Companies Act 2014 section 506

Civil liability of directors and experts

Section 506 establishes the personal civil liability of directors and independent experts for losses suffered by shareholders as a result of misconduct or untrue statements in connection with a company division.

• Shareholders who suffer loss due to director or expert misconduct during the preparation or implementation of a division are entitled to compensation from the person responsible
• Liability also arises where untrue statements appear in key division documents, including the draft terms, the directors' explanatory report, the expert's report, or the division financial statement
• Directors can defend themselves by showing they did not know about the document's issue and promptly notified shareholders, or that they had reasonable grounds to believe the statements were true after exercising all reasonable care and skill
• Experts can similarly defend themselves by showing they promptly informed the company and shareholders of the untruth, or that they were competent and had reasonable grounds to believe the statements were true

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