If you are a Company Director you have significant financial exposures under the Companies Act 2014
If you are concerned about these exposures or if you are unaware of how they might arise please read on.
The 2014 Companies Act changed the position of directors and specifically the sanctions and penalties that are now applicable. Directors often believe that any financial loss or penalties arising will be dealt with by their company. The new Act re-emphasised that companies are restricted in the circumstances in which they can indemnify directors. A director cannot be indemnified by their company for negligence, default or breach of duty or trust. These would represent most of the actions that are likely to be taken against a director. It is also important to note that a director cannot be indemnified by his company if the company is insolvent or has gone out of business.
Other areas where a director can have liability are claims arising from Health and Safety matters, Pollution and environmental risks and Investigations. In addition a director could be sued by a competitor for defamation.
This now means to all intents and purposes that any liability arising for a director is against their personal assets. This represents a major financial exposure both in respect of initial legal costs to investigate and defend a matter and any subsequent legal award or fine. You are still seriously exposed whether you are a director of a small or large company.
Directors and Officers Liability insurance has evolved over time to deal with these exposures. Its cost relative to the protection provided represents very good value for money. Notwithstanding that the policy is essentially protecting the director’s personal assets the annual premium can still be paid by the company.
Once an action is commenced against the insured director the insurer steps in and provides the appropriate legal defence. This is a critical part of the protection and provides important peace of mind both financially and in relation to preserving reputation.
The policy is based on a pre-selected limit of indemnity that applies to ALL insured directors. This has to be set at a level to accommodate possible multiple claims against directors. Apart from legal costs the policy also covers investigation and pre-investigation costs. Civil fines and penalties are also insured where allowed by law. The policy also provides for an element of PR costs to help deal with any reputational issues that the insured director may have arising from an allegation of negligence, breach of duty etc.
Many directors are unaware of the specific legal and financial exposures they have and the extent that their personal assets are at risk. Directors of small private companies are just as susceptible to legal actions as are directors of larger companies. Directors and Officers Liability Insurance can provide a high level of protection and most importantly peace of mind.
If you are concerned that you have any exposures or if you like to discuss this area in more detail we will be delighted to assist and provide an indication of the cost of cover to meet with your requirements, Please contact Glennon today, your usual Glennon contact or call us on 01-7075800.
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