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For directors and officers (D&Os), the current business landscape presents a host of risks. Even prior to the outbreak of COVID-19, the direction of travel was one of increased regulatory scrutiny, litigation and shareholder activism, with the pandemic only magnifying problems. As the government support offered to many organisations begins to dry up over the second half of 2021, a deluge of corporate insolvencies is likely, which will increase the pressure on D&Os. Meanwhile, the mass migration to remote working brings other liability issues, as companies are required to implement appropriate measures to guard the health and safety of their staff.

UNITED STATES

Holland & Knight

“The personal risks to directors and officers (D&Os) continue to increase due to heightened scrutiny of the US Securities and Exchange Commission (SEC), the Department of Justice (DOJ), other regulatory bodies, and an active plaintiffs’ bar. In addition to the more traditional exposures, D&Os now also face exposure from myriad data privacy and data management claims, and claims related to special purpose acquisition companies (SPACs). All of this, combined with the economic uncertainty caused by the COVID-19 pandemic, has created significantly heightened risks for D&Os.”

CANADA

Norton Rose Fulbright Canada LLP

“Directors and officers (D&Os) in Canada are common targets for potential recovery in connection with corporate litigation. In high-stakes corporate litigation, plaintiffs often cast the net widely, looking to gain a tactical advantage and to access D&O insurance. Exposure to costs and liability risk may be elevated in class action proceedings. Times of crisis often lead to new types of claims. Recent examples in which D&Os may become implicated are COVID-19 based claims, such as negligence claims against nursing home operators arising out of an alleged failure to adequately protect residents during the pandemic.”

MEXICO

Nader, Hayaux y Goebel, S.C.

“The personal risks that board members are facing continue to increase in Mexico, particularly in the financial sector and capital markets, partly due to the abundant regulations imposing obligations on the directors and officers (D&Os) of financial institutions (FIs) and public companies. Due to the current challenging business environment, board members of companies are making decisions daily that could be considered mistakes or omissions that could cause their companies, investors and third parties to incur losses on a global scale. The COVID-19 pandemic has increased the pressure on board members for any potential liability.”

BRAZIL

Chalfin, Goldberg & Vainboim Advogados

“Better investigative tools available to the tax and labour authorities in Brazil, combined with more information sharing between public agencies, has led to more accusations of director and officer (D&O) mismanagement. This highlights the importance of D&O insurance to protect D&Os’ personal assets. Beyond this, the global economic crisis caused by the COVID-19 pandemic has significantly increased the risk that D&Os may be held liable for the debts of their companies.”

UNITED KINGDOM

Arthur J. Gallagher

“The risk environment for directors and officers (D&Os) has never been more fraught with pitfalls here in the UK. Notwithstanding the pandemic, which has brought with it a whole new level of scrutiny, the litigation landscape was already shifting toward a culture more commonly seen in other territories. Regulators have sharpened their teeth in the last few years. While recent news of potential corporate reform in listing rules has hinted toward some red tape lifting, forthcoming audit law changes have quickly balanced that out. These changes place greater personal liability on directors to get their numbers right.”

IRELAND

William Fry

“COVID-19, together with the disruption to traditional business methods caused by digitalisation and the growth of the internet of things (IoT), which has been accelerated by the move to remote working due to COVID-19, as well as the continued uncertainty of the impact of Brexit, will have profound positive and negative impacts on the Irish economy. The unprecedented level of support provided by the Irish government over the last 12 months has kept businesses afloat, however we expect that once this support ends there will almost certainly be a considerable number of companies which end up in insolvency.”

BELGIUM

CMS Legal

“The recent reforms to Belgium’s insolvency and corporate legislation are putting a greater focus on director and officer (D&O) liability, facilitating and encouraging the introduction of claims, especially in situations where a company encounters financial difficulties. COVID-19 is not the only trigger for financial difficulty, but it requires D&Os to adapt to new situations. For instance, the obligation of employees to work from home leads to increased vulnerability to cyber attack and data breaches and poses new questions in respect of safety at work. D&Os must ensure that sufficient safety mechanisms are put in place.”

ITALY

PG Legal

“In the years following the global financial crisis, there have been a number of changes that have impacted the liability risks for directors and officers (D&Os) in Italy. The increase of relevant legislation and greater regulatory monitoring has resulted in a significant number of lawsuits against D&Os. Indeed, we have seen enhanced regulatory activism caused by risks such as climate change, cyber risk, data protection and privacy, which threaten exposure for corporations and civil liability for directors. The COVID-19 pandemic has been one the largest and most damaging events in history, causing enormous human and financial losses.”

CONTRIBUTORS

Arthur J. Gallagher

Chalfin, Goldberg & Vainboim Advogados

CMS Legal

Holland & Knight

Nader, Hayaux y Goebel, S.C.

Norton Rose Fulbright Canada LLP

PG Legal

William Fry