Directors & Officers Liability Insurance

Directors' & Officers' Liability Insurance

As a director or an officer of a company, you are exposed to personal liability.

In terms of section 218 (2) of the Companies Act No. 71 of 2008 (‘The Act’), “Any person who contravenes any provision of this Act is liable to any other person for any loss or damage suffered by that person as a result of that contravention.”

Under the previous Act, there was a limited group of people who might sue you for your alleged negligence in your capacity as a director or for a breach of your fiduciary duties. Generally, it would have been up to your fellow directors to pursue legal action against you.

The provisions of the new Act, however, open a direct channel for any stakeholder to institute civil action against you personally.

Stakeholders would include for example, employees, creditors, clients, banks and unions. In fact anyone who could potentially be affected by your decisions, actions and omissions in your capacity as a director or an officer.

There are certain defences allowed to you under the Act, for example, you can prove that you did not act negligently. But litigation is not generally swift or cheap.

It makes sense given this exposure that you ensure that you and your fellow directors and officers are protected by arranging directors’ and officers’ liability insurance.

This policy is effectively a ‘management liability’ policy. It is triggered where an allegation is made against you that you have acted wrongfully/negligently in the discharge of your duties as a director or officer of your company or where it is alleged that you have breached a fiduciary duty that you owed the company.

The cover is relatively inexpensive. We currently have access to a facility with a very reputable insurer where you can obtain R5 million cover for under R3000.00 per annum, subject to certain qualifying criteria.

If you would like us to obtain quotes for your consideration, please contact us at info@cfpbrokers.co.za.

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Directors & Officers Liability Insurance

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