UK - Company directors, including those of pension trustee companies, should look at meeting new conflict of interest rules concerning pensions by gaining authorisation from shareholders rather than other directors, law firm Allen & Overy has suggested.

All company directors are required from 1 October 2008 to avoid situations in which they may have a conflict of interest concerning management of a pensions arrangement, but Allen & OVery has suggested the conflict situation can be 'authorised' to avoid the resignation of trustee directors in situations where, for example they act as a director of the sponsoring employer as well as to the trustee company.

The new rules, resulting from the Companies Act 2006, are targeted at directors of companies, so if a trustee body is made up of individuals then no action is necessary, from a pension scheme's perspective.

If, however, the trustee is technically a company then it needs to carry out a "tick-box exercise" to ensure the directors are not breaking the law.

Maria Stimpson, pensions partner at the law firm Allen & Overy, said there are two methods of authorising potential conflict situations.

Once a director has been authorised to continue in those circumstances any actual conflicts can be dealt with under the normal conflict of interest processes - as The Pensions Regulator (TPR) recently stated in its updated guidance for trustees. (See earlier IPE article: TPR conflicts guidance falls short on 'thorny' issues)

The first way to tackle the apparent conflict might be for the rest of the board of directors of the trustee company to authorise the conflict situation.

However, Stimpson warned while this sounds simple, most of the directors are likely to have some kind of conflict situation that needs to be authorised and this can raise the question of whether or not these directors can authorise each other.

Alternatively, Stimpson suggested trustee companies could get the shareholder - potentially the sponsoring employer - of the trustee company to authorise one of its directors to authorise conflict situations, so that it cuts out the potential conflict in authorising each other.

Although this route may seem more complicated - for example involving another body - it is actually likely to be more efficient in the long-term.

Stimpson said: "Most companies should be dealing with this for all of their directors, but for trustees the pensions manager should tie up with the legal and secretarial parts of the sponsoring employer to make sure trustee directors also meet the requirements. It's a bit irritating, but you need to make sure you go the right route in getting the authorisation."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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