conflicts of interest in cases of overlap of the boards of pension scheme trustees and the scheme’s sponsoring company

by Roderick Ramage, solicitor,

this has not been published but if any reader has a view on the subject his or her comments will be very welcome and might lead t an article for publication



This article is not advice to any person and may not be taken as a definitive statement of the law in general or in any particular case. The author does not accept any responsibility for anything that any person does or does not do as a result of reading it.


1          Conflicts of interest does not imply actual conflict between the parties, but there can be no doubt that when the directors of the employer and even more so its shareholders are trustees, they have real legal conflicts of interest: they have duties to both parties whose interest can become opposed with differences that must be resolved.  I do not share TPR’s stringent view of conflicts, although they are technically correct.  In my opinion, a rigid regime to avoid conflicts can be counter-productive and uneconomic and impose unreasonable restrictions on the conduct of the both the employer’s and the scheme’s activities.

2          In my opinion there is often no need for trustees to abstain from voting or even discussion of issues in which they have a conflict:  I believe that this can be an artificial device which imposes unreasonable burdens on the other trustees or trustees, especially if the non-director trustees are MNTs.  I suggest that one way to deal with the conflicts without appointing independent trustees is as follows.

3          There are two main elements of conflict.  One is of confidentiality and the other is of issue.  At a trustee you have a duty to keep confidential information about the scheme and another to disclose to the scheme (ie co-trustees) any information you acquire that affects the scheme.  Directors have similar duties to the employer.  Therefore if directors of an employer have knowledge about the employer that they must keep confidential, yet as trustees they must disclose it to their co-trustees, and visa versa.  There can be no information barrier (or so called “Chinese (or ethical) wall”) in these circumstances.  Therefore my advice is that the employer and trustees, whilst maintaining confidentiality as against the outside world, must operate between themselves on an “open book” basis, so that information, including advice, available to either directors or trustees is available without restrictions to the others, with the exception mentioned below.

4          In anticipation however of occasions on which either the employer or the trustees need an exception to the open book practice, the scheme’s trust deeds or rules should provide as follows or to a similar effect.

confidential information

1          If a Trustee acquires Confidential Information and complies with rule 32 and with the provisions of any conflicts policy adopted by the Trustees from time to time, he is not under a duty to disclose the Confidential Information to the other Trustees.

2          Where a Trustee is in possession of Confidential Information which he believes would be of relevance to the other Trustees in performing their functions as Trustees, the Trustee shall:

(a)      declare that fact to the other Trustees; and

(b)      take no part in any discussions or decisions of the Trustees where he believes that the Confidential Information would or might be material.

3          The Principal Employer shall procure that a Trustee, who is a director or employee of an Employer and is under a duty to disclose Confidential Information to the Employer, is not under a duty to disclose the Confidential Information to the Employer if he:

(a)      declares that fact to the Employer; and

(b)      takes no part in any discussions or decisions of the Employer where he believes that the Confidential Information would or might be material.

5          Conflicts of issue are more obvious:  as trustees you want the employer to pay £x but the employer claims that it can afford only a smaller amount.  Subject again the exception below, this conflict can be resolved substantially by reliance on independent advice coupled with relevant information that can be objectively verified and justified.

6          By these means it should be possible to concentrate on the common ground between the parties, which in some case removes any real conflict, or show the extent of differences that may be resolved by good sense and reasonable judgement. 

7          The exception is where it becomes apparent that there are not just differences but the differences are too great to be bridged, so that some dispute resolution, eg litigation, may be necessary.  It is at this stage that confidentiality must be preserved.  At least one director on the employer’s side and at least one trustee, neither of whom is conflicted, should be designated as the person to whom the professional adviser can give advice which must be confidential, eg that legal action may have to be taken.  In case on either board there is no one who is not conflicted and it is not possible or practical to appoint an independent member, the designated persons should be expressly released from their duty of disclosure to the other body.  At that stage would more drastic action to deal with the conflict may be necessary, eg resignation (probably as trustees) or the appointment of an independent trustee or both.


draft 13/09/05, paragraph 4 added 15 August 2015


© Roderick Ramage

click below to

return to list of pension law articles

return to list of other law articles

return to home page