You are the Company Secretary of Nice Entertainment Ltd, a listed entity, engaged in the business of producing and trading of video games. The Board of directors have asked you to prepare and submit before the Board a no

Answer 5(a) MEMORANDUM BEFORE THE BOARD OF DIRECTORS Subject: Directors and Officers Liability Insurance policy (D & O Insurance Policy) This note is being perused before the Board of Directors highlight some key features of the Directors and Officers Liability Insurance Policy What is Directors and Officers Liability Insurance? Directors and Officers Liability Insurance (D&O) covers the cost of legal defense of directors, even in their individual capacity, when the company is unable to defend them. The D&O cover applies to former, present, and future members of the board of directors or any employee performing a managerial role. Usually, the policy covers the following: Management Liability | Management indemnification Non-Profit Outside Directorship Liability Estates and legal representatives of incapacitated or deceased insured individuals covered Spousal Liability extension Cover for the creation or acquisition of new Subsidiary companies (effective from the date of acquisition or creation) The D&O policy offers the following coverage: It covers any loss or damage that the company may incur because of actions mistakenly taken in the individual capacity as directors and officers under the Memorandum and Articles of Association. It includes loss or damage arising from claims made against directors and officers for any wrongful act done in their official capacity. It covers legal expenditure incurred with the written consent of the insurance companies arising out of the prosecution of any director or officer at any investigation, enquiry or other proceedings by the authority empowered to do so. It covers expenses incurred by the company's shareholders in pursuance of a claim against a director/ officer for which the insurance company is legally obliged to pay, as per the court's direction. It provides indemnity to the legal heirs or legal representatives of the director/ officer if the director or officer becomes insolvent. SEBI (LODR) Regulations, 2015 The Regulations 25(10) of the SEBI (LODR) Regulations, 2015 provide that with effect from October 1, 2018, the top 500 listed entities by market capitalization calculated as on March 31 of the preceding financial year, shall undertake Directors and Officers insurance ('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. Need of D&O Insurance Policy It is essential for every company to have a director & office insurance (D&O), in order to have some peace of mind. If you haven't purchased the policy, we've put together the top reasons to buy a D&O insurance. 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 they 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. Looking to benefits attached to the D&O Insurance Policy and the need of the hour to protect our worthy directors and key officers, the Board of Directors is requested to consider the buying of D&O Insurance Policy. Submitted for perusal approval Please. Sd/- Company Secretary