Directors at risk of legal action

Published:  16 September, 2009

LONDON: The rise in business failures, up 56% on last year, puts company directors are at greater risk of being sued said Aviva.

Robin Farquhar, head of specialist lines for Aviva, said: "As we become a more litigious society, directors and officers are facing additional pressures as more businesses face closure".

"When a firm faces insolvency, a director's duty to creditors intensifies," he said, warning that insolvency practitioners will often try to recover money for a company's creditors by bringing a claim against a director for either a breach of their duties, or fraudulent or wrongful trading.

"The Companies Act 2006 sets out the duties and obligations of company directors, making them liable not just for the long-term success of the business, but also for the supplier and customer relationships, the interests of employees, fairness towards shareholders and environmental impacts," Farquhar said.

Aviva provides management liability insurance protection against the exposures that private companies face.

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