Directors of Interwoven Arts CIC are bound by three layers: the general statutory duties in the Companies Act 2006, the company’s own Articles, and the CIC-specific obligations that flow from the asset lock and the community interest test. This note states them and sets out the conflict-of-interest process.
The general statutory duties (Companies Act 2006, ss.171–177)
- s.171 — act within powers. Act in accordance with the company’s constitution (its Articles) and exercise powers only for their proper purposes.
- s.172 — promote the success of the company. For an ordinary company this means success for the benefit of members. For Interwoven Arts it is read differently: section 172(2) provides that where a company’s purposes consist of or include purposes other than the benefit of its members, the duty is to act so as to achieve those purposes. The company’s purpose is the community benefit declared in its objects (Article 5) and CIC36 — so “success” here means delivering that community benefit, not financial gain for the directors or members.
- s.173 — exercise independent judgement. Directors must reach their own decisions. They may take advice — including from tools and advisers — but the judgement must be theirs (see AI in management).
- s.174 — exercise reasonable care, skill and diligence. To the standard of a reasonably diligent person with the general knowledge and any special expertise the director actually has.
- s.175 — avoid conflicts of interest. Avoid situations where a personal interest conflicts, or may conflict, with the company’s — unless the matter has been authorised.
- s.176 — not accept benefits from third parties. Do not accept a benefit from a third party given because of being a director, or doing (or not doing) something as a director.
- s.177 — declare interest in a proposed transaction. Declare the nature and extent of any interest in a proposed transaction or arrangement before it is entered into (and s.182 for interests in existing ones).
The CIC overlay
Two constraints sit on top of every board decision. The asset lock (Article 3) prevents value being extracted for private benefit. The community interest test (section 35, Companies (Audit, Investigations and Community Enterprise) Act 2004) is ongoing — the company must keep acting for its declared community benefit, demonstrated annually in the CIC34. Director remuneration is permitted but must be reasonable and is disclosed to the Regulator in the CIC34.
The conflict-of-interest process (Articles 19–21)
- Declare it (Article 19.1). A director in a situation reasonably likely to give rise to a conflict must declare it to the other directors, unless they are already aware. This mirrors the statutory duties in ss.177 and 182.
- Decide whether a conflict exists (Article 19.2). If in question, the other directors decide by majority.
- Recuse (Article 19.3). On a matter where a director has a conflict, that director may remain only so far as needed to inform the debate, is not counted in the quorum for that part, and withdraws during the vote with no vote on the matter.
- Authorisation (Article 20). The other directors may authorise a conflicted director to act, set the terms, and — if they decide — allow that director to vote and count in the quorum. An authorised director is not accountable for a benefit properly derived from the authorised matter (Article 20.3).
- Register it (Article 21). The company keeps a register of directors’ interests; each director declares the nature and extent of any direct or indirect interest. The register is an internal record.
Worked example — Interwoven Arts and Grove Wellbeing
Two Interwoven Arts directors (Dan Gauden and Kubi May) are also directors of Grove Wellbeing CIC. Any matter involving both organisations — a shared resource, a joint project, a sub-contract — is a conflict that must be declared (Article 19.1) and entered in the register (Article 21), with the conflicted directors recusing (Article 19.3) unless the others formally authorise their involvement (Article 20). Any transfer of assets between the two must be at full market value (Article 3.1) or routed through the asset-locked-body exception with the Regulator’s consent (Article 3.2); see constitution & asset lock. This cross-directorship is the company’s principal standing conflict and the first thing a regulator is likely to test.
Director remuneration
A director cannot decide their own pay — setting it is a conflict, so the affected director recuses under Article 19.3 and the other directors decide. The company’s full approach and current position are set out transparently in director remuneration.
How decisions are taken, and the records kept, are in board & decision-making.