The Department of Trade & Industry's consultative document on director and auditor liability, published in December, is likely to arouse strong feelings both from business groups who feel that directo

It is clearly a question of achieving the right balance, as Patricia Hewitt, Secretary of State for Trade and Industry, points out in her foreword.

Says Hewitt: 'We don't want regulations that are so stringent, complex or unclear that honest, capable people are put off being directors or auditors. Equally, the law must be firm and robust to deal fairly with cases where something has gone wrong - as a result either of negligence or of dishonesty.'

The document notes that there are growing concerns that the law does little to recognise that directors may face legal action for breach of duty (especially the duty of care and skill) even when they have acted in good faith and in the belief that their decisions were in the best interests of the company. Among the more controversial options for reform is a move towards the US model, where most state laws allow a corporation to eliminate or limit the liability of directors for money damages for breaches of certain duties, most frequently the duty of care. Any reforms would only apply to civil law so directors would still be personally liable for criminal actions such as fraud. The DTI has requested comments on the options by 12 March.