Directors and Officers Liability

BBA's Directors' and Officers' Liability solutions are specifically tailored to your business.

Public companies, as well as most medium to large private companies, require Directors' and Officers' cover to protect the liabilities of their directors and executives. The demand for cover in Australia has been brought about primarily by the evolution of legislation such as the Corporations Act which places an increased focus on the responsibilities of directors.

Why your company needs Directors' and Officers' insurance

The law imposes duties upon the directors and officers of companies which they are personally liable for including:

  • To exercise a reasonable degree of care and due diligence in the conduct of their duties and use of the power of their position
  • Not make improper use of information or their position to gain advantage for themselves, or to disadvantage shareholders or the company §Act honestly in all of their dealings
  • Prevent the company from trading and continuing to incur liabilities whilst insolvent

Actions against directors and officers are not restricted to high flying entrepreneurs. Even where a director or executive has acted at all times in an honest manner and with appropriate diligence in the performance of their duties, an allegation can be made which must be defended in court. Anybody involved in the management of your organisation may have duties and obligations which arise from a multitude of statutes including:

  • Corporations law
  • Superannuation legislation
  • Trade Practices Act and Fair Trading Acts
  • Equal employment opportunity and anti-discrimination legislation
  • Occupational health and safety legislation
  • Income Tax Assessment Act
  • Dangerous goods legislation
  • Environmental legislation
  • Workers’ compensation legislation
  • Customs and excise legislation

Under Australian corporations law, the organisation is legally able to indemnify its directors and officers, other than in respect of claims:

  • Made by the company or a related body corporate, i.e. the company cannot indemnify the director for obligations that they owe to the organisation and other board members
  • Involving a lack of good faith

The company may also indemnify a director or officer for the successful costs of defending an action, whether civil or criminal. Your organisation may choose to do this from its own resources, or is legally allowed to arrange Directors' and Officers' Insurance, unless the liability arises out of conduct which involves a lack of good faith.

From an individual director or executives perspective, insurance is the better option. An agreement by the company to provide indemnification may prove to be inadequate:

  • Because of insolvency
  • The company becomes insolvent and has no resources to fulfil its indemnities
  • An action is brought by ASIC or a liquidator acting on behalf of the company
  • Further changes to the corporation law are made which effect the ability of the company to provide indemnity
    PDF   Directors and Officers Liability - FAQs
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