BVI Companies, Indemnification And Protection Of Directors After Resignation

An underlying principle of company law has been that a company should be managed for the main purpose of increasing its share price, or as some put it returning "shareholder value". Against this backdrop of the interest of the shareholders being paramount and the main driver in the pursuit of profits, there is also the need to give directors, who manage the company, a certain latitude to be able to take risks within certain parameters. This brings into sharp focus the need for indemnification and D&O insurance as a means of protecting management, provided that they operate within the rules, whilst they go about the business of maximising shareholder value. BVI law provides for directors, former directors and in certain cases, other persons to be indemnified and the law is reasonably clear on that and on the advancement of expenses in that context but what is less clear are the risks that former directors face and how, after resignation, one might attempt to alleviate those risks.

Who may be indemnified under the Act?

The following persons may (subject to the company's Memorandum or Articles of Association) be indemnified by a BVI company under the BVI Business Companies Act, 2004 (the "Act"): 1. a director of the BVI company 2. a former director of the BVI company 3. a director of another company or other enterprise (with or without legal personality), serving as such at the...