Company directors have many responsibilities when carrying out their duties.

​Generally, company directors and officers are not personally liable for a company’s debts. Certain circumstances however can arise where directors may find themselves facing legal or other regulatory action exposing them to personal liability. Generally, the more complex the role, the greater the risk.

​In addition to potential civil proceedings being brought against a company and personally against its directors, regulatory bodies such as the Australian Securities and Investment Commission (ASIC) have the power to personally fine directors for certain breaches of company law. 

The threat of personal liability could cause directors to become overly risk averse which may jeopardise potential opportunities for the company’s growth and development. It is therefore appropriate that companies might wish to protect their officers against such liability and that company directors should insist on protection.

Warranty & Indemnity (W&I) insurance is an insurance product that has been developed specifically for the mergers and acquisitions (M&A) market. This type of product is sometimes referred to as Representations and Warranty (R&W) product cover, particularly in the US. W&I insurance provides cover for unidentified breaches of warranties or representations in a share or asset sale agreement. 

​The purpose of W&I insurance is to transfer the risk of any financial loss that may arise from a breach that arises from a share or asset sale agreement from the seller (or some other person or entity providing the warranty or representation) to the insurer or issuer of the W&I policy.