Director‘s Indemnity Agreement - Compulsory Insurance

INTRODUCTION

You can build and purchase the "Director’s Indemnity Agreement" in order to protect the directors of your company.

By using this Agreement the company promises to look after the director.

It has become standard practice to indemnify directors to the maximum extent permitted by the law. In some cases, this occurred without sufficient focus on whether the indemnities were fair and reasonable from the point of view of the company.

If a court found an indemnity to be completely one-sided (in favour of a director) the agreement may not work to protect the director. The agreements at greatest risk are those that were drawn up before 1 July 2001, as they are more likely to contain onerous indemnities and obligations to maintain a particular level of Directors’ and Officers’ Liability insurance, which the company cannot meet in the current insurance environment.

Unless new agreements are drafted carefully, and existing agreements reviewed regularly, they may cause severe financial or legal difficulties for the company or the director in the future.

This Agreement contains compulsory indemnity insurance. If you do not require compulsory indemnity insurance in your Agreement, go here to build the Director’s Indemnity Agreement – No Insurance.

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Download the Director‘s Indemnity Agreement - Compulsory Insurance Sample

Company Details
• What is this Agreement all about?
• What does indemnify mean?
• What if we want to indemnify more than one director?
• What about if we want to indemnify past acts of the Director?
• How do I write the name of the company?
• What is an ACN?
• How many digits in an ACN?
• Is the ACN the same as the ABN?
Director Details
• Who is a director?
• Who are the directors of the company?
Liability Insurance
• What is Director's and Officer's Liability Insurance?

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Company Details

• What is this Agreement all about?

  This Agreement is for the director who is in the firing line when the company does something wrong. The director is liable, but should be protected by the company indemnifying the director from loss, getting insurance and allowing the director access to the records. This Agreement does the lot.

  This hint is provided by Law Central Legal.

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• What does indemnify mean?

  Unfortunately, when the company does something wrong, it is the director who is in the firing line. The director is liable, but should be protected by the company.
  
  The power to indemnify allows the company to become liable for losses or legal costs that the director may suffer.

  This hint is provided by Law Central Legal.

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• What if we want to indemnify more than one director?

  This Agreement allows you to indemnify only one director. Each director needs their own agreement with the company. Just build an agreement for each director.

  This hint is provided by Law Central Legal.

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• What about if we want to indemnify past acts of the Director?

  Our Indemnity Agreement protects the director for all liabilities, whether they happened before or after the indemnity agreement was entered into.

  This hint is provided by Law Central Legal.

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• How do I write the name of the company?

  
  You write the name of your company exactly as the name that appears on the company registration when you first registered with ASIC.
  
  For example: Manley Pty Ltd
  
  Correct way is: Manley Pty Ltd
  
  Incorrect: Manley Pty Limited
  or Manley Proprietary Limited
  or Manley Proprietary Ltd

  This hint is provided by Law Central Legal.

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• What is an ACN?

  "ACN" stands for Australian Company Number. It is a unique number given to every registered Australian company. You can find the "ACN" of your company on the Certificate of Registration you received from ASIC when you first registered your company.

  This hint is provided by Law Central Legal.

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• How many digits in an ACN?

  The ACN of a company usually has nine digits.
  
  For example the ACN of Smith Pty Ltd is ACN 999 250 250.

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• Is the ACN the same as the ABN?

  No. You must enter the ACN of the company for this Agreement.

  This hint is provided by Law Central Legal.

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Director Details

• Who is a director?

  A director is a person who is involved with the management of the company. Directors can be personally liable for any debts incurred by the company if the company trades while it is insolvent or fails to pay some taxes.

  This hint is provided by Law Central Legal.

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• Who are the directors of the company?

  If you are not sure of who are all the directors of your company, have a look at your Company Secretary file.
  
  Alternately, you can do a search of your own company's records at www.asic.gov.au.

  This hint is provided by Law Central Legal.

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Liability Insurance

• What is Director's and Officer's Liability Insurance?

  This is an insurance policy that the company takes out, the conditions of which at least meet the standards (if any) prescribed by the Australian Institute of Company Directors (“AICD”) in respect of directors’ and officers’ insurance released by the AICD from time to time and are otherwise reasonably acceptable to the director insuring the director against any liability incurred by the director arising out of the director holding office as a director of the company, including legal costs.
  
  You need to insert an amount for the Director's and Officer's Liability Insurance Policy in numbers. For example: “10,000,000“
  
  This Agreement also requires the company to take out a Legal Costs Insurance Policy. This means an insurance policy effected by the company, or the director (as the case may be), on terms and conditions at least meeting the standards (if any) prescribed by the AICD in respect of legal costs insurance released by the AICD from time to time and otherwise reasonably acceptable to the director insuring the director in respect of legal costs on the basis that such costs are paid by the insurer as and when incurred without recourse to the director.
  
  You do not need to insert an amount for the Legal Costs Insurance Policy.

  This hint is provided by Law Central Legal.

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This document has been prepared by the law practice Law Central Legal

Liability limited by a scheme approved under Professional Standards Legislation