After the tug of war between Tata group and the Infosys, fears of legal liability on the professionals have crawled up between the companies. Now companies are turning towards insurance companies for individual cover for these professionals, so that they could be retained.
Corporate directors have already been on guard since the new Companies Act assumed directors and the key management personnel to be the sentinels of governance. The attribution of criminality to the “officer who is in default” is established under section 2(60) of the Companies Act, 2013, with individuals having been made liable to penalty or imprisonment. A mere awareness of any wrongdoing makes an official liable to penal action and/or individually liable, says the Act.
Anup Dhingra, senior vice-president, Finpro practice leader, Marsh India Insurance Brokers, said, “After the recent boardroom battles, the demand for individual cover under the directors and officers liability insurance has increased.”
These liabilities include cover for legal cost, the cost of actual settlement, payout, regulatory and civil fines. Globally, over 60 per cent of Marsh’s clients buy individual cover for directors, called ‘Side A’ cover, but in India it’s still limited to US-listed or very large Indian companies. In India, the leading global insurance broker has over 1,000 blended policies but only 15 of these have separate Side A policies.