Scariest D&O Risk: Insolvency

The Scream, by Edvard Munch (1893)What should be keeping board members awake at the moment is the fear of finding themselves suddenly shorn of the protection usually afforded to them by the corporate veil. Insolvency is a game changer even in a benign liability regime like the UK’s. According to the Insolvency Service, in the 12 months ending Q2 2011, approximately 1 in every 139 companies went into liquidation. When a company becomes insolvent, control shifts through the liquidator to the creditors, but the scariest part is that the legal fiction of the company continues to exist after corporate “death” and is still quite capable of suing the directors thus overcoming all the usual defenses such of duty of care etc. Talk about life after death!

This post was part of the special feature about Our Scariest Risks, published October 31, 2011. The feature also included these other risks:
Aerospace
Captive Insurance
China
D&O
Employee Benefits
Energy
Environmental Liability
ERM
Financial Services
FINEX
Global
Health Care
Middle East
Mining
Power
Real Estate
Reinsurance
Renewables
Supply Chain
Terrorism
Trade Credit

About Francis Kean

Francis is an Executive Director in Willis Towers Watson's FINEX Global, where he specializes in insurance for Dir…
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