Directors’ and Officers’ Liability Insurance
Each manager is potentially responsible for any erroneous actions (inaction) carried out as part of the business activities of the company. This applies, inter alia, to cases where the head himself did not participate in the decision and the corresponding actions / inactions were committed by other company officials or persons authorized by the company.
From May 1, 2016, economic courts of Ukraine may consider disputes between a business company and its official, even if the authority of this official has already been terminated. The corresponding norm has been introduced into the Commercial Procedural Code of Ukraine in connection with the entry into force of the law “On Amending Certain Legislative Acts of Ukraine Regarding the Protection of Investor Rights”.
In particular, the document determines that economic courts are subject to cases in disputes between a business company and its official regarding compensation for losses caused to the company by its actions or inaction. In such disputes, the representative of the company may be a shareholder who owns 10 or more percent of the authorized capital (ordinary shares) if he filed a claim with the arbitration court on behalf of the company or a statement on the representation of the plaintiff.
In connection with the above reasons, many companies, both public and private, have a number of questions and the need to protect their leaders.
What is a D&O policy?
The main objective of the D&O policy is to recover losses both for the company as a whole and for the director personally. Claims can be brought against the director and the company for any wrong actions / inaction in the process of managerial activity, for example:
- abuse of authority;
- disagreement of decisions taken in due course;
- distortion of official data;
- violation of antitrust, labor laws, etc.
- prudent investment;
- errors, inaccuracies or incomplete disclosures in financial statements, investment declarations and prospectuses;
- misuse of information or copyright;
- unjustified spending of company funds, etc.
The D&O policy works on the principle of "insurance of all risks", and in addition to reimbursing any amounts awarded for payment, it also includes a large number of additional options, namely: legal defense costs, investigation costs, extradition expenses, settlement costs, expenses to restore reputation, etc.
This product is especially important for companies that are planning a public offering of securities (IPO). The fact is that an IPO is a serious risk for directors, since it is the disclosure of a large amount of detailed information about the company’s business. At the same time, the directors are responsible for the accuracy of the information.
Advantages of Working with Aon
Among the D&O's Caller ID clients there are the largest public companies, namely:
- public metallurgical enterprises;
- public telecommunications companies;
- public companies in the chemical and agricultural sectors;
- public retailers;
- 4 largest banks.
In addition, the Aon team has vast experience in managing D&O losses and it is well versed in the intricacies of this financial risk.