Introduction

Directors & Officers (D&O) liability for Canadian startups protects individual leaders and, in some cases, the company from claims alleging mismanagement, breach of duty, or regulatory violations. For venture‑backed companies, D&O is frequently requested in term sheets and board onboarding. See Summit’s primer on Directors & Officers Insurance and complementary Cyber Insurance.

What D&O Covers: Side A, Side B, Side C

• Side A (Non‑Indemnifiable): Protects individual directors/officers when the company cannot indemnify them (e.g., insolvency or legally barred indemnification). Paid directly to individuals.

• Side B (Company Reimbursement): Reimburses the company for indemnifying directors/officers (defence costs, settlements, judgments) per corporate indemnification bylaws.

• Side C (Entity): Covers the company itself. For public companies, Side C typically responds to securities claims; for private companies, entity coverage may be broader but varies by policy. Review definitions, securities claim wording, and entity exclusions with your broker. For foundational concepts, start with Summit’s D&O overview.

VC Term‑Sheet and Board Onboarding Checklist (Canada)

Use this list to prepare for investor diligence and post‑close onboarding:

• Target limit and structure (e.g., CAD limit; A/B/C tower; Side A Difference‑in‑Conditions (DIC) optional)

• Minimum insurer financial strength (e.g., A‑ or better) and approved markets

• Claims‑made form with retroactive date aligned to incorporation or earlier as negotiated

• Priority of payments clause favouring Side A

• Severability and non‑rescission provisions for Side A

• Insured‑versus‑Insured carve‑outs (e.g., whistleblower, former director) and conduct exclusions with “final adjudication” language

• Outside directorship liability (ODL) where founders serve on portfolio or community boards

• Roadshow/securities claim wording suitable for future financing rounds

• Change‑in‑control, run‑off (tail) options for M&A (commonly 6 years requested by investors)

• Worldwide territory/jurisdiction as needed; local policies for foreign subsidiaries when required

• Employment‑related claims handled under EPL, not D&O (bundle in a management liability program)

• Broker letter of undertaking and evidence of insurance delivery timelines

How Much Limit? Stage‑Based Benchmarks

These are common starting points we see for venture‑backed private companies in Canada. Adjust for industry risk, board composition, US exposure, and financing size.

Note: Limits are guidance, not rules. Underwriters consider revenue, burn/runway, governance, and territory.

What Drives Cost? Key Underwriting Levers

• Financial profile: revenue, burn rate/runway, capitalization, audit status

• Industry risk: fintech, life sciences, med‑device, and regulated sectors price higher

• Territory: proportion of US revenue/customers; international subsidiaries

• Governance: board composition, independent directors, indemnification agreements, bylaws

• Claims history and litigation environment

• Transaction activity: frequent rounds, secondary sales, or M&A

• Security and privacy controls (especially when bundled with Cyber)

What Underwriters Need to Quote Fast

Prepare these items for a 24–48 hour turnaround on most startup submissions once complete:

• Completed D&O application (Summit will provide the correct market form)

• Cap table and most recent pitch deck or investor memo

• Latest financials (compiled/reviewed, if available) and 12–18 month cash runway

• Organization chart and list of subsidiaries (with % ownership and countries)

• Copies or summaries: bylaws, indemnification agreements, board minutes highlighting recent financing

• Any prior D&O coverage details and loss runs (if applicable)

How to Bind Coverage in 24–48 Hours

1) Discovery call (30 minutes): share funding, headcount, revenue, and US exposure. 2) Application and documents: we pre‑fill forms from your deck and data room. 3) Market sweep: Summit shops multiple insurers concurrently and negotiates terms as an independent broker. 4) Options review: compare limits, retentions, key exclusions, and Side A enhancements. 5) Bind and evidence: sign binder, pay premium, receive Certificate/Evidence for your investors and board.

Need help now? Contact Summit: Contact us or call (250) 900‑8749. See how we work on How We Get Paid.

Bundle for Broader Protection (SME Management Liability + Cyber)

• SME Management Liability Bundle: D&O + Employment Practices Liability (EPL) + optional Crime/Fiduciary for a unified governance risk stack. Ask us about bundling credits and consolidated renewal dates.

• Cyber Insurance: Many D&O claims co‑travel with data/privacy events or fundraising disclosures. Coordinate incident response and securities claim wording. Learn about Cyber Insurance.

Common Startup D&O Claim Scenarios

• Investor or minority shareholder alleges misrepresentation during a funding round

• Competitor or regulator alleges anti‑competitive practices or misleading statements

• Creditor actions following insolvency or down‑round restructuring

• Breach of fiduciary duty related to M&A, expansion, or capital allocation

Typical exclusions to review: fraud (post‑final adjudication), prior known claims, bodily injury/property damage (handled elsewhere), insured‑vs‑insured without carve‑outs, professional services (consider Professional Liability/E&O).

FAQs

• Is D&O legally required in Canada? No, but it is commonly required by investors and boards. See Summit’s D&O page.

• Claims‑made or occurrence? D&O is claims‑made. Continuity dates, retroactive dates, and tails matter.

• When should a startup buy D&O? Before closing an institutional round or onboarding independent directors, and earlier if signing larger enterprise/customer contracts.

• How is the retention set? By stage, risk, US exposure, and market conditions. Higher limits can increase retentions.

• Do we need Side A DIC? Consider it as you add independents, expand to the US, or increase limits. It can provide broader protection for non‑indemnifiable scenarios.

• What about IPOs or a direct listing later? Ensure roadshow/securities wording now; plan a public‑company D&O program ahead of filing.

• How does Cyber interact with D&O? Data/security incidents can trigger D&O allegations; coordinated wording across D&O and Cyber helps close gaps.

Why Summit for Venture‑Backed D&O

• Independent market access: we shop multiple insurers to secure terms aligned to your stage and cap table

• Speed and precision: venture‑savvy applications, board‑level summaries, and fast bind/evidence delivery

• Transparency: learn exactly How We Get Paid

• Ongoing advocacy: claims support and proactive limit/retention reviews each round

Get a Quote in 24–48 Hours

• Email hello@summitcover.ca or use Contact us

• Include: latest deck, cap table, financials, and target close date

• We’ll return options with clear comparisons of limits, retentions, Side A/B/C, and key exclusions