Although many associate the role of a director with lucrative salaries, generous holiday allowances and attractive bonuses, few realise the great responsibility that comes with being the head of a company.

Being a director of a company can be a professional minefield which has several potential risks in regards to liability.

As the leader of a company, it is the director who is likely to face the consequences of any legal action taken and is also the most likely to lose their job if anything does go wrong.

In the Companies Act 2006 there are more than 200 offences for which directors can be personally liable and new reforms under consideration may expose directors to direct compensation claims.

Directors are increasingly being held to account on a long list of areas including the Bribery Act, environmental legislation, Health & Safety regulations and financial reporting requirements and can be found individually liable if they act negligently or in breach of trust.

The responsibilities of a director are endless, and a mistake can have serious consequences, both personally and professionally.

Directors are responsible for making sure the company complies with the law and could become liable if there is fraud, or in some cases, negligence.

It is important to note that all directors, officers and employees of companies can face unlimited personal liability, no matter the company’s size, but the director of a company has certain responsibilities that others do not.

For example, a director is personally responsible for the company’s annual accounts and returns and can be prosecuted if they are not done properly. It is estimated that approximately 1,000 directors are prosecuted annually for failing to comply with the above, since it is a criminal offence not to file company accounts and returns.

As well as having various financial responsibilities, a director is answerable to the owners and shareholders of the company and is also responsible for the health and safety of their employees.

In short, a director has responsibilities towards all members of staff, which for bigger companies can mean that they are responsible for hundreds, if not thousands, of people.

For example, companies and organisations can be found guilty of corporate manslaughter as a result of serious management failures resulting in a gross breach of a duty of care. In the most extreme of cases a director of a company could potentially be held responsible for corporate manslaughter, a crime which could lead to a hefty fine or even imprisonment.

As well as professional risks there are also various financial risks involved in being a director.

A company’s directors are often asked to give personal guarantees for loans, overdrafts and other financial liabilities, meaning that they could potentially lose their assets if the worse were to happen.

For example, if a director’s guarantee is secured by a mortgage on their house, they could lose their home if things go wrong.

The reputational risks in becoming a director are also an important factor.

A director who has been dismissed may find themselves becoming unemployable, if a costly mistake has left their reputation in tatters.

As the face of the company it is the director who will often have to answer to the media and is also often targeted on social media, when a situation arises.

A recent report from the Economist Intelligence Unit and law firm Clifford Chance found that nearly two-thirds of all UK board members refuse to become non-executive directors due to concerns that they will be targeted by activists and on social media should anything go wrong.

Arguably more serious than the risks to a director’s reputation are the health problems associated with the stress brought on by a high-powered role.

Stress-related illnesses can affect a person both physically and mentally, and can lead to nervous breakdowns, depression, insomnia, and heart problems.

From all of the above it is clear to see that there is more to being a director than a large pay-packet and the amount of risk involved is enough to make anyone think twice before taking on the responsibility.

It is important to note than there are several insurance packages available that could help protect against any action taken against you as a director.