What is a California Indemnification Agreement between Corporation and its Current and Future Directors? In California, an indemnification agreement is a legal contract that provides financial protection and reimbursement to directors of a corporation for expenses and liabilities incurred as a result of their duties and responsibilities. This agreement serves as a safeguard for directors, assuring them that they will not personally bear the burden of legal costs or damages related to their corporate activities. The California Indemnification Agreement is an essential tool that helps attract and retain talented directors, as it offers them peace of mind and protection against potential legal risks while serving on a corporation's board. This agreement demonstrates the corporation's commitment to supporting its directors and minimizing their personal liability. Key Elements of a California Indemnification Agreement: 1. Scope of Indemnification: The agreement defines the extent to which the corporation will indemnify its current and future directors. This includes expenses, liabilities, judgments, fines, and settlements incurred during the course of their board service. 2. Advancement of Expenses: The agreement typically allows directors to be reimbursed for legal fees, costs, and expenses as they are incurred, relieving them of any financial burden during legal proceedings. 3. Standard of Conduct: The agreement may establish a standard of conduct that directors must follow to be eligible for indemnification. Directors who act in good faith, reasonably believe their actions are in the corporation's best interests, and do not engage in misconduct may be entitled to indemnification. 4. Procedures for Indemnification: The agreement outlines the procedures for directors to request indemnification and the corporation's obligation to make such payments. This includes the provision of supporting documentation and the board's approval process. Types of California Indemnification Agreements: 1. Agreements for Current Directors: This type of agreement applies to the existing board members of a corporation and is meant to provide them with indemnification coverage for any ongoing or future legal proceedings that may arise during their term of service. 2. Agreements for Future Directors: This type of agreement is designed for individuals who will be joining the board in the future. It assures prospective directors that they will also be protected from personal liability while serving on the board, encouraging them to accept the position. By implementing a California Indemnification Agreement, corporations can offer a level of protection that attracts skilled directors and ensures their commitment to the corporation's success. It is important for corporations to consult with legal professionals when drafting these agreements to ensure they comply with the specific requirements of California state laws and adequately protect the interests of both the corporation and its directors.
California Indemnification Agreement between corporation and its current and future directors
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Section 145(b) empowers a corporation to indemnify its directors against expenses incurred in connection with the defense or settlement of an action brought by or in the right of the corporation, subject to the standard of conduct determination, and except that no indemnification may be made as to any claim to which ...
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 ...
Many company constitutions set out rights of indemnity for directors, and often also include provision for directors and officers (D&O) insurance. Alternatively, they may simply provide that the company may indemnify directors. The deed of indemnity is an agreement between the company and a director.
Indemnification is often very broad, often extending ?to the maximum extent permitted by law?, whereas D&O insurance polices contain numerous exclusions and conditions. In addition, D&O insurance must be renewed each year, with possible changes in terms and conditions.
In the indemnification agreement, the corporation agrees to reimburse the director or officer for losses incurred in legal proceedings related to their service as a corporate director or officer to the maximum extent permitted by law.
A director and officer indemnification agreement is a contract that allows executives to protect themselves from claims made against them while performing job. Indemnification means that in the event a lawsuit is filed against a company, the indemnified party is "held harmless" from claims.
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.
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.