Are You a Target? Protecting Yourself against D&O Liability

Are you a D&O on a board of a company that is or may be an acquisition target?

You may be wondering what happens to your indemnity after the company you act for is acquired. First things first, if you have a contractual indemnification agreement with the company, check it and see what the duration of the agreement is. If there is no language with respect to duration in the contract, or if there is any ambiguity as to coverage following the acquisition, make sure you negotiate a written confirmation or acknowledgement with the acquiror that your indemnity will remain following completion of the acquisition and you ceasing to be a D&O. Typically, if there is a time limit to the duration it is 6 years to cover most limitation periods in Canada.

What about insurance? Does your contractual indemnity obligate the company for which you act as a D&O to purchase or maintain D&O insurance for you after you cease to become a D&O? If it doesn’t, demand it! This type of insurance is commonly referred to as “run-off” or “tail” insurance and can be purchased by the company on a non-cancellable basis for a period of time. Make sure that your arrangements continue post-closing and remain in effect for activities conducted during the time you were a D&O.

acquisition D&O indemnity agreement Insurance Target



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