DIRECTORS RISKS

Below some of the risks the director can face due to not acting in the best interest of the entity.

Principles
Directors don’ts
Directors risks
Ideal structure
  • Personal liability
  • Criminal prosecution
  • Reputational damage
  • Disqualification as a director
  • Compensation orders
  • Liability arising from breaches of fiduciary duties
  • Reckless & fraudulent trading
  • Non-compliance with applicable legislations
  • Under and/or over value of transactions

What can directors do to protect themselves from all these risks?

  • Remain aware, vigilant and professional at all times – keep up with the law.
  • Ensure that all board decisions are minuted and you understand and agree with the decision.
  • Obtain legal and other advice when unsure of the implications of a situation in the company.
  • Document decisions and decision making processes to show a proactive and reasonable approach to issues.
  • Act with honesty, integrity and reasonableness at all times – this of itself can constitute a defence to most potential liabilities for directors.
  • Seek an indemnity from the company against any financial liability or costs of defending criminal or regulatory proceedings.
  • Obtain Directors & Officers Insurance although be aware that, as with any insurance policy, there may be exclusions for some matters and the policy may be voided by dishonesty, criminal activity and so on.
  • Lastly, resign should you feel uncomfortable with certain matters.