• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Personal liability of Board Memebers

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

W

w_woltrap

Guest
I'm not sure if this is covered by US law or PA state law, but my question is this. Being on the Board of Directors for a small corporation, could I potentially be liable for the actions taken by the company that results in a lawsuit, large fines, etc.. Meaning is there a potential for me to lose my personal assets. I have been told that I am covered by the companies liability insurance, but I am not sure if I believe this. Any help would be greatly appreciated.
 


ALawyer

Senior Member
It really depends. As a director you should NOT be liable to the ordinary creditors of the company (such as a customer, or landlord) unless you did something wrong or were personally involved.

You could be liable to shareholders if your conduct was negligent and asa result the company or shareholders suffered. If there is a real serious problem, as there is at Enron, the directors will get caught up in it as the creditors will likely try to go after anyone in sight, even if they are not ultimately liable.

As far as the insuance goes, that depends on the nature of the matter and if the insurance is broad enough. If a customer is injured by a defective product the General Liability carrier will cover the company's liablity TO THE EXTENT OF THE POLICY and thus protect a director. If the board does a stupid or dishonest deal, or is asleep at the switch, the other shareholders may sue. Ordinary general liability insurance would not protect directors, only director's and officers' liability would.
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top