15 examples of Directors & Officers (D&O) claims

  Legal Costs

Shareholders brought an action for mismanagement against a company which had suffered exceptional losses. The directors were able to successfully defend themselves but substantial legal costs were incurred.

  Verbal Assurances

Directors of a construction company were successfully sued for losses incurred by an architect who relied on a director’s repeated assurances that a contract performance bond had been arranged.

  Insolvency

A company went into liquidation after one of its directors ran up a bill with a vehicle repairer for the cost of repairs carried out to a company vehicle. The cost was incurred on behalf of the company. The vehicle repairer brought an action for the outstanding invoices and there was suggestion that the directors were liable personally in view of the provisions of the Insolvency Act.

  Companies House

The directors of a company which failed to comply with the time limit for delivery of accounts to the Register of Companies and then did not disclose certain directors’ appointments were prosecuted under the Companies Act.

  Revenues & Customs

The bar staff of a company were allegedly paid without the deductions for tax (apparently without the knowledge of directors). The Inland Revenue are considering bringing proceedings against the directors.

  Signing A Cheque

A director who signed a company cheque whilst the company was in receivership, found that the cheque was dishonoured and he was held personally liable to the payee.

  Criminal Defence Costs

Company Secretary of a building company was prosecuted, as labourers breached a tree preservation order whilst developing a site. Criminal defence prosecution costs were sought.

  Health & Safety

Director of a construction firm responsible for Health & Safety was subjected to an Investigation from the Health & Safety Executive following an accident of one of the Company’s constructions sites.

  Faulty Work

Director of a Heating & Ventilating engineering firm had to defend himself at an HSE investigation following the faulty installation of a gas central heating system, which lead to a fatality. The work had been subcontracted out to an outside contractor.

  Company Loans

In Neville (as administrator of Unigreg Ltd) and another v Krikoran (2006), the Court of Appeal held that directors will be jointly and severally liable under section 341(2)(b) of the Companies Act 1985 to repay all loans made by their company to a fellow director in breach of section 330, from the time at which they first became aware that illegal loans were being made even if they were not aware of the circumstances, or even the fact, of each subsequent loan. Furthermore, where directors fail to take steps to prevent losses to the company, such as by not preventing further loans or by not calling in those already made, they will be personally liable to indemnify the company under section 212 Insolvency Act 1986 if their co-directors are unable to repay.