Directors Liabilities - How much risk are you prepared to take?
Health and Safety: Prosecutions of directors on the rise.
Many professionals harbour a dream of one day being promoted to director level within their organisation, but not all of them appreciate what responsibilities they are taking on when stepping into that role. Whilst every business is different, they all face similar litigation and regulatory challenges. Challenges that we predict are likely to become more rather than less onerous in the years to come.
In this series of blogs we consider some of the regulatory perils and pitfalls that any prospective director should be alert to before taking their seat at the top table.
Fire Safety is just one of the many issues with which management must concern themselves. However, unlike a lot of other safety concerns, fire has the potential for large scale and devastating consequences.
The Regulatory Reform (Fire Safety) Order 2005 (“the Order”) came into force on 1 October 2006 and applies to non-domestic premises in England and Wales. The Order replaces previous fire legislation. The responsibility for complying with the Order rests with the ‘responsible person’. In a workplace, this is the employer or the person who has control of the premises. It is common for there to be more than one responsible person and all should be aware of and take steps to comply with their obligations under the Order. This will include undertaking a fire risk assessment to ensure the safety of all ‘relevant persons’ which includes those who are or may be lawfully on the premises and any person in the immediate vicinity of the premises who is at risk from a fire on the premises. The Order is far reaching in its effect.
The Department of Communities and Local Government (“DCLC”) have published a number of guidance documents to assist individuals and companies in meeting their responsibilities. In similar vein to a director’s liability when it comes to health and safety offences, a director can be personally liable for fire safety offences committed by or in connection with their company under the Order. Where an offence is committed by a body corporate with the consent or connivance of, or is attributable to any neglect on the part of any director, manager secretary or other similar officer of the body corporate, then that individual, as well as the body corporate can be prosecuted (article 32(8)). The Order is onerous in that article 32(10) allows for a director or similar officer to be prosecuted even if there is no prosecution against the body corporate.
In addition, directors and similar officers could be prosecuted by virtue of article 5(3), which states that any duties under the Order imposed upon the responsible person(s) shall also be imposed on ‘every person, other than the responsible person, who has, to any extent, control of those premises so far as the requirements relate to matters within his control.’ The Order is broad and far reaching in this regard. It would be difficult to argue that a director did not have any control. They could be prosecuted in relation to the extent of their control and if successfully prosecuted face anything from a fine to a prison sentence.
Directors should be aware that the enforcing authority has the power to inspect premises to check the Order is being complied with, including that a suitable risk assessment has been undertaken and that the significant findings have been acted upon. The enforcing authority has the power to issue various forms of notice, including a prohibition notice which restricts the use of all or part of the premises until changes or improvements are made. A failure to comply with any notice served by the authority is also an offence.
Fire Services have increased their use of article 32(8) in recent years in bringing prosecutions against directors and other senior managers. If an individual is successfully prosecuted for an indictable offence under the Order this can, as with health and safety offences, also lead to the disqualification of that individual from being a director, or taking part in the formation or management of a company for a period of up to 15 years (Section 2 of the Company Directors Disqualification Act 1986). This could prevent individuals going on to set up a new company and having the same disregard for fire safety.
The Order is onerous and the consequences for non-compliance are serious. We strongly encourage directors to ensure they understand their obligations under the Order.
If you are a corporate or an individual who requires legal assistance we have a team of Health and Safety and Fire Law specialists at Kingsley Napley who would be happy to help; please contact Hannah Eales Melinka Berridge Jonathan Grimes or Irene McMillan for further information.
This blog was written by Hannah Eales as part of our blog series on Directors' liabilities. Other blogs in this series includes:
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