California Directors and Officers Indemnity Trust is a specialized form of insurance that is designed to protect the directors and officers of corporations from legal expenses and potential liabilities arising from their roles and responsibilities. The main purpose of the California Directors and Officers Indemnity Trust is to provide financial protection to directors and officers in situations where they may face legal actions, claims, or investigations due to alleged wrongful acts, such as breaches of fiduciary duty, negligence, or non-compliance with laws and regulations. This trust is specifically tailored for California-based companies and adheres to the legal framework and regulations set forth by the state. It provides coverage for legal defense costs, settlements, and judgments that might arise from lawsuits brought against directors and officers. Some key features of the California Directors and Officers Indemnity Trust include: 1. Comprehensive coverage: The trust covers a wide range of claims, including but not limited to shareholder lawsuits, employment practices disputes, securities law violations, misrepresentation claims, and conflicts of interest. 2. Legal expense reimbursement: It reimburses directors and officers for legal fees incurred in defending against covered claims. This can include attorney fees, court costs, expert witness charges, and other related expenses. 3. Entity coverage: The trust may also extend coverage to the entity itself, providing protection for the company in cases where it might be legally obligated to indemnify its directors and officers. 4. Options for additional coverage: Companies can purchase optional coverage extensions, such as Side-A coverage, which provides dedicated protection for individual directors and officers, even if the company is unable to indemnify them. Different types of California Directors and Officers Indemnity Trust may include: 1. Basic Trust: This type of trust provides essential coverage for directors and officers against a range of common liabilities. It may often be a requirement for companies to have this level of coverage. 2. Enhanced Trust: This type of trust offers broader coverage and higher policy limits compared to the basic trust. It provides more extensive protection and may be suitable for companies with higher levels of risk or larger boards of directors. 3. Nonprofit Trust: This specific trust caters to nonprofit organizations, including charities, foundations, and associations. It addresses the unique risks associated with serving on nonprofit boards, such as potential donor suits, fundraising litigation, and compliance issues. In summary, California Directors and Officers Indemnity Trust is a specialized form of insurance that safeguards directors and officers of California-based corporations by providing financial protection against legal expenses and liabilities. This trust offers coverage for a wide range of claims and can be tailored to suit different types of companies, such as for-profit and nonprofit organizations.
California Directors and Officers Indemnity Trust
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FAQ
Insurance ? The indemnification agreement typically will require that the company provide D&O liability insurance that protects the indemnitee to the same extent as the most favorably insured of the company's and its affiliates' current directors and officers.
Indemnification refers to the right to have a company reimburse current or former directors or officers for all losses, including legal fees, incurred in connection with litigation arising from actions taken in service to the company or at the company's direction.
Insured parties: Directors Liability Insurance protects a company's directors and officers and the company in case they get indicted over the decisions taken by them to manage the business. On the other hand, professional liability insurance protects businesses and individuals that provide professional services.
Indemnification, also referred to as indemnity, is an undertaking by one party (the indemnifying party) to compensate the other party (the indemnified party) for certain costs and expenses, typically stemming from third-party claims.
Indemnification Agreement to secure against loss or damage; to give security for the reimbursement of a person in case of an anticipated loss falling upon him. Also to make good; to compensate; to make reimbursement to one of a loss already incurred by him.
Section 145(c)(1) provides that to the extent a director has been successful on the merits or otherwise in defense of any action, suit, or proceeding referenced in Section 145(a) or Section 145(b), the director shall be indemnified against expenses actually and reasonably incurred by the director in connection ...
Under Section 317, subdivision (b), California corporations have the power to indemnify any person who was or is a party or is threatened to be made a party (other than an action by or in the right of the corporation to procure a judgment in its favor) by reason of the fact that the person is or was an agent of the ...
A company may, however, lend money to a director to fund the director's defence costs. Frequently, an indemnity will include a provision under which the company agrees to lend the director the amounts necessary to fund the director's defence costs.