In most companies, the people who manage and the people who own are different groups, and directors’ and officers’ (D&O) insurance exists to protect the first from claims by the second and by third parties. In a family holding company or a family office the two groups are largely the same people — and that is precisely why the exposure is often underestimated. A director who is also a shareholder, a son or a cousin of the other shareholders, and a trustee of a family trust, takes decisions whose consequences can be challenged from several directions at once.
Why a family holding is not a “low-risk” company
A holding company may have no customers and few employees, which makes it look like a quiet risk. The decisions taken inside it are not quiet: acquiring or selling a business, refinancing, guaranteeing a subsidiary’s debt, distributing or retaining profits, moving the seat of a company or restructuring after a generation change. Each of these can later be described as a breach of duty by someone who disagrees with it.
The most frequent sources of claims in family structures are:
- Family shareholders — minority branches of the family, heirs who were not involved in management, or a spouse after a divorce, alleging that a decision favoured one branch over another.
- Creditors and insolvency administrators — when a subsidiary fails and the holding’s directors are said to have known, or should have known, that it could not pay.
- Tax and regulatory authorities — investigations into transfer pricing, residence of companies, beneficial ownership registers and anti-money-laundering obligations.
- Buyers and sellers of businesses — warranty and misrepresentation disputes after a transaction.
- Employees — employment claims against a family office as an employer, which a separate employment practices section may answer.
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What the law says, in Portugal and in Spain
In Portugal, directors answer to the company, its shareholders and its creditors under the Código das Sociedades Comerciais (arts. 72 and following). For a sociedade anónima, art. 396 requires each director’s liability to be secured by a bond, and allows that bond to be replaced by a liability insurance contract, with exemptions that the law itself sets out — a reminder that the legislator treats directors’ personal liability as real. In Spain, the Ley de Sociedades de Capital sets out directors’ liability towards the company, shareholders and creditors (arts. 236 and following), and art. 367 makes directors jointly liable for company obligations arising after a legal cause for dissolution if they fail to act on it.
The legal analysis of a specific structure belongs with the family’s lawyers. The insurance point is simpler: in both countries, a director’s own assets can be reached, and the defence costs alone can be significant long before any question of liability is decided.
How a D&O policy for a family structure is built
Side A, B and C
Side A pays the director directly when the company cannot or may not indemnify them — for instance, because the company is insolvent or the law prevents indemnification. Side B reimburses the company when it does indemnify its directors. Side C, or entity cover, protects the company itself, usually only for certain claims. For family offices, where the personal exposure is the point, Side A is the part to check first, and some families add a dedicated Side A layer that only individuals can draw on.
Who counts as an insured person
The definition should match reality: directors and de facto directors, members of investment committees, family members who sit on boards of subsidiaries, and executives who are not family. Directors of portfolio companies and non-profit boards held at the family’s request need specific wording — the policy for board seats held abroad is often a separate conversation.
The “insured versus insured” exclusion
Most D&O policies exclude claims brought by one insured against another, to prevent collusion. In a family structure, where the claimant is often a relative who is also a director or shareholder, this exclusion can remove the very claims the family worries about. Well-negotiated wordings carve back claims by shareholders, by former directors, by insolvency administrators and derivative actions. This is the clause we read first.
Territory, run-off and changes of control
A holding with companies in Portugal, Spain and elsewhere needs worldwide territory and jurisdiction, with attention to the United States if there are assets or investors there. When a director retires, or the structure is sold or merged, run-off cover keeps protection in place for claims that arrive later about decisions taken while in office.
Where D&O ends and other covers begin
D&O does not replace the liability of trustees and protectors, which follows fiduciary duties of a different kind — we cover it in liability cover for trustees, foundation boards and family offices. Nor does it pay for money stolen through a payment fraud, which belongs to crime and cyber cover. A family office that provides investment or advisory services to several families may also need professional indemnity. The value of a review is in fitting these pieces together so that each claim has one policy that answers it.
Frequently asked questions
Is D&O necessary if the company has no outside shareholders?
Often, yes. Claims also come from creditors, insolvency administrators, tax and regulatory authorities and transaction counterparties — and, in family companies, from relatives who inherit shares or leave the business. The question is the personal exposure of the directors, not the number of shareholders.
Does D&O cover claims between family members?
Only if the wording allows it. The standard insured-versus-insured exclusion can remove claims between people who are all insured. Carve-backs for shareholder claims, derivative actions and former directors are negotiable, and in a family structure they are essential.
What is Side A cover?
It is the part of a D&O policy that pays the individual director when the company cannot or may not indemnify them. Because family office exposure is personal, Side A — and sometimes a dedicated Side A layer — is usually the priority.
Can one D&O policy cover the holding and all subsidiaries in Portugal and Spain?
Frequently, yes, with the subsidiaries defined in the policy and worldwide territory. Some insurers require local policies in certain countries; the structure is confirmed in writing before placement.
A written review of your D&O position
Send us the structure chart and any D&O policies in force. We reply in writing with who is insured, where the wording fails a family structure, and what a well-placed policy should contain.
This article is general information and does not constitute personalised, legal or tax advice. Cover, limits and exclusions are only those of the policy actually issued, after underwriting. Adler & Rochefort is a commercial brand of Ownizo, Unipessoal Lda., mediador registado na ASF n.º 425591790/3.
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