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Or [Book a CONSULTATION](https://calendly.com/consulttreelife) Δ #### Stay updated with our Newsletter Δ AI Summary - Directors and officers (D&O) insurance is referenced under sections 197(13) and 149(8) read with Schedule IV of the Companies Act, 2013, but obtaining such a policy is not mandatory under the Act. - Section 166 of the Companies Act, 2013 sets out directors' fiduciary duties, including exercising due and reasonable care, skill and diligence, and not seeking undue gain or advantage, and breach of these duties can trigger liability on the company. - D&Os can face liability under multiple statutes beyond the Companies Act, including the Income Tax Act, 1961, the Goods and Services Tax Act, 2017, and applicable environmental and consumer protection laws. - D&O insurance indemnifies directors and officers against liabilities but excludes claims arising from fraud, wilful misconduct, bribery and insider trading. - Premiums paid by a company for D&O insurance are not treated as part of a director's or officer's remuneration, unless that person is proven guilty of contravening the Companies Act, 2013, in which case the premium is treated as remuneration. - Under the Income Tax Act, 1961, directors and officers can face fines and imprisonment for failure to deduct TDS, wilful tax evasion and making false statements. - The Income Tax Act, 1961 imposes joint and several liability on every director of a private company for recovery of the company's outstanding tax dues. - Directors who resigned or joined during the relevant previous year remain covered under the Income Tax Act, 1961 provisions on director liability for that year. - Key exposures warranting D&O insurance include shareholder and stakeholder claims, employment practice violations, regulatory investigations, accounting irregularities, M&A-related exposures and corporate governance and compliance requirements. [ Contact us ](#contact-us-sidebar) #### Need help choosing the right D&O policy? [Talk to us.](https://calendly.com/consulttreelife?utm_source=blogbannertreelife) #### Get in touch with us Your information is confidential and secure Please leave this field empty. Or [Book a CONSULTATION](https://calendly.com/consulttreelife) Δ Directors and Officers (“**D&O**”) play a crucial role in running a company, making important decisions and bearing responsibilities towards various stakeholders. However, they are also susceptible to risks and personal liability for losses or harm suffered by the company arising out of the company’s acts during the course of their management. As a result, protecting such D&Os from unnecessary claims is crucial. References to D&O liability insurance (“**D&O Insurance**”) have been made under sections 197(13) and 149(8) read with Schedule IV of the Companies Act, 2013 (“**Act**”). However, obtaining a D&O Insurance has not been made mandatory under the Act. Section 166 of the Act outlines the fiduciary duties of directors, including but not limited to (a) exercising due and reasonable care, skill, and diligence; and (b) not attempting to gain any undue gain or advantage. Failure of the D&Os to follow these duties could lead to [several liabilities arising](https://treelife.in/compliance/liabilities-of-directors-under-the-companies-act-2013/) upon the company. The D&Os can also be held liable under other statutes, such as the Income Tax Act, 1961 (“**IT Act**”), the Goods and Services Tax Act, 2017 and other environmental and consumer protection laws. The said D&O Insurance indemnifies D&Os against liabilities, except for those arising out of or in relation to fraud, wilful misconduct, bribery, insider trading, etc. Premiums paid by the company to the insurer shall not be considered to be a part of the D&Os’ remuneration, but if such D&Os are proven guilty of acting in contravention of the provisions of the Companies Act, 2013, it shall be considered to be a part of their remuneration. Under the IT Act, D&Os can be prosecuted with fines and imprisonment for (a) failure to deduct TDS(b) willful tax evasion; and (c) making false statements. The IT Act also imposes joint and several liabilities on every director of a private company for the recovery of tax dues.As per the provisions of the IT Act, directors who have either resigned or joined during the relevant previous year would be covered under the purview of the same. Some of the specific exposures that make D&O Insurance necessary are: - Vulnerability to shareholder/stakeholder claims - Employment practice violations - Regulatory investigations - Accounting irregularities - Exposures relating to mergers and acquisitions - Corporate Governance requirements - Compliance with various legal statutes Protecting D&Os through D&O Insurance is essential in today’s corporate environment, as companies and directors face increased risks and exposure to liability. ### Related posts: 1. [Demystifying POSH: A World of Taboos and Uncertainty](https://treelife.in/legal/demystifying-posh-a-world-of-taboos-and-uncertainty/ "Demystifying POSH: A World of Taboos and Uncertainty") 2. [THE DRAFT NATIONAL DEEP TECH STARTUP POLICY](https://treelife.in/legal/the-draft-national-deep-tech-startup-policy/ "THE DRAFT NATIONAL DEEP TECH STARTUP POLICY") 3. [ECB FOR START-UPS](https://treelife.in/legal/ecb-for-start-ups/ "ECB FOR START-UPS") 4. 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