Directors Insurance? – Maybe not

Health and safety in the workplace is very topical with changes to the liability of directors made over recent years and more on the way in the bill before the house. Are you sure you are covered by your insurance policy?

Companies can indemnify directors and officers and take out insurance to protect them and cover defense costs and fines in certain circumstances. Any policy may be held invalid however if your company does not have a constitution.

Companies without constitutions fall back on the Companies Act 1993 to determine the rules. Section 28 of the Act states “If a company does not have a constitution, the company, the board, each director, and each shareholder of the company have the rights, powers, duties, and obligations set out in this Act”.

Section 162 of the Act allows a company to indemnify and insure a director but only “…if expressly authorised by its constitution…”. So if the company does not have a constitution it cannot indemnify you or take out insurance cover.

While the Act is silent on the consequences of taking out insurance in breach of the provisions do you want to run the risk that the insurer rejects a claim on these grounds.

It is timely to have a look at your company’s constitution and check if it allows you to be insured. You can check on the Companies Office website by searching for your company and looking under Documents to see if there is a constitution.

If you don’t have one and need insurance cover there are several standard constitutions available which can be purchased and put into place.

Talk to us today if you need a hand.