One of the main benefits to individuals to working within a company or corporation is what is known as limited liability - not being liable for the actions or debts of the company or corporation in question.
This is known in legal parlance as operating behind a "corporate veil" of protection and in large measure applies.
But in recent years, there has been an increased "piercing" of the corporate veil in a move to encourage better governance, leaving directors and controllers of companies and corporations open to potential personal liability in a still narrow but broader range of circumstances than before.
So it is no longer easy to (what has been termed as) "hide behind the corporate veil" when things go wrong.
Fair or not, this is reality.
A sample of relevant areas where the corporate veil may not necessarily afford protection to directors, controllers and in some cases even shareholders (with possible director disqualification as well as criminal and financial implications), are as follows:
● corporate manslaughter
● breach of warranty of authority
● corporate tax fraud
● certain health and safety breaches
● discrimination
● serious regulatory breaches
● exposure for wrongful trading - see our post entitled "StressBusting™ in a failing company scenario" for further insights
It is therefore important to take steps to mitigate exposure and be able to provide evidence of best endeavours having been expended to avoid a risk materialising if the need ever arises.
These can include:-
● keep a full and accurate record of decision making and risk mitigation strategies - see our post entitled "Keep a Tech Trail as opposed to Paper Trail to Stressbust™"
● keep all policies fully up to date and compliant with recent legal developments; make sure and keep a record of the fact that every member of staff has not only been issued with all updated policies but has also read them!
● engage outside, insured specialists to advise on relevant risk areas where appropriate - see our post entitled "Engagement with external advisors: key structural considerations"
● ensure delegated authority policies are clear and well communicated to existing and new staff at all times
● seek advance clearance from any relevant regulators where necessary, comply with all filing deadlines and document regulatory compliance internally. Consider appointing a dedicated Compliance Officer if needed - see our post entitled "The Relationship between Legal Compliance & Stressbusting™". But make certain they are properly trained and managed, as a mere appointment may not act as a full defence in isolation
● place adequate insurance - see our post entitled "Make Insurance relevant to StressBust™ optimally".
It would be wise not leave these matters to chance given the potential financial and emotional impact of either an individual or a corporation being involved in court proceedings, as laid out in our dedicated posts entitled "The Dangers of Litigation to Stressbusting™" and "The Dangers of Litigation to Corporate StressBusting™" respectively. And because the risks as laid out in those posts can be amplified by 10 if the other party to proceedings is a state body with relatively unlimited resources at its disposal, which is often the case in such contexts.
Thus proactive action to avoid breach is absolutely crucial to protecting the long term success of any business and the wellbeing of those individuals involved with it, even if that means seeking out and funding specialist external reviews periodically to alleviate any doubts.
If you can relate to the contents of this post and would like the further value of our extensive expertise in this area, please reach out to us in confidence via our "Contact" page.
For further information in this regard, please consult our "Legal Notices" page.