Directors' and Officers' Insurance

Insurance that covers certain legal costs and claims made against a company's directors and officers in connection with their roles.

Example

A policy paying defence costs when a shareholder sues the board over a sale.

Important

Policies have limits, conditions and exclusions, and do not cover every type of claim.

Related terms

• Fiduciary Duty — A legal obligation to act in the interests of another party - for a company director, generally the company and its shareholders as a whole.
• Duty to Creditors — The obligation, recognised in many jurisdictions, for directors of a company approaching insolvency to give significant weight to creditors' interests.

Lessons that explain it

• A board seat can carry personal legal risk, especially when a company approaches insolvency — Directors can face personal liability for certain failures, and the risks often rise when a company is close to running out of money. Directors' and officers' insurance and indemnities reduce but do not remove that exposure. (11 min)

All 578 terms in the Investing glossary