In the business world, there is a myth that is difficult to dispel: that of “limited liability”. Many entrepreneurs and managers are convinced that, by operating through a limited liability company (S.r.l.) or a public limited company (S.p.A.), their personal assets are shielded behind an impenetrable wall.
The reality, unfortunately, is quite different. That wall has a door that opens much more easily than you might think.
The paradox of leadership: great powers, great risks
Being at the helm of a company means making decisions every day. But what happens if one of these decisions – perhaps made in good faith – turns out to be the wrong one? Or if a partner, a creditor or an employee decides to challenge your actions?
At that point, liability ceases to lie with the “company” and falls on you, the individual. Directors, managers and auditors are liable for their own mistakes with everything they own: their home, their bank accounts and their life’s savings.
What is D&O insurance (and why you need it yesterday)
A D&O (Directors & Officers Liability) policy is a safeguard designed specifically for those in charge. It doesn’t protect factory buildings or machinery, but it protects you.
This cover provides protection in the event of claims for compensation arising from unlawful acts (errors, omissions, breaches of duty) committed in the course of your duties. But it is not just about paying out on any damages. The real added value lies in legal defence.
The reality: In Italy, most disputes against managers end in a stalemate, but only after years of court proceedings. The cost of defending yourself? It often runs into tens of thousands of euros. D&O insurance covers these costs, sparing you financial ruin even before a judgement is handed down.
Three reasons why D&O cover is now a strategic investment
- The new Corporate Crisis Code: Recent legislation has raised the bar. Today, a director is liable if they have not put in place “appropriate organisational structures”. This is a broad concept that leaves considerable scope for interpretation by the courts.
- Protecting talent: No top-level professional today would agree to sit on a board of directors unless the company provides D&O cover. It has become a standard contractual condition.
- Cost vs. Benefit: Given the risk it covers (cover limits starting at €500,000 or €1,000,000), the annual premium is surprisingly low. It is, to all intents and purposes, one of the policies offering the best value for money.
Beyond the mistake: the peace of mind that comes with making a decision
A manager’s real enemy is not risk, but uncertainty. Running a business whilst constantly fearing a seizure order or a frivolous lawsuit stifles innovation and growth.
Having a D&O policy means being able to say: “I know what I’m doing, and I know my family is safe whilst I’m doing it”.
Who are the insured persons?
Coverage is usually extended to anyone holding management or supervisory roles:
- Members of the Board of Directors.
- Managing Directors and General Managers.
- Auditors and members of the supervisory board.
- Managers with decision-making powers.
- Data Protection Officer (DPO) or similar roles in the field of compliance.
Now is the time to secure your future
Risk is not something you can eliminate entirely, but you can certainly transfer it. Analysing your position costs nothing, but ignoring it could cost you everything.
Are you sure your current cover is in line with the latest reforms? Contact me for a free review of your insurance cover. Protecting your business is your job; protecting you is mine.
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Salvatore Longo
Mobile: 338 740 7359
website: www.salvatorelongo.it
This document is provided for information purposes only and does not constitute, nor should it be construed as, financial, legal or investment advice.
