The Companies Act 1985 (as amended) contained a section which rendered void any provision that purported to exempt a director from liability in connection with negligence, default, or breach of trust or duty. However, companies were able to obtain insurance for directors against such liabilities and directors were able to benefit from a “qualifying third party indemnity”.

The Companies Act 2006 adds a third form of indemnification to the benefit of directors of pension scheme trustee companies: the Qualifying Pension Scheme Indemnity. Under Section 235, a director of a company, which is trustee of a pension scheme, can be indemnified against liabilities incurred in connection with the company’s activities as trustee of the pension scheme.

However, the indemnity cannot extend to: 

  • any liability of the director to pay a fine imposed in criminal proceedings; 
  • any liability of the director to pay a fine to a regulatory authority by way of penalty for noncompliance with a regulatory requirement; and 
  • any liability incurred by the director in defending criminal proceedings in which they are convicted.

The introduction of the qualifying pension scheme indemnity provision is good news for a trustee company director. It will permit indemnification against costs incurred by the director in defending civil proceedings brought by the company (or an associated company) in which judgment is given against him, and against liabilities incurred by him in connection with an application for relief which the court refuses to grant to him. Neither of these protections is available under a qualifying third party.