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Guide to D&O Insurance for De-SPAC Transactions

February 15, 2022

/SPACs/Management Liability/D&O

Are you a successful private company being courted by a SPAC? This alternative route to going public has become extremely popular—particularly given the record-breaking 613 SPACs that went public in 2021. Many SPACs that went public in 2020 and 2021 have not yet found a suitable target for a business combination. This means that private companies that are ready to go public will find that they have many SPAC suitors interested in pursuing them.

If you choose to go public through a de-SPAC transaction, one of the many things you’ll need to plan for is obtaining D&O insurance suitable for a publicly traded company.

The process of obtaining D&O insurance for a new public company is both complicated and expensive, and de-SPAC transactions have some nuanced differences when compared to obtaining D&O insurance for IPO companies. You will benefit from working with a specialized D&O insurance broker who understands these nuances and can guide you through the process.

The 2022 edition of Woodruff Sawyer’s Guide to D&O Insurance for De-SPAC Transactions will help you map the D&O insurance process to your de-SPAC timeline in a way that will optimize your outcome.

Guide to D&O Insurance for De-SPAC Transactions Guide Cover

D&O Insurance Process for a De-SPAC Transaction

To help you think about the D&O insurance process for a de-SPAC transaction, we’ve divided the timeline into various phases: preparation, launch, implementation, and ongoing support.

De-SPAC Going Public Milestones

The Preparation Phase

This phase is all about developing a strategy for risk mitigation and your D&O insurance, not to mention your other lines of commercial insurance. As you gear up to be ready for public company scrutiny, you will want to look at corporate governance practices to help mitigate director and officer litigation risk. For example, the adoption of federal forum provisions can help you avoid duplicative state court litigation as a public company.

The Launch Phase

This step is all about refining your decisions around how much insurance to purchase, negotiating the coverage terms, and socializing this decision with your board. Merely giving your board D&O policy information, however, may under-serve your board. Most boards want to be educated about the evolving threat landscape they are walking into as a new public company. In addition, as part of the launch phase, you will want to schedule compliance training for employees. Being a public company employee carries with it new challenges. You want to be sure everyone understands things like the rules against insider trading.

The Implementation Phase

Here is where all aspects of the D&O insurance program will be finalized. Things like executing warranties, addressing subjectivities, securing “look back” coverage, and binding the policy all happen in this phase.

The Support Phase

Placing D&O insurance is not a one-and-done activity (or at least it shouldn’t be). There are many challenges that a newly public company may face. A good broker can provide critical support to a new public company. This might take the form of ongoing advisory services, board training, D&O market updates, and, unfortunately in some cases, claims advocacy.

Next Steps

Woodruff Sawyer’s Guide to D&O Insurance for De-SPAC Transactions will help you understand the critical milestones on the path to an optimized D&O insurance program as you undertake your de-SPAC business combination.

Regardless of how you go public, whether through a traditional IPO or a de-SPAC transaction, the goal from an insurance perspective is to have a robust D&O insurance program with appropriate limits and broad terms that provide coverage for litigation that may arise.

Download the Guide to D&O Insurance for De-SPAC Transactions today.

Guide to D&O Insurance for De-SPAC Transactions Guide Cover

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn

Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn