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Ergon Energy Corporation Limited ACN 087 646 062 This expands

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					Ergon Energy Corporation Limited
A.C.N 087 646 062



Conflicts of Interests Guidelines

This expands upon the Directors’ Code of Conduct .
General
There are general duties on directors and officers under common law (ie fiduciary
duties including the duty of good faith and loyalty), and specific duties under sections
181, 182, 183 and 184 of the Corporations Act.
These are summarised in the directors’ Code of Conduct and equally apply to officers
(ie executives):
       A director/executive must act honestly, in good faith and in the best interests
       of the company as a whole.
       A director/executive must use the powers of office for a proper purpose, in the
       best interests of the company as a whole.
       A director/executive must not make improper use of the information acquired
       as a director/executive.
       A director/executive must not take improper advantage of his/her position.
Specifically, the directors’ Code of Conduct includes the following in relation to
conflicts of interest (which is based on the above duties). The Employees’ Code of
Conduct also covers this concept:
       A director/executive must not allow personal interests, or the interests of any
       associated person, to conflict with the interests of the company.
The key issues here are to identify the potential conflict and decide whether the
situation meets the threshold discussed below. If so:
   •   it should be disclosed in a timely manner; and
   •   an appropriate management strategy formulated – which may include
       refraining from taking part in the activity or decision making (which is
       required by s195 Corporations Act where the conflict circumstance amounts to
       a material personal interest).
What is a conflict?
Conflicts are circumstances where a person’s private interests, or duties to another
organisation, are inconsistent with, or diverge from, the person’s duties to Ergon
Energy. Private interests are those that can bring a benefit or disadvantage to the
person or to others whom they may wish to benefit or disadvantage. (This can include
personal, professional or business interests of the person or interests of family or
associates, and can be pecuniary or non-pecuniary.)
The question of whether a conflict exists is an objective question – ie would a
reasonable person consider that a personal interest or a duty elsewhere might motivate
the director or executive rather than being solely motivated for Ergon Energy’s
benefit.
It includes actual, apparent and potential conflicts and direct or indirect conflicts.
Ergon Energy Corporation Limited
A.C.N 087 646 062


       Example - Ergon Energy enters into a contract to buy land from ABC Pty Ltd.
       An Ergon Energy director owns 50% of ABC. The director’s private interest
       (as a shareholder of ABC, to maximise the return from the sale of the land)
       potentially diverges with the director’s duty to Ergon Energy (to select the
       most suitable land for the best price).
       Example of an indirect conflict - The board of Ergon Energy is debating
       whether to enter into a contract to purchase a business owned by ABC Pty
       Ltd. ABC owes $250,000 to DEF Pty Ltd. The spouse of one of the directors
       of Ergon Energy owns 50% of the shares in DEF.
Responsibility
Responsibility for disclosure or avoidance of a conflict of interest and disclosure of a
material personal interest rests with the individual director / executive.
Materiality threshold
Not every personal interest will present a conflict. For companies, the courts have
recognised the need for there to be a real possibility of conflict before requiring the
director/executive to act.
‘Material personal interest’ is not defined by statute, however it would include an
interest that involves a relationship of real substance to a matter concerning the
company such that it might, or could be seen to, influence the director’s vote or
decision.
The Queensland Government’s ‘Statutory Officer Guidelines’ apply a stricter
emphasis for statutory office holders, by formulating the test in this way:
       “In the area of conflict of interest perception is all important…Essentially it
       means that such reasonable member of the public would conclude that
       inappropriate factors could influence an official action or decision.”
A case by case analysis is usually required.
If there is doubt in deciding whether a situation presents a conflict, the matter can be
discussed with the Company Secretary or Chairman, or discussed with the Board first,
but it is better to err on the side of caution.
Examples of investments and interests
Some examples of investments and their materiality are discussed here:
       Blind trusts or Superannuation Funds
       That is, where the beneficiary of an investment vehicle has no advance
       knowledge or control over the nature of the investments made.
       To the extent that the beneficiary has no prior knowledge of an interest, the
       investment is unlikely to cause a conflict because a reasonable person properly
       informed would not expect the beneficiary to prefer the interest of an unknown
       investment to that beneficiary’s duty to Ergon Energy.
       It needs to be remembered that any investment based on prior knowledge of
       confidential company information will in any event be a form of insider
       trading.
Ergon Energy Corporation Limited
A.C.N 087 646 062




      Self managed superannuation schemes
      Although many beneficiaries under self managed super funds do not ‘control’
      the fund in the sense that they do not conduct the day to day management of it,
      they do have an ultimate say over the investment, even if they choose to
      delegate the decision to their financial adviser.
      Given the focus in the Statutory Officer Guidelines on perception, these
      investments do have the potential to give rise to conflicts of interest and
      depending on materiality and relevance ought to be disclosed.
      Spousal and family interests
      The interest of a person’s spouse, partner or family member may give rise to a
      conflict if a reasonable person would perceive that the person may prefer their
      spouse’s or partner’s interest to their own.
      Therefore, directors and executives should ensure they carefully consider
      indirect conflicts. It is the director’s/executive’s obligation to identify potential
      conflicts.

				
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Description: Ergon Energy Corporation Limited ACN 087 646 062 This expands