A Company does not make decisions. It appoints a board of directors, officers and managers to make decisions on its behalf. In making these decisions the directors and officers not only place the company at risk from actions by an aggrieved party, they also place themselves personally at risk. A director’s personal liability is unlimited. All his personal assets are at risk. Unlike the Company, he cannot take shelter under limited liability. Directors are jointly and severally liable. It is the directors who manage the assets and control the company’s day to day affairs. Directors are liable personally to pay losses suffered by the Company following an act which is wrong, negligent, outside the Company’s authority, beyond their power, or which evidences insufficient skill and care in managing the Company’s affairs.
Directors and officers are bound by duty towards various stake holders — shareholders, employees, creditors, customers, competitors, members of the public, government and other regulatory bodies. Any breach or non-performance in the duties can result in claims against the companies and/or its directors of the company by reason of any wrongful act in their respective capacity.
D&O insurance affords protection to directors and officers from liability arising from actions connected to their corporate responsibilities. The policy provides indemnity to the directors and officers in respect of: