Study On The Director's Liability Insurance System

On October 27, 2005, Tenth session of Standing Committee of the National People's Congress 18th conference has made a larger revision to the , two point have changed obviously: First, Strengthened the directors' and officers' personnel's civil liability, which is the establishment foundation of D&O liability insurance system; Second, had stipulated the shareholder derived the lawsuit system, which eliminated the barrier of procedural law. It is the background in which I write this paper on D&O liability insurance system.Stemming from benefit balance consideration, we should strengthen the directors' and officers' personnel's liability as well as protecting their benefit. With security, efficiency, justice and so on, the D&O system decentralizes directors' and senior officers' professional risks by means of insurance and assures their working safety. The system also makes sure the compensate liability for the interested person and facilitates the company's steady operation. And the system is helpful for the company to attract the excellent managerial and administrative personnel and persuade them to stay. It helps the directors and senior officers to take active management strategies and ensures the economic dynamics for the company and the whole society. In addition, it provides support and assurance to strengthen the directors' and senior officers' obligation and liability, which makes for the perfection of the corporate governance.Start with accounting the directors'liability system, D&O liability insurance establish on the basis of directors'and officials'personnel liability. It is the premise to make sure what directors'liability is. Regardless of common law or other, they stipulate nearly the same content of directors' liability, which including the loyal duty and attention duty. This paper has carried on the foundation elaboration to the D&O liability insurance, from which get the conclusion of the identify of D&O liability insurance. And the history of D&O liability insurance is simply introduced.The constitution content is elaborated in the third part of the paper. D&O liability insurance has developed for 70 years in developed countries, but it just started in china. The study method is comparative study. Constitution each essential factor has carried on the detailed analysis.Up to now, D&O are practical preliminarily in China, but there still exists argument. In order to strengthen the duties and liability of the directors and the officers and perfect corporate governance, China should introduce the D&O system and amend the constitution to dispose of the current legal obstacles.