A family-owned business that has been nurtured with utmost care for several generations still requires bright minds to lead the decision-making process of the day. As a part of a successful family business, you need to make decisions that can drive next-level growth plans. Most importantly, you want your family’s legacy to shine and grow in the future. However, some decisions may not turn out as well as expected. Their results can motivate various stakeholders to file lawsuits against you or other directors of your company. No matter which industry your family business belongs to, lawsuits can cause severe financial losses, while also taking up considerable time and efforts. There are several ways to protect the directors and senior executives of your family business, one of which is D&O liability insurance.
Here is why investing in D&O lawsuit coverage is crucial for your family business :
It covers compensation to be given
The board of directors of your family business is vulnerable to potential lawsuits. The unhappy parties may include, but not be limited to investors, employees, vendors, competitors, and even customers. Most claimants try to ensure the directors are held liable for adverse business-related consequences, the cost of dealing with which can be hefty. However, you do not have to pay if you have bought a D&O insurance policy with adequate coverage. The policy will cover the directors and officers and avoid their needing to pay for the damages awarded if any.
It helps to preserve the reputation of your business
The reputation of your family business amongst your clients, end-consumers and other stakeholders is hugely important. Any lawsuit filed against the directors or senior officers of your company can attract media attention, which will take the news public. You do not want your brand or business’s name to get tarnished due to unsubstantiated allegations, but such a case can adversely affect the reputation of your age-old business. This is where D&O liability coverage can help you immensely. You can even get positive public relations coverage as per the terms of the chosen D&O policy.
It covers regulatory exposures
Enforcement actions by regulatory agencies are difficult to deal with. In the worst cases, these actions become so complicated that they could end up taking the business to bankruptcy. Depending on the severity and the complications involved, the attorneys can charge very high fees for their legal services. Paying for defending a director of your company can be highly expensive. However, you need not worry about the legal costs involved if you have bought a D&O policy from a renowned insurer.
It ensures peace of mind
You might have felt that running a family business gives peace of mind to a certain extent. However, it is hard to be at peace when there is a lawsuit filed against the directors of your company. If you are a part of the company’s board, you may even have the allegations against yourself, which will make it difficult for you to focus on the business operations and its growth. You need to invest your time and efforts to deal with them. A D&O policy is what you need to be at peace in such situations. Your insurance policy, if well chosen, will also make sure the lawsuits do not affect or hinder your plans of business growth.
In sum: protect the directors in your family business with a D&O policy
Family business owners in India often believe that they do not need D&O insurance. This may be because they are not aware of the possible consequences of various stakeholder’s potential actions against their businesses. A single D&O claim can drain the financial assets of your company and its leadership team, as well as tarnish your carefully nurtured brand name. Make sure you safeguard your family business with a D&O policy.