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Directors Awareness of Decision-making Personal Liability

Directors Awareness of Decision-making Personal Liability

A recent poll of a thousand Small and Mid-sized businesses revealed over half of business leaders are unaware that as directors, they can be personally and legally responsible for a decision made in their business.

The concept of a company as a legal entity separate and independent from its owners and controllers has been enshrined in the common law since Queen Victoria was on the throne. However, laws covering health, safety and workplace wellbeing, environmental impact, financial impropriety, employment and the management of personal data have changed that. And it is compounded for the leaders of independent public organisations like schools, housing associations and health trusts

Today’s increasingly regulated world means that being a company director could be regarded as a high-risk occupation, given the duties and responsibilities that come with the role. If it is believed you breached any of these regulations, or even failed to safeguard the interests of a variety of stakeholders, you can find yourself in court facing legal action.

And let’s be clear. If a fine is levied against you, you can’t charge it back to your company, it will be your personal liability. It is vital to understand the legislation that applies to you in your role as director, and the implications of claims being made against you.

These are some of the generic Acts that apply to all organisations, but there specific public sector laws that apply to specific organisations that carry the same consequences, such as The Education (School Premises) Regulations 2012.

                 Companies Act 2016              Health and Safety at Work Act 1974

                 Insolvency Act 1986               Defamation Act 2013

                 Environment Act 1995            Wildlife and Countryside Act 1980

                 Modern Slavery Act 2015       Criminal Finances Act 2017

                 General Data Protection Regulation 2018

Without an in-house legal team to help manage a claim or investigation against you, the investigation and court case alone could put your own assets, including your home, car and savings, at risk.

Directors & Officers (D&O) insurance is designed to protect you from the financial implications of legal action associated with your senior role. And it will cover the cost of defending a claim, provide access to expert legal advice and compensation awards.

Against the backdrop of these regulations, D&O insurance is becoming a must to protect your finances, but it can’t protect your organisation from far bigger hidden costs.

Not managing all aspects of property related health and safety will affect how your trust or agency’s ability to fund service delivery. Last year’s successful prosecution of an Essex academy school by the HSE for asbestos mismanagement, led to a £46,000 pay out in fines and costs. That’s without the hidden costs of management time, legal costs and the effect on staff morale.

Whichever preventable incident disrupts your school, hospital or housing development; while hard to quantify, it will impact your organisational outcomes, reputation and future corporate liability.

Now is the time to consider if you are asking your advisers the right questions.