Company directors may need insurance for life to defend against the threat of legal action pursuing them into retirement and old age, a prominent employment lawyer has warned.
The implementation of the Companies Act 2006 earlier this month promises to make life a little more uncomfortable for some directors whose approach to the boardroom needs to be more professional than in the past, says Ranjit Dhindsa, head of the employment law team in the Birmingham office of Reed Smith Richards Butler.
Those affected are statutory directors, registered at Companies House, whose duties and responsibilities are codified for the first time in the Act.
Ms Dhindsa warns that directors making decisions now which might result in legal action many years down the line, can't leave their legal responsibilities in the boardroom when they resign or retire.
"Under the Act, directors' duties are now so broad that there is a strong case for companies to offer insurance for life, because liability for decisions taken today does not end just because the person taking them has left the company," she added.
The risk of legal action could come from a number of quarters, such as some form of class action, a member of the public, or - increasingly - the company's own shareholders attempting to recoup lost value resulting from poor decisions.
Ms Dhindsa says that for some companies and their directors the Act will have next to no real impact, because many of its provisions were already being implemented.
Others, however, face more of a culture shock.
She believes the impact of seeing their duties and obligations in print could be enough to dissuade some high fliers from seeking a boardroom role.
Among other things, the Act forbids directors from making secret profits from their position.
"This is an interesting area," she added. "For example what happens in the case of a sales and marketing director who travels the world on company business, racking up air miles that he later uses on a private holiday. Would those air miles fall into the category of secret profits?"
Ms Dhindsa says the first step for any director should be to read their own company's articles, the rules by which they operate. She advises that directors are given training in their obligations under the new law, and says service agreements should be reviewed to ensure their duties and obligations reflect the provisions of the Act.