Access to directors and officers’ policies – the emerging rights of shareholders

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Access to directors and officers’ policies – the emerging rights of shareholders

There now exists further authority for potential litigants to gain access to D&O policies, where the potential litigant is a shareholder relying on s 247A of the Corporations Act.

Over recent years, there have been a number of applications by persons contemplating action against companies (or directors of those companies), seeking access to the liability insurance policies (including D&O policies) of those companies prior to commencing proceedings for negligence or breach of statutory duty against the company or its directors.

The purpose of those applications is to determine whether the company is likely to be indemnified by an insurer before an action is commenced which may otherwise result in an empty judgment.

While not all such applications have been successful (see Wingecarribee Shire Council v Lehman Brothers Australia Limited (in liq) (No 2) [2009] FCA 532; and Kirby v Centro Properties Limited (ACN 078 590 682) [2009] FCA 695), applications brought by shareholders of a company seeking access to the insurance policies of that company pursuant to s 247A of the Corporations Act 2001 (Cth) (the Act) have had greater success than other applicants who cannot bring their application under that section.

Section 247A of the Corporations Act

Section 247A of the Act provides that a shareholder of a company may apply to the Court for an order allowing the shareholder to inspect the books of that company if the court is satisfied that the shareholder is acting in good faith and that the inspection is to be made for a proper purpose.

Source and Full Details : www.carternewell.com

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