All too often the task of procuring and renewing D&O insurance at a portfolio company is assigned to the portfolio company’s CFO or Controller, who employs an insurance broker to find the best price for the amount of coverage deemed appropriate by the broker. When such insurance is procured and thereafter renewed, the CFO/Controller simply reports to the board the fact of the procurement/renewal and few questions about the terms of coverage are discussed at the board level. This can be a big mistake.

Under Section 1031 of the Internal Revenue Code, a taxpayer does not recognize gain or loss on the exchange of like-kind property. Before 1984, the Code did not specifically address so-called deferred exchanges - exchanges in which the taxpayer relinquished property and some time later received the replacement property - although at least one leading case did. The 1984 rules require that the taxpayer identify the replacement property within 45 days after the disposition and close on the replacement property and close within 180 days after the disposition.