Protecting the Decision-Maker, Not Just the Company — Wrongful Acts· Regulatory Investigations· IBC Claims· Securities Litigation —
Directors & Officers Liability Insurance Policy (D&O), the insurer

the insurer's D&O Policy is India's most personally consequential liability insurance — the only product that protects an individual director's personal home, savings, and investments when they are sued for decisions made in their official capacity.

Who is covered (Insured Persons):
→ Executive directors (Managing Director, Whole-Time Director)
→ Non-executive and independent directors
→ Officers (CEO, CFO, Chief Risk Officer)
→ Key Managerial Personnel (Company Secretary, Compliance Officer)
→ Past directors (for acts during their tenure)
→ Shadow directors (persons under whose instructions the board acts)
→ Any "Officer in Default" as defined in Companies Act 2013
→ Employees named in lawsuits alongside directors (limited)


→ Breach of Trust
→ Breach of Fiduciary Duty
→ Misleading Statement
→ Error or Omission
→ Negligence in managerial capacity
→ Mismanagement of company affairs
→ Misrepresentation in financial statements
→ Regulatory violations (SEBI, RBI, Companies Act)
→ IBC-related decisions (preferential transactions, undervalued deals)

Three sides of coverage:
Side A: Personal protection when company cannot indemnify
Side B: Corporate reimbursement (company reimburses director, insurer reimburses company)
Side C: Entity coverage for company in securities-related claims

The defining feature: D&O protects the INDIVIDUAL DECISION-MAKER, not the company's physical or commercial assets. It is the only the insurer product where an individual's home and savings are the protected asset.

Three sides, three different trigger conditions and beneficiaries — confirmed from Cyril Amarchand Mangaldas (Feb 2026).

Side A — Individual Protection (activates when company CANNOT indemnify):
"This is a personal safety net for directors and officers when no indemnity is provided by the company. The insurer directly pays the loss incurred by an insured person." — CAM
When: Company is insolvent, under IBC resolution, legally prohibited from indemnifying, or has refused/lacks funds
Who is paid: The director PERSONALLY
Deductible: Usually NONE for Side A
No deductible = critical for independent directors who have no promoter resources

Side B — Corporate Reimbursement (most common in practice — company has ALREADY PAID):
"This side exists for the benefit of the company. The insured person gets indemnified by the company first, and the insurer reimburses the company." — CAM
When: Company has already paid the director's legal costs or settlement
Who is paid: THE COMPANY (gets reimbursed)
Deductible: Company deductible typically applies
Most D&O claims in healthy companies use Side B

Side C — Entity Coverage (company named as CO-DEFENDANT):
"The insurer pays the loss incurred by the company, in connection with any alleged wrongdoing directly implicating the company, alongside its directors and officers. Such claims are most relevant in securities related regulatory actions." — CAM
When: Company is itself named in SEBI action, securities class action, DRHP/prospectus misrepresentation claim
Who is paid: The COMPANY directly
Primarily for listed companies; some private company regulatory claims

Side A DIC (premium fourth layer):
Separate standalone limit that responds when main D&O limit is exhausted or denied. Ring-fenced director protection — entity claims (Side B/C) cannot deplete it. "Strongly recommended for independent directors."

Mandatory for listed companies. Strongly recommended for all others.

SEBI LODR Regulation 25(10) — Confirmed from (March 2026):
"With effect from October 1, 2018, SEBI mandated D&O Insurance for independent directors of the top 500 listed companies. This was subsequently extended to the top 1000 listed companies by market capitalisation."

What the mandate covers:
→ D&O cover is mandatory for INDEPENDENT DIRECTORS of top 1000 BSE/NSE listed companies
→ The board determines the quantum of coverage (minimum not specified — board discretion)
→ Non-compliance = SEBI can take regulatory action against the listed company
→ All other directors of listed companies are equally exposed but not technically covered by this specific mandate

Companies Act 2013 — Schedule IV:
"D&O Insurance is a governance requirement for independent directors under Schedule IV of the Companies Act 2013.". Schedule IV is the code for independent directors — not a legally enforceable mandate, but a governance standard.

For private companies / startups:
"PE/VC investors and international stakeholders increasingly require D&O coverage as a pre-condition of investment.". While not legally mandatory, refusal to take D&O can block funding from institutional investors.

The bottom line:
If your company is in the top 1000 listed companies: D&O is legally mandatory. For others: increasingly commercially mandatory as investors, lenders, and sophisticated clients all require it. Call 022 4302 0000 to verify your specific obligation.

YES — D&O covers legal defence costs for investigations by all major Indian regulatory authorities. This is one of D&O's most critical features in India's current enforcement environment.


"Defence costs for regulatory investigations or enforcement proceedings by SEBI, IBBI, RBI, MCA, NCLT, SFIO, Enforcement Directorate (ED), NFRA, or any other statutory authority. Covers notice response, legal representation, and compliance-related expenses throughout the proceedings."

What D&O covers for each authority:
SEBI: Show cause notices, enforcement orders, insider trading investigations, LODR violations, takeover code violations — all defence costs covered
SFIO: Serious fraud investigations under Section 212 Companies Act — all defence costs covered
ED: Enforcement Directorate summons under FEMA, PMLA — defence costs covered (criminal fines if imposed ultimately are generally excluded)
RBI: Banking regulation violations, NBFC governance issues — defence costs covered
MCA/ROC: Companies Act violations, filing defaults — covered
NCLT: Section 241/242 petitions (oppression/mismanagement), IBC proceedings — covered

Key nuance — criminal fines:
"Indian law does not allow insurers to pay for certain penalties, especially criminal fines or penalties under statutes like Income Tax Act, FEMA, Companies Act — if they are considered punitive."
BUT: Legal defence costs are covered throughout — even if the ultimate finding results in a fine/penalty that itself is excluded.

The practical difference:
Without D&O: A director receiving an ED summons hires their own lawyer at ₹5–15 lakh per month in fees during a 2–3 year investigation.
With D&O: The insurer funds all legal representation throughout the investigation — regardless of the outcome.

NO — one director's fraud does NOT automatically bar innocent directors from claiming. This is the severability clause and innocent insured doctrine — confirmed by Cyril Amarchand Mangaldas (Feb 2026) citing the Satyam precedent.

From CAM (Feb 2026):
"Fraud by an insured person does not automatically preclude coverage of persons not at fault. The policy may continue to apply to insured persons against whom no fraud has been established."

The Severability Clause:
"For Side A or Side B claims, any knowledge possessed by one insured person would not be imputed on any other insured person. Therefore, knowledge of an insured person can only affect the portion of the claim attributable to such insured person." — CAM


After the Satyam Chairman confessed to an accounting fraud, the Telangana High Court appointed an arbitrator to adjudicate a former senior vice president's claim under D&O. The court recognised that an innocent co-insured could not be denied coverage because of a different insured person's fraud.

The Innocent Insured Doctrine:
"An innocent insured should not be denied insurance coverage due to the fraudulent or reckless acts of another co-insured." — CAM citing common law principle.

What to check in your D&O policy:
→ Severability clause: expressly states knowledge of one insured is not imputed to others
→ Innocent insured protection: specifically preserves coverage for non-fraudulent co-directors
→ CAM recommendation: verify this clause is present before purchasing D&O

Call 022 4302 0000 — Probitas will review your D&O policy wording to verify severability protection.

Run-off (also called "Tail Cover" or "Extended Reporting Period") is one of the most important and most overlooked D&O features in India.

The problem:
D&O is a claims-made policy — the claim must be filed during the active policy period. When a director resigns or a company is acquired, the D&O policy typically ends. But the director's liability for their past decisions does NOT end — it can continue for years.

Key scenarios where run-off is critical:
IBC/Insolvency: A director resigns in 2023 from a company that enters IBC in 2025. The Resolution Professional investigates 2021–23 transactions. Claim arrives in 2025 — AFTER the D&O policy has lapsed. Without run-off: no coverage. With run-off (purchased on resignation): covered.

Company acquisition: When Company A acquires Company B, Company B's old D&O policy typically terminates. The new acquirer's D&O doesn't cover Company B's pre-acquisition directors. Run-off for Company B's board members is essential.

Long-tail SFIO/ED investigations: SFIO investigations can take 3–5 years from the triggering event. If the D&O policy lapses before the SFIO files a complaint, coverage is lost.

confirmed:
"Extended reporting window (typically 1–6 years) after policy expiry, company acquisition, or a change in control. Critical for directors who leave a company — claims can emerge years after their tenure ends, especially from insolvency professionals or regulators."

When to purchase run-off:
→ Before resigning from any board
→ Before a company acquisition or merger closes
→ Before a company files for insolvency
→ Before a board undergoes major composition change

Call 022 4302 0000 immediately when a board transition is planned — run-off must be purchased before the triggering event, not after.

Independent directors face the full legal liability of executive directors — but with far less information access, fewer company resources for indemnification, and greater reputational exposure.

The key statutory position (Section 149(12) Companies Act 2013):
Independent directors have the SAME legal liability as executive directors for all acts of the company — except acts that occurred without their knowledge, or where they had taken due diligence steps, or where they had raised concerns through the board or audit committee.

Independent directors' specific D&O exposures:
→ SEBI LODR compliance failures (mandatory D&O under Regulation 25(10))
→ Financial reporting misstatements — audit committee independent directors face NFRA scrutiny
→ Insider trading — independent directors with board access may receive material non-public information
→ Related-party transaction approvals — independent director approval required under Companies Act; if transaction is later challenged, independent directors face personal liability for their approval
→ Section 245 class actions — any shareholder can sue directors including independent directors
→ IBC proceedings — Resolution Professionals pursue all board members, not just executive directors

Why Side A and Side A DIC are critical for independent directors:
1. Company indemnification may be legally prohibited in some situations (insolvency, certain regulatory orders)
2. Promoter-group resources (which executive directors may access through personal relationships) are not available to independent directors
3. Independent directors often have personal wealth that makes them attractive targets for plaintiff lawyers

Best practice:
Before accepting any independent directorship: verify the company has D&O with (a) Side A with no deductible, (b) Side A DIC as a separate limit, (c) adequate aggregate limit, (d) run-off provision on exit. Call 022 4302 0000 to assess any specific board's D&O adequacy.

The Insured vs. Insured exclusion is one of the most complex and frequently misunderstood D&O provisions in India's growing management liability market.

What it excludes:
Claims brought by one "insured person" against another "insured person" — for example, a promoter-director suing an independent director within the same company, or the company itself suing one of its own directors.

Why this exclusion exists:
To prevent collusion — two insured parties could potentially fabricate a claim between themselves to extract policy proceeds. The exclusion protects the insurer from manufactured intra-company disputes.

Where it gets complex — the exceptions:
Most Indian D&O policies carve back the Insured vs. Insured exclusion for:
1. Employment claims: Employees suing directors for wrongful termination, POSH violations — even though employees may be named insureds, employment claims are typically carved back
2. Derivative actions: Shareholder derivative actions (shareholders suing on behalf of the company) initiated without board or promoter collusion — carved back in most policies
3. Certain regulatory proceedings: Where the claim is initiated by a regulatory authority rather than an insured person

India-specific concern:
In promoter-dominated Indian companies, the promoter-director and the independent directors may both be "insured persons." If the promoter sues an independent director for decisions made in the independent director's role, the Insured vs. Insured exclusion could potentially apply — depending on whether it falls within a carved-back exception.

Call 022 4302 0000 — Probitas reviews D&O policy wordings specifically to identify Insured vs. Insured gaps before binding.

YES — the IBC 2016 created one of India's most aggressive director personal liability frameworks, and D&O covers the resulting defence costs and potential liability.

How IBC creates director personal liability:
When a company enters the Corporate Insolvency Resolution Process (CIRP), the Resolution Professional (RP) is empowered to investigate all transactions from the 2 years preceding the insolvency commencement date and pursue directors personally for:

Section 43 — Preferential Transactions:
If the company paid a creditor more than they would have received in liquidation, within 2 years of insolvency commencement (for related parties) or 1 year (for unrelated parties), the RP can reverse the transaction and pursue the director who authorised it.

Section 45 — Undervalued Transactions:
If the company entered a transaction where it gave something away at significantly less than its value, within 2 years of insolvency (related parties) or 1 year (others), directors can be personally liable.

Section 50 — Extortionate Credit Transactions:
Financing arrangements with unfairly high interest rates or unconscionable terms — if the director approved such financing, they can face personal liability.

Section 66 — Fraudulent or Wrongful Trading:
If the company continued to trade when it should have known insolvency was inevitable, directors can be personally liable for the resulting creditor losses. Wrongful trading is the most significant personal liability provision for directors of distressed companies.

What D&O covers:
→ All defence costs throughout NCLT proceedings initiated by the RP
→ Legal representation before NCLT, NCLAT, and High Courts
→ Expert witness costs (insolvency experts, financial analysts)
→ Any court-ordered settlement within the policy limit

The run-off imperative:
IBC claims reach directors AFTER they have left. A director who resigned in 2022 from a company entering IBC in 2024 will receive RP notices in 2024-25. Without run-off coverage purchased at the time of resignation: no D&O coverage available. With run-off (3–6 years typically needed for IBC): fully covered.

Call 022 4302 0000 immediately if your company is facing financial distress — run-off must be purchased while the company can still pay the premium.

The D&O limit is one of the most consequential insurance decisions a board makes — and historically, Indian companies have been dramatically underinsured (Satyam: $75M cover for a $125M settlement).


Startup / Unlisted: ₹1–5 Cr → ₹25K–₹80K/year
Mid-size Private: ₹5–25 Cr → ₹80K–₹3L/year
PE/VC-backed: ₹10–50 Cr → ₹1.5L–₹5L/year
SME Listed: ₹25–100 Cr → ₹3L–₹12L/year
Large Listed / NBFC: ₹100–500 Cr → ₹10L–₹50L/year

Key factors that should drive limit selection upward:
1. Investor expectations: PE/VC investors often specify minimum D&O limit in SHA
2. Regulatory exposure: SEBI enforcement proceedings can generate crores in legal costs across multiple senior officers simultaneously
3. Number of directors: The limit is shared across ALL directors and officers — 15 directors × potential ₹5L each in legal fees = ₹75L consumed before any settlement
4. International operations: If the company operates in multiple jurisdictions, legal costs multiply
5. Company valuation: A ₹500 Cr valued company with ₹5 Cr D&O cover is dramatically underinsured — a single securities class action can far exceed this limit

The Satyam lesson:
"The Satyam settlement was USD 125 million. Reports noted the company carried about USD 75 million in D&O cover, insufficient for the exposure. The directors not involved in wrongdoing still spent years defending themselves, and the insurance limit matters far more than the policy itself."

Our recommendation:
Buy the maximum limit you can afford — the marginal premium cost of doubling the limit (e.g., from ₹15 Cr to ₹30 Cr) is often only 30–50% additional premium, while the protection difference in a major claim is enormous. Add Side A DIC as a separate standalone limit for all independent directors.

Call 022 4302 0000 for a detailed limit adequacy analysis for your specific board composition, industry, and regulatory exposure.