The risk of legal liability that directors are exposed to is increasing, particularly with the introduction of new or amended legislation, such as the Health and Safety at Work Act 2015.
For new and existing directors alike we suggest you:
Ensure the company you are a director of has appropriate Directors and Officers Insurance in place; and
Seek an indemnity from the company in respect of:
Liability to any person for any act or omission in your capacity as a director, excluding fraudulent or criminal actions; and
Costs incurred in legal proceedings defending your actions as a director.
BUT, before you do so, make sure you check the Company has a Constitution and that the Constitution contains a clause which authorises the Company to insure its directors and provide director indemnities. Without it, the Company is not permitted to indemnify or obtain insurance for its directors or employees (section 162 Companies Act 1993). If the Company does not have a Constitution with these simple provisions in it, we suggest you insist it adopts one.
A Constitution and Deed of Indemnity are both relatively simple and inexpensive documents to prepare, but a worthwhile investment.
To find out more, contact Kylie van Heerden.