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Question: When you are starting a new company, what cover do you need in order to hire the best talent and protect yourself against damage or failure?
Answer: As a business owner, one of the first decisions that you will need to make is how your company will be structured. One of the keys to expanding your business is to leverage your professional expertise and the skills of a qualified team of directors and managers.
To attract qualified professionals and independent experts, especially to a start-up organisation, it is important that candidates don't feel an imminent threat of a lawsuit or liability claim.
A strong attraction in bringing on board indep-endent professionals is the assurance of a liability cover applicable to their senior positions.
This cover is called Dir-ectors and Officers (D&O) Liability Insurance. D&O coverage is an essential aspect of managing your company in today's litigious environment.
Directors and officers have to comply with a high standard of responsibilities and they have legal responsibilities to their employees, shareholders, invest-ors and others. Companies can incur several forms of liabilities in conducting their business activities and as a result they can be held accountable for a range of issues.
Companies often underestimate the need for D&O Liability Insurance, and when they do, it can put their key people and their company at significant fin-ancial risk.
Members of your board of directors and investors in your business are often not willing to risk their personal assets when they serve as a director or officer, no matter how confident they are in your company.
Whether it is a shareholder or anyone with an interest in your company, a complaint can be filed against your directors and officers. No matter what the outcome of a complaint, defending any legal claim can be financially crippling and in addition, ruin the reputation of your company.
The Directors and Officers (D&O) Liability insurance cover protects the company's directors and officers against claims arising from their decisions and actions taken whilst managing the business.
Initially, it is easier for you to adopt a hands-on approach to your business and play an active part even in small decision making. But as the company grows, you will have to shift responsibility and authority downwards - allow senior management to make influential decisions relating to services or employees.
Corresponding to business growth, assets and wealth accumulation also increase, leaving you open to the possibility of larger claims.
Potential problems such as dissatisfied dismissals could result in lawsuits against your directors - whether internally employed or externally recruited.
A D&O cover will enable both you as the owner and your senior management to direct claims or losses to an insurance company; this will safeguard both the business assets and those of your senior management.
Since you are just starting up and may be unsure on how to decide what policy is best suitable for your, it is advisable to discuss your requirements with an independent financial adviser who is able to assess your requirements and guide you as to the insurance cover you require and the best provider for the type of insurance required.
The writer is director of general insurance at Nexus, one of the region's leading financial advisers. Views expressed are the author's own and not necessarily reflect those of Gulf News. If you have questions, please email advice@gulfnews.com.
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