Law firm Freshfields Bruckhaus Deringer has urged its biggest clients to lobby the government for changes to enable directors to limit their liabilities in the event of corporate disasters, revealed a report.
The company will today write to its FTSE 300 clients asking for action to persuade the government to allow board members greater financial protection, claimed the report.
Freshfields is campaigning for an amendment to the 1985 Companies Act. Under section 310 of the Act, directors are prohibited from limiting their liabilities or securing indemnities from their companies that would cover their legal expenses or cap their financial exposure.
Freshfields head of corporate finance Barry O'Brien said: "It is an unusual thing for a law firm to do but we think the issue is so important as to warrant this action.
"This change is necessary to encourage the best director to join companies' boards at a time when many are becoming increasingly reluctant to do so."
Under Freshfields' proposed changes, directors could still be sued over corporate failings, but they would be able to obtain an indemnity from their company that would cover liabilities in excess of a certain limit, such as a pre-determined multiple of their annual salary, said the report.
Most US states already allow directors to limit their liabilities in this way, concluded the report.
