Director conflicts: being a founder does not remove the duty
Directors owe duties to the company, even when they are also founders, shareholders or investor nominees. Identify conflicts early, disclose relevant interests and follow the correct authorisation and decision process.
Recognise the different kinds of conflict
The Companies Act 2006 includes duties to act within powers, promote the company's success, exercise independent judgement and avoid conflicts. Interests in proposed or existing transactions require their own analysis. A situation conflict and an interest in a specific transaction are related but not identical categories.
Examples include a director's side business, a family-owned supplier, competing board roles or a personal interest in an acquisition. A transaction may be commercially attractive and still require a proper conflict process. Disclosure is not an admission that the transaction is necessarily prohibited.
Check who can authorise and vote
Read the articles and relevant statutory provisions to determine the available authorisation route, quorum and voting restrictions. Do not assume that telling the other founder in a private chat completes the process. Some transactions require additional shareholder approval under specific company-law rules.
Example: A director proposes renting office space from a company owned by their partner. The board should receive the material facts, compare the commercial terms and follow the applicable conflict and approval rules. Minutes should reflect the process and decision without including unnecessary personal detail.
Keep the company's interests in view
An investor-appointed director is not simply an agent who must vote as the investor instructs. Directors must exercise their own judgement within their duties. As insolvency concerns arise, creditor interests and insolvency-specific obligations can become particularly important.
Maintain an interests register as a practical aid and revisit conflicts when circumstances change. Use independent advice or an unconflicted decision maker where appropriate. Do not assume resignation erases every continuing restriction relating to opportunities or information obtained as a director. This guide focuses on private companies in England and Wales and does not replace advice on a specific transaction.
Your next steps
- Identify personal, family, investor and competing-business interests before the decision.
- Check authorisation, quorum, voting and any shareholder approval requirements.
- Record the facts and process while preserving independent judgement.
Sources and scope
General legal information. The contract, applicable jurisdiction and particular facts can change the outcome. This guide does not replace advice on your individual circumstances.