The conflict of interest register
Declaring an interest is the easy half. The register only protects the board if it also proves the recusal, the recalculated quorum and the vote taken without the conflicted member.
What goes in a conflict of interest register?
Standing interests declared on appointment and refreshed annually, situational interests declared against a specific agenda item, the date of each declaration, what the board decided to do about it, and the record of the vote that followed. A register of declarations alone records the disclosure without recording the protection.
- Two kinds of interest
- Recusal has to be visible in the record
- Refresh and publication
- How Mithaq handles it
Two kinds of interest
A standing interest is a fact about the director: another directorship, a shareholding, a family member employed by a supplier. It is declared once on appointment, refreshed on a fixed cycle, and it is visible to the board whether or not it is relevant today.
A situational interest arises from an item. The board is about to consider a contract with a company the director's brother owns. This one is declared at the meeting, against the item, and it is the kind that gets lost because it is verbal and the minute writer is summarising.
A register that only holds the standing kind looks complete and protects nothing, because the disputes are almost always about a specific transaction.
Recusal has to be visible in the record
The protection a board wants is a sequence of four facts in one minute: the interest was declared before the item was discussed, the member withdrew from the discussion, the quorum was recalculated without them, and the vote was taken and carried by the remaining members.
Boards commonly record the first and skip the other three, then discover under challenge that the record shows an interested director present throughout an item they were supposed to be excluded from. Nothing improper may have occurred. The record simply cannot show that it did not.
Where a conflict is severe and recurring, the answer is not a better minute. It is a change of composition, or a standing exclusion from a category of business, recorded once and applied automatically.
Refresh and publication
An annual refresh is the minimum, and it should require a positive response from every director, including a positive "no change". A blank return is ambiguous: it might mean nothing changed, or it might mean the form was never opened.
Whether the register is published depends on the entity. Listed companies and many public bodies publish at least a summary. For everyone else, the useful discipline is to write the register as though it will be read externally, because the moment it matters, it will be.
How Mithaq handles it
Mithaq holds conflicts as records attached to a member and, where relevant, to a specific item, so a declaration is a dated object rather than a sentence in a paragraph. Decisions record who voted, which is what turns a declaration into evidence of recusal.