D&O cover gap review in England & Wales: scope and consequences

A D&O cover gap review in England & Wales starts from a narrower question than the policy wording itself: what can a company lawfully promise a director under English law, and where does that boundary leave a gap that an insurance policy is meant to close. The review does not price cover and does not place it. It maps what the company may indemnify against what the policy actually delivers, and it marks where the two diverge.

A private company incorporated in England & Wales renews its D&O policy on the broker's recommendation, without anyone in the business checking whether the exclusions in the new wording still match what the articles and the appointment letter promise the board. Six months later a director facing a shareholder claim discovers that the policy excludes exactly the liability the company's own indemnity was meant to cover, and that the company cannot fill the gap itself.

This page sets out what drives the review under English company law, what becomes visible on the public record once cover is confirmed or found wanting, and where the firm's own advisory role stops.

What changes for a D&O cover gap review in England & Wales

The generic version of this work, described on the D&O cover gap review page, sets out the method: read the policy, read the indemnity, read the appointment terms, and mark where they stop lining up. In England & Wales the method is the same, but the ceiling on what a company may promise a director is fixed by statute, not by the drafting choices of whoever wrote the articles.

Companies Act 2006 voids any provision, in the articles or in a separate contract, that would indemnify a director against liability for negligence, default, breach of duty or breach of trust owed to the company itself. A qualifying third-party indemnity provision is permitted instead – cover against liability to someone other than the company, excluding criminal fines, regulatory penalties and the costs of an unsuccessful criminal defence. 01 A D&O policy is the mechanism a board actually uses to fill the space statute leaves open, and the review exists because that space is narrower than most boards assume, whether or not the company is doing business in England & Wales as its primary market or as a subsidiary of a foreign parent.

The jurisdiction brief on the management and control test for England & Wales sets out the wider board framework this review sits inside; the gap review is narrower and looks only at where indemnity and insurance meet. How differently two jurisdictions can treat the same board is visible in the comparison of director liability across the Netherlands and Hong Kong, which is why a group with entities in more than one place cannot assume the England & Wales answer travels unchanged.

The local requirement that drives the review

England & Wales company law does not require a company to hold D&O insurance at all. There is no statutory obligation to buy the policy, only a statutory limit on what the company can promise instead of one. Sections 232 to 234 of the Companies Act 2006 make any indemnity against a director's own liability to the company void, and permit two exceptions: the company may buy and maintain insurance against that liability, and it may give a qualifying indemnity against liability to third parties. 01 A gap review has to work from that structure, not from the policy wording alone, because the policy is only doing part of the job the statute allows.

The test that actually drives the work is whether the exclusions in the current policy line up with the liabilities English company law lets the company cover in the first place. Board resolution records, the director appointment terms and the minute book are read together against the policy schedule, because a mismatch usually shows up first in what the board minuted when it approved the renewal, not in the policy document itself. Where the director appointment predates the current policy, the appointment letter is frequently the place the gap actually originates.

Once a claim against a director crystallises and the company's purported indemnity turns out to fall outside the qualifying exception, the director's contractual fallback ceases to be available for that liability, and only the policy, if it responds, is left standing.

A mismatch between what the directors' report says about cover and what the policy actually excludes does not resolve itself once the filing is in; it sits on the public record for the year it was filed, available to the next claimant who reads it.

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The filing and register consequence

A qualifying third-party indemnity provision does not stay private once it exists. Companies Act 2006 requires a company to disclose in its directors' report that a qualifying indemnity is in force for the benefit of a director, and to keep a copy of the provision available for inspection. 02 The board minute recording approval of the indemnity or the renewal, kept in the minute book, is often the only internal record that predates the current policy schedule and explains why the disclosure was worded the way it was.

The register that carries this and other filed company information at Companies House is open to public inspection without charge. 03 A shareholder, a counterparty or a claimant can read what the directors' report said about indemnity cover for the year in question, and a mismatch between that statement and the policy actually in force at the time is a fact pattern that surfaces in litigation, not only in an internal review.

Once the financial year closes and the annual filing recording indemnity cover has gone to Companies House, correcting a wrong statement does not restore a director's access to indemnity for a liability that arose during that year; the only remedy left standing is whatever the policy itself provides for that period.

What this service does not include in England & Wales

The gap review maps the mismatch between the indemnity, the appointment and the policy. It does not extend into acting as a director, arranging for a director to be appointed, or supplying anyone to fill an office, and in England & Wales that boundary is not a matter of house style. By-way-of-business acting, or arranging for another person to act, as a director or secretary of a company is regulated activity under the Money Laundering Regulations 2017, carried out by a person acting as a trust or company service provider. 04 The firm holds no licence for that activity and does not carry it out, in England & Wales or anywhere else.

Carrying on that activity without the required supervision or registration is itself an offence under the same regime. 05 That is the reason the boundary exists: it is a licensing question, not a preference about scope. What the review produces instead is a written account of where the indemnity, the appointment terms and the policy diverge, a marked list of the exclusions that matter, and a set of questions the board can put to whoever placed the policy, so the decision about what to do next stays with people already properly appointed to make it.

• A comparison of the indemnity permitted under the articles against what the policy actually excludes
• A review of the director appointment terms against the current cover
• A record of the board resolution and minute book entries relevant to the renewal
• A written note of the gap, addressed to the board, not to the insurer

A board that has never checked the indemnity against the policy usually finds the gap at the worst possible moment, when a claim is already in front of a named director rather than in front of the company.

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Frequently asked questions

Does a D&O cover gap review in England & Wales change for a foreign-owned company?

The statutory ceiling on indemnity under the Companies Act 2006 applies regardless of who owns the shares. What differs is the appointment letter, which a foreign parent often drafts against its own home jurisdiction's template rather than an English one; the same review run for a subsidiary in the Hong Kong version of this review starts from a different statutory ceiling entirely.

What does a D&O cover gap review require in practice?

It requires the current policy schedule and exclusions, the articles, the director's letter of appointment, and the board minute approving the last renewal. Without the minute, it is often impossible to tell whether the board understood what it was approving or simply signed off the broker's recommendation.

Who inside the company is responsible for a D&O cover gap review?

The board as a whole holds the responsibility, because the indemnity it can lawfully give is a board decision, not an individual director's. In practice one director or the company secretary is usually asked to hold the file, but the sign-off on any gap identified has to come from a board resolution, not from that individual acting alone.

What evidence should the board keep on a D&O cover gap review?

The board resolution approving the review's findings, the marked-up comparison of indemnity against policy exclusions, and the minute book entry recording what was decided and when. For the kind of file this produces, see what the output of a D&O cover gap review actually looks like.

What happens if a D&O cover gap review in England & Wales is not addressed?

The gap does not close itself; it sits unnoticed until a claim tests it, at which point the director discovers the exclusion at the same moment the company discovers it cannot lawfully fill it. Nothing about failing to review the position postpones the liability, it only postpones the moment the company finds out how exposed the director already was.

Author: Marcus Lindqvist, Consultant, Director Duties and Board Governance. Marcus advises boards and group counsel on director liability, indemnity structures and the allocation of governance duties across cross-border groups. He works from the constitution and the appointment terms outward, testing where local law and internal documents actually agree, before the policy wording is read at all.