Going abroad may be the best option for capital, but make sure your D&O is global
Three years after the financial crisis began, the U.S. capital markets continue to struggle to support many small companies and has forced some to turn to investors overseas in order to go public. A New York Times article earlier this month featured the story of Reva Medical, a medical device company who was denied a chance to list their stock here in the U.S., but found ready buyers of their shares in foreign markets. And they are not the only ones, there is a growing number of companies who are choosing foreign exchanges – 10 in 2010.
The Alternative Investment Market (AIM), part of the London Stock Exchange meant for small company listings, is popular destination for some American companies to go public, along with the Australian Securities Exchange.
Along with the challenge of raising U.S. capital, there is also the consideration of Sarbanes-Oxley compliance which costs more in the United States. According to the New York Times, the costs can be as high as $2-3m each year depending on the size of the company, and only $320k on the AIM or $100k-300k in a market like Taiwan.
Our team has had first hand experience placing Directors’ & Officers’ Liability (D&O) programs for IPO’s or other companies listing on foreign exchanges. D&O coverage is still very important to secure even when an entity is listed on an international exchange due to local insurance regulations, legal and personal liabilities. There are several key components that need to be considered in structuring a compliant international D&O placement to adequately protect D&O’s globally. Especially, given the significant uptick in D&O claims arising outside the U.S., in counties such as Australia, China, India, Russia, Hong Kong and Italy.
For more information, feel free to contact a member of WGA’s ExecutiveRisk team.
Connect with Rich Leavitt on LinkedIn.