Scholarly record

ANALYSIS OF COMPANY STATUTORY BODIES MEMBERS? LIABILITY AND ADVANTAGES OF DIRECTORS AND OFFICERS LIABILITY INSURANCE

M. Krugerova, M. Koziel

Abstract

Background: The members of statutory bodies of corporations are responsible for the damage caused by them personally and unlimitedly within the period of their function. Legal claims for compensation can be submitted by the company, shareholders, creditors, bankruptcy administrator or employees. The negative consequences of decision made by statutory body can occur even after longer period of time and can influence other subjects (e.g. husband, wife, heirs). Directors and officers liability insurance covers damages caused by statutory bodies’ members individually in case the compensation for damage is applied. The aim of the article is to evaluate the significance of insurance protection of the statutory bodies’ members as well as of the company itself. Methods: During the elaboration, the methods of analysis, synthesis, deduction and induction and statistical method have been applied. Results: Directors and officers liability insurance becomes necessary tool nowadays to protect both private property of people being members of statutory body or company management and company property. This article deals with the analyses of the selected claims for damage involving negligent or violation of duties determined by the Czech law; both points of view are considered – claims of the third parties (external liability) or claims within the frame of company (internal liability). Conclusions: Considering an increasing competition, frequent overlapping to international environment as well as more frequent lawsuits against the statutory bodies’ members, the authors recommend more detailed analysis of those members liability and its engagement in current and regular risk management in connection with the use of insurance method. To make the insurance functional in critical situation and make it cover all specifics of legal liability, the company authorities need the insurance to be fit to their measures. In this case, it is not recommended to use just standard insurance product.

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