3 common challenges faced by company directors & officers, and how to mitigate it
How you can protect your organization against any wrongful acts by Directors
The main reason one enters a partnership is to reduce one's load and stress by involving more able individuals in certain aspects of the business. These aspects are usually ones in which the person desiring additional partners, is either less adept at or is not too fond of.
The ideal partnership is a win-win situation in which both or all partners operate on the same page while engaging in their unique specializations. Trust, values and common vision are required for a successful partnership.
But what happens when your ideal partner or team of directors who seemed just right not too long ago, end up being the cause of financial disruptions, or fiduciary irresponsibility whether voluntarily or involuntarily?
Common responsibilities as Directors and Office Bearers
Firstly, it’s important to remember that all individuals in places of authority whether it be professionals, managers and executives (PMEs) or Directors hold crucial roles of high responsibility. A company director is expected to at all times, keep his or her personal agenda and opinions aside and operate solely in the interest of the company. He or she should be very careful not to misuse information or power, among fulfilling many other obligations such as avoiding conflict of interests, to exercise care, skills and diligence, and holding statutory meetings such as AGMs and keeping records with Statutory Registers.
As a person in power of your company, you could be vulnerable to much foul play and discrepancies. (For a detailed guide to Duties and Responsibilities of Singapore company Directors you may visit our featured article here)
You could be inviting trouble from...
On top of dealing with a challenging business environment, certain statutory duties, there are numerous external parties who can pose a threat to your firm’s directors, office bearers, and yourself!
ONE: Third party bodies
Clients, vendors, or even members of the general public are liable to sued or bring direct claims against individual members of your company’s management. These can be based on a variety of reasons such as breach of contracts or agreements, violations or any wrongful act as deemed suitable to that external party.
TWO: Company shareholders or employees
Your internal community is quite capable of taking action against a non-performing company or one believed to be indulging in unfair practices. Personal claims based on issues of discrimination as per age, gender, nationality, marital status or any other differentiating factors are among the top fears of most companies. And this fear is further compounded in a world dominated by social media in which information and opinions travel faster and more freely than ever before.
THREE: Regulatory threats
Government authorities have strict regulations regarding health and safety measures, tax procedures, or statutory accounting processes. An enquiry can interrupt business processes while government fines or penalties can result in a colossal waste of valuable time and money.
Please note that even though certain allegations can be completely baseless, defence and other legal costs involved in proving your innocence, can amount to huge monetary losses.
Directors & Officers Insurance - Your best bet
So are you completely defence-less and at the mercy of constant threats that can disrupt your business practices and peace of mind?
Of course not! Every problem has a solution.
Your best safety net to avoid such mishaps is to invest in a Directors & Officers Insurance Policy that protects you and your people in multiple liability situations.
The many advantages of a D&O Insurance Plan
The D&O Insurance is a personal insurance policy designed to protect a company’s top management or board of directors and officers against financial or reputation loss incurred during the function of managing or supervising a company. It is applicable for both private limited companies or public organisations.
More robust investigative bodies and methods are seen clamping down on smaller entities and companies which earlier found ways to foil the system. In this case, sound legal counsel will assist to manage the situation.
D&O insurance offers high quality legal representation and guidance, and appropriate management liability insurance solutions.
Here are some of the coverage highlights of a typical D&O Insurance policy:
- Defense costs regarding breach of contract claims
- Identity fraud coverage for misrepresentation of the company
- Public relations consultation for crisis and other situations
- Investigation costs coverage
- Bodily injury and property damage defense costs
- Civil fines and penalties
- Lifetime discovery period for retired managers
- Extradition costs
- Insured Person's Tax Liability Cover
- Asset and Liberty Cost ensures timely defense when an asset is confiscated or the liberty of the director or officer is restricted
- Court attendance allowance
- Reproduction cost of lost or damaged documents
- Automatic cover for new subsidiaries
To sum up, in today’s dynamic and somewhat volatile business environment it definitely pays to be safe than sorry.
Contact us today to know more about how to protect your business and your top people.