If a director’s spouse owns a proposed supplier, tell the company secretary and obtain advice on the interest disclosure before approving the deal. Then assess whether the purchase serves the company on its actual terms.
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Section 156 of the Companies Act addresses direct and indirect transaction interests and treats specified family interests, including a spouse’s, as the director’s for this purpose. Review the applicable requirements and the company’s constitution.
Describe the relationship accurately
Identify the supplier’s legal entity, who holds the interest and the proposed contract. Record the nature and extent of the relevant interest. Avoid a vague statement that the director merely “knows the supplier” where ownership is the real connection.
Keep the disclosure and its proper circulation or recording separate from the commercial recommendation. Disclosure does not itself prove that a transaction should be approved.
Example: the connected quote is cheapest
A spouse-owned vendor offers the lowest price. The company should still assess scope, quality, delivery, payment terms and the interest. A price advantage may be relevant, but it does not remove the need for a proper decision process.
Prepare a comparable procurement pack
- Supplier identity and relationship information.
- Disclosure and the applicable approval rules.
- Specifications and genuinely comparable offers.
- Reasons for the proposed supplier selection.
- Payment milestones and performance safeguards.
- Who will monitor delivery and resolve problems.
Where there are no alternative quotes, explain why and obtain appropriate review. Do not fabricate competing offers to make the file appear independent.
Check participation and decision authority
Ask legal advisers to review voting, quorum and conflict handling under the constitution and applicable law. Do not assume a universal rule for every private-company constitution.
Record the decision actually made, the relevant disclosure and reasons. A director’s private conversation with a shareholder should not automatically be substituted for the required company process.
Monitor the contract after approval
Use the same delivery, invoice and payment checks that would apply to an unconnected supplier. Escalate changed pricing, advance payments or an expanded scope for review where appropriate.
Give the accountant the actual supplier identity and transaction records. If tax or GST treatment is relevant, assess it independently rather than assuming a board approval establishes deductibility.
Does declaring the relationship authorise any payment?
No. Assess the purchase and its approval separately.
Should the relationship be omitted if the price is attractive?
No. Provide accurate information so the company can assess both the interest and the commercial terms.
Related company resources
Explore our company constitution guide, nominee director services and nominee register guidance.
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Email [email protected] or WhatsApp +65 8501 7133 for corporate secretarial assistance. Legal advisers from our associated law firms can assist with director disputes, guarantees, resolutions and related agreements.