Directors’ liability set to increase

Directors could face stiffer penalties for negligence or breaches of duty
under a shake-up of rules expected on tomorrow’s Company Law Reform bill.

Early indications are that the bill will include provisions for investors to
sue directors more easily. Speculation about the bill suggests that a technical
change to a mechanism for bringing claims against directors will increase
litigation risk.

It is also anticipated that clauses limiting auditors’ liabilities through
the idea of ‘proportionate liability’ are set to get the nod.

The move will mean auditors are only held liable for mistakes in proportion
to their responsibility, rather than necessarily for all losses that may follow
from an error.

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