by Ian Gregory, of MPW insurance brokers

Directors assume onerous responsibilities as far as their duties to creditors, shareholders, clients and customers are concerned.

Claims resulting from a wrongful act or more commonly an alleged wrongful act may arise from many directions, including creditors suspecting mismanagement, investors who feel they have been misled, trade association investigations or industry regulatory bodies and perhaps the liquidator if the company is thought to have traded while insolvent.

Directors involved in public companies may face further additional potential claims involving concerns arising out of allegations of insider dealing or misuse of information, while European law continues to drive a movement away from corporate to personal responsibility.

An alleged breach of any of these duties may lead to a claim being made against the company or the director individually, whether or not the director is culpable. In the event of a claim being brought against the director, it is the director's personal assets at risk. He cannot rely on his company to indemnify him as this may result in a breach of the Companies Act.

Directors may face hefty fines, possible disqualification or even imprisonment. Protection for the key decision makers of the business is available in the form of Directors and Officers Liability insurance.

Further protection is also available for employment practices, pension trustee issues and fraud losses, if required.

When arranging insurance cover, it is important your broker fully understands your business activities. At MPW, we regularly advise our clients and arrange tailored cover so to suit their budget, providing protection for both the company and its directors.

The cost of Directors and Officers Liability insurance has substantially reduced whilst the risks have increased in recent years and we recommend such cover for all company directors and senior management. Can employers and key employees afford not to have this cover?