When a business is bought, sold, or unfortunately closes down, many people assume that past responsibilities disappear. But for directors and senior managers in the UK, that isn’t the case. Decisions made years ago can still lead to claims long after someone has stepped away from the business.

That’s where run-off cover comes in.

What Is Run-Off Cover?

Run-off cover is an extension to a Directors & Officers (D&O) insurance policy.

It protects former directors and officers if a claim is made:

After they have either sold, merged or taken significant investment into the business, or the business has ceased operating for some other reason, such as insolvency.

But for issues that relate to something they did before the company was sold or closed.

You can think of it as a safety net that remains in place once your role at the company has ended. Without it, individuals can be personally liable for things like:

–        Decisions made in the years before a sale

–        Mistakes linked to financial reporting

–        Allegations relating to negligence, misrepresentation, or breach of duty

–        Complaints raised by regulators

–        Disputes with creditors after an insolvency

The key point is that directors aren’t only judged on their decisions at the time, they remain legally responsible for them for up to six years under the UK Limitation Act 1980.

Run-off cover protects them during that period.

Why Is Run-Off Needed After a Sale?

In many business sales ownership and control move from the old management to new owners.

At that moment:

–        The old directors stop making decisions.

–        But they remain responsible for everything that happened beforehand.

–        The buyer won’t usually agree to cover those old issues.

–        The new D&O policy (if the buyer arranges one) won’t insure past actions.

Run-off cover removes this uncertainty by giving clear, ring-fenced protection for past decisions.

Why Is Run-Off Needed After an Insolvency?

When a business enters administration or liquidation, tensions often run high. Creditors, investors, employees and regulators all review what happened leading up to the insolvency.

Allegations often include:

–        Wrongful trading

–        Mismanagement of funds

–        Misleading statements about finances

–        Breach of duty

But many D&O policies do not automatically include run-off for insolvency, meaning directors can be left exposed unless the policy had pre-agreed options.

How Long Does Run-Off Last?

Most claims arise within six years, so insurers often offer run-off for:

–        1 year

–        3 years

–        6 years (the most complete and most common “standard”)

The cost is a one-off premium paid upfront and is “fully earned”, meaning it cannot be cancelled or refunded.

Why This Matters for Agencies, Tech Firms and Entertainment Businesses

These sectors face unique pressures:

Creative and digital agencies

These businesses regularly work with client money, intellectual property and time-sensitive campaigns. Claims about past strategy or financial decisions can arise long after handover.

Technology companies

They often face allegations around product performance, investment information and financial projections.

Entertainment and immersive experience businesses

These companies must manage safety, regulation, customer data and high-risk operational environments, which can lead to investigations even years later.

Run-off ensures former directors are not left dealing with major legal costs on their own.

In Summary

Run-off cover is essential protection when:

–        A business is sold

–        A business merges

–        A business closes or becomes insolvent

–        New owners take control

Without it, individuals may personally face significant legal and financial risk for past decisions.

With it, they gain peace of mind during a period of transition.

Whether you’re selling a creative agency or a tech business, the decisions you made before the sale don’t disappear when you hand over the keys. Getting the right cover in place means you can move on with confidence, not uncertainty. Speak to a member of our team to understand how D&O run-off works and what the right cover looks like for your business.

Photo by Cytonn Photography on Unsplash