What it means
A director may bring experience from another business, but holding positions across companies creates obligations to more than one organisation. A decision benefiting one company can disadvantage the other.
The concern is especially serious when the businesses compete. A shared director or officer can create a link between organisations that should make independent decisions about pricing, products, customers, and strategy.
An interlock does not require a signed price-fixing agreement to deserve legal review. Some laws restrict the overlapping role itself when their requirements are met.
In the United States, Section 8 of the Clayton Act addresses simultaneous director or officer service in specified competing corporations. Its text includes conditions concerning commerce, competition, and financial thresholds, along with exceptions.
The thresholds are adjusted over time. The FTC publishes annual updates, so a board should not rely on a memorized amount or a threshold copied from an old appointment paper.
The statute also contains competitive-sales exceptions. These require analysis of the relevant businesses and figures, rather than simply declaring that two companies are unrelated because their main products have different names.
Confidentiality remains a concern even if the overlap is permitted. Board information about future prices, customer negotiations, capacity, or strategy should not become a conduit between independent businesses.
For non-finance managers, maintain an accurate list of directors' and officers' outside roles. Review proposed appointments and later business changes with governance and legal teams rather than assuming an existing appointment remains appropriate forever.
In practice
Real-world examples.
Example
A director is invited to join a second software company's board. Before accepting, the companies assess competitive overlap and applicable restrictions instead of assuming that different customer segments eliminate every competition concern. Counsel records the analysis in the board file.
Example
Two businesses begin offering competing products after a shared director has served both for years. The governance team reviews the changed circumstances, recognising that a previously acceptable arrangement does not settle the legal position after business activities change. The director steps back from one role while advice is taken.
Example
A board discusses confidential customer pricing while one director also serves another industry participant. The chair checks conflicts and information-handling arrangements and seeks legal advice rather than relying on a general promise to keep information private. The discussion is paused until the position is clear.
Formula
Calculation
There is no single calculation proving that an interlock is lawful. Map the overlapping roles, business competition, relevant legal entities, financial measures, and applicable exceptions before drawing a conclusion.
For a simplified competitive-sales illustration, suppose a fictional corporation has annual total sales of $100 million, including $1 million from products competing with the other corporation. Competitive sales are $1 million / $100 million = 1% of total sales.
Section 8 includes percentage-based competitive-sales exceptions, such as a test that asks whether the competitive sales of a corporation are below a stated percentage of its total sales. At 1%, this fictional corporation may sit below such a percentage, but the arithmetic alone does not establish a legal answer. The correct sales definitions, both companies' circumstances, other statutory requirements, current thresholds, and any additional laws require review.
A second illustration shows why the other company matters. If the second fictional corporation has total sales of $20 million and $2 million of competing sales, its competitive share is $2 million / $20 million = 10%, a much larger proportion than the first corporation's 1%. Each company's figures are tested for itself, so a small share at one company does not settle the position for the other.Case study
Seen in the real world.
This fictional case follows a manufacturing company considering a board candidate who already directs a supplier. The nomination team initially treats that outside role as valuable industry experience and records no concern. Legal reviewers discover that the supplier also sells a product competing with a newer business line of the manufacturer. They map the relevant entities, roles, sales overlap, and applicable competition rules before the appointment proceeds.
The governance team also assesses confidential information and potential conflicts over purchasing decisions. It does not assume that recusal from one meeting would cure a statutory restriction on simultaneous service. After review, the candidate declines the additional appointment and the company selects another director. Management adds outside-role checks to its nomination process and periodic updates, ensuring that later product expansion or corporate changes trigger a fresh assessment rather than relying on the original appointment record.
Watch out
Common mistakes.
- Assuming an interlock is permitted because no agreement to fix prices has occurred or because the shared director promises confidentiality.
- Using old financial thresholds, broad industry labels, or incomplete sales figures instead of reviewing the current rules and actual competitive overlap.
- Treating a conflict policy or occasional recusal as an automatic cure for restrictions on holding the overlapping roles themselves.
Questions
People also ask.
Are all overlapping board appointments illegal?
No. The answer depends on the companies, competition, roles, jurisdiction, and applicable requirements or exceptions. A permitted arrangement can still create confidentiality and governance issues that need management.
Does the US rule concern only directors?
Section 8 also addresses officers within its statutory definition. Legal reviewers should examine the actual position and requirements rather than relying on a job title or assuming that leaving the board resolves every issue.
Why review an appointment after it starts?
Business activities, corporate structures, financial measures, and outside roles can change. An assessment based on earlier facts should not be treated as permanent clearance when the relevant circumstances have moved.
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