Your company’s liabilities may be limited – but yours are not. Can you afford to take a risk?
With corporate governance in the spotlight, today’s company directors are under constant scrutiny. You may believe your decisions and actions are shielded by your company, but this is not always the case – an increasing number of directors are being personally investigated or pursued in court. Your home, savings, investments, even your career could be under threat as a result.
To some extent, this is as a result of the current legal and commercial environment which has become potentially more hostile for company directors. It is a statutory duty for company directors, officers and other senior employees to manage their organisations with due care and integrity yet there are increasing numbers of cases reaching the courts where they are finding themselves being accused, either rightly or wrongly, of corporate malpractice.
When such circumstances arise, the individuals concerned can incur an entirely personal liability and be faced with enormous legal expenses and settlement costs which their company may either not wish to pay or in deed be forbidden by law to meet. This is why an individual’s personal asset and livelihood can be threatened.
Legal action can be taken for matters arising out of error, omission, mis-statement or breach of duty. Directors can be sued as an individual by third party’s suffering a loss, for example employees, former employees, customers and suppliers. However, most directors will relate to the distinct possibility of actions by various regulatory bodies such as the Official Receiver, Inland Revenue, Customs and Excise and, last but by no means least, the Health & Safety Executive. The latter in particular is of some concern bearing in mind the ever-increasing emphasis being placed on employee safety and the fact that The Director nominated as the “Competent Person”, has a personal liability should something go wrong.
Companies with a full Risk Management programme in place can certainly alleviate the problem but we would strongly recommend arranging a Directors and Officers Liability insurance which is designed to cover directors and officers and senior management for legal actions and their costs, thus protecting personal assets. In addition, the policy will support the Risk Management programme and offer legal help which can identify problems and minimise their impact before they escalate beyond control.
Call your contact at Capital & County.