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Given the shifting corporate sands in recent years, it is unsurprising that directors and officers (D&Os) liability insurance has become essential. Shareholder activism is on the rise, securities actions are increasing and cyber security breaches are commonplace. D&Os are facing an unprecedented level of scrutiny, and as such, are exposed to potential liability. Any company which does not have an adequate D&O policy is exposing its leaders to significant risk.

UNITED STATES

Thomas H. Bentz Jr.

Holland & Knight

“Given the extended bull market in the US, we would expect litigation against corporations and their D&Os to be down. However, securities law filings in 2017 were the highest since 2001. Part of the increase can be explained by increased governmental regulation, a renewed focus on individual liability for D&Os, activist shareholders and cyber claims. However, there is also some evidence that the increase has been driven by a small segment of the plaintiffs’ bar that is focusing on smaller corporations and their D&Os. According to Kevin LaCroix of RT ProExec, this small portion of the plaintiffs’ bar pushes a high-volume case strategy that targets smaller corporations, particularly in the life sciences area. Together, all of these factors are increasing the personal risks for D&Os.”

CANADA

Glenn Smith

Lenczner Slaght Royce Smith Griffin

“The most recent pressures exerted on D&Os in Canada have come from several, multiple points of attack. Securities regulators, particularly in Ontario, have become especially aggressive in their investigations of companies and their executives. Ontario now has a whistleblower programme which provides an added incentive to come forward and report the wrongful conduct of D&Os, even paying monetary awards to whistleblowers who provide useful information. A second development in this area has been the advent of litigation funding following the recognition by Ontario courts of the ethics of allowing plaintiffs to obtain so-called ‘access to justice’.”

BRAZIL

Ilan Goldberg

Chalfin, Goldberg, Vainboim & Fichtner

“The personal liability of D&Os in Brazil has become an increasingly serious issue in the last few years. It is important to clarify that in the past it was difficult to sue D&Os directly. First, a lawsuit would be opened against the company itself and, in the end, if there were no assets available, plaintiff had to request that the legal entity be disregarded. If the judge granted the request, the company’s D&Os would become involved. Today, however, it is quite common to see D&Os involved from the outset, without the need of a prior lawsuit against the company. Regulators, creditors, customers, suppliers and tax authorities are more conscious of their power and, as such, D&O insurance is definitely worthwhile.”

UNITED KINGDOM

Ffion Flockhart

Norton Rose Fulbright LLP

“From a UK perspective, D&Os are subject to greater scrutiny – and potential liability – than ever before. As well as the direct obligations that are being placed on D&Os in certain sectors – a notable example being the Senior Managers Regime in financial services – directors are increasingly seen as the front line in managing risk and meeting legal and regulatory obligations on behalf of their companies. A good example of this is the emergence of cyber risk and the expectation that it will be understood and managed at board level. The COO of the FCA recently commented that “we do not consider cyber risk to be a purely technical issue.”

BELGIUM

Sylvie Gerlo

Tokio Marine HCC

“For some time now, the Belgian government and, more specifically, the Ministry of Justice has been reviewing Belgian corporate law. One of the changes they want to introduce is the limitation of personal liability for D&Os. If this bill is approved by parliament, it could be enforced in the near future. On the surface, one could argue that personal risks for corporate D&Os will be limited, but this is perhaps a short-sighted view. Looking at this from a broader perspective, one ought to bear in mind other factors such as defence costs, tax investigations and any potential and consequent administrative fines that a D&O may find themselves facing.”

SPAIN

Belén Vílchez Morales

Aon Risk Solutions

“2017 saw the continuation of a trend seen over the last three years – actions against D&Os are on the rise, mainly due to actions raised by regulators. Three regulators were especially active during 2017. The Spanish Stock Exchange Commission (CNMV) and the Central Bank (BdE) issued fines between €30,000 and €100,000 against the D&Os of both commercial and financial entities, mainly due to lack of transparency or a defined organisational structure, and the use of privileged information. Meanwhile, the Spanish Anti-trust Commission (CNMC) imposed a total of €160,000 in 16 actions against D&Os of diverse sectors.”

ITALY

Giovanna Aucone

PG Legal

“Considerable pressure has been exerted on D&Os in recent years. A high percentage of the receiverships in insolvency proceedings have brought responsibility actions against the former D&Os of bankrupt companies. Furthermore, the recent provisions of the Italian legislator and the rulings of the Italian courts have required a higher level of diligence from D&Os. Since the requirements for commencing insolvency proceedings are rather low – in fact, insolvency proceedings may be brought in case of debts exceeding an amount of €30,000 – a single customer and supplier can put D&Os under a certain degree of pressure.”

POLAND

Paulina Radgowska

Tokio Marine HCC

“Today’s regulatory and legal climate puts directors and officers under more scrutiny than ever before. Regulatory investigations are now one of the main sources of new claims in Poland and are on the rise. Regulators seem to be targeting individuals rather than the legal entity in isolation, and legislative changes such as the Market Abuse Regulation (MAR) and the General Data Protection Regulation (GDPR), are also affecting directors’ and officers’ personal liability in a number of ways. As a consequence, development of this insurance segment is accelerating.”

CHINA & HONG KONG

Eddy So

Reed Smith Richards Butler

“In Greater China, we see stronger policy support for promoting good corporate governance, enhancing transparency and accountability, and providing remedies against unfair corporate behaviours, leading to increased expectations on D&Os. In Hong Kong, the greatest threat of personal liabilities for D&Os traditionally comes from regulators. Today, regulators continue to hold and are increasingly holding D&Os liable for corporate fault.”

INDONESIA

Susandarini

Susandarini & Partners

“In the past decade, regulators in Indonesia have issued two major pieces of legislation. The first, issued in 2007, established the new limited liability company rules which tightened the regulations on companies, as well as the duties and authorities of a company’s D&Os. The second piece of legislation was the new financial services authority rules, introduced in 2011, which launched a new governmental institution – OJK – that supervises all activities in financial sectors, within the framework of promoting well-organised, equitable, transparent and accountable financial, insurance and banking industries.”

CONTRIBUTORS

Aon Risk Solutions

Chalfin, Goldberg, Vainboim & Fichtner

Holland & Knight

Lenczner Slaght Royce Smith Griffin

Norton Rose Fulbright LLP

PG Legal

Reed Smith Richards Butler

Susandarini & Partners

Tokio Marine HCC