Directors and Officers Liability Insurance
D&O provides protection to company management from any and all third-party claim that relates to their business activities. King III and the introduction of The Companies Act in 2008; Directors and Officers now find themselves in a far more onerous position than ever before, with legislation holding them more accountable for any wrongful act or negligent actions, as well as breaches of their fiduciary duties.
The Companies Act No. 71 of 2008 also changes the business landscape substantially, as far as the incorporation, administration and management of companies is concerned. Ushering in a new era of uncharted territory for Directors and Officers in South Africa, no person should consider taking up a position as a Director before ensuring that there is a Directors’ and Officers’ Liability insurance policy in place. When a board of directors is assembled, Directors and Officers Liability insurance becomes mandatory.
D&O Liability Insurance provides financial protection for the Directors and Officers of a company in the event they are faced with a legal suit pertaining to the failure to perform duties as they relate to the company. Since a Director can be held personally responsible for acts of the company, most Directors and Officers will demand to be protected rather than put their personal assets at stake. Fortunately the enormous responsibilities facing business leadership need not go unprotected: Section 78 (3) of the new Companies Act allows for the indemnification of Directors and the purchase of D&O liability insurance. Think of Directors and Officers Insurance as a
management Errors and Omissions policy.
Cover is for: Past, present and future directors, officers, prescribed officers, and employees acting in a managerial or supervisory capacity.
The Policy respond by: Advancing Defence Costs, Investigation costs and settling Awards where Directors are found to have acted honestly.
Usual allegations: Error, Misstatement, Act/omission, Negligence and Breach of duty.