Mihika Saraf and Vishvesh Gupta
The evolution of corporate governance has increasingly strived for transparency and accountability through its constant changes in the Companies Act, 2013 which renders numerous rights and benefits to businesses but also exposes them to jeopardy. After the principle of lifting of the corporate veil came into force, directors and officers faced heightened risk as they could also become targets of legal battles by their employees, stakeholders, creditors, and competitors, leading to high legal costs and damage to business reputation. To mitigate these risks, it becomes highly imperative for companies to invest in directors and officers (D&O) insurance. This paper attempts to highlight the importance of the D&O policy, outline the clauses covered in the contract between the insurers and the insured, discuss the factors determining entitlement to the insurance, and explain the claiming process under the insurance policy. An empirical research through online surveys was conducted to determine the scenario and implementation of D&O insurance policy in India from various stakeholders. After assessing the results, it is found that such policies are ignored by companies due to their limited understanding and awareness surrounding this. The author attempts to analyse and underscore the need for even small and medium-sized businesses to opt for blanket covers offered by insurance companies, the factors that render the insured eligible for such claims, and the lacunae that exist in such policies which often hinder the prospects of businesses investing in such crucial programs.
