An Emerging Hub For D&O Insurance

Directors' and Officers' liability insurance has been around for several decades now but has not always attracted the interest of local buyers in the Middle East in comparison with other parts of the world. We are however seeing a shift in the previous trend.

In this editorial piece, we explore why directors, officers and senior managers (D&Os) of companies would be well advised to take out D&O insurance, some of the key considerations that apply and why we are seeing a gradual shift in the attitude towards taking the insurance for protection.

Directors' duties from a Qatari perspective

The two most common types of corporate vehicles in Qatar are the Qatar shareholding company (QSC) and a limited liability company (LLC).

The main source of legislation which sets out the duties owed by Directors and liabilities which could be imposed upon them is the Commercial Companies Law (Law No 5 of 2002 as amended) (Companies Law). The Companies Law is due to be revised but as yet the 2002 version of the Companies law applies.

As all laws and regulations in Qatar are published in Arabic, it is important to note that the terms "director" and "manager" are used interchangeably.

In the case of LLCs, the term General Manager is used in practice for someone who is appointed to run the company. In the case of QSCs, the term Director is used. The Companies Law sets out that the General Manager of an LLC has the same duties and responsibilities as a Director of a QSC and we therefore deal with both, together.

The main duties on directors

The duty to act in the best interest of the company; The duty to avoid conflicts of interest and transactions with directors; The duty to exercise reasonable care, skill and diligence. These are broad ranging duties which pervade each aspect of management.

Further duties exist under the Corporate Governance Regulations, which includes ensuring the company's compliance with the laws and regulations and its Articles of Association and drafting a corporate governance code.

Liabilities and Penalties

All directors are jointly responsible for compensating the company, its shareholders and third parties for damages resulting from any fraudulent act, abuse of power, breaches of the Companies Law and company articles and error of management. Those liabilities are those of the directors and the company cannot give an indemnity to the directors.

Directors may also be subject to penalties under the Companies Law, which for breaches of...