5 examples of management liability

Being a company director comes with a lot of responsibility. If something was to go wrong – and a ‘wrongful’ act was committed – you would be held accountable. This is known as corporate liability. It can lead to hefty legal fines and prosecution in a court of law. Which is why it’s important to understand exactly what counts as corporate crime and invest in management liability insurance.

What counts as a 'wrongful' act?

Corporate crime is often referred to as ‘white collar crime’. It refers to any action that is taken by the company or its employees, either deliberately or unintentionally, which benefits the company in some way. This action could include a wide range of things – here we take a look at the five most common acts that lead to corporate criminal liability in the UK.

definition of liability for management liability insurance


1. Breach of contract

Contracts are an essential part of business – but, before you sign on the dotted line, be sure to familiarise yourself with the exact terms of the agreement. If any of these terms are breached (whether done so intentionally or unintentionally), you and your company will be held liable.

This type of corporate liability can incur substantial legal costs – therefore, when entering into any kind of business agreement or contract, it’s usually worth investing in management liability insurance.


2. Financial records and tax evasion

As the director of a company, it’s your responsibility to keep accurate and up-to-date financial records, including details of all outgoings and profits. Failure to do so can be deemed as negligence and – should the company suffer financially and go into liquidation – you could be held liable. 

Tax evasion is a related issue that can also lead to corporate liability allegation. It is a serious offence and, if found guilty, you may be charged significant fines and prosecuted for the crime.


3. Health and safety offences

Injuries and fatalities within the workplace are a leading cause of corporate liability claims. Health and safety are of paramount importance. If you haven’t complied with regulations, and an incident occurs, you could be sued for negligence. Not only will you be expected to pay considerable fines and compensation, but you may also be taken to court and prosecuted for corporate manslaughter.

health and safety sign to avoid management liability

4. Fraud

It goes without saying, fraud is a criminal offence. If a senior manager or employee is found to be involved in fraudulent activity – an activity which benefits the company in some way – you will be prosecuted in a court of law. Even if you were unaware of the activity, you could be held liable for negligence. This is why you should always protect your assets with management liability insurance.

5. Environmental offences

Violating an environmental law can lead to corporate legal liability. Every effort should be made to protect the environment and, if your business’s activities have polluted the air, destroyed trees or affected wildlife, you will be held accountable. It doesn’t matter if the action was intentional, or not. It’s likely that you would have to pay a hefty fine and you may potentially be prosecuted.

Stay protected against corporate liability

company director signing corporate liability insurance policy

No matter how cautious you are as a director, mistakes and oversights can happen and corporate liability is a real possibility. There’s a long list of actions that can be deemed as ‘wrongful’ – and the best way to protect yourself and your company is to invest in management liability insurance.

Here at Rigby Financial, we can help to identify the best policy for you. We have a team of specialist advisors, with excellent knowledge and experience in management liability insurance. Check out our comprehensive guide to management liability and get in touch today. We can provide the best possible protection, at the best possible price. Simply give us a call on 01744 886077 to speak to our experts, or send an email to enquiries@rigbyfinancial.co.uk and we will respond as soon as possible.