Director Indemnity Agreement Uk

The insurance policies of the D-O often refer to the fact that for the purposes of the policy, the company compensates its directors and senior executives „to the extent permitted by law”, which means that the insurance coverage only covers debts that the company itself is not authorized to repay. Companies sometimes have a strategy of having O-O insurance coverage as the primary protection for directors, but this is generally not feasible, as most D-O insurance policies contain significant deductions in Side B insurance coverage, which must (and does) make compensation the primary source of coverage for directors, unlike the insurance coverage itself. The law generally prohibits a British company from compensating a director for liability for negligence, delay, breach of duty or breach of trust in the company or related company (a „debt”). Any provision of the company`s by-laws or other agreement with the company that purports to exempt its directors or directors of its related companies from this liability is not applicable. An associated company includes the British holding company, British subsidiaries or BRITISH subsidiaries of the same British company. To what extent can a company protect its directors from some of the debts described in our guides regarding the functions of directors, including any legal costs that may be related to them? There are two options: a company renewing its D-O insurance should consider how the compensation provisions of the law are related to insurance coverage and, to the extent that the wording and terms of the D-O insurance can vary, it should ensure that the coverage is as broad as possible. The amount of coverage will depend on the nature of the sector in which it operates, the degree of regulatory oversight of the sector, the public citation of the company, the attitude of the board on risks and market conditions at the time of the policy renewal. Given that, in the current financial environment, shareholders and other third parties are more aware of directors` obligations and responsibilities and their liability rights of failing directors, directors may increasingly be exposed to personal liability claims for their own misconduct. Given that directors and companies are increasingly regulated, a possible liability could arise, because the statutes of my company say that directors are „compensated” – is that enough? The insurance is generally structured in Side A and Side B coverage.

Page A`s coverage is paid for a director`s legal costs in defending a right to an unlawful act that cannot be compensated by society. The cover of page B compensates the company if it is allowed to compensate its directors. The law expressly authorizes companies to maintain AND insurance, which comforts directors not to be required to fund potentially lengthy and costly litigation from their own personal resources. While the level of coverage for these policies will overlap with the provisions of the Compensation Act, D-O insurance may be more generous than the benefits a company can provide under the law. For example, the D-O insurance cannot cover criminal sanctions, but it can cover the costs of defending criminal proceedings to the point where the director is found guilty. A company may pay the legal costs of directors „as taken care of” in defending civil or criminal proceedings in a jurisdiction related to a right or in relation to a right to disclaimer under Section 1157 of the Act.

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