Discovering a Cover-Up - Tips for Directors

Dubious business practice will always exist but normally becomes more prevalent and is more often uncovered in times when business is tough. A director who discovers dubious business practices within his company can find himself in a difficult situation. This is especially common when a director finds that the true financial position of a company has been disguised.

What should you do if you find yourself in such a position?

Firstly, try to establish the facts of the situation and its impact and severity. Once that is known, consider the ethical principles which apply to company directors under the Companies Act and other legislation and your responsibilities as a director and under your contract of employment. Consider also your company’s corporate policies and procedures.

If necessary, clarify your obligations by speaking with colleagues and/or your company’s HR department. It is important when consulting with others not to breach confidentiality.

When deciding what to do next, taking legal advice is sensible. Taking the wrong action may have unpleasant consequences – however, doing nothing might be even worse. Remember that it is against the law (under the Public Interest Disclosure Act 1998) for an employer to discriminate against an employee who makes a ‘protected disclosure’.