Director's indemnification Agreement Regarding a Publicly Held Corporation

• Category: Corporations - Officers and Employees
• State: Multi-State
• Control #: US-0853BG
• Format: Word; Rich Text

Description

Most companies' corporate bylaws or articles of incorporation contain indemnification and advancement provisions. While these provisions provide important protection for corporate executives if the individuals become the target of claims relating to their action undertaken in their corporate capacities, these provisions alone may not be provide sufficient protection. The provisions in the corporate documents may not address all of the issues that can arise and may not provide sufficient protection for the individuals when there are indemnification or advancement disputes and may not protect individuals from changes to corporate bylaws after the individuals have left the company. For these and many other reasons, well-advised corporate executives will want to have their rights memorialized in a separate, written indemnification and advancement agreement with the company.
The most important reason for individuals to seek to put a written indemnification agreement in place is that written agreements typically provide more comprehensive protection than corporate bylaws or statutory provisions. Most bylaws, for example, provide for permissive indemnification, whereas most written agreements are written on a mandatory basis. Moreover, the rights enumerated in the agreement are enforceable obligations that cannot be amended or terminated without the individual executive's agreement.
Another reason that directors and officers will seek to put contractual indemnification agreements in place is so that if the individuals are the target of claims after they have left the company, they can assert their rights of indemnification notwithstanding the arrival of new management. The contractual indemnification provides them an extra measure of protection and some level of assurance that their rights will be protected if claims arise after they have left the company.

A Director's Indemnification Agreement Regarding a Publicly Held Corporation is a formal agreement between a publicly held corporation and a director of the company. The agreement outlines the rights and obligations of the director in the event of claims or litigation against the company. It is typically used as a way to protect the director from financial losses incurred if they are sued by another party. The agreement will typically include the following elements: 1. Definition of the Director’s duties and responsibilities. 2. Indemnification of the Director for any losses incurred as a result of a breach of the duties and responsibilities. 3. Limitations on the amount of indemnification the Director can receive. 4. Liability of the Director for any breach of duty or wrongful conduct. 5. Description of the Director’s rights and obligations in case of litigation. 6. Requirement for the Director to provide notice before taking any legal action against the company. There are two main types of Director's Indemnification Agreement Regarding a Publicly Held Corporation: 1. Standard Indemnification Agreement: This type of agreement outlines the basic rights and responsibilities of the Director and provides indemnification for any losses incurred due to a breach of the Director’s duties or wrongful conduct. 2. Enhanced Indemnification Agreement: This type of agreement goes beyond the basic rights and responsibilities of the Director and provides additional protection against claims and litigation. It may include clauses that limit the amount of indemnification the Director can receive, and clauses that require the Director to provide notice before taking any legal action against the company.