As companies grow in scale and business processes become more complex, the scope of responsibility for executives also expands. Strategic decisions, financial management choices, and legal obligations not only affect the sustainability of the company but may also directly impact the personal assets of executives. In this context, protecting executives against risks that may arise while performing their duties has become an essential element of corporate governance.
What is Directors & Officers Liability Insurance?
In Turkey, Directors & Officers Liability Insurance (D&O) is a type of insurance that provides financial protection to board members, directors, and senior executives against liabilities that may arise from their decisions while performing their duties.
It covers damages resulting from faulty decisions, misstatements, negligence, or incomplete information. This type of insurance is particularly important in publicly traded companies and entities with foreign investors.
Scope of Directors & Officers Liability Insurance in Turkey
While the scope may vary depending on the policy, it generally covers:
- Financial losses resulting from management errors and negligence
- Lawsuits filed by shareholders, employees, creditors, or public authorities against executives
- Liabilities arising from tax and labor law
- Legal defense costs
Legal Framework
Under the Turkish Commercial Code (TCC), executives may be held personally liable for damages if they act in breach of their duty of care and loyalty.
- The company, shareholders, or third parties may file lawsuits against executives.
- This creates significant risks for the personal assets of executives.
- Directors & Officers Liability Insurance in Turkey helps protect executives from such financial risks.
Who is Covered?
- Board members
- Company directors
- General managers and deputy managers
- Senior executives such as CEO, CFO, COO
Is it Mandatory in Turkey?
- It is not mandatory.
- However, the Capital Markets Board (CMB) recommends that publicly traded companies obtain D&O insurance within the framework of corporate governance principles.
- Therefore, in publicly held joint stock companies, this insurance is considered part of good corporate governance practices.
Benefits for Companies
The main advantages of obtaining Directors & Officers Liability Insurance in Turkey include:
- Enables executives to make decisions with greater confidence
- Protects the company’s reputation and increases investor trust
- Covers high compensation claims and legal expenses arising from lawsuits against executives
- Strengthens investor confidence, especially in companies with international stakeholders
Professional Support and Corporate Protection
Directors & Officers Liability Insurance in Turkey is a mechanism that protects the personal assets of executives and strengthens corporate governance principles. Although not mandatory, it is highly recommended for publicly traded and foreign-capital companies as it provides significant protection for both investors and executives.
For more information on Directors & Officers Liability Insurance and to evaluate the most suitable solution for your company, you can contact OzbekCPA.
