Declared, Then Forgotten: Stress-Testing the Board's Conflict Register Each Quarter

Most UK boards can produce a conflicts register within the hour. Rather fewer can show that the document has ever altered the course of a discussion. That gap is worth closing, because the statutory duty to declare an interest and the practical duty to manage one are not the same obligation, and only the second protects the company when a decision is later examined by a regulator, an auditor or a claimant's solicitor.

Under the Companies Act 2006, a director must declare an interest in a proposed transaction or arrangement, and must also declare an interest in an existing one where it has not previously been disclosed. The current UK Corporate Governance Code adds an expectation that the board should have a formal, written policy for identifying and managing conflicts, and that the chair should be satisfied that arrangements are operating effectively. Neither requirement is discharged by a spreadsheet that is accurate on the day it is signed and untouched thereafter.

The obvious risk is a register that has quietly gone stale. The subtler risk is a register that is perfectly current and still fails, because nobody has asked it a question.

What the Register Records — and What It Leaves Out

A conventional register captures four things: the director, the interest, the date of disclosure and the date of the last review. Useful, but incomplete. It says nothing about the decision that was live at the time, nothing about who withdrew from the room, and nothing about what the board did instead.

That omission matters because disclosure is a personal act and management is a collective one. A director who declares an interest has done what the law requires of them. The board has not yet done what governance requires of it.

Test One: Reconcile Declarations Against the Forward Agenda

The first test is mechanical, and it is best performed with the papers for the coming quarter spread out on a table.

Take every declaration on the register and ask, item by item, whether the interest touches anything the board is due to consider in the next three months. A directorship in a supplier will matter when the contract renewal appears. A family interest in a landlord will matter when the lease is renegotiated. A non-executive role at a competitor will matter when the pricing strategy is tabled — and probably also when the risk appetite statement is refreshed.

Where a match is found, the company secretary should flag the item in the pack before it is circulated, not at the door of the meeting. Pre-briefing the chair is not a courtesy; it is how recusal is planned rather than improvised.

Test Two: Trace the Commercial Perimeter

Registers tend to be strong on directors' other board roles and weak on the relationships that sit one step further out: advisory positions, consultancy arrangements, directorships held by a spouse, shareholdings in a parent or subsidiary, and interests in entities that appear in the supply chain under a different trading name.

The practical exercise is to take the ten largest customers and the ten largest suppliers by spend, and check each against the register. Run the same check against the entities named in the most recent due diligence pack and against any counterparty in an acquisition or disposal under consideration. Where an entity is unknown to the register, that is not necessarily a failure — but it is a question that needs an answer recorded somewhere.

For firms in regulated sectors, the perimeter will also need to accommodate the expectations of the relevant regulator on conflicts of interest. The principle is consistent: proximity to commercial decision-making is what attracts scrutiny.

Test Three: Interrogate Recent Appointments and Movements

Conflicts are not static. They change when a director takes a new role, when a company they are involved with is acquired, when a family business is restructured, and when a colleague moves between organisations.

The quarterly test should therefore crosstab the register against appointments and resignations in the period since the last review — including appointments held outside the group, and including roles that directors may not regard as significant. A non-executive position at a small trade body can create a more awkward conflict than a large listed directorship, because it is closer to the sector in which the company actually competes.

Recording the Management, Not Just the Disclosure

This is the part most registers omit, and the part most useful eighteen months later. For each conflict that touched a live decision, the record should capture:

• the nature of the interest and the item to which it related;
• who withdrew, for which part of the discussion, and who chaired in their absence;
• what information the remaining directors had before them;
• the decision taken, and the reasoning that supported it;
• any residual exposure accepted, and by whom;
• the date the arrangement is next to be reviewed.

A register with these columns becomes something more than a compliance artefact. It becomes evidence — contemporaneous, specific and internal — which is precisely what is worth having when a decision is questioned years later.

The Minutes Problem

Recusal that is not minuted may as well not have happened. Chairing a meeting through a conflict gracefully is an achievement of the moment; recording it is what makes the achievement durable. Boards should avoid the formulaic line that a director "having declared an interest, took no part in the discussion". Specify the interest, specify the item, and say what the board relied on in the director's absence.

Where a director remains in the room because the conflict is indirect and the board judges participation appropriate, that judgement should be reasoned and recorded too. Silence is the weakest option available.

A Quarterly Sequence That Works

A workable rhythm places the work roughly two weeks before the board meeting: the company secretary reconciles the register against the forward agenda and the commercial perimeter, and circulates any questions to directors. At the meeting, the chair notes the review, the board confirms any changes and approves the management approach for flagged items. Afterwards, the register is updated with the management record rather than only the disclosure dates.

An annual independent review remains sensible, particularly where the register is large or the group structure is complicated. But the quarterly test is what stops the annual review from uncovering a year of unexamined decisions.

Signs the Test Is Working

A functioning register produces friction. Items get deferred. A director leaves the room. A paper is reworked because the board concludes it cannot properly be discussed with a particular member present. If a year passes with no such moments, the likeliest explanation is not that the board is unusually free of conflicts, but that the register is being consulted rather than used.