Most conflicts of interest are not misconduct; undisclosed ones are. A relative at a vendor, a side business or an investment in a competitor becomes a problem when nobody declares it.
Our course shows employees how to recognise a conflict and disclose it the right way. The articles below answer the questions people hesitate to ask their compliance team.
Quick answer
Indian law has no general statute requiring conflict of interest training for employees. It does impose conflict duties on directors (Companies Act sections 166 and 184), approval rules for related party deals (section 188), and disclosure duties on senior management of listed entities (SEBI LODR Regulation 26(5)). Employee training is how companies enforce their own codes.
The course
What the law requires
Companies Act, 2013: section 166, duties of directors
Section 166(4) of the Companies Act, 2013 says a director shall not be involved in a situation in which they may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company. Section 166(5) bars a director from achieving or attempting to achieve any undue gain or advantage for themselves or their relatives, partners or associates; a director found guilty must pay an amount equal to that gain to the company. Section 166(2) and (3) add duties of good faith, due care and independent judgment.
Companies Act, 2013: section 184, disclosure of interest by directors
Under section 184(1), every director must disclose their concern or interest in other companies, bodies corporate, firms or associations, including shareholding, at the first board meeting they attend, at the first board meeting of every financial year, and at the first board meeting after any change.
Under section 184(2), a director who is directly or indirectly interested in a contract or arrangement with a body corporate in which they (alone or with other directors) hold more than two per cent shareholding, or are promoter, manager or CEO, or with a firm or entity in which they are a partner, owner or member, must disclose the interest at the board meeting where it is discussed and must not participate in that meeting. A contract entered without that disclosure, or with the interested director participating, is voidable at the company's option (section 184(3)).
Companies Act, 2013: section 188, related party transactions
Section 188 requires board consent, and shareholder approval above prescribed thresholds, for specified contracts with related parties, such as sales, purchases, leases, services and appointment of a related party to an office or place of profit. Transactions in the ordinary course of business on an arm's length basis are exempt. Many employee-level conflicts, such as a vendor owned by a director's relative, become section 188 issues once they reach the board. See our related party transactions guide.
SEBI LODR Regulations, 2015: Regulations 17(5) and 26
For listed entities, Regulation 17(5) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 requires the board to lay down a code of conduct for directors and senior management, and Regulation 26(3) requires them to affirm compliance with it every year.
Regulation 26(5) requires senior management to disclose to the board all material financial and commercial transactions in which they have a personal interest that may potentially conflict with the interest of the listed entity at large. The explanation says such conflicts relate to dealing in the entity's shares and commercial dealings with bodies in which management or their relatives hold shares. Regulation 26(6) bars employees, KMP, directors and promoters from agreements with shareholders or third parties for compensation or profit sharing linked to dealings in the entity's securities without prior board and shareholder approval.
SEBI (Prohibition of Insider Trading) Regulations, 2015: Schedule B
Clause 14 of Schedule B to the SEBI (Prohibition of Insider Trading) Regulations, 2015 requires designated persons in listed companies to disclose, annually and whenever it changes, the names and PAN of immediate relatives and of persons with whom they share a "material financial relationship" (a payment such as a loan or gift in the previous twelve months equal to at least 25% of the recipient's annual income, excluding arm's length transactions).
Who must be trained and how often
No Indian statute requires conflict of interest training for employees in general, and none sets a frequency. The statutory duties fall on directors (sections 166 and 184, with disclosure at the first board meeting of every financial year), senior management of listed entities (LODR Regulation 26(5), with annual affirmation of the code under Regulation 26(3)) and designated persons under the insider trading rules (annual disclosure under Schedule B clause 14).
For other employees, the obligation comes from the company's own code of conduct and employment terms. Common practice, not law, is to train all staff at induction, collect an annual conflict declaration alongside the code of conduct acknowledgement, and give procurement, finance and hiring managers more detailed training because they make the decisions most exposed to conflicts.
| Audience | Legal duty | Timing set by law |
|---|---|---|
| Directors | Companies Act s.166(4), s.184(1)-(2) | First board meeting attended, first meeting of each financial year, and after any change |
| Senior management of listed entities | LODR Reg. 26(3) and 26(5) | Annual affirmation of the code; disclosure of conflicted transactions to the board |
| Designated persons (listed companies) | PIT Schedule B clause 14 | Annual and on change |
| All other employees | Company code of conduct (no statute) | None; induction and annual declaration is common practice |
Penalties and consequences
Statutory penalties apply to directors and senior management; for other employees the consequence is disciplinary action under company policy.
| Breach | Provision | Consequence |
|---|---|---|
| Director contravenes the duties in section 166 | Companies Act s.166(7) | Fine of not less than one lakh rupees, up to five lakh rupees |
| Director makes an undue gain | Companies Act s.166(5) | Liable to pay an amount equal to the gain to the company |
| Director fails to disclose interest under section 184(1) or (2) | Companies Act s.184(4) | Penalty of one lakh rupees |
| Contract entered without disclosure or with interested director participating | Companies Act s.184(3) | Voidable at the option of the company |
| Related party contract entered or authorised in breach of section 188 | Companies Act s.188(5) | Penalty of twenty-five lakh rupees (listed company) or five lakh rupees (other company) on the director or employee |
| Listed entity breaches LODR | LODR Reg. 98(1) | Stock exchange action including fines and suspension of trading |
What good Conflict of Interest training covers
- What a conflict of interest is: actual, potential and perceived
- Common scenarios: relatives at vendors or competitors, side businesses, outside directorships and investments
- Gifts, hospitality and favours as a source of conflicts
- Conflicts in hiring and managing relatives or close friends
- How and when to disclose, and to whom, including updating a declaration when circumstances change
- Recusal: stepping away from decisions where you have an interest
- How a disclosed conflict is managed, and why disclosure protects the employee
- Links to related party transactions and director disclosure duties under sections 184 and 188
- For listed companies, senior management disclosures under LODR Regulation 26(5) and designated person disclosures under the insider trading rules
- Consequences of non-disclosure under the code and the law
Our courses for this topic
| Course | Audience | Duration | Language | Format |
|---|---|---|---|---|
| Conflict of Interest | All Staff | 26 min | English | SCORM eLearning |
Laws & standards covered
- Companies Act 2013 – Director Duties
- SEBI Code of Conduct
- Corporate Governance Best Practices
Who it's for
- All employees
- Managers and supervisors
- Finance and procurement teams
- Board members and directors
Guides & insights
Frequently asked questions
Is conflict of interest training required by law in India?
There is no general statutory requirement to train employees on conflicts of interest. The law imposes conflict duties on directors, senior management of listed entities and designated persons, and companies use training to make their own code of conduct enforceable for everyone else.
Does a relative working at a supplier have to be declared?
For an employee, it depends on the company's code, and most codes require it. For a director, an interest in a contracting firm or body corporate triggers section 184(2) disclosure, and a contract with a relative or their firm may be a related party transaction under section 188.
How often should employees complete a conflict declaration?
The law sets no frequency for employees. Directors disclose at the first board meeting of each financial year, so many companies align an annual employee declaration with that cycle and require updates when circumstances change.
Who counts as senior management under SEBI LODR?
Regulation 16(1)(d) defines senior management as officers and personnel who are members of the core management team, excluding the board, including all members of management one level below the CEO, managing director, whole-time director or manager, functional heads, and KMP other than board members. They must make the Regulation 26(5) disclosures.
Is a disclosed conflict still a breach?
Not in itself. The law and most codes focus on disclosure and recusal: a director who discloses under section 184 and does not participate is compliant. The breach is failing to disclose or taking part in the decision.
Which Conflict of Interest Training courses does Compliance at Workplace offer?
Conflict of Interest (26 min, for All Staff).
Which laws and standards does Conflict of Interest Training cover?
Companies Act 2013 – Director Duties; SEBI Code of Conduct; Corporate Governance Best Practices.
Who should take Conflict of Interest Training?
All employees, Managers and supervisors, Finance and procurement teams, Board members and directors.
Can the Conflict of Interest Training be customised to our organisation?
Yes. Every course can be customised to your policies, branding and industry scenarios, and delivered on your LMS as SCORM or on our Compliance Central platform.
Sources
- Companies Act, 2013 (India Code)
- SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (consolidated, SEBI)
- SEBI (Prohibition of Insider Trading) Regulations, 2015 (consolidated, SEBI)
Last updated by the Compliance at Workplace Editorial Team.