RTOs and their D&O Insurance Implications

The area of concern and common oversight in these transactions is the protection of the old company and outgoing board of Directors, who can be subject to significant (and insurable) risks during and following the RTO. The RTO does trigger a change in control and the vast majority of D&O insurance policies have a change in control provision that reads the policy is typically null and void post transaction. To properly cover the outgoing board of Directors, companies should consider buying a 7 year run-off policy attached to the past policy to cover past acts. Many companies have been focusing on the new D&O policy for the new company/board and this leaves the outgoing board exposed.

It is important to keep the insurance broker and insurer involved throughout the transaction process so that you can secure the best possible solution for all parties involved, without paying more than you need to for the insurance program. We are always happy to provide advice on insurance programs and structures, so please feel free to contact us if you are uncertain about your past, current and future D&O coverage.