I am the director of a small building services company. We have a few members and a small amount of share capital. At the moment we are running a project to re-build the local council chambers. I need to get some work done on my house and I was thinking that I could ask a contractor to come in and do some work on my home to see whether he is any good. If he is I could ask him to give me a discount in exchange for putting in a good word for him when we are deciding on the next round of contractors for our council building project. Can I do this?
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Answer by LegalEagle™ staff, Northcote 3070 VIC
- As a director you have certain obligations towards your shareholders. Even if the building contractor seems acceptable when he is undertaking work at your home they may not be the best or most appropriate person for your current building project. You may be in breach of several directors' duties if you make a recommendation such as this.
- For example you may be seen to have used your position as director improperly. This involves the use of your position to gain an advantage for yourself to the detriment of the company.
- You may also be in breach of the duty to act it good faith and in the best interests of the company including the duty to avoid a conflict of interest between yourself and your shareholders.
- It is advisable to keep your personal interests completely separate from the workings of your company. It is very likely that if you were to undertake the actions you are proposing that you could open yourself up to potential civil or even criminal liability.