Industry News

What is Your Liability as a Director or Officer?

Your Liability as a Director or Officer

November 2016


Any Director or Officer of a company will be subject to certain legal duties placed upon them by a variety of different areas of law

Examples are:

  • The Companies Act 2006, which requires, amongst other things Directors and Officers to act with Reasonable Skill and Care
  • Health & Safety Legislation in relation to good working standards
  • The requirement to account accurately and transparently
  • Employment Law Legislation
  • The Insolvency Act - if a business falls upon hard times and Creditors launch an action against a Director(s).

Businesses often look to arrange liability insurances to indemnify themselves against the risks associated with their activities; these covers respond to losses of Third Parties (often their Clients) in relation to Financial Loss, Property Damage or Personal Injury.

But if an investigation is launched into the cause of an incident, or a claim is made alleging that a Director has not carried out their duties correctly resulting in loss to fellow Shareholders, Creditors, Employees, Customers, Suppliers or any other Stakeholder in your business then what safeguards are in place to protect against the potential personal liability?

The Company may provide an indemnity, if this is written into its Articles of Association, but then the Company balance sheet suffers.

A more robust solution is a Directors & Officers Insurance Policy, that will indemnify individual Directors & Officers in respect of defence costs and awards flowing from claims and allegations of Wrongful Acts whilst holding office.

This does not just have to be cover for individuals. Whilst individual Directors and Officers want protection against personal liability to protect their own assets, we must not forget that actions can be brought against the companies as well as individuals. Cover for the company can easily be included within the same policy. Ensuring the right limits are in place is another important aspect in today’s litigious climate.

So if you were unaware of this type of cover, or want to check the cover your Directors and Officers Insurance policy provides, call our Financial Lines expert Mike Sayers for a quotation or advice around this very important area of risk on 01332 375215.