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Financial Markets Conduct Act 2013

Enforcement, liability, and appeals - Indemnities or insurance for directors, employees, and auditors of issuers, offerors, and licensees

528: Permitted insurance for certain liability or costs

You could also call this:

"Insurance to help company directors and employees pay for costs if something goes wrong"

Illustration for Financial Markets Conduct Act 2013

You can get insurance to cover certain costs if you are a director or employee of a company. This insurance can cover you if you are liable for something, but not if it is a criminal matter. You can also get insurance to cover the costs of defending yourself in court, including if you are accused of a crime and found not guilty, as explained in section 526(1)(a).

You can get insurance to cover the costs of defending a claim or settling a proceeding related to that liability. The company's board of directors must approve the insurance and think it is fair to the company.

If the directors do not follow the rules when getting the insurance, you may have to pay the company back for the cost of the insurance. However, you will not have to pay the company back if the insurance was fair to the company at the time it was taken out.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4091774.

Topics:
Money and consumer rights > Banking and loansBusiness > Industry rulesBusiness > Fair trading
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527: Permitted indemnities for certain liabilities or costs, or

"When a company can help pay court costs for its directors and employees"

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529: Prohibition on indemnity or insurance for auditors of issuers, offerors, or licensees, or

"Companies can't pay to insure auditors against mistakes they make on the job."

Part 8Enforcement, liability, and appeals
Indemnities or insurance for directors, employees, and auditors of issuers, offerors, and licensees

528Permitted insurance for certain liability or costs

  1. A specified person, or a related body corporate, may, if expressly authorised by its constitution and with the prior approval of its board of directors, effect insurance for a director or an employee of the specified person in respect of—

  2. liability (other than criminal liability) of a kind referred to in section 526(1)(a); or
    1. costs incurred by that director or employee in defending or settling any claim or proceeding relating to that liability; or
      1. costs incurred by that director or employee in defending any criminal proceedings—
        1. that have been brought against the director or employee in relation to any alleged act or omission in his or her capacity as a director or employee; and
          1. in which he or she is acquitted.

          2. The directors of the specified person, or of the related body corporate, who vote in favour of authorising the insurance under subsection (1) must sign a certificate stating that, in their opinion, the cost of effecting the insurance is fair to the specified person or related body corporate (as the case may be).

          3. The director or employee who is insured is personally liable to the specified person or related body corporate for the cost of effecting insurance if—

          4. subsection (2) has not been complied with in effecting the insurance; or
            1. reasonable grounds did not exist for the opinion set out in the certificate given under subsection (2).

              1. However, subsection (3) does not apply to the extent that the insurance was fair to the specified person or related body corporate at the time the insurance was effected.

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