HC-2 HC-2 Directors and Officers Loyalty
HC-2.1 HC-2.1 Principle
HC-2.1.1
The directors and officers must have full loyalty to the company.
July 2011HC-2.2 HC-2.2 Personal Accountability
HC-2.2.1
Each member of the board must understand that under the Commercial Companies Law he is personally accountable to the company and the shareholders if he violates his legal duty of loyalty to the company, and that he can be personally sued by the company or the shareholders for such violations.
Amended: April 2013
July 2011HC-2.2.2
The duty of loyalty includes a duty not to use property of the company for his personal needs as though it was his own property, not to disclose confidential information of the company or use it for his personal profit, not to take business opportunities of the company for himself, not to compete in business with the company, and to serve the company's interest in any transactions with the company in which he has a personal interest.
July 2011HC-2.2.3
For purposes of Rule HC-2.2.2, a director or officer should be considered to have a "personal interest" in a transaction with the company if:
(a) He himself; or(b) A member of his family (i.e. spouse, father, mother, sons, daughters, brothers or sisters); or(c) Another company of which he is a director or controlling shareholder,is a party to the transaction or has a material financial interest in the transaction. (Transactions and interests which are de minimis in value should not be included.)
Amended: January 2012
July 2011HC-2.3 HC-2.3 Avoidance of Conflicts of Interest
HC-2.3.1
Each director and officer must make every practicable effort to arrange his personal and business affairs to avoid a conflict of interest with the company.
July 2011HC-2.3.2
The board must establish and disseminate to its members and management, policies and procedures for the identification, reporting, disclosure, prevention, or strict limitation of potential conflicts of interest. It is senior management's responsibility to implement these policies. In particular, the CBB requires that any decisions to enter into transactions, under which approved persons would have conflicts of interest that are material, should be formally and unanimously approved by the full board. Best practice would dictate that an approved person must:
(a) Not enter into competition with the company;(b) Not demand or accept substantial gifts from the company for himself or connected persons;(c) Not misuse the company's assets;(d) Not use the company's privileged information or take advantage of business opportunities to which it is entitled, for himself or his associates; and(e) Absent themselves from any discussions or decision-making that involves a subject where they are incapable of providing objective advice, or which involves a subject or (proposed) transaction where a conflict of interest exists.July 2011HC-2.4 HC-2.4 Disclosure of Conflicts of Interest
HC-2.4.1
Each director and officer must inform the entire board in writing of conflicts of interest immediately as they arise. Board members must abstain from voting on the matter in accordance with the relevant provisions of the Commercial Companies Law. This disclosure must include all material facts in the case of a contract or transaction involving the director or officer. The directors and officers must understand that any approval of a conflict transaction is effective only if all material facts are known to the authorising persons and the conflicted person did not participate in the decision and that such information must be disclosed in the annual report.
Amended: April 2013
July 2011HC-2.4.2
The board should establish formal procedures for:
(a) Periodic disclosure and updating of information by each director and officer on his actual and potential conflicts of interest; and(b) Advance approval by disinterested directors or shareholders of all transactions in which a company director or officer has a personal interest. The board should require such advance approval in every case.July 2011HC-2.4.3
Any conflict transaction or contract that could be considered material should be tabled at a shareholders meeting for approval.
July 2011HC-2.5 HC-2.5 Disclosure of Conflicts of Interest to Shareholders
HC-2.5.1
The company must disclose to its shareholders in the Annual Report any abstention from voting motivated by a conflict of interest and must disclose to its shareholders any authorisation of a conflict of interest contract or transaction in accordance with the Commercial Companies Law.
July 2011
