Former director of an insolvent company held liable for $146m - a wake up call about Directors and Officers liability

A recent headline sent shockwaves through the corporate world as the Singapore High Court rendered a staggering judgment against Goh Jin Hian, a former director of the insolvent marine fuel supplier, Inter-Pacific Petroleum (IPP).  

The Court found Goh liable for breach of director’s duties, statutory duties, and losses suffered by IPP amounting to USD 146 million (S$196 million) plus interest.  The liquidators of IPP pursued Goh to recover USD 156 million in losses, accusing him of “sleepwalking through his time as a director” of IPP and of failing to discover and prevent drawdowns in trade financing for alleged non-existent or sham transactions.

This news report is riveting for several reasons:

1. Personal Liability of Directors

It underscores that directors can be personally liable for breaches of their duties which affect not only the company and its shareholders, but also creditors.

2. Liquidators’ Pursuit of Claims

It highlights that liquidators have the authority to pursue claims against directors for failures resulting in losses to the company and stakeholders.

3. Magnitude of Liability Exposure

The sheer size of the liability award against Goh personally is jaw-dropping, emphasising the gravity of the consequences directors may face for failure in governance.  And all it took was just one directorship to produce liability this size!

Getting protected with Directors and Officers (D&O) Liability insurance

Whilst D&O Liability insurance cannot absolve directors of their responsibilities nor erase potential financial liabilities, it offers mutli-faceted financial reliefs to mitigate the harsh consequences of personal liability. 

A D&O policy typically provides personal protection for past, present and future directors and officers, of a company against civil, criminal¹, and regulatory proceedings arising from their roles. This policy can also cover legal fees and other costs incurred as a result of such proceedings.  

It is designed to pay for the following², among others, reasonably incurred with the insurer’s prior written consent:

• Defence costs incurred in defending against claims made by third parties for alleged wrongdoing
• Settlements reached amongst the parties
• Legal representation for regulatory investigations
• Public relations expenses and other costs 

A D&O policy also covers damages, compensation, or interest awarded by a court.

¹ Only for legal defence costs and subject to policy terms and conditions; criminal fines and penalties are not covered.
² Subject to policy terms and conditions