Non-executive director case studies
Resource summary
These case studies were written by Lucy Grey, Associate, Coffin Mew LLP and are for general information only. Last updated April 2011.
Personal interest
A director of a company who is the purchase manager and responsible for buying components for the cars they fix has recently bought a new car for himself and his wife as well as going on a holiday. Although he is paid a salary by the company, the other directors are suspicious about where he is getting his money. They soon discover that he is a 95% shareholder of their main supplier. On further investigation it is discovered that the components the company had purchased seem expensive compared with other suppliers in the market.
It is clear that the purchase manager is breaching his duty as a director in a number of ways. He is using the knowledge he has obtained from his position as a director to his own advantage and he also has a personal interest that is in conflict with his duty to his company. By keeping this personal interest a secret from the other directors he may be obliged to account to the company for the profit he has made as a result of being a shareholder of their main supplier.
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