Page 29 - BOSS Today Issue 10

LEGAL

WITH POWER COMES
RESPONSIBILITY

Anyone skilful and lucky enough to become a company director should
also be aware of the duties that such a role entails

any of us consider But you should also be aware own company. Companies that they should not allow
it a privilege to win of the potential costs that come have their own separate a company to continue
Mthe title of director with taking on such a position. legal persona, and can bring trading while it is insolvent.
of our company, and really, As a director you have actions in their own right. That Any transactions undertaken
who wouldn’t be happy in such duties, and these duties were is something the executives in those circumstances can
a position? You get to be the most recently formalised in the of former supermarket chain result in the creditor coming
boss, you decide what way the Companies Act 2006. Breaches Safeway discovered in the cold after the director for his or
company or your department of that act can attract penalties light of day. her money back. Resigning in
is going, and in some cases you of up to £5,000 per breach. That In 2002 and 2003, Safeway these circumstances will not
get the perks – the company car, applies to both the company (through its directors and other necessarily release you from
the separate office, and so on. itself and the “officer responsible” senior management) engaged any liabilities either. Directors
– which usually means a in repeated direct and indirect must be seen to have taken
director. exchange of commercially positive steps to do everything
Most of the duties in sensitive retail pricing intentions they could to ensure that the
the Companies Act are with other large supermarkets magnitude of a company’s
straightforward in that they deal and dairy processors. This problems – or their perception
with the fact that directors are resulted in initiatives which of them – is brought to the
in a position of trust. But there increased the price of milk attention of the full board of
are now some new concepts, and other dairy products for directors.
including the need to consider consumers. The price increases Directors should also try to
“the impact of the company’s were passed back to the farmers. make sure that the company
operations on the community Safeway was fined £16m - takes all the steps necessary,
and the environment”. Yes, that and that was with a discount for including seeking professional
is in there. cooperation. But then Safeway advice, in an attempt to recover.
It is a common itself decided to sue some of Whilst directors won’t be
misconception that being its officers for getting it into protected if they engage in
the director of a limited this mess. Fortunately for the criminal activity, D&O insurance
company protects you from individuals concerned, the will protect you against the
the company’s liabilities. In company eventually lost on the financial consequences of
fact, courts are more and more basis that it shouldn’t profit from negligence or breach of trust.
prepared to “pierce the veil of its own illegal act. But it was a But you really need to make
incorporation” these days and close call, and the executives sure you double-check any
deal with those they consider concerned were certainly exclusions on the policy. You
wrongdoers directly. dusting off their directors and wouldn’t want your hard earned
While you wouldn’t be at officers (D&O) liability policies. progression to being a director
all surprised to hear about On top of that, shareholders to come unstuck so badly.
the possibility of criminal also have a right enshrined in
prosecutions for fraud and the Companies Act to bring n FOR FURTHER INFORMATION
other criminal activity, you may derivative actions against PLEASE CONTACT YOUR
well be surprised to know that executives. REGIONAL LEGAL ADVISER ON
directors can be sued by their Any executive knows 0845 450 1565

November/December 2011 | BOSS TODAY 29

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