(1)If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors.
(2)The declaration may (but need not) be made—
(a)at a meeting of the directors, or
(b)by notice to the directors in accordance with—
(i)section 184 (notice in writing), or
(ii)section 185 (general notice).
(3)If a declaration of interest under this section proves to be, or becomes, inaccurate or incomplete, a further declaration must be made.
(4)Any declaration required by this section must be made before the company enters into the transaction or arrangement.
(5)This section does not require a declaration of an interest of which the director is not aware or where the director is not aware of the transaction or arrangement in question.
For this purpose a director is treated as being aware of matters of which he ought reasonably to be aware.
(6)A director need not declare an interest—
(a)if it cannot reasonably be regarded as likely to give rise to a conflict of interest;
(b)if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as aware of anything of which they ought reasonably to be aware); or
(c)if, or to the extent that, it concerns terms of his service contract that have been or are to be considered—
(i)by a meeting of the directors, or
(ii)by a committee of the directors appointed for the purpose under the company's constitution.
Cases considering section 177 (61)
[2023] EWCA Civ 1433 · 29 November 2023
The court held that Mr Bennett had a realistic prospect of defending the allegation that he failed to declare his interest in the sale of company land. The scope of the alleged agreement, informal dealings and the pleaded full-value sale required trial. (see paras [66]-[76])
The court applied the exception where other directors were already aware, or ought reasonably to have been aware, of the interest. It was arguable that agreement to an external development meant they ought to have appreciated that the company land would need to be sold at an appropriate value. (see paras [69]-[76])
[2017] EWCA Civ 2140 · 21 December 2017Limits
A director who is directly or indirectly interested in a proposed company transaction must disclose the nature and extent of that interest. Contemporaneous solicitation of paid work from a serious prospective counterparty created such an indirect interest. (see paras [68]-[70]; [76]-[79])
The court held that informal knowledge held by one or more board members could not substitute for proper disclosure to the board in the manner required by the section. (see para [79])
The exception for an interest not reasonably likely to give rise to a conflict did not apply. The objectively assessed possibility of conflict was sufficient. (see paras [68]-[76])
[2026] EWHC 2292 (Comm) · 4 September 2026Limits
The court applied section 177 to find a breach because the family connection and financial interest were not fully disclosed to the board. Piecemeal disclosure or actual knowledge would not suffice. (see paras [54]-[55]; [59](a))
The court interpreted section 177 as requiring disclosure of all material facts so that the board is fully informed, and found a real and sensible possibility of conflict. (see paras [21]; [23]-[25]; [54]-[55])
The statutory exceptions were not engaged because the appointment objectively created a real and sensible possibility of conflict and the other directors were not fully informed. Informal disclosure would not cure the breach. (see paras [21]; [54]-[55])
41 more judgments, and what each says about section 177, are in the
case-law panel in the full Act.
347.The equitable rule that directors may not have interests in transactions with the company unless the interest has been authorised by the members is replaced by this duty. This section requires a director to disclose any interest, direct or indirect, that he has in relation to a proposed transaction or arrangement with the company. The director does not need to be a party to the transaction for the duty to apply. An interest of another person in a contract with the company may require the director to make a disclosure under this duty, if that other person’s interest amounts to a direct or indirect interest on the part of the director.
348.Under the current equitable rule, shareholder approval is required for transactions between a company and a director. Company articles often modify the equitable rule, requiring disclosure of the conflict instead. As proposed by the CLR, shareholder approval for the transaction is not a requirement of the statutory duty. The members of the company may however still impose requirements for shareholder approval in the articles.
349.The duty requires directors to disclose their interest in any transaction before the company enters into the transaction ( subsection ( 4) ). The duty does not impose any rules on how the disclosure of interest must be made, but subsection ( 2) allows the disclosure to be made by written notice, general notice or disclosure at a meeting of the directors.
350.Disclosure to the members is not sufficient. The director must declare the nature and extent of his interest to the other directors. It is not enough for the director to merely state that he has an interest.
351.If after he has disclosed his interest, he becomes aware that the facts have changed, or for some other reason the earlier disclosure is no longer accurate or complete, the director must make a further declaration, correcting the earlier one ( subsection ( 3) ). However, this is only necessary if the company has not yet entered into the transaction or arrangement at the time the director becomes aware of the inaccuracy or incompleteness of the earlier declaration (or ought reasonably to have become so aware).
352.As the duty requires disclosure to be made to the other directors, no disclosure is required where the company has only one director. There is no need to disclose anything the other directors already know about or ought reasonably to have known ( subsection ( 6)(b) ). A director will breach the duty if he fails to declare something he ought reasonably to have known, but the duty does not otherwise require a director to declare anything he does not know. Subsection ( 6)(c) makes special provision for service contracts that are considered by a meeting of the directors or a committee appointed for the purpose (such as a remuneration committee).
353.No declaration of interest is required if the director’s interest in the transaction cannot reasonably be regarded as likely to give rise to a conflict of interest ( subsection ( 6)(a) ). Currently regulation 85 of Table A imposes a materiality test.
354.Conflicted directors may, subject to the company’s articles of association, participate in decision-taking relating to such transactions with the company.