So you’re a director! You’ve got the keys to the executive loos and staff wave palm fronds in your wake as as you walk through the office……….. Then you wake-up as your alarm goes off and it suddenly dawns on you that being a company director carries a whole burden of responsibility.
And now the buck might stop with you!
Oh no need to worry though. I’m a director of a limited liability company so I’m pretty safe. If only it were that simple!
Increasingly directors of businesses are finding themselves at the wrong end of the courtroom as individuals are pursued for their actions or indeed inactivity; and unfortunately, it’s not always possible for the corporate entity to protect the individual. Often personal assets are at risk as company directors are faced with legal bills and compensation awards that they have to fund themselves from their own assets.
So who makes claims against directors? Well the answer is potentially anyone!
Employment-related claims against directors are an explosive area of potential liability. The two most common types of claims are brought for wrongful dismissal and discrimination.
Outsiders can also make claims. Competitors, creditors, the regulatory agencies, such as the health and safety executive and any other person affected by corporate conduct can assert third-party claims for a whole raft of issues.
Surprisingly, shareholders can make claims against directors should they be able to demonstrate that the directors actions have had a negative impact on their investment.
The good news is that it is possible for the company to buy insurance to cover the directors or officers of a business that provides protection for legal defence costs and compensation awards. This type of policy is relatively inexpensive and if arranged properly can cover all of the issues identified earlier. It’s not even classed as a benefit in kind so there are no additional tax implications. Importantly, it’s vital that all activities are fully disclosed and the correct limits of indemnity are purchased. It’s also important that all the relevant extensions are activated to ensure that you benefit from the widest possible cover.
Contact the experts at ProAktive who can give you peace of mind.