The corporate community has become accustomed to the US authorities frequently investigating and prosecuting offences under the US Foreign Corrupt Practices Act (FCPA). Until recently, the same could not be said about investigations and prosecutions by the UK authorities. In part, the historic failure to investigate and prosecute corruption offences has been attributed to a lack of impetus by the Serious Fraud Office. However, to some extent, the lack of action has been a result of the antiquated and piecemeal nature of the UK law on bribery and corruption.

However, with the enactment of the Bribery Act (the Act) on 9 April 2010, with its wide-ranging changes and significant extra-territorial reach, one of the impediments to the bringing of successful prosecutions will be reduced.

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The EU Services Directive was brought into the UK law by the Provision of Services Regulations 2009 (the “Regulations”), which came into effect on 28th December 2009 and is intended to simplify bureaucracy in EU member states and inspire consumer confidence in businesses throughout Europe.

Who do the Regulations apply to?
The Regulations apply to both individuals and businesses that provide a wide range of services in the UK including:
• Business Services: such as management consultancy and professional services including lawyers, accountants and actuaries.
• Services provided to both business and consumers: such as estate agents and financial advisers.
• Consumer Services: such as tourism and leisure services.

Details of excluded activities can be found on the Dept. of Business, Innovation & Skills ("BIS") website, www.bis.gov.uk.

What do we need to do to comply with the Regulations?
Ensure that clients always have access to the information specified in the Regulations by:
• Providing them with details of the Company's dispute resolution procedures and where they can send requests for additional information; and
• Ensuring there are no provisions in the general conditions of service that will result in differential treatment for clients of different nationalities or places of residence (except where justifiable).

What information must always be available about the service provider?
Some of the information will already be included on a company's website, but any of the required details not already stated there should be added to the website or included in other company literature. Information required includes:
• Name, address, contact details, legal status and VAT number;
• Details of any trade registrations or authorisation schemes to which the service provider is subject;
• General terms and conditions used by the business;
• Price, and main features, of the service where pre-determined; and
• Details of professional liability insurance(s) and the existence of any voluntary after-sales guarantees.

Where must the information be made available?
The information must be available to clients either:
• At the place where the service is provided;
• On a freely available website; or
• In any information documents that set out a detailed description of the services provided, which may include marketing literature, brochures or email shots.

What are the consequences of non-compliance?
The Office of Fair Trading and other consumer bodies can take action against businesses that do not comply with the Regulations if the breach harms the collective interests of consumers. Businesses and individual consumers can only initiate proceedings for a breach of the Regulations through the courts.


Further information on the Regulations can be found on the BIS website at www.bis.gov.uk/servicesdirective. Queries in relation to the Regulations can be emailed to servicesdirective@bis.gsi.gov.uk.

Being substantially involved with corporate liquidations, Law firms have noticed that there are two main areas where directors of smaller companies breach legislation.

Directors of companies, which become insolvent, can find themselves in hot water, sometimes unwittingly.

For two reasons; firstly by continuing to trade and to incur debts when there is no realistic prospect of the company avoiding insolvent liquidation – this is called wrongful trading. In such circumstances directors may be required to contribute personally towards the losses of the creditors.

The second area covers creditor payments, when a firm experiences financial difficulty. In many instances, directors have preferred to pay trade creditors i.e. PAYE/NIC and VAT to accrue. Although directors may believe that it is beneficial for trade creditors to be paid first to enable the company to trade, this course of action is entirely contrary to Insolvency Legislation under the regulations relating to preferences. Many directors are unaware of their obligations under the Insolvency Act 1986.

In both of the above circumstances, directors may be required to contribute personally towards the losses and may be disqualified from acting as a director. A director’s duty, when a company approaches insolvency is to act in the best interests of the creditors of the company. It is therefore very important for company directors to ensure they are continually up to date with the company’s financial position and to seek advice when encountering problems.

Under most company’s Articles of Association the entity undertakes to indemnify its directors and officers against actions brought against them whilst undertaking their roles. This typically applies to all directors whether directly employed or acting in a non-executive capacity.

Whilst having a company’s indemnity is important, it is vital that this is backed up with sufficient resources to provide the practical protection. This will involve covering the costs of a proficient legal defence, other specialist fees and ultimately, awards and damages. Rather than expose the company’s assets to such a risk, companies ought to arrange a Corporate Directors & Officers (D&O) Insurance policy. This policy will span all directors and officers and will provide the funds for the costs outlined. Once the D&O policy has been exhausted (of if there isn’t one in place) the company’s assets are then at risk.

Should the company’s assets (including D&O cover if there is any) have been exhausted, a Director must then fund the balance of any costs or awards personally. This is where an individual policy comes in to play by providing the final layer of personal protection. Director Protection Individual Director’s Liability Insurance also provides the necessary cover should the action be brought by the employer itself.

A new Private Members Bill has been put before the House of Commons. The Health and Safety (Company Director Liability) Bill would amend the Health and Safety at Work Act 1974 (“HSWA”) to place further statutory duties on directors. Currently, directors can be prosecuted as well as the company under Section 37 HSWA if the offence is proved to have been committed with the ‘consent or connivance of, or to have been attributable to any neglect on the part of’ any director (or person purporting to act in a similar capacity) of the company.

At present, the Health and Safety Executive (HSE) and the Institute of Directors encourage company boards to comply with their joint guidance issued in 2007. This voluntary compliance is designed to encourage directors to adopt good health and safety practice in the workplace. The guidelines take a common sense approach, highlighting the importance of good practice and procedures. Setting out a four-step process to establish essential health and safety principles, the publication also gives a brief overview of legal liabilities, a checklist of key questions for leaders and a list of resources and references for implementing the guidance in practice.

However the HSE is shortly to recommend to ministers whether or not further statutory duties should be introduced as in previous surveys undertaken, it was found that comparatively few organisations are aware of the guidance and fully utilise it in practice.

Due for its second reading on 23 April, the Bill was introduced under the ‘Ten Minute Rule’ by Frank Doran, MP for Aberdeen North. Only two bills introduced under the Ten Minute Rule have become law since 1998 and the rule is mainly used by MP’s to raise the profile of an issue. The issue of statutory duties on directors has been a point of contention for a considerable period of time as it is felt that the current approach is not working.

Many solicitors firms are fighting to boost income streams right now. Reforms to the Legal Aid structure, replacing hourly rates with fixed pricing, have left many such firms in severe need of greater private client business in order to sustain their income levels. Coneyancing business has dried up dramatically and the credit crunch has seen many clients reduce their legal spend.

But legislative changes have also presented opportunity. Revisions to the 2006 Companies Act, most of which have now come into force, have placed senior managers and directors under greater threat then ever from liability claims. The cumulative effect is a climate where law firms need business and their clients need insurance.

By offering D&O liability (insert link to article on issues surrounding D&O) and Criminal insurance directly to their clients, solicitors reduce the claim drain that can occur when legal fees get paid out to a ‘panel’ firm specified by their client’s insurer. For many, the ability to offer insurance directly also strengthens client relationships by providing knowledge continuity (rather than the client having to use an unfamiliar solicitor).

We’ve recorded more and more enquiries to our "
www.directorprotection.co.uk website from solicitors concerned over precisely these issues. It looks set to become an opportunity more take up as the credit crunch continues its stranglehold on the market.