Ten reasons why you should have Directors' and Officers' Insurance:

1. In the event of a claim, it helps to prevent serious disruption to management time.
2. It provides protection against potential loss of personal assets including home and possessions.
3. It protects corporate assets from the costs of expensive legal proceedings.
4. It provides access to lawyers specialising in corporate issues.
5. The risk management service helps to improve standards of corporate governance.
6. It provides the framework for a focused strategy for dealing with lawsuits against Directors - especially the frivolous.
7. It allows Directors to focus on running the business which is especially important in times of high risk activities such as flotations, acquisitions and MBO's.
8. It provides [protection for all employees against Employment Practice claims.
9. It can be extended to provide worldwide cover to embrace the activities of international companies.
10. If the company goes into bankruptcy, the policy continues to the expiry date, providing valueable cover at a time when it is most needed.

Six reasons why you should not have Directors' and Officers' Insurance:

As a Director or Officer of your Company, you:-

1. Have a complete grasp of all your responsibilities and duties;
2. Never make a mistake;
3. Are continually updating yourself with all new developments, both within the law or elsewhere, that affect your personal liability.
4. Have full confidence in all your fellow Directors, Officers and employees.
5. Are absolutely certain that all parties you owe a duty to will never level allegations or file writs against you over actual or alleged mistakes.
7. Are certain your Company will never encounter problems, meet all set targets and continually achieve increasing profits.

 

Popular Misconceptions:

• The Company will pay any damages and legal costs awarded against its Directors.

WRONG: By law, the Company may only have to meet defence costs and damages awarded against its Directors in certain circumstances. Even then, a Director would be unable to insist upon such payments as a right.

• I am not a Director so I cannot be held liable as an individual.

WRONG: In fact, many senior Company officials are viewed as "Directors" in the eyes of the law because their duties are the same, regardless of their job title.

• We do not have any exposure to D & O because we are a small family-owned Company with no external shareholders.

WRONG: The law is fundamentally the same for both private and public Companies - and while it is only in exceptional circumstances that Directors may be liable to shareholders, they can be on the receiving end of such actions from other sources including regulatory bodies and third parties such as creditors and franchises

• Directors of limited Companies have limited liability.

WRONG: It is true that shareholders have limited liability but Directors do not, even if they are shareholders as well. In fact, Directors may have unlimited personal liability.

 

Claims Examples:

The following are all situations where D & O cover may provide valuable protection by meeting legal defence cots and the cost of any awards or settlements made following judgement:

• The purchases of a major High Street Retailer sued five of its former Directors for misrepresentation.

• Two Directors of a Construction Company which went into liquidation were held personally liable to the creditors for £417,000 which had been paid to another Director. They were found guilty of a breach of fiduciary duty and wrongful trading.

• Seven Directors of an industrial conglomerate were sued by 75 shareholders alleging deceit and negligence in respect of a share prospectus.

• A Director of a Health Food Company allegedly overrated a set of financial projections.  The plaintiff relied on this information in deciding whether or not to enter into a franchise agreement with the Company. The Court found the overstatement was a breach of duty and that the Director responsible should assume personal responsibility for his actions.

• In a case in Scotland, a Company Director was sued for fraudulent breach of his duty of trust in relation to alleged overpayments of £93,379 to another Company of which he was also a Director.

• Two Directors of aPackaging Company faced legal action alleging breaches of their fiduciary duty and eventually were forced to settle out of Court for an undisclosed sum.

• A Boat-builder went into liquidation with losses of £1.5 million. The Directors had believed that the Company was making a profit, but the liquidators sued the Directors for negligence after discovering no accurate financial records were being kept.

• Two Company Directors were convicted of illegally dumping 12,900 tyres on a site in Devon. Another Director was imprisoned for operating an unlicensed was transfer station.

Please call to arrange an appointment. We would be more than pleased to discuss your special requirements.