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New legislation: Directors with Directors' and Officers' Liability (D&O) insurance should check their cover following new director liabilities

Directors with D&O insurance should check whether it covers their defence costs if their company becomes insolvent - and its liquidators and administrators exercise new powers to sell the right to bring legal claims against them to third parties - following new liabilities for directors.

Legal Alert

This update was published in Legal Alert - November 2015

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

From 1 October, both liquidators and administrators of insolvent UK companies can transfer ('assign') the right to bring claims for wrongful or fraudulent trading (and certain other claims against directors) to third parties. Such claims will effectively become assets of the insolvent company which the liquidator or administrator can sell – probably to businesses which make a living pursuing such claims – to raise immediate cash for creditors.

D&O liability insurance usually covers the legal costs of successfully defending such claims if brought by a liquidator or administrator. However, they may not protect the director if a claim is sold to a third party who then brings the claim instead.

Operative date

  • Now

Recommendations

  • Directors with D&O insurance covering their defence costs if they successfully defend claims by a liquidator or administrator should check whether such costs are also covered if they successfully defend a claim brought against them by a third party.

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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