Board Conflicts of Interest: A Practical Guide

The Law Demands Objectivity

The Norwegian Public Limited Liability Companies Act is clear: A board member must not participate in the handling of matters where they have a prominent personal or financial special interest. The key is that the mere existence of a potential conflict of interest is enough to trigger disqualification. It is not about whether you intend to be influenced, but that your objectivity could be questioned. The rules are in place to ensure trust in the board's decisions.

This is an absolute requirement to protect the interests of the company and its shareholders.

The Boundaries are Drawn in Practical Situations

It is in specific cases that doubts about qualification arise. An agreement with a company you own is an obvious ground for disqualification. Hiring a close relative or an agreement with a company where you also serve as a board member will also normally trigger disqualification. The line is more fluid in cases where the interest is less prominent, but a good rule of thumb always applies.

If you are in doubt, you are probably disqualified.

Fact Box: Managing Disqualification Briefly Explained:

• Inform: If you believe you may be disqualified, it is your duty to inform the board chair immediately.
• The Board Decides: The board itself, without the person in question present, formally decides whether a member is disqualified in the matter.
• Withdraw and Minute: The disqualified person must leave the room during the entire proceeding, and everything must be documented in the minutes.

Correct Procedure is Your Only Defense

When a potential conflict of interest arises, the procedure is absolutely crucial. It is your duty to raise the issue yourself, but it is the board as a collective body that formally decides if you are disqualified. If the conclusion is disqualification, you must withdraw completely from both the discussion and the vote. The entire process, from assessment to conclusion, must be meticulously documented in the board minutes.

A proper process eliminates all doubt and protects both the company and the board.

“It is better to declare yourself disqualified one time too many than one time too few.”

Want a deeper understanding of the total responsibility you have as a board member? Read our comprehensive guide on personal director liability in Norway.