DIRECTORS AND OFFICERS INSURANCE

Being a director or officer of a non-profit corporation — even a small one like Naturist Legacy Inc. — is no easy job. There's always a ton of things that need doing, and many of them need doing at very specific times. It's a lot to remember. This page offers a friendly reminder concerning one of those things.

Naturist Legacy's by-laws underwent a major revision in 2014. Included in these by-laws was Section 16 - Protection Of Officers And Directors.

16.3 The Corporation must purchase and maintain Directors and Officers Insurance coverage for its directors and officers.

Log in to Member Central (the members area of Naturist Legacy's website) to see the annual financial statements for 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024 and 2025 posted there per Section 9.1(a) of the by-laws.

These statements reveal how much Naturist Legacy paid for insurance each year. Unfortunately, they may not break that figure down into how much was paid for Directors and Officers coverage, and how much was paid for other coverages. This is information that every director, officer and member should have.

I can report that in each of the four years prior to the 2014 revision of the by-laws, Directors and Officers policies provided $1,000,000 of coverage with a $500 deductible and a $600 annual premium. These policies were initially purchased from AXA Pacific, and then from Intact Insurance (who acquired AXA Pacific).

Here are some important questions to ask your directors and officers:

• Is Directors and Officers coverage still purchased per Section 16.3 of the by‑laws?

• If so, is it still purchased from Intact Insurance, or from a different company?

• What is the value of the current policy's coverage? ($1,000,000 previously)

• What is the current policy's deductible? ($500 previously)

• What is the current policy's annual premium? ($600 previously)

A DUTY TO COMPLY

Directors and officers have a duty to comply with their by-laws, their articles of incorporation, The Corporations Act and the Corporations Regulation.

Duty to comply
117(2) Every director and officer of a corporation shall comply with this Act and the regulations, the articles and by-laws, and any unanimous shareholder agreement.

No exculpation
117(3) Subject to subsection 140(5), no provision in a contract, the articles, the by-laws or a resolution relieves a director or officer from the duty to act in accordance with this Act or the regulations or relieves him from liability for a breach thereof.

Why is obedience to even the smallest detail in the by-laws so important?

In legal proceedings, adherence to good governance practice will not necessarily provide a complete defence. Where, however, a corporation or director can point to having followed an established practice in keeping with good governance, or to have chosen a course in an effort to achieve good governance, this often provides a highly persuasive argument in the corporation or director's favour.

Read this and more in the Primer for Directors of Not-for-Profit Corporations.

ADDITIONAL READING

Article: Dirty Little Secrets

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