In terms of the new Company’s Act, directors and officers of a company are liable for many employment related activities and for any wrongful acts committed in their capacities as a director, officer or employee of the company. The Act places onerous responsibility on the directors and/or officers whose conduct could affect an employee or any other stakeholder.
The D&O liability policy indemnifies the company for any wrongful act committed by a director, officer or an employee of the company in their respective capacities of the company, subject to policy conditions to the extent that the employer has indemnified the party concerned.
A ‘Wrongful Act’ is defined in the policy as an “alleged breach of duty, breach of trust, neglect, error, misstatement, misleading statement, omission, breach of warranty or authority or other acts by the directors, officers or employees of the Insured company. These include misrepresentation in a prospectus, inaccurate or inadequate disclosures in a company financials and accounts, Employment practices and HR issues and shareholder actions. However, the policy does not cover fraud, intentional noncompliance and criminal activities of a director, officer or an employee.