There is little doubt that directors and officers operate in an increasingly difficult business and regulatory environment.

This is true of all companies, large or small, public or private and applies to all directors, executive and non executive.

New Acts like the Competitions Amendment Act which seeks to criminalise director behaviour and the Consumer Protection Act, have already raised fears and concerns among many directors. Yet 2010 will see a fundamental change to our corporate law regime when the new Companies Act of 2008 becomes law.

The Act is clear in its stated intention to increase both accountability and transparency in corporate South Africa. The enhanced duties of disclosure, codification of directors common law fiduciary duties and the introduction of new statutory duties, have radically increased directors personal liability. Couple this with the increase in the number of channels through which directors can be sued, and the ease with which the law will allow these actions, and the consequences of these liabilities simply cannot be ignored.

Loss of personal assets, permanent reputational damage and the prospect of delinquency will require directors to protect themselves.

Although there is no single solution to this protection, nor anything directors can do to diminish the growing complexity of regulation, directors and officers liability insurance (D&O) can be an effective tool in mitigating a directors personal exposure.

Private Company Exposures:

Examples of D&O claims brought against directors of Private Companies include:

• Claims by Employees: Claims alleging harassment, discrimination and wrongful termination against the directors and officers.
  
  
• Claims by Customers, Clients and Consumer Groups: Common allegations include contractual disputes, discrimination and false advertising.
  
  
• Claims by Competitors, Suppliers and other Contractors: Common allegations include unfair competition resulting in lost business by the competitor and infringement of patent, trademarks and trade secrets.
  
  
• Claims by Other Third Parties: Common allegations include claims brought by regulatory government agencies.
  
  
• Claims by Shareholders : While the most severe shareholder claims plague the public company, the private company is not immune to suits brought by private shareholders, bondholders or other investors for claims alleging misrepresentation, inadequate or inaccurate disclosure in financial reporting or breach of fiduciary duty.