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Why a Director’s assets may not be protected

May 13, 2016

When a corporation or business is taken to court in Australia, directors and others in senior management roles may be held personally liable for any damage or loss caused by the company in question. In short, the Court can demand compensation from you personally.

Management liability protects directors and those in senior management roles from this very real risk. Here is what you need to know.

Protecting your personal assets

The key reason for securing Management Liability cover is to protect your personal assets. In some instances, Australian Corporate Law pierces the ‘corporate veil’ and holds management personally responsible for losses their company or business incurs.

The risk of litigation is arguably greater for companies with large numbers of employees, as it is more difficult to manage and track the actions of multiple individuals.

If you are operating a small business, management liability will still hold you in good stead. The cost of legal proceedings can be crippling to a small business, and Management Liability covers you for this too.


  • You are covered for the cost of legal proceedings, which in many cases can exceed the $100,000 mark. This cost alone can cripple a business.
  • Many Directors and managers believe their business will never experience a loss. However, even the most OH&S conscious companies may experience litigation at some point in their lifetime.
  • Management liability allows you to continue operating your business, without losing excessive income or risking bankruptcy.
  • Your assets are protected, should the courts decide to hold you personally liable for the loss or damage incurred by the company you direct or manage.
  • Peace of mind, knowing the company is protected against instances of theft, loss or fraud, especially where employees are involved.
  • Directors who also own the company are protected against financial hardship.
  • The cost of Management Liability insurance is surprisingly affordable.

What level of cover do I need?

Like any insurance, it is vital to choose a comprehensive policy that covers you for all foreseeable losses related to your specific business or industry.

This is why we recommend choosing a Management Liability policy that includes the following key items:

Employment Practices Cover

  • Covers Directors, officers, employees and the company itself against legal claims instigated by past, future and existing employees.
  • Relates to issues concerning employment practices, unfair dismissal, harassment and other employment-related issues.

Statutory Cover

  • Covers Directors and the company for penalties and fines relating to running the business.
  • This includes fines relating to worker’s compensation.

Crime Cover

  • Covers the company for dishonest acts, including but not limited to fraud and theft on the part of employees.
  • For example, if an employee steals stock from a company.

Corporation Entity Cover

  • Covers a company against actions that originate at management level.
  • Especially important for companies owned by Directors, as they will ultimately wear the cost of litigation and possibly damages, if a case is brought against their company.
  • Protects Director/ Owners from financial hardship.

Directors and Officers

  • Protects past, present and future Directors and officers.
  • Also protects any person involved with managing the company.
  • Protection is granted for claims of wrongful acts where the company has not indemnified the person involved.

Superannuation Trustees Cover

  • Covers a company in the event of funds being mismanaged.
  • Also provides cover for companies with a sponsored staff superannuation fund, if a trustee breaches their responsibility.

How do I get covered?

A good Management Liability Policy should, at the very least, include the items listed above. We also recommend a number of extensions, depending on the industry you are in and the nature of the company you operate.

Contact us about finding a Management Liability solution that protects your personal assets today.


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