Conflicts and related-party protocol for multi-jurisdiction boards

A conflicts and related-party protocol sets out how a board identifies a director's personal interest in a transaction, what must be disclosed, and whether the director may take part in the decision at all. Groups with boards in more than one jurisdiction cannot rely on a single house rule, because the disclosure duty, the register entry and the consequence of getting it wrong are set separately in each place the group has a board. The protocol is drafted once and applied consistently, but the content of each jurisdiction's chapter has to be checked against what that jurisdiction actually requires, not assumed from the jurisdiction the group is used to.

A holding company's subsidiary director also sits on the board of a counterparty in a supply contract the subsidiary is about to sign. Nobody in the group flagged it, because the director appointment happened two years ago and the contract sits with a different team. The conflict existed from the date of the appointment. The exposure starts running from the date the board approves the contract without the interest recorded.

This page sets out when the work is needed, what it produces, and what falls outside an advisory engagement.

The situation a conflicts and related-party protocol has to solve

The pattern repeats across group structures more often than boards expect. A director sits on two boards within the same portfolio and a transaction runs between the two companies. A family-owned group has the same three people on every subsidiary board, and a related-party loan between two entities never reaches a formal disclosure step because everyone already knows about it informally. A private-equity portfolio company appoints a partner from the sponsor as director, and that director later negotiates a management services agreement between the portfolio company and a sponsor affiliate. In each case the conflict is not hidden. It is simply not recorded, and an unrecorded conflict is treated, on review, as an undisclosed one.

The work usually begins with a mapping exercise: which directors sit where, which of those appointments create an interest in a transaction the group is entering or renegotiating, and which of the group's jurisdictions attach a formal consequence to a director acting on an undisclosed interest. A group whose director appointment terms were drafted for one jurisdiction and then rolled out across the group without local review is a common starting point, because appointment terms drafted for one board rarely say anything about a director's duty when sitting on a related board. The mapping exercise that identifies where a group's director duties actually sit is often the first step, before the protocol itself is drafted.

A board sitting in the Abu Dhabi Global Market can see how one such protocol is drafted and filed in that specific setting on the page covering the Abu Dhabi Global Market, which is the level of detail this work moves to once the group structure has been mapped and the jurisdictions identified.

What triggers the work, and why timing matters

Four situations tend to bring this forward. A new director appointment onto a board that already has related-party exposure elsewhere in the group. A transaction being negotiated between two group entities, or between a group entity and a director's outside interest. A restructuring or a merger, where boards are combined and appointments carried over without re-testing the conflicts each one now creates. And, less comfortably, a conflict discovered after a transaction has already closed, usually during a financing round or an audit, when a counterparty's due diligence asks a question the group had not asked itself.

Timing matters more than the drafting itself. The disclosure obligation runs from the point a director becomes aware of an interest, not from the date the transaction eventually closes, and a board decision taken before that disclosure is recorded is difficult to unwind once the transaction has gone through. This is where the directors' duties and personal liability question becomes concrete: a director who takes part in a decision without disclosing an interest is exposed personally, in a way that the company's own indemnity provisions do not necessarily reach.

A board that has already identified a live conflict and has not decided how to record it is not looking at a drafting question. It is looking at a decision that either gets made correctly, with the interest disclosed and the conflicted director excluded from the vote, or gets made in a way that stays open to challenge for as long as the transaction has consequences.

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Assess your director exposure

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What the work produces, in sequence

The engagement produces a defined set of artefacts, in a fixed order, rather than a single advisory memorandum.

• A map of director appointments across the group and the interests each one creates, set against a live or planned transaction.
• A marked-up conflicts and related-party protocol, drafted for the group's actual jurisdictions rather than adapted from a template written for one of them.
• A set of resolution wording for the board to adopt, disclosing the interest and recording who abstained, in a form the minute book can carry without later amendment.
• A short board pack explaining the protocol to directors who have not seen one before, so the disclosure step is understood rather than treated as a formality.
• A note on how the process is recorded where the board meets by video rather than in person, since a conflicted director's exclusion from the vote has to be visible on the record either way.

The sequence matters because a protocol drafted before the mapping exercise tends to describe a process the group's actual boards cannot follow. The board resolution wording this work produces is written to be entered into the minute book directly, not reworded by whoever is running the meeting. Where a board is asking whether the disclosure step can be handled in a meeting held over video, that question is addressed separately, and the answer differs from the question of whether the shareholders can meet the same way.

Where this differs by jurisdiction

This work does not produce one protocol and roll it out unchanged. Coverage differs by jurisdiction in a way that changes the drafting, not just the language it is written in. Some jurisdictions attach a statutory disclosure duty directly to the office of director, with a defined consequence for breach. Others leave the point to the company's own constitution, so the protocol has to be checked against the articles of each entity rather than against a statute. A number of common-law jurisdictions treat the duty as part of the general duty of loyalty a director owes the company, without a separate related-party rule at all, which changes what "disclosure" has to look like in practice.

The distinction between a civil-law board and a common-law board is not cosmetic here. The general shape of that difference, and why it affects how a conflicts and related-party protocol is drafted, is set out on the comparison of how civil-law and common-law systems treat director duties. A group with boards on both sides of that line needs two chapters, not one chapter translated.

The point at which a related-party transaction becomes visible on a public register also differs by jurisdiction, and the clock for that visibility starts when the transaction is entered on the company's books, not when someone outside the group happens to notice it. A group that assumes the same filing rhythm applies everywhere is usually the group that discovers, during due diligence, that one jurisdiction's register already shows the transaction and another jurisdiction's does not.

What this service does not include

This engagement does not include acting as a director, secretary, nominee shareholder or trustee for the group, and it does not include supplying, sourcing or arranging any of those roles from a third party. It does not extend to any activity for which a trust or corporate service provider licence is required. This is not a matter of preference. In a number of the jurisdictions this work covers, providing or arranging a director is a licensed activity, and a firm that is not licensed for it cannot offer it, whatever the client's convenience would suggest.

What the engagement does deliver instead is the mapping of the group's actual appointments, the criteria a board should apply to decide whether a conflict exists, a review of the appointment terms already in place, and an assessment of the exposure a specific director carries under the transaction in front of the board. That is a different, narrower and more defensible piece of work than sourcing a person to sit on the board, and it is the piece of work a licensed provider elsewhere in the group's structure still needs, whoever that provider turns out to be.

The following bridge applies where a board is deciding whether to update its protocol before or after signing a pending transaction.

A board that signs first and updates its protocol afterward has closed off the option of disclosing the interest before the decision was taken, and correcting the record afterward is not the same thing as having disclosed it at the time.

Assess your director exposure

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Frequently asked questions

What happens if a conflicts and related-party protocol is not addressed?

The conflict does not disappear for being unrecorded. A transaction approved without disclosure remains open to challenge for as long as anyone with standing can raise it, and the director who took part in the vote carries personal exposure separately from the company's own position.

How often should a conflicts and related-party protocol be reviewed?

Review it whenever a director appointment changes, whenever a new related-party transaction is proposed, and at a fixed point each year regardless of whether either has happened, because appointments accumulate conflicts quietly between reviews.

Does a conflicts and related-party protocol change for a foreign-owned company?

Yes, in most cases. A foreign parent's own governance rules do not substitute for the disclosure duty attaching to the local board, and a protocol written for the parent's home jurisdiction usually has to be re-checked against the subsidiary's own company law rather than assumed to apply unchanged.

What does a conflicts and related-party protocol require in practice, day to day?

It requires a director to raise an interest before a vote is taken, not after, and it requires the board to record the disclosure and the conflicted director's abstention in the minutes at the time. Most failures are not drafting failures but timing failures, where the disclosure happens verbally and is never entered on the record.

Who inside the company is responsible for a conflicts and related-party protocol?

The board as a whole is responsible for applying it, but the person chairing the meeting where a conflict arises carries the practical burden of enforcing the abstention and making sure the minute book reflects it. Treating this as a company secretary's administrative task, rather than a chair's governance task, is the most common misconception in groups new to running boards across more than one jurisdiction.