Directors Conflicts of Interest

The Question Asked was: I am on a condo board of a new build condo in Toronto(Registered Aug 2011). The board is made up of 7 well meaning but inexperienced board members(there is only 1 original member left). For the first time in the 2 years since we were registered a dispute has arisen with one board member claiming another was in a conflict of interest when that Director proposed a change in a rule last November 2012. The dispute started in May of this year. Our Declaration doesn’t seem to contain any remedial structure for this, it only says that Directors should avoid conflict of Interest. How do we handle this and is there a procedure we should add to help solve this and to use if conflicts arise again.

Answer: Condominium Board members have the same duty as corporation directors in regard to conflict of interest.  Look to the Corporations Act for guidance. When a director has a conflict they should not vote on the issue.  They may be allowed to speak to the issue ahead of discussion and answer questions from others. They should leave the room so they are not present for discussion or the vote on the issue where they have a conflict.  If they or their immediate family are affected financially by a decision they have a conflict.  There can be a conflict that affects them in ways other than financially or indirectly which must also be considered. An example of a conflict is where the issue will affect the value of the conflicted director’s unit more than it will affect other units. Another one is if the Board is considering giving a contract to a director’s family member. If every unit in the condo  is equally affected there is no individual conflict.  When in doubt about whether there is a conflict of interest, a director should excuse themselves from dealing with the issue.

Leave a Reply