Can a director vote when they have a conflict of interest?

It all depends on the situation in question. When a director has a personal interest, direct or indirect, that may conflict with that of the company in the context of a contract or transaction, whether ongoing or planned, certain disclosure obligations apply.

In Quebec, a director must disclose their interest to the board of directors, either in writing or by having the disclosure recorded in the minutes as prescribed by law. At the federal level, they must inform the corporation of the nature and extent of their interest in writing or request that this information be recorded in the minutes.

Depending on the nature of the interest, the decision in question, and the law under which the company was incorporated, the administrator must then:

• disclose its interest and, according to applicable law, its nature, extent or value;
• abstaining from participating in certain deliberations when required by law;
• abstaining from voting on the decision, contract or transaction in question when required by law;
• comply with any other formalities required by law or company documents.

However, the rules are not the same in Quebec and at the federal level.

In Quebec , an administrator subject to rules regarding the disclosure of an interest generally cannot vote on the resolution concerning the contract or transaction or attend the deliberations, subject to the exceptions provided by law.

At the federal level , the administrator in question generally cannot participate in the vote, but the law also provides for certain exceptions, particularly with regard to his remuneration, certain compensation or insurance issues and certain transactions with a legal entity of the same group.

For example, the rules may differ depending on whether it is a contract or transaction in which the director has an interest, their remuneration, or another situation expressly covered by law.

However, regarding directors' conflicts of interest, certain rules provide for distinctions or exceptions depending on the nature of the transaction and the circumstances. It is therefore important to identify the nature of the conflict before making a decision and to determine whether the director can participate in the deliberations or the vote.

Adherence to these rules helps protect the company's interests and reduces the risk of disputes arising from any situation involving a director's conflict of interest. Where the law mandates disclosure, the director must disclose their interest in accordance with the applicable law.

In summary , a director with a conflict of interest should not assume they can vote or that they must automatically abstain in all situations. They must disclose their interest when required by law and comply with the rules applicable to their participation in deliberations and voting, which vary depending on the jurisdiction and the nature of the contract or transaction.