Recently an insurance company announced a policy to protect directors from personal legal liability that may arise against directors under the Companies Act of 2007.
The company said that in Sri Lanka, just like overseas, there is an increasing trend of claims being filed against corporate executives exposing them to potential personal liabilities for violations of laws and regulations and this is mainly due to the collapse of some major financial institutions recently.
Some well known business leaders and top corporate executives, it was reported, had lost virtually everything they had earned during their life time due to this clause in the law.
These provisions in the Companies Act are for the specific purpose of holding directors accountable for their actions particularly in the case of companies that take deposits from the public. The Ceylinco collapse was a clear example of how some directors lived it off (luxuriously) while others decamped with the money – never to be seen again. Depositors who dumped their life savings (how ironical when directors are protected by an insurance cover to protect their properties) have lost everything and are desperately ‘Waiting for Godot’ to deliver the goods.
It would now be easy for directors to take an insurance policy, run down the company and still be able to safeguard their properties.
Is this the kind of governance, accountability and transparency that the private sector is talking of? Very soon an insurance company would have to come up with a policy to protect depositors against any possible loss of their funds in a finance company or bank!