MONTH-IN-BRIEF (Sep 2022)
SPAC Extensions Create D&O Insurance Riddles
Those of you following the developments in the SPAC market have no doubt noticed the drama around DWAC’s quest for an extension earlier this month. DWAC, aka Digital World Acquisition Corp., aka “the Trump SPAC,” went through a few adjourned shareholder meetings to finally lock in a three-month extension on September 8, 2022.
While SPAC sponsors are typically aware that they need shareholder approval or additional funds to extend their investment period, most, unfortunately, don’t consider the added costs or difficulties of extending their directors and officers (D&O) insurance coverage to match. Many don’t realize that their SPAC’s D&O policy will likely not automatically extend to cover the additional few months and that, of course, creates additional risk for their directors and officers and a possibility of a hefty litigation bill that may need to be paid out of pocket. There are ways, however, to get ahead of these problems, and a few factors to consider.