Blurred Lines: Decoding Conflict of Interest for Directors!

"Ma’am, it’s just a routine contract—should be a quick approval.”

She looked up from the board agenda, eyes narrowing slightly.

“Who’s the vendor?”

The name seemed ordinary. But to her, it wasn’t.

It was her cousin’s firm—one she hadn’t spoken to in years.

No operational connection. But a family tie, nonetheless.

𝑾𝒉𝒂𝒕 𝒘𝒐𝒖𝒍𝒅 𝒚𝒐𝒖 𝒅𝒐?

In boardrooms, conflict of interest doesn’t always announce itself with flashing lights. Sometimes it hides quietly—in bloodlines, old partnerships, or forgotten shareholdings. But for a director, silence is never neutral. It’s risky.

𝑺𝒐 𝒘𝒉𝒂𝒕 𝒅𝒊𝒅 𝒔𝒉𝒆 𝒅𝒐?

𝑺𝒉𝒆 𝒅𝒊𝒔𝒄𝒍𝒐𝒔𝒆𝒅. 𝑺𝒕𝒆𝒑𝒑𝒆𝒅 𝒐𝒖𝒕. 𝑨𝒏𝒅 𝒆𝒏𝒔𝒖𝒓𝒆𝒅 𝒉𝒆𝒓 𝒓𝒆𝒄𝒖𝒔𝒂𝒍 𝒘𝒂𝒔 𝒏𝒐𝒕𝒆𝒅 𝒊𝒏 𝒕𝒉𝒆 𝒎𝒊𝒏𝒖𝒕𝒆𝒔.

𝑾𝒉𝒂𝒕 𝑰 𝒃𝒆𝒍𝒊𝒆𝒗𝒆 𝒊𝒔 𝒕𝒉𝒂𝒕 - 𝑩𝒆𝒄𝒂𝒖𝒔𝒆 𝒊𝒏 𝒕𝒐𝒅𝒂𝒚’𝒔 𝒈𝒐𝒗𝒆𝒓𝒏𝒂𝒏𝒄𝒆 𝒄𝒍𝒊𝒎𝒂𝒕𝒆, 𝒄𝒐𝒏𝒄𝒆𝒂𝒍𝒎𝒆𝒏𝒕—𝒏𝒐𝒕 𝒄𝒐𝒏𝒇𝒍𝒊𝒄𝒕—𝒊𝒔 𝒕𝒉𝒆 𝒓𝒆𝒂𝒍 𝒆𝒏𝒆𝒎𝒚.

If you sit on a board in India—listed or private—here are 7 key truths you should never ignore when conflict of interest comes knocking:

1. 𝑫𝒊𝒔𝒄𝒍𝒐𝒔𝒆 𝑬𝒂𝒓𝒍𝒚. 𝑫𝒊𝒔𝒄𝒍𝒐𝒔𝒆 𝑹𝒊𝒈𝒉𝒕. Section 184 of the Companies Act, 2013 demands written disclosure of direct or indirect interest—either at the first board meeting of the year or when the interest arises.

2. 𝑫𝒐𝒏’𝒕 𝑺𝒕𝒂𝒚 𝒊𝒏 𝒕𝒉𝒆 𝑹𝒐𝒐𝒎. If conflicted, step away from discussion and decision. Let the minutes show it. Silence isn’t golden here.

3. 𝑻𝒉𝒆 𝑹𝑷𝑻 𝑻𝒓𝒂𝒑: If it’s a Related Party Transaction (Section 188 / SEBI LODR), ensure prior approvals and transparent disclosures are in place.

4. 𝙄𝙣𝙙𝙚𝙥𝙚𝙣𝙙𝙚𝙣𝙩𝙨, 𝙎𝙩𝙖𝙮 𝘼𝙬𝙖𝙠𝙚. Even perceived conflicts count. Independent directors are guardians of stakeholder confidence. Perception is reality.

5. 𝙎𝙘𝙧𝙪𝙩𝙞𝙣𝙞𝙯𝙚 𝙩𝙝𝙚 𝘼𝙜𝙚𝙣𝙙𝙖. Look deeper than what’s printed. Scan for links—past, personal, professional—that could cloud judgment.

6. 𝙏𝙧𝙪𝙨𝙩 𝙩𝙝𝙚 𝘼𝙪𝙙𝙞𝙩 𝘾𝙤𝙢𝙢𝙞𝙩𝙩𝙚𝙚—𝙗𝙪𝙩 𝙫𝙚𝙧𝙞𝙛𝙮. For listed entities, this is your filter. Ensure decisions are backed by clear rationale and records.

7. 𝙈𝙖𝙠𝙚 𝙏𝙧𝙖𝙣𝙨𝙥𝙖𝙧𝙚𝙣𝙘𝙮 𝙖 𝙃𝙖𝙗𝙞𝙩. Create a culture where directors want to disclose. Maintain a conflict register. Normalize integrity.

𝑺𝒐 𝒏𝒆𝒙𝒕 𝒕𝒊𝒎𝒆 𝒚𝒐𝒖 𝒕𝒉𝒊𝒏𝒌, “𝑰𝒔 𝒕𝒉𝒊𝒔 𝒆𝒗𝒆𝒏 𝒂 𝒓𝒆𝒂𝒍 𝒄𝒐𝒏𝒇𝒍𝒊𝒄𝒕?”—𝒓𝒆𝒎𝒆𝒎𝒃𝒆𝒓: 𝑰𝒇 𝒚𝒐𝒖’𝒓𝒆 𝒂𝒔𝒌𝒊𝒏𝒈, 𝒚𝒐𝒖 𝒑𝒓𝒐𝒃𝒂𝒃𝒍𝒚 𝒏𝒆𝒆𝒅 𝒕𝒐 𝒅𝒊𝒔𝒄𝒍𝒐𝒔𝒆.

𝑳𝒆𝒕’𝒔 𝒃𝒖𝒊𝒍𝒅 𝒃𝒐𝒂𝒓𝒅𝒓𝒐𝒐𝒎𝒔 𝒘𝒉𝒆𝒓𝒆 𝒕𝒓𝒂𝒏𝒔𝒑𝒂𝒓𝒆𝒏𝒄𝒚 𝒊𝒔𝒏’𝒕 𝒃𝒓𝒂𝒗𝒆—𝒊𝒕’𝒔 𝒋𝒖𝒔𝒕 𝒔𝒕𝒂𝒏𝒅𝒂𝒓𝒅.

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