Conflicts of Interest

1     Fundamental duty of Directors

 All directors should know that they have an absolute responsibility to act in the best interests of the companies of which they are directors.

2     Possibility of conflicts of interest

Theoretically this can lead to a conflict of interest - individual directors must reconcile any such conflict to their personal satisfaction and if they cannot do so they may have to consider resignation.

3     Unlikelihood of such conflicts

In most cases parallel interests are not conflicts of interest. It is unlikely that directors will be faced with irreconcilable conflicts of interest.

4     Certain rules

Section 317 of the Companies Act requires directors to disclose any interest which they may have in a contract which their company is considering, at a meeting of directors.

Under Section 317(3), if such interest arises because they are -members- of another company or firm they can make a blanket disclosure (see attached possible wording). If the interest is because they are directors of another company they must disclose their interest on a case by case basis.

"Interests" are widely defined to include any interest, direct or indirect, and include the interests of any connected party.

The Articles of most companies state that its directors may have such other interests but they must declare them - some Articles then go on to say that the directors must then not vote upon such matters. (There are certain statutory restrictions depending upon the nature of the interest e.g. loans to directors; property transactions with directors; insider dealing in company shares).

Charitable companies do not include such wording in their Articles because The Charity Commission do not allow persons to benefit in any way from charities of which they are directors (except in the limited cases laid down in the Articles of Association). This is unfortunate because the conflicts often do not involve personal interests of the directors but may arise because they have other loyalties to other bodies.

In the absence of any such rules in the Articles consider such actions in line with commercial rules as a minimum standard of best practice.

5     In Unipol's Case

(a) It is hoped that a situation in which a director has a personal interest is unlikely to occur - consider carefully the restrictions in the Articles of Association; disclose the interest; do not vote and consider absenting yourself from the discussion.

(b) Disclosure of Interests/Blanket disclosure/Directors disclosures:- de minimis rules mean that Unipol directors are unlikely to need to disclose an interest due to membership of other organisations. Similarly it may often be the case that Unipol directors are not directors of any other organisations.

Unipol asks its directors to declare their interests annually as a matter of routine. However, bear in mind that changes in interest should be notified as they arise, and that "interests" include interests of close family members.

A standard agenda item appears on all Board agendas after "Minutes of the Last Meeting" and before the substantive business headed "Directors Disclosures" where any Director with any perceived conflict of interest on any matters before the Board at that meeting should declare those possible interests.

(c) Mutual Interests - Unipol exists for the benefit of the 4 Principal Members. It is hoped that there will never be a serious conflict of interest even when Unipol is contracting with one of its members or agreeing upon their level of subscription. They must not act upon the instructions of their nominating bodies if they believe this conflicts with the best interest of Unipol. It is for the directors to satisfy themselves individually that they are voting in the best interests of Unipol - in most cases they will be able to reconcile this with the wishes of their nominating body.

(d) Confidentiality - members have defined rights to information; in particular they do not have the right to confidential information about directors discussions etc.

(e) Mutual respect - Nominating bodies should recognise the responsibilities of directors to act in the best interests of the Company. The Board of Unipol should recognise the natural interest which Principal Members have in their progress and not restrict unnecessarily the right of directors to report to their nominators.

(f) In cases of difficulty - Normally directors should seek advice from the Chief Executive. If this is inappropriate professional advice should be sought.