When you’re heads down building product and prepping for your next raise, it’s easy to overlook insurance — especially something like Directors & Officers (D&O) insurance, which sounds like it belongs in the realm of large corporates.
But here’s the thing: investor disputes, boardroom decisions, and executive liability don’t wait until you’re a Series B company. They can happen from day one. And that’s exactly why early-stage startups in Singapore should be thinking about D&O insurance before their first term sheet lands.
What is D&O Insurance?
D&O insurance protects the personal assets of your directors and officers if they’re personally sued for decisions made in their capacity as company leaders. This includes both external claims (from investors, employees, or regulators) and internal ones (from co-founders or board disputes). You can also read our previous post where we breakdown the basics of D&O insurance.
Common D&O clauses that matter during investor disputes
Pay attention to the following clauses in the D&O policies to make sure you have the right cover you need, especially when it comes to investor disputes.
Side A coverage:
This is often the most critical part of a D&O insurance policy — especially for early-stage startups. If a director is personally named in a lawsuit, e.g. from a disgruntled investor who claims the co-founder misled them during the fundraising process, then the company will have to indemnify the director. That means the company will step in to cover legal fees, settlements, or damages on their behalf.
However, the company often cannot indemnify their directors because:
- The company is insolvent or bankrupt, and has no funds to defend its leadership.
- The law prohibits the company from indemnifying someone (for example, in regulatory investigations or derivative shareholder lawsuits).
- There’s a conflict of interest or internal dispute that prevents the company from providing defence.
This is when Side A cover comes in to protect the directors, by covering the legal defence and investigation costs.
Side B coverage:
Side B coverage is all about protecting the company’s balance sheet when it steps up to defend its directors and officers.
When a director, officer, or even a founder is sued for actions related to their role in the company — for example, a claim from an investor alleging breach of fiduciary duty — the company will often indemnify that individual. That means the company pays for their legal defence, settlements, and other related costs. This is standard practice in most startups — it’s even written into many company constitutions and shareholder agreements.
Side B coverage reimburses the company for these costs. Instead of having to absorb tens or hundreds of thousands of dollars in legal fees, the company can claim those costs back through its D&O insurance policy.
Side C (entity coverage):
Side C coverage — also known as “entity coverage” — is designed to protect the company itself when it gets sued, particularly in relation to securities claims. Some examples of this in the context of fundraising include:
- Alleged misrepresentation during fundraising (e.g. false or misleading information in a pitch deck or data room)
- Disputes over valuation, dilution, or share allocation
- Claims that material information was withheld from investors
- Alleged breaches of shareholder agreements or capital raising regulations
While Side A and Side B are focused on protecting individuals (directors and officers), Side C covers the legal liability of the company as a legal entity. This is especially important when investors or shareholders bring lawsuits not just against individuals, but against the company as a whole.
Major shareholder exclusion (or limitation):
The Major Shareholder Exclusion limits or excludes coverage for claims brought by shareholders who own more than a certain percentage of the company — typically 15% to 20%.
In other words, if someone who owns a large chunk of your company (like a lead investor, co-founder, or strategic partner) sues the directors or the company, the D&O policy might not cover it.
When it comes to startups, cap tables are tight. Even a relatively small investor may cross the “major shareholder” threshold. Early investors (especially lead VCs or angels) are more likely to have strong opinions about company decisions — and sometimes those disagreements turn into legal disputes. This is when you might want to speak to experienced brokers such as our team at Anapi to discuss how to get the best coverage to ensure protection from major shareholders.
Insolvency-related claims:
No founder wants to think about failure — but the truth is, not every startup makes it. And when a company becomes insolvent, i.e. unable to pay its debts, things can get legally complicated — fast.
In these situations, directors and officers can personally be held liable by:
- Creditors trying to recover unpaid debts
- Investors alleging mismanagement or misleading information
- Liquidators or judicial managers reviewing whether the company was properly run prior to insolvency
This is where D&O insurance comes into play to protect directors and officers from this exposure, however only if there is an insolvency clause in the wording. There may instead be an insolvency exclusion, meaning that the insurer would reject any claims related to the company being insolvent.
If this is important coverage to you, the best would be to speak with experienced brokers such as Anapi, who can advise you on how to get cover for insolvency related claims.
Why you need D&O when fundraising
Fundraising is a key inflexion point for legal and governance risks. Here’s why D&O should be on your checklist:
- Investor expectations: More VCs now expect startups to have D&O cover before they come on board — especially if they’ll be taking a board seat.
- Negotiation leverage: It shows you’re serious about governance and protecting your leadership team.
- Founder protection: If things go south — whether that’s a valuation dispute or a breakdown in co-founder trust — D&O helps insulate personal assets.
- Insolvency scenarios: While no one likes to think about failure, the reality is that early-stage ventures are high risk. Having D&O in place gives directors protection even if the company runs out of money.
Future-proof your risk strategy
Getting D&O insurance from day one helps you build a clean risk profile that makes it easier (and cheaper) to expand coverage later. Insurers look favourably on companies that take governance seriously from the start — which can pay off in later stages when your exposure increases and your coverage needs become more complex. That’s why D&O isn’t just a nice-to-have — it’s a smart, strategic move to make early in your company’s journey.
Get covered instantly with Anapi
At Anapi, we offer instant D&O insurance coverage for newly incorporated startups in Singapore — no paperwork, no delay. You can get insured in minutes, so you’re protected by the time your pitch deck hits investors’ inboxes.
👉 Apply now for instant D&O coverage
Rather discuss your specific set up and your concerns? Get in touch with one of our experienced brokers instead!
