If you’re a director of a company, you’ve probably worked very hard to get there. However, it can come crashing down if you’re faced with a civil action, and having a defense attorney if the company is sued can be the difference between a demotion and prison.
The unfortunate truth is that there are situations in which company directors can be held personally liable for legal issues, and we’ll discuss insights below.
What is a Company Director?
A company director oversees all business operations and is responsible for ensuring daily operations are carried out according to legal requirements. Technically, company directors are officeholders.
They have legal status and the accompanying responsibilities, including legal responsibility for a company’s actions.
Everything You Need to Know About the Role of a Director
Company directors must act in accordance with the company’s constitution. They must use their discretion to act in good faith for the benefit of the company. For example, increasing the company’s value with due consideration of the long-term consequences.
Directors have a duty of loyalty, meaning there can’t be any conflict of interest, such as having shares in a competitor’s business.
As a director, you are subject to statutory duties, including preparing financial accounts and reporting to the board of directors and shareholders. You are liable if the company isn’t able to fulfill its statutory duties. For instance, you have personal liability for loss resulting from your failure to act properly.
When Can a Director Face a Lawsuit?
Directors act with authority, but they aren’t autonomous and are responsible for their actions. Many liabilities are related to the misuse of funds, but there are other areas that open the way for a lawsuit.
A business’s California employer defense attorney can help a director survive a lawsuit with as little harm as possible, perhaps even have the claim withdrawn.
When Can a Director Be Sued?
What actions and omissions can lead to company directors being sued?
Personal Guarantee
To help the company obtain a loan, they provide a personal guarantee. They are responsible if the company can’t repay the loan. They may even lose personal assets to recover the funds.
Shareholder Agreements
Shareholder agreements can require directors to provide security for the business’s debts. This is similar to a personal guarantee because the director is then personally liable for the debt.
Third-Party Contracts
Directors sign a contract with a third party without clearly stating it’s for the company. The third-party may believe the contract is personal and take legal action against the director in a dispute.
Overstepping their Mandate
If a director acts beyond the extent of their responsibilities and the company is harmed as a result, the director pays back the financial loss.
Bribery and Corruption
Directors can share liability if their company’s convicted for receiving or offering a bribe. Liability is contingent upon the director’s knowledge and compliance. Penalties include up to 10 years in prison and unlimited fines.
How Can a Business Law Defense Attorney for Companies Assist a Director Facing Lawsuits?
The best time to engage the services of a business law defense attorney for companies is when the company is first established. That way, business owners build a good working relationship with their lawyers from the start.
Understand the Business
The defense lawyer understands the nature of the business and ensures that the company has taken steps to prevent lawsuits.
Obtain the Best Possible Result
The objective when a civil case is filed is to exonerate the director. If it doesn’t look like that’s possible, they negotiate an out-of-court settlement.
Litigation
If the plaintiff is determined to have their day in court, the business attorney defends the director in front of a judge and jury.
For example, a plaintiff sues the director for concealing information that led to a substantial financial loss. The plaintiff wants to prove that the director is a conniving thief in court.
You need a specialist litigation defense attorney for a sued company to cast doubt on the legitimacy of the case.
Working as a Team
Civil lawsuit defense lawyers for businesses work closely with the accused to prepare the defense, including securing witnesses.
Communication
One of the biggest ways in which a California employer defense attorney can help the director is by explaining each step in the case. When they understand why processes are done in a particular way they don’t get frustrated.
Legal Advice for Company Directors to Avoid Getting Sued
Company directors can avoid lawsuits if they follow some simple legal advice.
Directors can start by familiarizing themselves with the legal requirements and limitations that govern things like employment, fraud, and harassment. Understanding essential processes help directors take preventative action.
Legal advice can be given for:
- Employment – The employment litigation defense attorney for the company advises on fair remuneration, health and safety, and a harassment-free working environment.
- Duties – Directors have a duty to creditors. This includes treating all creditors and shareholders fairly.
- Environmental laws – Protecting environmental resources such as air and water and ensuring that any business processes that cause pollution are offset.
- Maintaining their role – Not overstepping their bounds to the detriment of the company.
How Can a California Employer Defense Attorney Defend a Director’s Rights in Court?
It’s important for the director to contact the defense attorney as soon as possible to determine if the charges are valid. If they are valid, they must look at how they can defend the allegations.
The approach is different for minor and major damages. Minor damages can usually be settled out of court, but major damages could go to trial. The approach also depends on whether the damage caused was from a genuine mistake or deception.
Defense attorneys must reach a compromise with the plaintiff that includes reasonable penalties or reasonable terms; for example, monthly installments.
In more serious cases, the best the defense attorney can do is argue for the best possible outcome, which could be a lighter prison sentence.
Work with LibertyBell Law Group’s Business Law Defense Attorney Near Me
The business law attorneys at LibertyBell Law Group in California possess extensive knowledge of civil codes, as well as state and federal laws that regulate businesses. The intricacy of legal matters that one must consider when launching a business can be deceptively overwhelming.
That’s why having a defense attorney if your company is sued is crucial. To learn more about our legal services, contact us at 866-320-4854 at LibertyBell Law Group today!
