Under the Companies Act 2006,
directors and company officers are subject to over 200 areas of statutory
liability. A breach of any legislation has the potential to lead to civil or
even criminal charges. Directors and officers of companies can be held
personally liable for these charges and could face significant fines and
possible custodial sentences.
Regulatory compliance is an
ever-growing challenge, and the powers of regulatory bodies are becoming
increasingly onerous. Risks are also apparent in the workplace in the form of
employees who are these days well aware of their rights and do not hold back in
taking action where they feel those rights have been violated.
Keeping your head above water amidst
all this is an exceptional challenge for any business owner, particularly when
the business is a smaller one that doesn’t have its own in-house legal
department.
Personal Risks for Company Directors and Officers
Directors and officers face a
raft of personal risks. These include health and safety failings; employee
claims; data protection breaches; advertising standards violations and company
activity irregularities.
In some cases, convicted
directors can face sentences of between two and ten years as well as being
banned from running a company for up to 15 years.
Thankfully there is a way to
protect yourself from these risks if you are a company director or officer.
How to Protect Yourself from Personal Risk as a Company Director or Officer
If an investigation is launched
against your company you will obviously need to put up a solid defence. The
legal costs involved in this can run into tens or hundreds of thousands of
pounds, even if the outcome is favourable. This will obviously put a significant
strain on both company and personal finances.
The way to protect against this
risk is by taking out a Directors and Officers Liability insurance policy, also
known as D&O insurance.
These policies take away the
financial risks faced by directors and officers, protecting them in the event
of claims or allegations needing to be defended.
D&O insurance provides cover
for key officers and directors of a business, protecting them by covering legal
defence costs in cases of regulatory inquiries; environmental mismanagement
investigations; employee claims; licensing breach actions, corporate
manslaughter allegations and more.
Most directors and officers
taking up new positions have an expectation for such cover to be in place to
protect them in their new role. This cover is not expensive and premiums are
based on a sliding scale according to turnover.
If you think in terms of the
potential costs involved in NOT having the cover, it has to be considered a
wise move.
