Who stands to Benefit under Directors’ and Officers’ Liability Insurance?

November 10, 2020

A company’s articles of association delegate management of a company to its directors in order to take policy decisions on its behalf. Directors, who are collectively known as the board, also assume the role of agents and trustees in carrying out business and managing assets of a company, respectively. By virtue of these responsibilities, the board and other executive officers may be liable for any breach of authority committed to the company and its stakeholders, such as shareholders, creditors, debtors and even employees.

Directors can be classified into 2 types, namely executive and non-executive. Executive directors are full time employees of the company whereas non-executive directors are not. However, despite this difference, both are in a position of trust and have a duty of good faith to the company. Those of you who are Christians will concur with me by referring to the Bible, according to Paul’s letter to the Corinthians, 1 Corinthians chapter 4 verse 2.  Directors are not supposed to make personal secret profit, abuse the power endowed on them or breach any confidentiality. Any act conducted by a director that is illegal or outside the powers bestowed will make them liable to compensate the company.