Deeds of Access, Insurance and Indemnity are an important element of protection for directors and officers against personal liability, in addition to the company constitution.
A policy of Directors & Officers (D&O) insurance is essential to provide protection for liability arising after the director ceases to hold office.
A Deed of Access, Insurance and Indemnity is an agreement between the company and a director or company officer. As the name suggests it provides:
- access to company documents which the company must maintain and the D&O insurance policy. For example:
- that the company must maintain specific books and records for a nominated period;
- the classes of documents which the director can have access to and the permitted purposes for which access will be granted. This might include board papers and minutes, documents mentioned in them and legal opinions necessary to defend claims;
- a framework for access to any privileged documents in a way which ensures that the company’s privilege is protected; and
- the period of time access is permitted. This may be unlimited but should be for at least seven years after the directors ceases to hold office.
- an indemnity for the directors and officers to the extent permitted by law. For clarity, the Corporations Act prohibits indemnifying a director against liabilities:
- owed to the company itself or a related entity;
- for certain pecuniary penalties or compensation orders; and
- owed to someone other than the company that did not arise out of conduct in good faith.
the benefit of D&O insurance that the company must arrange on their behalf and pay for the premium (particularly important in the case of insolvency). The insurance policy should specify:
- The period of time for which cover must be maintained. Ideally, this should be for at least seven years after the director ceases to hold office;
- The amount and terms of cover. These should reflect the size and complexity of the company operations and the industry in which it operates;
- The right of the director to access a copy of the policy terms and conditions. Self evidently, the director should have access to the policy documents; and
- The company will pay the premium for the policy.
These are important issues for companies and directors. Consult a lawyer for further information, and to prepare the instruments.