Are you an administrator or manager of a company? Do you know what you risk when a serious problem arises in your company? On more than one occasion we have encountered major scares due to lack of knowledge. The directors' insurance are often unknown until you find yourself in the situation of needing them. It can happen that, when faced with a major problem in a company, senior managers may have to risk their personal assets to solve it, unless they take out insurance of senior executives. Don't worry, don't panic, we'll explain everything: what insurance of these characteristics consists of, coverage, etc.
Why directors and officers insurance?
Fundamentally, as a result of changes in legislation, you may find yourself criminally liable for what happened in the company.
Recent amendments to the Criminal Code and the Capital Companies Act make companies liable for the actions of their directors and managers, which means that they are ultimately directly liable. The Article 236 of the Capital Companies Act, says that:
The directors shall be liable to the company, to the shareholders and to the company's creditors for any damage caused by acts or omissions contrary to the law or to the articles of association or for those carried out in breach of the duties inherent in the performance of the office....
In other words, the directors become responsible for everything that happens in the management of the company, and are therefore personally and unlimitedly liable before the law with their assets for any damage they may cause to third parties as a result of their management.
For all these reasons, D&O insurance, In order to offer protection in these situations, it is essential to provide civil liability for administrators and directors.
When talking about this type of insurance for managers, it is also important to talk about “...".“compliance”The procedures that allow companies to implement protocols that ensure compliance with regulations and good practices.
The “marriage” between D&O insurance and “....“compliance”It minimises the risk of negligence and, if there is any, facilitates the resolution of negligence. Compliance is, so to speak, a compliance plan, whose purpose is to prevent a management problem that could trigger a bigger problem. If we add to this the insurance civil liability of directors and officers, We have the company shielded against major unforeseen events.
Who can they complain to and who usually complains?
In every company there are usually several decision-makers, and each of these persons is susceptible to complaints. Let us not forget that any person with an interest in the company can make a complaint: employees, partners, shareholders, creditors, customers...
Therefore, any claims against the company that are related to negligence in management should be borne by the manager or director, and this can generate significant costs for the manager.
Directors' and officers' liability insurance, or D&O insurance, offers cover to help settle any liability arising from a claim during the exercise of the position of administrator. What it does is to protect their personal assets against claims from third parties by transferring the responsibility for dealing with the claim to the insurance company.
The senior managers' insurance can be defined as a cover aimed at managers, executives, directors or administrators of companies in order to guarantee their personal liability. In this way, it protects their assets against claims from third parties (suppliers, creditors, employees, shareholders, etc.) arising from their business decisions.
Moreover, with the increase in demand for this type of insurance, and the increase in competition between companies, this insurance costs much less than you might imagine.
What kind of claims does the directors' insurance cover me for?
Once we are clear that senior management insurance can help us to solve company management problems generated by error or omission, let's see what type of claims are covered. Before going into the details, let's not forget that we are going to talk in general, and that each policy, contracted in a particular way, will have its own special characteristics.
And, of course, we should not think that this can only happen in large companies. Whether your company has 5 employees or 50, it is advisable to be aware of this coverage and consider taking it out. You know that if you have any doubts, you can count on us.
In order to see the different types of scenarios that we may encounter, we will consider the most common situations: employee complaints, creditors and shareholders.
- Employee grievances: here we can be faced with claims ranging from discrimination or harassment, dismissal, etc.
- Claims by creditors: most are linked to omission or concealment of information, actions to the detriment of the company and to their own benefit, fraudulent contracts, etc.
- Shareholder claims: the most common are claims related to mismanagement of the company, fraudulent activities or misleading actions, breach of articles of association, insider trading...
The most common coverages are:
- Civil liability of the company's administrators and directors.
- Defence expenditure.
- Costs of investigations/ proceedings before administrative bodies.
- Emergency expenses.
- New subsidiaries
- Administrative penalties
- Claims in labour matters for improper employment practices.
- Expenditure on publicity, communication or reputation protection.
- Civil bonds
- Costs of setting up and maintaining criminal bonds.
- Professional disqualification
- Subsidiary tax liability
- Civil liability in bankruptcy
- Corporate criminal liability
- Unlimited Retroactivity
- Worldwide territorial scope
And let's not forget that a large part of the payments through these insurances go to legal defence, the payment of lawyers and legal expenses. Even if the claim is unfounded, you have to find lawyers and a team to defend you.
Given the complexity of this type of insurance, PIB Group Iberia is at your disposal to help you choose the best protection for your needs. to grow your company or enterprise in a way that is healthy, legally responsible and beneficial to you.
If you still have more doubts, in this link with information on D&O insurance you can find out more about: legislation applicable to the executive, its risks and key aspects when taking out this insurance.
