Directors and Officers Liability

If the company’s directors or managers are sued in their personal capacity for mismanagement of the company, then this policy will pay the Damages as well as the legal costs.

Question: What is the difference between Sequestration and Liquidation?
  • Sequestration applies to natural persons (living breathing people).
  • Liquidation applies to juristic persons (such as companies and CCs).
Question: What is the difference between Insolvency and being Bankrupt?

The term insolvency is commonly confused with bankruptcy. Both terms refer to liabilities exceeding assets, but

  • Insolvency is a financial condition that happens when:
    • The company’s liabilities (debts) exceed its assets, commonly referred to as 'balance-sheet' insolvency.
    • The company can no longer meet its debt obligations on time as they become due, commonly referred to as 'cash-flow' insolvency.
  • Bankruptcy is a legal status that happens when:
    • The court agrees with a third party (such as a creditor) who applies to have the company declared bankrupt.
    • The company itself has the court declare it bankrupt; or files a special resolution with the Registrar of Companies in order to be declared bankrupt.
  • A state of insolvency can lead to bankruptcy but the condition may also be temporary. Insolvency does not necessarily lead to bankruptcy, but all bankrupt companies are considered insolvent.
  • When a company has been declared bankrupt, its remaining assets will be liquidated (in the liquidation process the company’s assets are sold and converted into cash) to settle the outstanding debts. This is the winding up of bankrupt company.
Question: What is the difference between an executive director and a non-executive director?
  • An executive director is also an employee who participates in the day to day running of the business.
  • A non-executive director is not involved in the day to day running of the business.
Question: What is the difference between a Subsidiary and an Outside Organisation?
  • A subsidiary is an organisation in which the Insured company holds a controlling share. In other words, more than 50%, but not necessarily 100%.
  • An outside entity is an organisation:
    • in which the company holds a shareholding of 50% or less, or
    • which is a charity, trade association, or tax exempt non-profit entity (not necessarily associated with the Insured company).
Question: What is the difference between D&O and E&O (PI - Professional Indemnity)?





  • Both provide cover for pure economic loss (where people were not injured and property was not damaged).
  • Both provide for liability arising out of work not being done properly


  • D&O means Directors’ and Officers’ liability cover
  • E&O means Errors and Omissions liability cover


  • Covers directors and officers in their personal capacity when they are liable for mismanaging the company
  • Covers the company when it is liable for negligence in its professional activities


  • The complainant is usually the shareholders or creditors
  • The complainant is usually a customer


  • This is a stand alone policy
  • This is an extension on the public liability policy