Dilemma of the Interested Director in Pakistan: Lessons from English Courts’ Jurisprudence

Abstract

No-conflict and no-profit rules thrive in Company Law to extract the director’s undivided loyalty towards the company and oblige him to avoid conflict of interest and not to earn profit at the expense of the company and its shareholders. Disclosure of interest is required if the director steps into a situation of conflict of interest. Despite the statutory clarity, Pakistani courts’ attitude is not uniform and provides ample space for a loose or broad interpretation of the law concerning the application of these equitable rules, as the stringent application of rules satisfies the statute but the flexible application of these rules, and the categorization of disclosure of interest and exoneration of the director from breach of duty in cases of non-disclosure seem problematic and this does not sit well with the statutory requirement. Thereby setting up unhindered bridges to fill gaps between the Companies Law and Pakistani courts’ jurisprudence. The article focuses on the penumbral manners, as for the sake of completeness it compares the Pakistani legal regime with the English courts’ jurisprudence, which is more uniform and advanced, with the intent that Pakistani courts can learn the lessons from well-established English courts’ jurisprudence. Directors’ fiduciary duties, duty to avoid conflict of interest, no-conflict rule, no-profit rule, company’s best interest, director’s personal interest, interested director, disclosure of interest, nature and extent of disclosure, implied or explicit disclosure