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Directors’ Liabilities – The Buck Stops Here!

Congratulations, you’re a company Director! Once the euphoria has died down it may dawn on you that being a company Director carries a whole burden of new responsibility.

And now the buck might stop with you!

Oh, no need to worry, you say. I’m a Director of a Limited Liability Company so I’m safe. If only it were that simple!

Increasingly Directors are finding themselves at the wrong end of the courtroom as individuals are pursued for their actions or indeed inactivity. Unfortunately, it’s not always possible for the corporate entity to protect the individual. Your 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 can claim against a Director? 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 bring 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.

For more detail about this type of cover, contact ProAktive today who can offer you peace of mind.

By Beverley Brown FCII MBABroking Director

Chartered Insurance Broker

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