Even in a company with limited status, personal liability is unlimited. Any allegations of wrongdoing need to be investigated and defended. This can cost a significant amount even if the case doesn’t reach court, risking directors’ and officers’ personal finances.
What is a wrongful act?
This could be a breach of trust, breach of duty, neglect, error, misleading statement, or wrongful trading, committed or attempted by a director or officer whilst acting in this capacity on behalf of the company.
Where can a claim come from?
- Employees – Thousands of employee claims are brought against senior management every year, from unfair dismissal to harassment and discrimination
- Regulators – Companies can face investigation from industry bodies such as the Health & Safety Executive and Department of Trade & Industry, which can take action against individuals
- Shareholders – Following some high profile claims, shareholders now closely scrutinise the activities of directors and there are more requirements for transparency of directors’ decisions
- European Legislation – it can be difficult to keep up with the latest directives, but directors must ensure their company does not breach legislation
- Creditors – Creditors are now more frequently claiming against individuals in cases of insolvency
Covering the costs of investigating and defending allegations, a Directors & Officers Insurance policy can protect against allegations of:
- Breach of trust
- Breach of duty
- Corporate negligence
- Error or omissions
- Misleading information and statements
- Wrongful trading
- Damages and legal costs
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