Chancellor Rachel Reeves has recently announced significant reforms aimed at revitalising the UK’s financial sector.
One of these reforms involves private companies considering participation in the “Private Intermittent Securities & Capital Exchange System” (Pisces). Consequently, W Denis recommend that private companies considering this source of new capital, to reassess their Directors & Officers (D&O) insurance policies.
Traditional D&O policies often exclude coverage for private placements and securities-related activities, which could leave companies and their executives vulnerable to potential claims arising from their involvement in these transactions.
Key Considerations:
- Exclusion of Securities Entity Coverage:
Standard Private Company D&O policies typically do not cover claims related to the issuance or trading of securities, exposing companies to potential lawsuits from shareholders or regulatory bodies.
- Private Placement Exclusions:
Many Private Company D&O policies exclude coverage for claims arising from private placements, potentially leaving directors and officers personally liable.
- Increased Risk of Shareholder Lawsuits:
Engaging in securities transactions can heighten the risk of shareholder litigation, especially concerning transparency and compliance with new regulatory standards.
- Regulatory Scrutiny and Compliance:
Participation in Pisces may subject companies to increased regulatory oversight, necessitating broader protection for directors and officers against investigations or proceedings.
- Potential Conflicts with Exclusion Clauses:
Existing exclusion clauses in D&O policies may conflict with the activities associated with Pisces, potentially voiding coverage when it is most needed.
Recommended Actions:
Extend D&O Coverage: Companies should consider enhancing their D&O policies to include suitable coverage and protection against claims arising from private placements.
Review and Update Policies: Regularly assess and update D&O insurance policies to align with the company’s current and planned activities, ensuring adequate protection in the evolving financial, legal and regulatory environment.
Consult with Insurance Experts: Engage with specialist D&O insurance professionals to tailor management liability insurance policies that address specific risks associated with participation in platforms like Pisces.
By proactively adjusting D&O insurance coverage, private companies can better safeguard their directors, officers, and the organisation itself against the complexities introduced by new financial initiatives and regulatory changes.
W Denis are one of the largest independent insurance brokers in the UK and arrange competitive insurance solutions. To discuss this further with a broker at W Denis, please make arrangements with Daniel Moss at [email protected] or on 0044 (0)113 2439812.
