Conflict of interest refers to a situation, which places the director in a situation, where they misuse their function or designation to gain personally. In case a specific choice is expected to bring advantages to the director, to someone who is associated with director, the particular director therefore is not in the condition of arriving at an unbiased decision and ha s a conflict of interest. It is general that the directors have a conflict of interest on specific subjects. For instance, voting done by the directors towards increasing the rate of interest that is given to the people who have deposits in the bank, where there are deposits held by the directors in the same bank. The degree of the interest being material varies from one situation to another (Australian Institute of Company Directors, 2012).
The bottom line that is encompassed in the general law as well as statutory provisions pertaining to the duty of conflict of interest mainly caters to the performance of the role by the director towards the company’s benefit, and at the same time not misusing their position for making personal gains (The FindLaw, 2014).
In the position of a director, a person is allowed to access the information that can be used for making profits for themselves. Due to the respected position held by a director, this duty of not using the position for gaining a profit is quite significant. In the situations that a director misuse of the knowledge or information that they acquire from the function of a director, or carries out misappropriation of the funds of the company for making personal gains, for majority of the times the courts would treat such gains and profits as company’s profit, than the personal gains of the director. In addition, this duty of not making profits as well extends to the gains and advantages incurring from immoral ways, like, acceptance of commissions or bribes, as a favour in return of a deed conducted (The FindLaw, 2014).