Conflicts of interest among directors: who decides on

Suppose a director has a personal interest in a decision the board must make. His fellow directors believe he should therefore abstain from the deliberations and the vote. The director in question disagrees and simply wants to participate. Who has the final say? This is a situation that can arise in the boardroom of many companies, yet the law says remarkably little about it. On April 10, 2026, the Supreme Court—prompted by an inquiry into a major restructuring transaction—filled this gap in the law itself with a concrete and binding assessment framework.

What does the Supreme Court say?

Article 2:239(6) of the Dutch Civil Code stipulates that a director must not participate in deliberations or decision-making if he has a direct or indirect personal interest that conflicts with the company’s interests. However, the law is completely silent on how a conflict of interest must be disclosed and who determines whether one actually exists. Since the legislature has omitted this provision, the Supreme Court has filled that gap itself by formulating a new legal rule. That rule reads as follows. In a multi-member board without a supervisory board, the director with a potential conflict of interest has a primary duty to disclose: he must be as open as possible and report his potential conflict of interest to his fellow directors. If a disagreement subsequently arises as to whether he actually has a conflict of interest, it is not up to him but to his fellow directors to decide on the matter—even if the director in question has not disclosed his potential conflict of interest at all. If the other directors determine that recusal is warranted, they are also obligated to ensure that the director in question does not participate in the deliberations and decision-making regarding the matter in question.

What does this mean in practice?

This ruling has direct practical implications for any company with a multi-member board that does not have a supervisory board. The Supreme Court makes it clear that a director involved who remains silent about his potential conflict of interest, or denies that interest, cannot prevent his fellow directors from intervening nonetheless and excluding him from the decision-making process. In doing so, the ruling places a significant responsibility on the other directors: they must not only assess whether exclusion is warranted, but also actively ensure that the director in question remains outside the meeting. Precisely because the law is silent on this point, it is all the more important that the shareholders’ agreement contains clear procedural provisions: when must a conflict be reported, who decides in the event of a disagreement, and how is exclusion ensured in practice—and, not entirely inconceivable—what if there is a risk of abuse of this conflict-of-interest provision? A well-defined set of procedural rules prevents disputes after the fact and provides all parties involved with a clear framework when it matters most. Would you like to have your shareholders’ agreement reviewed, or do you have questions about the structure of your board? Please feel free to contact us.

Key points at a glance:

• The law (Section 2:239 of the Dutch Civil Code) contains no provisions regarding the disclosure and determination of conflicts of interest among directors; the Supreme Court has now filled that gap itself.
• In a multi-member board without a supervisory board, a director with a potential conflict of interest has a personal duty to disclose: he must be as open as possible and report this to his fellow directors.
• In the event of a disagreement, the other directors—not the director in question—decide whether exclusion from the decision-making process is required.
• This also applies if the director in question has not disclosed his potential conflict of interest.
• The other directors are then required to ensure that the director in question does not participate in the deliberations and decision-making.
• Clear agreements regarding the procedure for conflicts of interest are strongly recommended.
  

Questions?

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