Indemnification of officers and directors

Question 1

Indemnification of officers and directors

Answer 1

1. indemnification from corporation in suits by or on behalf of the corporation in her capacity as an officer or director
   i. for costs, attorneys’ fees, fines, etc.
   ii. for judgment or settlement in litigation

Question 2

No indemnification

Answer 2

i. if director officer was held liable to the corporation

ii. if director officer was held to have received an improper personal benefit

Question 3

Mandatory indemnification

Answer 3

i. if director or officer prevailed on the merits (including SoL)

Question 4

Permissive indemnification

Answer 4

i. anything not satisfying the above
ii. ex. if case settled

iii. requirement: directors must show they acted in good faith and with the reasonable belief that her actions were in the company’s best interests
a. must show director met the duty of loyalty
b. disinterested directors, disinterested SHs, or disinterested legal counsel makes the determination

Question 5

Court order

Answer 5

the court can order reimbursement if justified under the circumstances

i. indemnification rule does not apply to the court

ii. but if director was held
liable to the corporation, court-ordered indemnification is limited to costs and attorneys’ fees (cannot include the judgment)

Question 6

Exculpation provision

Answer 6

articles of incorporation can eliminate director liability to the corporation for damages

i. but not for intentional misconduct, usurping corporate opportunities, unlawful distributions, or improper personal benefit
ii. circuit split on if exculpation provisions apply to officers