Risk Partners Life Sciences Roundtable 2024 at the IZB: Register now for 18.07.24 - learn more >

No startup bonus for
criminal and administrative offenses.

As exclusively researched by Hannah Schwär and her team at Capital Magazine, the founders of Sono Motors are now also facing problems with the public prosecutor's office. According to Capital Magazin, subsidy fraud in the context of short-time work and the programs surrounding the corona crisis is in the offing. The company, which is listed on the NASDAQ via De-SPAC, has already filed a report with the SEC. While the loss amount of EUR 40,000 still seems manageable, the criminal proceedings against the two founders are much more unpleasant. Unfortunately, it does not matter that the two founders no longer work for the company. Before we go into the insurance perspective, we wish the two founders a good outcome and access to excellent criminal defense lawyers, because as partners of many growth companies and great founder personalities, our hearts "bleed" a little that the story seems to end so unpleasantly here.

What is the insurance perspective here?

It should be said in advance that Sono Motors' listing on the Nasdaq alone represents a "risk that is difficult to insure". Therefore, an effective marketing strategy is required to obtain appropriate insurance coverage. We refer interested parties to our "Road to IPO" page, where we also discuss a Nasdaq IPO. Ideally, the two founders will have access to specialized criminal liability insurance, either provided by Sono Motors or taken out privately, as well as (at least) D&O insurance.

In such cases, the preference is always for specialist criminal legal protection insurance, as it is specifically designed for such situations (which are not uncommon), whereas D&O insurance only offers a limited scope of cover to cover similar risks. Unfortunately, despite advice, we still see a low level of awareness of the issue of "unjustified" criminal investigations, particularly among growth companies, so it is not unlikely that the preferred specialist criminal legal protection insurance is not in place. In the less ideal case, the focus shifts to at least one D&O insurance policy in order to obtain insurance cover for costs (e.g. expensive criminal defense) via the criminal law section cover.

Why at least one D&O insurance policy? The special situation caused by the De-SPAC and the listing in the USA plays a role here. In addition to the challenging US capital market risk, a personal D&O or corporate D&O insurance policy without the US capital market risk, but with cover for risks in Germany, could also be available. Based on knowledge of the insurance market, it can be clearly stated that the possibly current D&O insurance with the US capital market risk, which certainly includes the company in Germany and thus the two founders, does not have to offer insurance cover despite possible negotiations on criminal law protection insurance. The background to this is that the (alleged) breaches of duty occurred before De-SPAC in 2021 and so-called De-SPAC D&O insurance policies in the USA are designed as pure "forward cover", which means that past breaches of duty are not covered. Therefore, the focus is shifting to current corporate D&O insurance policies for the "German risk" or the D&O insurance policy that was sent into run-off at the time of the listing, which should ideally be equipped with a longer grace period to step in if necessary. The same applies to any existing personal D&O insurance for the German risk (note: not available for the US capital market risk), which is certainly in run-off due to the departure of the two founders and ideally also has a correspondingly long grace period.

We hope that the two founders come out of this situation in good shape and ideally have access to high-performance special criminal legal protection insurance and - should civil law claims still arise here - also to strong cover via at least one D&O insurance policy.

Being Public

Whistleblower Protection Act

Whistleblower Protection Act ... is now in force. Hey #VCs, do you already have a system in place for safe #whistleblowing? And what about insurance cover in your D&O insurance? One month ago today, the German Whistleblower Protection Act came into force. Since July 2, 2023, not only companies with more than 50 employees, but also fund managers or ManCos (capital management companies pursuant to Section 17 (1) of the German Investment Code) are obliged to set up and operate a whistleblower system, regardless (!) of the number of employees. As of December 2

Read more "
Risk Partners

13th Hamburg Financial Lines Forum

Risk Partners at the Financial Lines Forum 13th Hamburg Financial Lines Forum. On October 12 and 13, the 13th Hamburg Financial Lines Forum took place with the participation of Risk Partners, a traditional event which this year once again served as a forum for the exchange of current trends. The program began with an overview of current developments and the handling of claims in financial lines, presented by Gabriele Schreiber-Sahin and Michael Hendricks. Dr. Oliver Sieg then shed light on directors' and officers' liability and the European

Read more "
Life Sciences

Cyber Risks: Case Study Evotec

Last year, more than 10 percent of German companies were affected by an IT security incident, with the proportion rising due to cyber attacks. Biotechnology is not excluded either. It is possible to learn from the Evotec case. It is about successful cyber attacks or other incidents that are important for security, such as acts of sabotage or hardware theft. According to a representative Ipsos survey conducted on behalf of the TÜV association among 501 companies with more than ten employees. According to the TÜV

Read more "