In which case is the civil liability of the director engaged? How can you protect yourself?

The manager of a private or public company may be personally implicated for many reasons of a contractual, regulatory, statutory or tax nature, following damage caused to others by his fault or the fault of persons for whom he respond.

In fact, any person (natural or legal) who feels aggrieved can question the personal liability of the manager and attempt legal action to obtain compensation.
In the event of a conviction, the law does not authorize the company (legal person) to pay instead of the manager. The latter will therefore have to answer for claims and costs incurred on his own assets.
Any business manager is exposed to this risk, whether he is a legal manager (manager, CEO, general manager, etc.) or a de facto manager (natural person who carries out management actions in a company without being invested with a corporate office, or even without having a delegation of power).

In which case is the civil liability of the director engaged? The civil liability of the business manager may be engaged if it is proven that he has committed a mistake causing damage to the company or to a third party. It may concern :
– a violation of the legal or regulatory provisions applicable to the company;
– non-compliance with social regulations, discrimination in hiring, employment of illegal labor
– exceeding the powers granted to the manager by the articles of association;
– mismanagement (recklessness, omission, error or negligence in accounting, tax matters, bankruptcy of a subsidiary, etc.), or even fraudulent practices.

In recent years, French justice has thus been led to condemn leaders in cases such as:
– failure to comply with the safety rules applicable in the company;
– unsuitable investment choices;
– irregularities in the presentation of the corporate accounts;
– a late declaration of cessation of payments;
– the purchase of a worthless patent;
– the lack of reaction to the deterioration of the company’s financial situation without,
– acts of tax evasion…

Please note: as this is a public order responsibility, the manager cannot avoid it by simple clauses written in a contract!

Who can engage the personal liability of a director?

Any legal or natural person believing that they have suffered damage is likely to take legal action against an executive or corporate officer. Many types of actors can therefore be at the origin of a legal action, such as:
– the public authorities: the judicial authorities are particularly vigilant in the event of recovery and liquidation. They very frequently look for the fault of management making it possible to cover all or part of the social liabilities. On average, 7% of companies filing for bankruptcy see their managers sought after on a personal basis;
– the company itself, in particular in the event that the corporate mandate given to a manager is not respected;
– shareholders or associates, including after they have ceased to be such, in particular in the event of acquisition or dissolution of the company;
– employees ;
– third parties: customers, competitors, suppliers, etc.

Why insure?

Although regular surveys conducted among business leaders show that they are now aware of the growing legalization of society, more than 70% of them continue to mistakenly think that the company will be able to take charge of their defense costs in the event of a third party claim. However, this is not possible because it would fall under the abuse of social good, which represents a criminal offence.

In fact, 2 essential points are to be remembered:
– none of the contracts subscribed by the company within the framework of its activity (operating civil liability, legal protection, etc.) can intervene and take charge of a challenge in a personal capacity of a corporate officer;
– when the personal responsibility of a director is recognized by a court decision, he will have to answer for his condemnation on his personal assets.

Sometimes the convictions can be combined and concern both the company, as a legal entity recognized as civilly liable, and its manager, recognized as civilly liable on a personal basis.

Thus, for example, in the case of an accident at work:
– the company, as an employer, may see its civil liability incurred for the inexcusable fault of the employer. This liability will be covered by the operating civil liability insurance contract taken out by the company;
– in parallel and in addition, the manager may also see his personal liability sought, by virtue of his obligation to ensure the physical and moral safety of the employees.

It is therefore essential today for a manager to insure himself against the risk of personal liability. The most appropriate solution is to opt for a contract dedicated to the coverage of the civil liability of corporate officers (RCMS). This type of contract is taken out by the company on behalf of and for the benefit of all its managers.

The fundamentals of a civil liability contract for corporate officers

A civil liability contract for corporate officers has a dual purpose:
– protect the personal assets of the business manager;
– support and defend the manager throughout the procedure in the event of a legal challenge.
As the benchmark insurer for construction and real estate professionals, SMABTP has long offered a solution that meets this dual objective. Its contract is perfectly suited to business leaders and managers of companies of all sizes and in all sectors (construction companies, real estate developers, builders of individual houses, local authorities, etc.). It supports:
– the civil and criminal defense costs that the managers may have to face when their personal liability is called into question. It should be noted that the free choice of lawyer is left to the beneficiary of the guarantee;
– compensation that the manager may be required to pay, following a complaint, with the exception of criminal fines;
– additional support costs such as:
– crisis management costs (costs for restoring the image of managers, communication costs);
– psychological support costs for the manager and his family;
– certain everyday expenses, such as those related to children’s schooling or housing in the event of deprivation of assets.

The contribution for this type of contract is fixed and depends on both the turnover of the company and the amounts of guarantee which the director(s) wish to have.

To find out more about the civil liability insurance solution for corporate officers offered by SMABTP, Click here

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