UK: Few directors are aware of their responsibilities.

UK: Few directors are aware of their responsibilities. - Gone is the time, if it ever truly existed, when a seat on the board was the ticket to a comfortable circuit of meetings, lunches and afternoons on the links. Modern bosses are in a precarious posi

Last Updated: 31 Aug 2010

Gone is the time, if it ever truly existed, when a seat on the board was the ticket to a comfortable circuit of meetings, lunches and afternoons on the links. Modern bosses are in a precarious position, beset on one side by unforgiving trading conditions and on the other, by enough red tape to gag and bind them. The personal liability of a director has never been higher, but how many are fully aware of the range of their responsibilities?

Not as many as you might imagine. While few would be foolish enough to ignore the measures that prevent dishonest trading, the minutiae of rules covering health and safety, environment and employment are less well understood. 'Directors tend to be aware of their responsibilities under the Companies Act, but are much less well-informed when it comes to health and safety or employment,' says Chris Mallon, an insolvency partner with City law firm Biddle. Yet it is this minutiae that can lead to heavy personal fines or even, in extreme cases, imprisonment. Allowing chemicals to pollute a local stream cost the managing director of a solvent company in Warwickshire a relatively modest £3,000, but not everyone gets off so lightly. In another recent case, the director of a Hertfordshire waste management business collected an 18-month jail sentence for the illegal dumping of clinical waste. The pressures of business can make a Nelsonian attitude appealing but Mallon warns that, in the long term, 'it is very easy to get caught out that way'.

The onus to inform themselves of their liabilities is placed firmly on directors, but doing so can be prohibitively time-consuming. The regulatory burden (on directors) is becoming onerous and can put people off the post. Legislation comes from many directions and, in the absence of a single source of reliable information, small businessmen in particular lose the thread, says Nicolas Clark, finance director of a small graphic design company BDA. So anyone contemplating accepting a directorship should seek professional advice (from a solicitor, of course), urges Paul Saffron, a partner at insolvency specialists Jay, Benning & Peltz. 'It is very much the case that honest traders can be caught out by current practices,' he counsels.

Even the well-informed can be at risk from the pace of change, according to Martha Bruce, author of Rights and Duties of Directors (Butterworths, 1998). She agrees that those at the helm of smaller companies are particularly vulnerable as they lack access to the support systems of larger organisations. As far as many regulations are concerned, 'there's a tendency simply to hope for the best', she says.

Ostrich tendencies can be exacerbated by the personalities of many directors. 'People go into business to do things - to make products and sell them, not to become administrators,' says Charles Rose, chairman of the British Chambers of Commerce policy committee and a director in his own right. 'Consideration of wider liabilities goes by the wayside or is left to other people,' he says.

Seats in the boardroom are likely to get hotter in the wake of a crackdown by environment minister Michael Meacher, predicts Ed Keeble, environmental law partner at Slaughter & May. 'Some directors are feeling a bit queasy about it,' he says.

Does this all add up to over-regulation? 'The Government is placing increasing emphasis on the need for enterprise, but all this legislation knocks the stuffing out of entrepreneurs,' says Rose. 'Too much regulation can be bad for business,' agrees Clark, who admits to a 'healthy fear' of some of his liabilities. 'I don't want to be sued, so I try to follow the rules, but there is always some tiny thing that could catch you out,' he says.

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