D&O exposure for non-executive board positions held abroad

A non-executive director seat, an advisory board place, a trusteeship of a family foundation — positions like these are often taken on in semi-retirement as a light commitment, made on trust, with quarterly meetings and an oversight rather than a management role. What travels with the seat, and rarely gets examined, is a set of personal legal duties and an exposure that reaches your own assets. For a resident of Portugal holding positions in companies abroad, that exposure sits across borders and across policies never designed to work together.

Non-executive does not mean non-liable

The most persistent misconception about a non-executive role is that the “non-executive” part limits the liability. It limits the day-to-day involvement. In most jurisdictions the fundamental duties of a director — to act with reasonable care, skill and diligence, and to act loyally in the interests of the company — apply broadly to non-executive, advisory and supervisory board members in much the same way as to executives. The standard is not softened because you attend four meetings a year rather than running the business. Where the precise duties and defences sit varies by country and is a question for your own lawyers; the general direction, though, is consistent, and it is that a seat at the table carries a personal legal standard you are held to.

The consequences follow the individual, not the company. Where a duty is found to have been breached and loss results, a director's personal assets can be within reach of the claim, and the people who bring these actions are not hypothetical. Regulators pursue board members over governance and disclosure failures. Insolvency practitioners, appointed when a company fails, look back at the conduct of directors — the non-executives included — and can bring claims on behalf of creditors. A non-executive who assumed that oversight without operational control also meant oversight without personal risk has misread the position.

Why “the company has D&O” is not a complete answer

Asked whether they are covered, most non-executives point to the company's directors' and officers' (D&O) insurance. Often it exists. But a D&O policy is an asset of the company — bought by it, controlled by it — and several features of it can leave the individual director exposed.

The first is scope. A policy written for a group may or may not extend to outside directorships, subsidiaries or foreign entities, and the entity you sit on may not be a named insured at all. The second is the shared limit: the whole board, and frequently the company itself, draws on one limit, and a large claim — or several running at once — can erode it through defence costs and settlements before your own exposure is reached. The cover you counted on may already have been consumed by others. The third is location: the policy and the insurer often sit in the company's home country, under its law and its language, which shapes how readily it responds to a director elsewhere.

Then there is what happens when the company itself is the problem. If it becomes insolvent, if a new board declines to indemnify a predecessor, or if it simply fails to renew the policy, the protection you counted on can disappear when you need it. And because D&O is written on a claims-made basis — the policy that answers is the one in force when the claim is made, not when the underlying events occurred — a claim arriving after you have left, or after the cover has lapsed, may find nothing there to respond. That is why run-off cover, discussed below, matters as much as the policy in force today.

A company's D&O policy is written to protect the company's balance sheet first and the director second. When the two interests part company — in insolvency, in a dispute, in a claim that outlives your tenure — it is the director who discovers which one the policy really served.

What Side A cover actually does

D&O policies are built in three parts, and which part protects whom is the most useful thing an individual director can take from this. Side A responds to the individual director directly, for loss they cannot recover from the company — typically because the company is legally prohibited from indemnifying them, or is unable to, as in insolvency. Side B reimburses the company when it has indemnified its directors, protecting the corporate balance sheet rather than the individual. Side C covers the company itself, most often for securities claims, and does not protect directors personally at all.

For a non-executive weighing personal exposure, Side A is the part that matters most, because it answers precisely when the company cannot or will not stand behind you. Ordinary indemnification and Side B assume a solvent, willing company. Remove that assumption — insolvency, a board that has turned against a former director, a legal bar on indemnity — and Side A is what is left between a claim and your own assets. A policy can carry a healthy overall limit and still be thin on Side A, or share that limit across the entire board. Some companies buy a dedicated, ring-fenced Side A layer; whether the board you sit on has one, and what it amounts to, is worth asking rather than assuming.

The cross-border layer

Residence in Portugal while serving on a company abroad adds a dimension the policy documents rarely address. If a claim is brought, where would it be brought — where the company sits, where the director resides, where the loss occurred? Would the company's D&O policy, written under the law of its own country, respond to proceedings commenced in another jurisdiction against a director living elsewhere? Defence costs, which in these matters can dwarf any settlement, would be incurred in a foreign legal system, in a language and under procedures the director may not know, and the policy's ability to fund that defence across a border is not something to take on faith.

The exposure compounds when the positions multiply. Someone holding seats on three or four companies in different countries relies on three or four separate policies, each from a different insurer, on different terms, with different limits, exclusions and definitions of who counts as an insured. No one coordinates them. There is no single limit that follows the individual across every board; there is a patchwork, and the gaps between the pieces — a directorship named on no policy, an exclusion in one that the others do not share — are exactly where an uninsured claim can land. Reading each policy for how it treats a foreign-resident director is the only way to see whether the patchwork covers the person at the centre of it.

What an individual director can do

The most effective steps cost nothing and must be taken before a seat is accepted rather than after a claim. Ask for the D&O policy and the deed of indemnity, and read the wording rather than the summary. Confirm that the entity you are joining is a named insured, that outside and foreign directorships are covered, what the Side A position is, and how the limit is shared. Establish the run-off or discovery position: what happens to your cover for decisions taken during your tenure once you leave, and for how long claims can still reach the policy afterwards. A director who steps down without securing run-off can remain exposed for years with nothing behind them.

Where the company's cover is thin, or its willingness to indemnify is uncertain, an individual can look at personal protection that sits above or independently of it — a personal excess layer, or standalone independent director liability cover that responds to the individual alone. The limits of this market are worth stating plainly. Appetite among insurers for writing personal D&O to an individual is narrow, and what can be arranged depends heavily on the profile of the underlying company or companies — sector, jurisdiction, financial health and claims history. It cannot be promised in the abstract; whether anything is available, and on what terms, is assessed case by case.

Trusteeships, foundations and informal advice

The same reasoning reaches beyond company boards to positions that carry analogous exposure and are far more often entirely uninsured. Acting as a trustee of a foreign trust, or as a board member of a foundation, places personal duties on you towards beneficiaries and towards the structure, and those roles frequently have no D&O-style policy behind them at all. Charity and non-profit board positions are the same — carrying real fiduciary responsibility, and commonly assumed to be risk-free precisely because they are unpaid. They are not, and the absence of a policy is felt only when a dispute arises.

Advice is a further grey area. Professionals who guide companies informally — the retired lawyer, accountant or executive whose counsel a board relies on without a formal engagement — can find their exposure falling between two policies. It may not be a directors' role that D&O would answer, and it may not be a contracted professional service that a professional indemnity policy would cover. Understanding on which side of that line a relationship sits, and whether anything responds to it, is worth doing before the advice is given rather than after it is questioned.

A board-position audit

Bringing this exposure under control begins with writing it down. Few people who hold several positions have ever listed them in one place alongside the cover behind each, and a board-position audit that does so usually reveals more exposure than expected. For each position it sets out:

• Every current board, advisory, trustee and supervisory position, and the country and entity each sits in.
• A copy of the D&O policy behind each — the wording, not a description of it — or a note that there is none.
• The policy limit, and whether it is shared across the board or includes a dedicated Side A layer.
• The insurer and the jurisdiction the policy is written under.
• The run-off or discovery terms, for current positions and any you have already left.
• The indemnification agreement or deed of indemnity from each company, and what it actually promises.

Laid out together, the exposure scattered across unrelated documents becomes legible: the position no policy names, the limit shared with a dozen others, the seat left two years ago with no run-off behind it, the trusteeship with nothing at all. A review with a broker works through that list, identifies where the company cover is genuinely relied upon and where it is not, and considers whether personal or excess cover is available and warranted for the gaps — alongside the questions that belong with your own lawyers on the duties themselves.

This article is provided for general information and does not constitute personalised advice; the right cover depends on your own circumstances. It is not legal advice, and questions of directors' duties, fiduciary responsibility and liability in any particular jurisdiction should be taken up with your own lawyers. Adler & Rochefort is a commercial brand of Ownizo Unipessoal LDA, mediador registado na ASF n.º 425591790/3.