The Corporate decisions that yesterday did not materially affect other people today powerfully impinge on their lives and the subject matter has a direct bearing on the potential liabilities of Corporate Directors’ and Officers’ today. The increase in litigation against directors reflects a change in the attitude of the general public towards greater management accountability and hence the position of a Director is becoming far more onerous. Actions are most likely to be commended in relation to: (i) Actual or alleged breach of trust (ii) Breach of duty or warranty of authority (iii) Neglect or Omission (iv) Error or misstatement or misleading statement (v) Failure to supervise or regulate properly. Who might bring an Action? (i) Shareholders: alleging financial loss attributable to failure by Directors or Officers responsible (ii) Employees: alleging unfair dismissal, discrimination, sexual harassment or mismanagement of pension funds (iii) Customers: alleging that they have suffered financial loss following wrongful advice on the application or suitability of product (iv) Competitors: alleging that their businesses have been adversely affected by a restrictive trade practice e.g.: price fixing (v) Members of the Public: failure to effect and maintain adequate control or services. (vi) Regulatory Bodies: for offences under the Companies Ordinance or breaches in similar legislation. Potential Allegations: The following list provides typical examples of “wrongful acts” which could be alleged against a Director or Officer – though, this is not an exhaustive list: (i) Inaccurate statements of financial conditions (ii) Errors in annual accounts (iii) Conflict of interest (iv) Lack of judgment, diligence or good faith (v) Mismanagement of funds (vi) Misstatements in prospectuses (vii) Allotment of shares (viii) Unauthorized or imprudent loans or investments (ix) Failure to obtain competitive bids (x) Imprudent expansion resulting in a loss (xi) Using inside information (xii) Unwarranted dividend payment, salaries or compensation (xiii) Misleading statements filed with the Stock exchange (xiv) Misrepresentation in acquisition agreement for the purchase of another Company (xv) Wrongful dismissal of an employee. Possible consequences: Civil Action: May involve personal liability for: (a) Damages (b) Claimant’s Costs (c) Costs of Personal Legal Representation. Criminal Action: prosecution may be brought under various Statutes. Whilst fines and penalties under Criminal Actions are not insurable, Directors and Officers may face substantial costs in arranging legal representation to defend such actions. These legal costs are covered by the D & O insurance provided the defence is successful.