Directors in the dock
When a new director takes on the role and addresses his or her mind to what is expected of them, the first things that usually spring to mind are the director's duty to act in the best interests of the company and its members as a whole and the duty to avoid situations of conflict of interest between the director and the company.
Thought is very rarely given to the criminal liability that a director can have if the company commits a criminal offence on the director's watch.
From a staff member being injured (or worse, killed) in the workplace, to a misleading advert being published by the company to the company breaching an environmental permit, there are a whole raft of Regulations governing the day to day operations of a company which, if breached, could result in those who are responsible for steering the ship facing criminal charges.
The reason for this is that many Regulations include a provision which means that a director (or other officer) of a company can commit a criminal offence, together with the company, if the offence in question has been committed with the consent or connivance of the director or other officer or the offence is attributable to the neglect of the director or other officer.
A recent case concerning a company that failed to comply with a prohibition notice issued by the Health and Safety Executive saw the company and one of its directors convicted of breaching health and safety legislation by putting the company's employees at risk. Despite there being no instances of injury, the director's neglect, which resulted in the risk to employees, was sufficient for the director to be convicted and fined £7,500 with an order to pay costs of £10,000. Whilst many directors may be in a position to afford such a financial penalty, the criminal record that follows the conviction is often much more damaging. This is particularly the case, for example, when a director's eligibility for insurance and travel visas is directly impacted.
That case is, of course, only a very lenient example of what can happen. The Courts can and do sentence directors to periods of imprisonment for their involvement in failings by the companies that they operate.
In a series of articles over the coming months, we will consider the concepts of consent, connivance and neglect with a review of recent case law exploring the pitfalls that have landed directors in the dock.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.