Why do I need a Director Indemnity and Insurance Deed?
Under New Zealand law, a director is subject to many duties and obligations, such as the duty to act in good faith and in the best interests of the company and the duty to avoid reckless trading. If a director breaches one of these duties, this can result in serious and significant personal liability for the director, such as fines and penalties. In some cases, the director could be personally liable for the company’s debts.
A Director Indemnity and Insurance Deed (also known as a Deed of Indemnity or Deed of Indemnity, Insurance and Access) gives some protection to directors by way of an indemnity (or promise) from the company to reimburse the director for any liability incurred as a director, or any costs incurred in defending or settling claims brought against the director, to the maximum extent permitted under the Companies Act 1993. It also requires the company to obtain directors’ and officers’ liability insurance (known as ‘D&O insurance’) which works as another form of protection for the director (and can provide protection for liabilities excluded from the indemnity).
Save time and money, and give yourself peace of mind and greater confidence to govern using the On Your Terms Director Indemnity Bundle to reduce the risk of personal liability as a director, or for the directors of your company.
Who’s this Director Indemnity Bundle for?
Directors of companies of all sizes and in any industry, but especially in industries where the risks involved in the director’s role are high, such as highly regulated industries and industries prone to financial difficulties (eg, construction). It is also for companies wishing to provide legal protection for their directors.
What’s in this Director Indemnity Bundle?
NZ lawyers have created this Director Indemnity Bundle for NZ businesses. It’s simple, with reduced legalese (to the extent possible while still including required wording from the Companies Act 1993) and fair to both sides to reduce negotiation time and keep the relationship positive.
This Director Indemnity Bundle contains three legal documents needed for a company to indemnify a director and obtain directors’ and officers’ liability insurance:
- Director Indemnity and Insurance Deed – indemnifies a director against legal costs and liabilities as far as permitted by law, allows access to certain company records (to assist their defence if taken to court) and requires the company to obtain D&O insurance to cover any potential liability or legal costs of the director (as far as legally permitted).
- Directors’ written resolutions (as opposed to passing resolutions at a meeting) approving the company to sign the Director Indemnity and Insurance Deed and obtain D&O insurance (on the terms set out in the Deed).
- Directors’ certificate certifying the cost of effecting the D&O insurance is fair to the company. This certificate is required by law.
How long will it take to create my documents?
Under 5 minutes - less time than making a coffee! During the Q&A you can save your progress to come back later, or repeat the Q&A to change an answer or produce a new version of a document.
What information do I need to complete the Q&A?
- Full name and contact details of the company and the director
- whether the indemnity is to apply to acts/omissions of the director before the date the Director Indemnity and Insurance Deed is signed or only after it is signed.
What if I need help?
On Your Terms has teamed up with Luminate Legal to offer its customers the option of obtaining legal advice from a lawyer to provide extra assurance and peace of mind. If you would like to ask a lawyer some quick questions about your document (or your responses to the Q&A), or have your document reviewed/edited by a lawyer, click here to view and select Luminate Legal's packages and fixed-fee pricing exclusively for On Your Terms customers.
What do I do once my documents are created?
The documents are ready to be signed as soon as you have downloaded them. Unless the company's constitution permits otherwise, the Director Indemnity and Insurance Deed must be signed:
- if the company only has one director, by that director in the presence of an independent witness who will also need to sign
- if the company has more than one director, by two directors.
All company directors must sign the Resolution of Directors and Directors’ Certificate (unless clearly permitted otherwise in the company's constitution but we recommend all directors sign to be safe).
Other helpful information:
- A company can only indemnify its directors if its constitution clearly permits it. If your company does not have a constitution, or its constitution does not expressly provide this authorisation, it must adopt a new constitution (or vary its existing constitution). See here for an On Your Terms Standard Constitution and here for an On Your Terms Constitution (for wholly owned subsidiaries).
- A company must update its Interests Register to record any indemnity given to, or insurance obtained for, any company director. If your company does not have an Interests Register (usually created when the company is incorporated), see here for On Your Terms’ Company Registers.
- See our Guide to Director Obligations and Responsibilities in New Zealand and Guide to Incorporating a Company in New Zealand
- If the company is indemnifying more than one director, a separate Director Indemnity Bundle is needed for each director
- Check out these blogs: Who can sign legal documents in New Zealand?
- The Institute of Directors New Zealand has a range of resources and insights on best practice board governance, and its Code of Practice for Directors provides guidance to directors to assist them in carrying out their duties and responsibilities to the highest professional standards.
- Check out our FAQs here
If you’re unsure whether this document/bundle is what you need, reach out to us at hello@onyourterms.co.nz – we’re happy to help!
If you’re not satisfied with your purchase of this product for any reason, let us know why within 10 days of your purchase and we’ll work with you to make sure you’re happy, including giving you a full refund if necessary.
Disclaimer: On Your Terms was created to provide fast, easy and affordable access to legal information and documentation. We are not a law firm and do not provide legal advice. The information and documents we provide are of a general nature, designed for common situations, and may not be suitable for your needs or circumstances. If you need legal advice, we have a network of specialist law firm partners able to help you here.