What's special about this policy?

Every company has a duty of care to its employees, customers, shareholders, and the general public; by extension, as a director or manager, you're responsible for the overall management of your firm and accountable for the decisions you make on its behalf.

What's at stake?

If something does go wrong in your business, your legal obligations as director mean that you could be personally liable - whether you were aware that something was amiss or not.

Without protection, you face the risk of having to pay to defend yourself and any subsequent damages awarded against you.

Though many people think D&O insurance is only appropriate for directors of large corporations, in fact, directors of small businesses are much more vulnerable.

This is because in a small company it's more obvious who is responsible.

Legislation that will affect your business

Companies Act 2006

Although this new act makes it easier to set up and run a company, it also increases director's duties and personal liabilities.

The current act sets out seven general duties required, by law, of company directors. These are as follows:

• A duty to act in accordance with the company's constitution, and only to use powers for the purposes for which they were conferred
• A duty to promote the success of the company for the benefit of its members
• A duty to exercise independent judgement
• A duty to exercise reasonable care, skill and diligence
• A duty to avoid conflicts of interest
• A duty not to accept benefits from third parties
• A duty to declare to the company's other directors any interest a director has in a transaction or arrangement with the company

Derivative claims

There are also new legal grounds for shareholders to sue directors in the company's name (known as the 'derivative action'), listing as causes for action:

• Negligence
• Default
• Breach of duty
• Or breach of trust

The Corporate Manslaughter Act 2007

The act came into force in April 2008, and has the effect that an organisation can be held to account for corporate manslaughter if a management or organisational failing causes someone's death.

Police investigating any death in the workplace will have to consider the new offence with the Health and Safety Executive.

If a prosecution were brought the jury would have to evaluate the corporate 'attitude' to safety in its deliberations.