Directors' and Officers' Liability
Directors' and Officers' Liability

Guardian Directors' and Officers' Liability solutions are specifically designed to protect your executives.

The Corporations Act places specific focus on the responsibilities of directors. In fact, the law imposes duties upon the directors and officers of companies that makes them personally liable to:

  • Exercise a reasonable degree of care and due diligence in the conduct of their duties and use of the power of their position
  • Act honestly in all of their dealings
  • Not make improper use of information or their position to gain advantage for themselves, or to disadvantage shareholders or the company
  • Prevent the company from trading and continuing to incur liabilities whilst insolvent

Actions against directors and officers are not restricted to recognisable entrepreneurs. Even when a director or executive has acted at all times in an honest manner and with appropriate diligence in the performance of his or her duties, an allegation can be made which must be defended in court.

Why your business needs Directors’ and Officers’ insurance

Anybody involved in the management of your organisation or business may have duties and obligations that arise from a multitude of statutes including:

  • Corporations law
  • Customs and excise legislation
  • Dangerous goods legislation
  • Equal employment opportunity and anti-discrimination legislation
  • Environmental legislation
  • Income Tax Assessment Act
  • Occupational health and safety legislation
  • Superannuation legislation
  • Trade Practices Actand Fair Trading Acts
  • Workers’ compensation legislation

Under Australian law, the business is legally able to indemnify its directors and officers, other than in respect of claims:

  • Made by the company or a related body corporate, i.e. the company cannot indemnify the director for obligations that they owe to the organisation and other board members
  • Involving a lack of good faith

The company may also indemnify a director or officer for the successful costs of defending an action, whether civil or criminal.

Your organisation may choose to do this from its own resources but a more sensible approach is to transfer the risk using Directors' and Officers' Insurance.

From an individual director or executives’ perspective, insurance is also a better option. An agreement by the company to provide indemnification may prove to be inadequate:

  • Because of insolvency
  • The company becomes insolvent and has no resources to fulfil its indemnities
  • An action is brought by ASIC or a liquidator acting on behalf of the company