For our foreign private issuer clients, I’m thrilled that Woodruff Sawyer is releasing our Guide to D&O Insurance for Foreign IPOs and Direct Listings, 2022 Edition. In this week’s edition of the D&O Notebook, my partner Jane Njavro, an expert when it comes to the tricky issues that beset foreign filers, highlights what makes for a good process. –Priya Huskins
Becoming a public company is a big undertaking for any private company; there is added complexity for foreign filers, which is to say private issuers incorporated under the laws of a country other than the United States.
One task that is not always at the top of the to-do list is making sure that there is a well-brokered directors and officers liability insurance program in place at precisely the right time. Working with a broker that is inexperienced with foreign filers, however, can lead to unnecessary friction and delays. Certainly you would never want D&O insurance issues to be a reason you couldn’t take advantage of an open IPO window.
Public company D&O insurance is more complex and more expensive than its private company counterpart, reflecting the very real increase in potential personal liability exposure directors and officers of new public companies will face when it comes to common litigation scenarios. These scenarios include things like securities class actions and enforcement actions by the Securities and Exchange Commission and other regulators.
Woodruff Sawyer’s Guide to D&O Insurance for Foreign IPOs and Direct Listings, 2022 Edition, will walk you through the steps needed to coordinate D&O risk management with your IPO or direct listing process.
Timing is Critical When Placing D&O Insurance
Timing matters when coordinating the placement of a D&O insurance program with the IPO or direct listing, particularly if this the first time your directors and officers are facing the prospect of liability exposure pursuant to the securities laws of the United States.
Getting an early start on the process is key. Ideally, you will start the process at least a year before you plan to go public by making strategic moves with your private company D&O insurance renewal. Outside the US, it is common for private company insurance polices to include broad US exclusions that would exclude many pre-IPO activities. A key part of the preparation process is negotiating insurance that covers activities prior to the first trade.
Of course, not everyone will be able to get such an ideal early start. There is still time to put an appropriate and responsive D&O insurance program in place. Ideally, you will start working on your public company D&O insurance strategy with your broker around the time of the big organizational meeting of your IPO or direct listing.
The five key phases of placing D&O insurance for IPOs and direct listings are as follows:
- Prepare: This is when you and your broker create the strategy, evaluate the potential D&O program options, identify specific country requirements, review certain corporate governance practices, and complete other tasks. It is important that your brokerage team—the individuals working on your account—has experience placing both US and foreign filer IPOs to better differentiate your company during the insurance placement process.
- Launch: In this phase, you and the broker refine insurance limits, brief your board on the important issues, and explore employee training (private to public conduct) to further mitigate risk.
- Broker: This phase is all about negotiation—negotiating coverage and pricing, higher limits warranties, etc.—to tighten up the details of your program.
- Implement: This is when you and the broker will finish off a series of housekeeping items to seal the insurance program deal.
- Support: No D&O insurance program is complete without ongoing support. You’ll want to access to your expert broker for advice, training, and education as well as claims advocacy should you find yourself the subject of securities litigation.
Your Resource Guide for D&O Insurance
You can get started with the process of preparing to obtain D&O insurance for your IPO as a foreign filer by downloading Woodruff Sawyer’s Guide to D&O Insurance for Foreign IPOs and Direct Listings, 2022 Edition.
Experience matters when it comes to IPOs, direct listings, and D&O insurance. You want a specialist on your insurance brokerage team to work through all the D&O insurance issues that will arise before, during, and after the process of going public, as well as during your life as a public company.
IPO and direct listing companies come to Woodruff Sawyer and Assurex Global partners because of our extensive experience, industry knowledge, and the ongoing support we can offer on topics ranging from insurance and claims to corporate governance as it impacts D&O risk.
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