Corporate Liability: What It Means for Duty Holders and Your Business

In general, Corporate Liability refers to the responsibility a company (or corporation) has for legislative violations or breaches of regulation, i.e., Health and Safety breaches, environmental breaches and even breaches of Employment Law.

However, the liability of individual people within the organisation (Directors, Managers, and even Supervisors) is complex and varies according to the jurisdiction/nature of the violation.

Here are four things you need to know:

Fines for the Corporation

• Typically, fines are not taken directly from any person unless they have been found personally liable, i.e., due to gross negligence, fraud, or criminal conduct, and this is mostly because they have been found to be the person responsible – the Duty Holder.
• Directors are also protected by the Corporate Veil, meaning the company itself is a legal separate entity from the directors, who are not then personally liable for the company’s debts or fines. However, this protection can be pierced under certain circumstances, i.e., where a Director is found to be personally at fault.

A Director’s Personal Liability through a Breach of Duty

If a Director (as a responsible person or duty holder) is found to be grossly negligent or knowingly failing to ensure compliance with legal requirement, such as Health and Safety legislation (i.e., causing a person harm through their own actions or inactions), they could be held personally liable for the consequences, including being fined, having to do unpaid work or community service or, where serious enough, even be given a custodial sentence.

Civil Liability

If a Director breaches their fiduciary duty, i.e., they acted in bad faith and/or made decisions that harmed the Company or Shareholders, they could be held personally liable for any financial damage they cause, with reparations needing to be personally met through that person’s personal assets.

Insurance Coverage

Many companies have Directors and Officers (D&O) insurance, which helps cover the legal fees and potential damages or fines that Directors may face in the event of a lawsuit or regulatory investigation. This type of insurance, however, typically does not cover criminal conduct or fraud.