- There are real risks when acting as a director on the board of a client’s company.
- Solicitors should be very clear about the role they are playing: whether decision making or advice giving.
- Even if not formally appointed to a board, there is a risk that a solicitor could be a de facto director unless roles are clearly defined.
Solicitors accumulate a wide range of commercial skill and knowledge, as well as a critical mindset, which can be extremely valuable on a corporate board. However, there are potential pitfalls for both the practising solicitor and the company when agreeing to serve on a client’s board.
Solicitors as directors
The first caution for a company appointing a solicitor to the board is that the line between giving legal advice and the role of director can become blurred. While it can be useful for the board to have direct access to a solicitor when discussing issues, where that solicitor is also a director, the company may lose legal professional privilege in the advice it receives.
In Standard Chartered Bank v Antico  36 NSWLR 87 (at -), the defendant company made a claim for legal professional privilege over the minutes of a board meeting in which one of the directors summarised the legal advice he had given the company in his capacity as the company’s solicitor. The court decided that, on the facts of this particular case, the director’s summary was given in his role as a director with legal knowledge, participating in the making of a commercial decision, rather than giving confidential legal advice. The company was not able to claim privilege over the minutes.
A solicitor director can also run the risk of finding themselves in a conflict of interest. Directors owe a primary duty to the company and, in some cases, to its debtors. However, solicitors owe a paramount duty to the court and may find that duty conflicting with directors’ duties.
A conflict may also arise in circumstances where the board is considering the remuneration paid to the solicitor’s firm or the engagement of another firm of solicitors, in which case the solicitor should follow the conflict of interest rules in the Corporations Act 2001 (ss 191–196).