Conflicts of interest among directors: when is a director prohibited from taking part in decision-making?

A director of a private limited company or foundation may not take part in decision-making if he or she has a personal interest that conflicts with the interests of the company. That sounds straightforward, but in practice the question of when exactly such a conflict of interest arises, regularly gives rise to debate. This sometimes has far-reaching consequences for the validity of decisions and the liability of directors.

What constitutes a conflict of interest?

A conflict of interest arises when a director is faced with interests that are so incompatible that there can reasonably be doubt as to whether he or she is guided exclusively by the interests of the company in his or her decisions. It is not always necessary for the decision and the (legal) act coming out of this decision to result in detriment to the company – the mere possibility that the director is not guided solely by the interests of the company is sufficient.

Whether a conflict of interest exists can only be determined on the basis of all the relevant circumstances of the specific case.

Examples:

• A director who is simultaneously (indirectly) involved with the other party to a transaction.

• A director acting as a buyer in the purchase of assets belonging to the company of which he or she is a director.

• A director who has a personal financial interest in entering into a particular loan or agreement.

• A director who is also a director of another company with which their company does business.

A conflict of interest may be either direct (the director is a party to the transaction) or indirect (the director relates to the other party, such as where immediate family members are involved).

Developments in case law

A director who may have a personal interest in a decision to be taken would be well advised to discuss this with his fellow directors at the earliest possibility. Although the law does not prescribe a specific procedure for reporting or determining a conflict of interest, it follows from a recent judgment of the Dutch Supreme Court (ECLI:NL:HR:2026:592) that the assessment of such a conflict does not lie with the director concerned. It is the other directors who must determine whether a conflict of interest exists and whether the director in question should therefore be excluded from the decision-making process. If they reach that conclusion, they must also ensure that the director is not involved in the discussion and decision-making on the matter in question. It is advisable to carefully record this assessment and the measures taken in the minutes and other documentation.

What does this mean for directors and companies?

A conflict of interest is not a mere formality. The law stipulates that a director with a conflict of interest must not take part in the deliberations and decision-making. A director who fails to disclose their interest or who nevertheless takes part in the decision-making, runs the risk of decisions being annulled and of being held personally liable for any resulting damage.

The key practical lessons:

• Disclose in a timely and proactive manner. If you are unsure whether a conflict of interest exists, disclose it. Whilst the mere appearance of a conflict of interest is not decisive, early disclosure prevents disputes later on.

• Fellow directors: be vigilant. Following the judgment of April 2026, it is clear that fellow directors also have an active role to play in identifying conflicts of interest.

Do you have any questions about conflicts of interest involving directors, or are you unsure whether a conflict of interest exists in your situation? Please feel free to contact us.