When do Indian companies need directors and officers insurance?

D&O policy covers the legal liabilities of Directors and Officers of a Company, it protects the personal assets of a company’s directors and officers, as well as that of the company itself. Companies of all size need to mitigate the risk of a financial loss arising due to any wrongful act from their directors. The reasons to purchase become imperative because of the following:

• The rising number of Corporate Frauds and tightening regulatory framework
• The top management of a company is more exposed as they are involved in the Day to Day activities of a company. Whilst a company may indemnify its Directors for actions brought against them, the scope of protection is limited and may well be removed if the company becomes insolvent and does not have sufficient funds, and the payment of claim by the Company is only permissible when a claim is defended.

Typically business with a corporate board or advisory committee should consider investing in D&O insurance, including non-profit organizations. Your company does not have to post revenues in hundreds of crores for your directors and officers to be personally sued over their management of company affairs. In fact, smaller businesses with fewer assets may need the protection just as much as large, deep-pocketed corporations.
If the company is looking to secure venture capital or funding from investors, they will need to have D&O coverage in place as the investors would seek protection for themselves.