The Woes of Being a Director

Another line I recall from an old song had the line, “I’d like to teach the world to sing in perfect harmony”. Well unfortunately life is not about perfect harmony. Jane’s article refers to “fate decrees that all blocks must have at least one difficult resident.” Here, she has hit the nail on the head.

Consider your position: Why do I (and my fellow directors) put up with this? Do I get paid? Is it enjoyable and worthwhile? Do my follow residents respect me (and my fellow directors) for taking these actions, reaching these decisions and looking after their interests? Well you know the answer to all of the above and of course you are respected and may actually rather enjoy having this role otherwise why take it on. However, help is out there but perhaps not in the way everyone would like as our ever increasing litigious and bureaucratic society places all those in a position of responsibility “on the pedestal” to be shot down. Yet help is out there in the form of an insurance policy known as Directors & Officers Liability Insurance.

Any director or officer of a residential management company can be held personally liable for their actions in that capacity. This insurance provides protection against personal liability. The policy covers losses arising from claims brought against directors and officers for wrongful acts committed in their capacity as directors and officers of the company.

Directors responsibilities

Appointment as a director can bring with it potential personal liability for any act which is negligent, outside your authority or in breach of duty or trust. Responsibilities are onerous. Personal accountability – if a director is sued in a personal capacity whilst acting on behalf of the company, he will generally have to fund his defence personally. It is his personal wealth that is at stake in such circumstances. If sued personally he has to respond personally.

It gets worse when one considers unlimited liability. Shareholders or a company may enjoy limited liability but there is no limit on the personal liability of directors or officers.

Who would make a claim against you as a director or officer? Any person that may have an interest in the affairs of your company could bring action. This might include creditors, government departments or regulatory authorities and indeed the individual flat owners you represent. Here are some examples of real claims dealt with by insurers.

Claim 1

Following damage caused to a residential block of flats it was discovered that the insurance purchased by the directors was inadequate to cover the loss. Shareholders of the property (the residents) have notified that they may bring an action.

Claim 2

The directors of a property management company brought an action against a resident for non-payment of a service charge. The resident issued a counter claim against the directors for an incorrect service charge calculation.

All very scary, yet in today’s world these and many other types of incident are occurring for which you can be held personally liable. Jane Barry finishes her article, “but until the answer is found, the dearth of willing directors will continue”. I have no doubt this is the case however at least make sure the company arranges a Directors & Officers Liability Insurance policy, which is not just in the interest of the serving directors but the company in general. This insurance will give peace of mind to those who are already serve and may encourage others to take up office.

Extremely competitive

This insurance can be arranged separately and need not go hand in hand with the buildings insurance. Towergate Risk Solutions ARG offer this insurance specifically for RMCs who are seeking to take out cover at competitive premiums that vary dependent on the number of flats in a block and the level of cover purchased (this is also known as the limit of indemnity).

For example, a residential management company block of up to 25 flats looking to purchase £250,000 limit of indemnity, can arrange their D&O cover with Towergate Risk Solutions ARG for as little as £150 for an annual policy plus 5% insurance premium tax (ipt). The scale of premium increases to £250 plus ipt for £500,000, £350 plus ipt for £1,000,000 or even £500 plus ipt for £2,000,000.

Quotations can be obtained direct from Towergate Risk Solutions ARG, part of the Towergate Group, one of Europe’s largest independently owned insurance intermediaries, merely by completing a one page proposal form and returning this to the address shown below. The quote will be confirmed in writing giving you the client the option to proceed with the arrangement of the insurance – the whole process couldn’t be easier and you will find one of our proposal form leaflets inserted with this issue. All completed proposal forms will be processed immediately and as a further incentive, all News on the Block readers will enjoy a 10% discount in their first year’s annual premium.

There are many woes in being a director of a company but if you consider your position, and accept your role with enthusiasm, there is help out there.