It is now commonplace for Directors to be sued when numbers go the wrong way. Bringing outside investors into the company massively increases risk particularly when listing on public exchange. Risk also multiplies as soon as there are US investors .
This is a highly specialised type of insurance and should only be purchased after advice from a broker familiar with the covers.
Directors and Officers liability insurance should be the number one priority of any board, as it enables the board, both executive and non-exec, to tread without fear of personal financial ruin. It falls outside the risk profile of the business as the insured persons are the Directors personally, rather than the company.
A Directors and Officers liability policy covers the Directors, (and the Company or “entity” where legally obliged to indemnify the Directors) against claims made against the Directors for wrongful act. Claims may be brought by a multiple of stakeholders including the revenue, investors, founders, and employees.
Cover is often wrapped into a Management Liability wording including cover for Employment Practices liability.