This article is an extract from the “Future Proofing Your Business” webinar series, created by Jo Haigh exclusively for Property Academy Members.

The most litigated act against directors is The Health and Safety at Work act – and those obligations extend to staff that are working from home! To view the full session, enquire about membership. We will send you a copy of Jo’s Home Working Assessment Template.


The role of a board director is undoubtedly an aspirational one.

It’s a prestigious title and carries gravitas within the business and externally in the business world.

The thing is, being a director is so much more than just a title.

Winston Churchill famously said, “with greatness comes responsibility”. If I may be so bold, I would like to add, “and in the case of a director, liability”.

When one thinks of a company, most have ‘limited liability’. This is what the LTD stands for after a company name and for many people in the position of director, they also tend to assume that if the company has limited liability, then so must the directors. However, this is simply not the case – Directors have unlimited liability.

The company can only be pursued up to the sum of its realisable assets, but a director can be made personally bankrupt.

I am not writing this to put you off the role as if this was the case, I wouldn’t hold multiple directorships.

My aim is to create awareness of director’s liabilities in the real world, and help outline the protective measures available, like a fireguard, to help protect your career.

Firstly, to dismiss a few urban myths.

The director liability doesn’t just refer to trading insolvently, just for the record, the most litigated act against directors is The Health and Safety at Work act. By the way, this includes obligations for staff that are working from home. Employers have responsibilities under statue law for any risks associated with tasks being completed at home – which include such things as whether the workstation is set up and used safely, whether electrical wiring is safe. Nor are you only going to be liable for your own acts or omissions. We have in law a concept called joint and several liability.

This simply means that in the event of a board member bringing about a cause for a litigious action, it will be the whole board who could be liable, on a pro rata basis.

It may also be said that in order to be a director, you must be registered at Companies House – however this is not the case.

The Companies Act states ‘A director is someone who carries out that function regardless of title or registration’.

Of the thousands of disqualified directors each year, 10% didn’t in fact know they were a director.

The two main areas you can fall foul to this are:

  • Calling someone a director i.e. just a prestige title – This is called an Associate Director.

The litmus test to assess liability is: would the person interacting with such a named individual believe they are a true member of the board? If the answer is YES, then they pick up the same liability as registered directors.

  • A shadow director is defined in The Companies Act as, ‘ Someone whom the other directors are used to taking advice from and acting on their recommendations’. It will be apparent that shadow directors can be external people, who can become directors of your business, or indeed, members of your senior team who may become directors of other people’s businesses.

For those who are registered, the most robust fire guard is a Directors Service Agreement. This replaces the standard employment contract, as it will contain items/clauses not included in the employment contract (for example: the contractual right to directors and officer’s liability cover).

It should be noted that this isn’t a policy that pays fines or damages, rather it pays legal fees to fight your case (if required!).

It must also have in the policy ‘Run Off Cover’ this allows the beneficiaries the right to access this post termination of the role, as liabilities for anything that happened on your watch are not terminated on leaving the post.

To protect individuals becoming shadow directors, it is vital to ensure any recommendations made by such persons are presented with options so that the actual decisions are made by the appointed directors of the business.

To eliminate shadow directors from possible litigation, considerations should be made regarding their title. For instance a ‘finance director’ may be renamed a ‘head of finance’. Whilst this may not be quite as prestigious, it is safter.


Jo Haigh is the CEO and founder of fds – a corporate finance house with bases in London, Birmingham and Yorkshire. Since 1989 Jo has bought and sold approximately 400 companies, specialising in owner managed companies.

Jo is a regular presenter on corporate governance and mergers and acquisitions for prestigious organisations across the UK and Europe and is a Trusted Advisor for members of The Property Academy, where she advises on how to maximise business value.


This article is an extract from the “Future Proofing Your Business” webinar series, created by Jo Haigh exclusively for Property Academy Members.

The most litigated act against directors is The Health and Safety at Work act – and those obligations extend to staff that are working from home! To view the full session, enquire about membership. We will send you a copy of Jo’s Home Working Assessment Template.