Marshall Wooldridge - Directors & Officers Indemnity & Corporate Legal Liability

Directors & Officers Indemnity
& Corporate Legal Liability

Directors and Officers of companies and limited liability partnerships have an ever increasing number of personal liabilities under Companies Acts and other legislation. When they are accused of breaching these duties actions are brought against them personally and this can have devastating consequences for the individuals concerned, placing all of their personal assets at risk. It is a common misconception that being a director of a limited liability company or partnership limits the director's personal liabilities. This is not the case; directors' personal liabilities are unlimited.

Exposure is not limited to large public limited organisations; the Companies Acts are equally applicable to the directors of small private limited enterprises. Government bodies such as the DIT, HSE and SFO are increasing the number of actions and investigations against businesses of all sizes. In 2005-6:

a)  Over 1,500 directors were disqualified for
     between 2 and 15 years.

b)  The DTI's Companies Investigation Branch
     prosecuted over 5,000 companies.

c)  The HSE issued over 13,000 notices and
     prosecuted 1056 cases.

The exposures are so onerous that many business people operating at this level will not now accept a board or non-executive position without adequate insurance cover being in place.

D & O Insurance provides a pool of money for the directors and officers of a company that can be drawn on to fund defence and settlement costs and to pay for the costs of legal representations of investigations.

New legislation such as the Corporate Manslaughter and Corporate Homicide Act 2007, which came into force on 6th April 2008, will impose further responsibilities and duties upon the business.

We would strongly recommend that all limited liability companies and limited partnerships arrange Directors and Officers Indemnity, with a Corporate Legal Liability extension.