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This policy covers liability (or exposure to litigation) of corporate board members and officers arising out of their actions pertaining to their management duties of the corporation. This policy insures the personal assets of corporate board members and officers [as well as the company’s corporate assets] from lawsuits arising out of their capacity as directors or officers of the cooperation.

Duties and Responsibilities of Corporate Board

Directors of corporate boards have many duties and responsibilities. The board of directors of a corporation generally performs the following duties:

  • Review & authorize major corporate actions
  • Advise & counsel management on corporate decisions
  • Review & oversee proper audit procedures
  • Review the Cooperation’s investments
  • Stay informed about the Corporation’s financial status and legal developments
  • Assist management in decision-making
  • Verify the Corporation is in compliance with all applicable statutes, regulations & laws
  • Monitor management’s performance

Directors and officers of many companies face serious risks of being sued since they have certain duties and obligations which they might breach. The directors and officers of your company could find themselves liable in various circumstances which might include the following:-

Directors Duties

General

Being trustees of the company assets , directors stand in a fiduciary position in relation to the company and should not act in their private capacity in a way that conflicts with their duties to the company which could arise if:-

  • The directors have special knowledge; they must not make a personal profit by disclosing that knowledge to a third party
  • They have a personal interest in a contract in which they are also involved so that there is a conflict of interest, they must disclose that conflict to the Company.

Directors and Officers must act in good faith and prudent judgment in their service to the cooperation.

Duty to the Company

A director owes a duty to the company they are working for and if they are in breach of those duties causing loss or damage to the company, the company can sue the directors for recovery of its property or for damages. The company can also take action to claim any personal profit that has being made as a result of the director exploiting his position within the company.

Common Law Duties

The following are the common law duties:

  • Duty of Loyalty  Directors & Officers must avoid conflicts of interest, self-dealing, and

misuse of corporate assets

  • Duty of Obedience Directors & Officers must act within the boundaries established by statute, corporate charter or by-laws, and written policies and procedures
  • Duty of Diligence and Care Directors & Officers must conduct themselves with the care that an ordinary person would exercise under similar circumstances and in similar capacities

Liabilities to Other People

Directors as agents of the company may incur personal liability in a number of ways which might include the following:

  • Where directors do not disclose the Company’s interest to a Third party who might believe they are contracting personally with the director and may hold them personally responsible
  • Directors may be responsible for a breach of warranty of authority if they make a contract with a third party which the Company does not honour

Criminal Responsibility

Through the Companies Act criminal responsibility may involve any of the following:-

  • Destruction or falsification old documents,
  • False statements made in returns, Reports, certificates etc.
  • Payment of dividends out of capital,
  • Publication of misleading or false statements with intent to deceive

The policy therefore indemnifies Directors and officers personally in respect of claims made against them for actual or alleged wrongful acts (as defined) resulting in:

  • Civil Damages
  • Claimants cost awarded against the insured
  • Costs of personal legal representations.
  • The Company for amounts it is entitled to pay any Directors or Officers as
  • compensation for costs and expenses incurred in successfully defending the action

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The policy therefore indemnifies Directors and officers personally in respect of claims made against them for actual or alleged wrongful acts (as defined) resulting in:

  • Civil Damages
  • Claimants cost awarded against the insured
  • Costs of personal legal representations.
  • The Company for amounts it is entitled to pay any Directors or Officers as
  • compensation for costs and expenses incurred in successfully defending the action
  • Limits of Indemnity
    – Limit any one claim
    – Aggregate Limit of Liability
  • An indication of number of Directors/officers.

 

 

This policy is ideal for all institutions/companies with a Board of Directors who are directly involved in day to day running of companies at board level.

 

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