As the saying goes, nobody’s perfect. We all make mistakes from time to time, and the pressure to get things right is especially high when you’re faced with the important and complex decisions involved in running a company. Unfortunately, as a director or officer of the company, your oversights could leave you open to legal action where you’re personally liable for covering the cost of defending yourself. Let’s look at some of the situations you could encounter:
Employment and human resources issues
You can have a claim brought against you by an employee who feels that you discriminated against them because of their age, gender, ethnicity, religion, disability, marital status, etc., or because they feel that they were unjustifiably dismissed.
Shareholders who feel that you have not acted in the best interests of the company, resulting in financial loss and the devaluation of their shares, may claim compensation for their losses.
Inadvertently publishing false, incomplete, or misleading information in your company’s financial reporting could result in breaches of the Companies Act 1993, the Financial Reporting Act 2013 or the Financial Markets Conduct Act 2013.
Making decisions that exceed your authority
If you act outside the authority given to you as an officer of the company, and the result of your action brings legal proceedings against the company, you can be held personally liable for the costs.
Failure to comply with regulations
As an example, the directors of a logging company were prosecuted under the Resource Management Act when, as a result of their ‘wrongful acts’, sediment was discharged into a local stream.
Regardless of which industry you operate in, the act of running a company can leave you open to any of the above risks through a simple mistake or error of judgement. Fortunately, you can protect yourself against the legal costs of defending yourself with Directors and Officers Insurance. If you would like to find out more about this cover, or to review your existing cover to make sure it’s appropriate, give us a call today.