The Directors And Officers' Liability Insurance System

With the transference of control right from stockholders' conference to the board ofdirectors, many countries strengthened the obligations and responsibilities of thedirectors. However, considering the balance of interest ,the rights and interests of thedirectors shall be protected at the time of intensifying the obligations of them. To drivethe excellent managers to conduct industry and business activities daringly at themaximum limit and obtain the most profit for the stockholders, the Directors andOfficers (D&O) Liability Insurance system is always stipulated to decentralize therisk of D&O incurred in the management due to negligence in the corporation law of thewest countries. D&O Liability Insurance means when D&O must assume correspondingresponsibilities for the third Party's loss incurred due to the negligence of D&O n theterm of position, insurer shall pay insurance compensation to them in accordance withthe insurance contract signed with D&O in the promissory quota.The increasing development of market economy needs legal mechanism of D&OLiability Insurance intrinsically. Aggravation of the liability is the binding to themanagers but the transference of risk is the actuation to them, which is the basicrequirement of establishing modern enterprise system. In the course of D&O LiabilityInsurance establishment ,we shall draw lessons from, absorb, transplant foreignlegislation achievement and practice experience based on present legislation andpractice in our country.This paper starts to analyze from the civil obligations and liabilities ,introduce the basictheory and the relevant law issues of D&O Liability Insurance ,set forth the necessityand feasibility of establishing D&O Liability Insurance system, analyze the inscape ofthe D&O Liability Insurance contract and the obstacle and default existing in theestablishment of D&O Liability Insurance system in our country and endeavor topropose some legislation suggestion.