Business Conflicts of Interest

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What Is a "Conflict of Interest" in Regards to Business Law?

In the context of business law, a Conflict of Interest (COI) doesn’t usually refer to conflicts between two people. Instead, it refers to situations where one person’s own private interests conflict with their professional interests and responsibilities. In most cases, this involves a breach of the person’s duty of loyalty to their corporation or business organization.

For example, corporate members who are on the board of directors owe their corporation duties of loyalty and fiduciary. If they take advantage of certain business opportunities to the detriment of the company, there may be a conflict of interests.

The term “conflict of interest” also arises in many other legal contexts (like when lawyers or judges have a conflict of interest requiring them to abstain from a lawsuit).  In a similar way, a conflict of interests in a business setting might require the person to refrain from participating in certain corporate decisions.  Serious conflicts of interests can also lead to legal penalties and consequences.

What Are Some Common  Conflicts of Interests?

According to business laws, most conflicts of interest involve a conflict between the actor’s own personal interests and their duties to the corporation, partnership, or other type of business entity. Most of the time, directors, officers, and members of corporate boards have higher duties of loyalty to the company than simple stockholders. 

Some common examples of conflicts of interest in a business setting can include:

Note that other violations like fraud or bribery are usually classified under criminal laws as white collar crimes.  In fact, classifying crimes as “conflicts of interests” will not relieve the parties of criminal fault, and can even lead to other violations under the law.

How Are Conflicts of Interest Handled under Business Laws?

It’s usually best if a conflict interest is identified and cleared up before any further disputes arise. A conflict of interests might not lead to legal consequences if they are resolved through:

If the conflict of interest does lead to further disputes, these can often be remedied through:

Do I Need a Business Lawyer?

Conflicts of interest in a business setting can often be complex. While they might lead to legal consequences, it is often possible to identify the conflict early on and preserve the employment status of the officer. If you have any questions at all regarding business conflicts of interest, you may wish to contact a qualified business lawyer in your area for advice and representation in a court of law.

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Last Modified: 06-19-2014 03:24 PM PDT

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