Many companies start operating in a multinational environment. Their investors, trading partners or operations are located in jurisdictions all over the world.
This means that directors and officers should take into account not only their markets legalities, but also compliance regulations, different government bodies, supervisory mechanisms, auditors’ opinions and the latest best practices for corporate governance and risk management for all countries of operation of their business.
This increased complexity in the operating environment puts managers in the firing line. Managers, directors and officers can make mistakes and they are often personally legally liable for them.
D&O insurance policies offer liability cover for company managers, directors and officers to protect them from claims which may arise from the decisions and actions taken within the scope of their regular duties.
Major D&O risk coverages are as follows:
- employment & HR practices
- shareholder actions
- reporting errors
- inaccurate or inadequate disclosure in financial reporting
- misrepresentation in a prospectus
- decisions exceeding the authority granted
- non-compliance with laws and regulations
A D&O policy does not cover fraudulent, criminal or intentional non-compliant acts. Nonetheless, innocent directors remain fully covered if they are co-defendants, even if acts of their colleagues were intentional or fraudulent.