D&O Deep Dive: Financial Distress and What It Means for Directors

COVID-19 and the economic “shutdown” as a result of government action to limit the spread of the pandemic has brought into sharp focus directors’ duties in relation to financial reporting and potential insolvency.

Although the Australian Government has acted to help moderate the risk of actions against organisations and their directors relating to potential insolvency as a result of the economic downturn, the uncertainty associated with the impacts of COVID-19 has had a flow on effect in the insurance market. Insurers are seeking to impose Insolvency/Financial Mismanagement Exclusions on Directors and Officers (D&O) Liability insurance policies for companies, in particular, those without strong balance sheets or comfortable debt positions.

In this article, Marsh examines the current state of play and the latest developments in the insolvency space, in particular, implications for directors and officers in the following areas:

  • Coronavirus Economic Response Package Omnibus Bill 2020 and associated Bills
  • Safe Harbour Amendment
  • Insolvency & Side C Cover
  • Financial Mismanagement/Insolvency Exclusions

Download a copy of the full article here.

De-Risking the Distressed

Has your business been financially impacted by COVID-19? Learn how to manage the unique risk and people issues through the various phases of restructuring, turnaround and recovery.

Please note any statements concerning legal matters are based solely on our experienceas insurance brokers and risk consultants and are not to be relied upon as legal advice,for which you should consult your own legal advisors. Marsh makes no assurances regarding the availability, cost, or terms of insurance coverage.

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Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions. This website contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements available from JLT Risk Solutions on request. Full information can be found in the JLT Risk Solutions Financial Services Guide.”