Serving on a company board can be rewarding for practitioners in various ways. However, when taking on a directorship, including for a non-profit, you need to be aware of the risks including the potential for the separate roles of director and legal adviser to become blurred.
Any lawyer director needs to consider whether they are also giving legal advice about matters under discussion at the board table. It is important to take the following measures:
- be alert to the possibility for an informal retainer to arise when potential legal issues are discussed
- make it clear that you are not retained as a lawyer regarding any issues discussed
- state your preference for the company to use another lawyer or firm for legal advice.
If you provide legal advice to the company, even under an informal retainer, you risk allegations that you failed to act with professional independence and objectivity.
Another risk is any potential coverage gap between your professional indemnity and directors and officers (D&O) insurance policies. LPLC’s policy excludes claims arising from acting as a director, secretary or officer of a body corporate other than the insured firm or the firm’s service company. It is therefore important to ensure your D&O policy dovetails with the LPLC policy so your various acts as lawyer and director will be covered. This also reinforces the need for clarity about which role you are acting in to avoid potential coverage disputes.
