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How to Write a Conflict of Interest Policy (With a Section-by-Section Template)

A conflict of interest policy tells everyone in a business what to do when their private interests could pull against the decisions they make at work: the director whose brother-in-law bids for a contract, the buyer who owns shares in a supplier, the manager asked to interview a friend. Conflicts are not wrongdoing in themselves. The harm comes from hiding them. A good policy makes declaring a conflict quick and routine, sets out who decides what happens next, and keeps a record. This page explains what the law expects of directors, the nine sections a policy needs, and how to roll it out.

What counts as a conflict of interest

A conflict of interest exists when a person's private interests, or a duty they owe to someone else, could influence a decision they take for the business, or could reasonably look as if they do. Policies usually describe three kinds:

• Actual: the conflict exists now. A purchasing manager is choosing between suppliers and one is owned by their partner.
• Potential: it could arise. A sales director takes a non-executive role at a firm that does not compete today but might next year.
• Perceived: there is no real influence, but an outsider could reasonably think there is. A manager sits on an interview panel for a former colleague they are friendly with.

The perceived category matters because trust depends on appearances as well as facts. Customers, staff and investors cannot see inside anyone's head; they can only see whether the business has a fair process.

What the law expects of directors

Company directors in the UK have specific statutory duties in the Companies Act 2006, which a policy should reflect:

• Section 175, duty to avoid conflicts of interest. A director must avoid a situation in which they have, or can have, a direct or indirect interest that conflicts, or may conflict, with the company's interests. The duty is not broken if the situation cannot reasonably be regarded as likely to give rise to a conflict, or if the matter has been authorised by the directors. In a private company the board can authorise it unless the constitution says otherwise; in a public company the constitution must allow it. The interested director cannot count towards the quorum or have their vote counted.
• Section 176, duty not to accept benefits from third parties because of being a director, unless it cannot reasonably be regarded as likely to give rise to a conflict.
• Section 177, duty to declare an interest in a proposed transaction with the company, before the company enters into it.
• Section 182, declaration of interest in an existing transaction. Failing to make this declaration is a criminal offence under section 183, punishable by a fine.

None of this applies directly to employees, but employees owe their employer a duty of fidelity under their employment contract, and a written policy makes the expectations clear. Our guide to directors' duties under the Companies Act 2006 covers all seven general duties.

The nine sections of a conflict of interest policy

Use these headings as a template. Keep the language plain: the policy is for the warehouse supervisor as much as the finance director.

1. Purpose. Two or three sentences: why the business has the policy, and that declaring a conflict is expected and is not a sign of wrongdoing.
2. Who it covers. Directors, employees, temporary and agency staff, contractors and, if relevant, volunteers and advisory board members.
3. What a conflict is. The definition above, with actual, potential and perceived conflicts explained.
4. Examples. The most useful section. Choose examples from your own business: family members as suppliers or job applicants, shareholdings in suppliers or competitors, second jobs and directorships, close personal relationships at work, gifts and hospitality, and using company information for personal investment.
5. How to declare. Who to tell, how (a short form or an online register), and when: on joining, as soon as a new conflict arises, and in an annual confirmation.
6. How a declaration is assessed. Who reviews it (normally the person's line manager plus compliance or HR, and the board for directors) and within what time.
7. Possible outcomes. No action needed; allowed with conditions, such as the person stepping out of one decision; the person removed from the process altogether; or, rarely, the person asked to give up the outside interest.
8. The register of interests. What is recorded, who keeps it, who can see it, and how long it is kept, in line with your data protection obligations.
9. Breaches. What happens if someone fails to declare: investigation under the disciplinary procedure, and for directors, the consequences under company law. Say how to raise a concern about someone else, linking to your whistleblowing policy.

Writing the declaration form

Keep the form to one page. Ask for the person's name and role, the nature of the interest, the people or organisations involved, which decisions or processes it could affect, the date it arose, and a signature. Add a tick box for "I have no interests to declare" for the annual confirmation, so a nil return is recorded rather than assumed.

Gifts and hospitality

Gifts and hospitality are the most common source of conflicts, and they also raise bribery risk. Many businesses cover them in a separate policy with a value threshold for declaring and a lower one for approval. If you do, cross-refer to it from the conflict of interest policy rather than repeating the rules. Our guides to a gifts and hospitality policy and Bribery Act compliance explain the overlap.

Rolling it out

• Get board approval and minute it, so the directors' own declarations start from a clear base.
• Collect a first round of declarations from everyone covered, including nil returns.
• Train the people most exposed: buyers, recruiters, anyone who approves spending, and the board.
• Put it in the induction pack and the staff handbook, alongside your code of conduct.
• Review annually, with a reminder to update declarations and a check that the register is complete.

The test of a good policy is whether people use it. If no one has declared anything in a year, that usually means the policy is not understood, not that there are no conflicts. For the wider picture, see our guide to building a compliance programme.

Source: Companies Act 2006, section 175, with sections 176, 177, 182 and 183 on legislation.gov.uk.