When a private company goes public or raises debt from the public, it can be a complicated and risky process for the company and its officers. The prospectus used for a public offering is crucial, as any misleading information can result in lawsuits from those who feel the tricky details harm them. In this type of situation, it is up to the injured party to prove only that they suffered damage due to the misleading information rather than having to prove the act or omission that caused the injury. While officers are granted protection from tort liability, they must prove their existence, making litigation more expensive than a typical lawsuit.
How the officer can reduce the risk in the case of issuing securities to the public
If you’re a director or officer preparing for an initial public offering, it’s wise to consider obtaining insurance coverage to protect yourself and your company. Public Offering of Securities Insurance (POSI) and Directors’ and Officers’ (D&O) insurance policies can provide coverage for claims filed against officers and violations of securities laws related to the offering. D&O Inc. IPO policy is specifically designed for IPOs. You can minimize the risk of legal action and financial harm by obtaining the appropriate insurance coverage.
Which Policy is the Most Suitable for an IPO?
Selecting insurance for an IPO can be challenging. POSI provides coverage for prospectus-related claims, whereas D&O offers more extensive protection. However, having both can be expensive. A declaration made under POSI only affects that particular policy, whereas a D&O claim could affect the insured’s insurance history. It is essential to carefully consider and choose the most suitable policy for the specific needs.
Important Highlights for Directors’ and Officers’ Insurance in Public Companies:
Here are some essential highlights to keep in mind when considering Directors’ and Officers’ Insurance for a public company:
- Make sure the policy covers preliminary procedures for derivative claims, such as the disclosure of information and the request for a derivative claim.
- Are the purchased liability limits suitable for the company’s risk, considering the value of the public’s holdings?
- Are the terms of the policy and its exceptions suitable for the company’s business environment?
It’s always a good idea to consult with an expert in the field before making any decisions. They can help adjust the policy according to the risks inherent in the issue. Our team specializes in this area if you need help with IPO insurance. Leave us your details, and a professional risk manager will contact you as soon as possible.