Taking some of the worry out of being a director

The rewards of running a successful recruitment business can be huge, not just in monetary terms but in giving directors job-satisfaction. It is one of the few services in the UK that requires a relatively small investment to start up, delivers good margins (usually) and offers plenty of people-contact to maintain variety.

However, rewards donít come without some risk and agency directors are probably more liable than ever to be the subject of a claim.

ëDirectors are liable on a personal basis for breaches of company, environmental and tax law as well as financial mismanagement and libel. Incorporating your business no longer limits your riskí Advises Robin Kirkland , MD of leading insurance brokers to the recruitment industry, Dallas Kirkland (Professions) Ltd.

ëRecent claims against directors include cases where:

- A director signed a company cheque but omitted the word ëLimitedí. The cheque was not honoured and by the time the corrected cheque was re-presented, the company had gone into liquidation. The MD was held personally responsible for the value of the cheque ñ over 30,000.

- Three directors of a recruitment firm were arrested and charged with breaches of the Immigration Act 1970. The charges were later dropped but only after the directors had incurred large legal costs.

- Two directors were prosecuted by The Department of Trade and Industry who alleged that the directors were in breach of the Companies Act after their inadvertent failure to identify the company correctly on the company notepaper and invoices.í

Under the Companies Act 1985 there are more than 200 possible offences for which a director could be personally prosecuted. Even astute directors could easily fall foul of the many regulations governing their conduct and obligations. Mistakes can happen.í

The Companies Act does now permit companies to provide indemnities to their directors for personal liability they may incur. But this means that the costs paid on behalf of the directors will have to come from the companyís own profits if they do not have the appropriate insurance.

ëThe best way to ensure peace of mind is to take out Directors and Officers insurance which allows you to perform your duties without worrying unnecessarily about the personal liabilities you may incur.í Continues Kirkland. ëCosts start from 500 plus tax and premiums are an allowable business expense.í

Directors and Officers insurance was developed to indemnify directors in case of an action taken against them. Policies generally cover defence costs, court awards against directors and any settlements.