interest in the MSA to the board of the Club.

The Court of Appeal subsequently overturned the lower court's decision and held that the declaration made by Mr Cohoon was sufficient to comply with the company law requirements.

Six factors of relevance when determining whether there has been a failure to declare

In overruling the lower court's decision, the language and purpose of the disclosure requirements were examined and the court considered six factors to be...