Prekshak Ltd, was a known name in media and news broadcast business. Over last two years, the business was severely impacted, due to heavy competition and the management was evaluating various cost cutting measures to na

Requirement for D & O Policy It is essential for every company to have a director & office insurance (D&O), in order to have some peace of mind. If they have not purchased the policy, the top reasons to buy a D&O insurance are provided as under: Personal assets of directors are at risk: If a director has been accused of breaching duties, their personal assets are at risk in case they don't have any D&O insurance. Defending a legal action is an expensive affair: The legal costs and expenses in litigations involving directors are usually complex and costly. Investors can file a case against you: It may sound unlikely, but things can go downward. If investors believe that they have incurred losses due to mismanagement of the company, they could approach the court to seek compensation. For instance, if any action of a director results in a drop-in share price, which leads to loss to shareholders and investors, then there is a high possibility that they may bring a class-action lawsuit against the company and directors. Employees can sue directors: It is not only shareholders who can file a case against the directors as even employees reach the court to challenge the decision of the directors. It is a hard reality that in today's corporate world, there has been a rise in the number of cases filed by employees, related to sexual harassment or wrongful dismissal. For example, in 2016, a sacked software engineer won case against HCL Tech. The court called his dismissal unlawful and asked the company to reinstate the petitioner with continuity of service and paid full salary along with other benefits. Customers can take legal actions: In some cases, customers also reach the court against misrepresentations made in the advertisement materials and deceptive trade practices. Enquiry initiated by regulatory authorities: Regulatory bodies, like SEBI, Revenue Department, etc.; can initiate enquiry against directors. In case of bankruptcy or insolvency: If faced with bankruptcy, creditors can pursue legal action against directors if they think that directors or officers have not acted in their best interest. Helps in attracting/retaining talent: Not having a comprehensive D&O may discourage talented employees from joining the company as they know will not be guarded against any legal case if arise in future. D&O claims are not covered under any other policy: Most of the people believe that D&O claims are also covered under other liability insurance plans like professional indemnity. Requirement as per SEBI (LODR) Regulations, 2015: As per regulation 25(10) of SEBI (LODR) Regulations, 2015 , top 1000 listed entities by market capitalization calculated as on March 31 of the preceding financial year, shall undertake 'D and O insurance' for all their independent directors of such quantum and for such risks as may be determined by its board of directors. Principles which the directors are expected to follow Duty of Care: It requires directors and officers to act diligently with regard to the management of the company's affairs. Duty of Loyalty: It restricts directors and officers from using their position in their interest. Duty of Obedience: It requires directors and officers to ensure that the company is adhering to code of conduct. Any deviation from the above principles could pose the threat of legal actions against directors.