Drafting Drag along Triggers in International Shareholders Agreements
Drafting cross-border drag-along triggers requires verifiable voting thresholds, explicit cash valuation floors, and deeded power-of-attorney execution clamp mechanics.
D&O Tail Insurance
Meaning
Insurance provision that extends the reporting period for claims made against directors and officers after their original policy has expired or been cancelled. D&o tail insurance is essential during a company sale or a dissolution to protect the personal assets of the leadership from lawsuits arising from their past service.
Runoff Protection
The policy covers acts that happened before the closing of the deal but are not reported until after the directors have left the company. Because traditional policies only cover claims made while the contract is active, the tail coverage provides a bridge that covers the gap between the end of the business and the end of the statute of limitations. This protection is often a non negotiable requirement for board members who are asked to approve a merger or a liquidiation.
Claim Window
The length of the tail period is usually six years to match the time during which legal actions can be brought under contract or corporate law. This extended window ensures that the board members are not personally liable for legal fees if a shareholder or a creditor files a lawsuit several years after the exit is complete. The insurance company agrees to pay for the defense and any settlements up to the limit of the policy.
Premium Payment
The company typically pays a one time premium at the time of the transaction to secure the coverage for the entire duration of the tail period. This cost is factored into the deal expenses and is paid out of the proceeds before the final distribution.