Tennessee Indemnification of Corporate Director

• Category: Corporations - Officers and Employees
• State: Multi-State
• Control #: US-13374BG
• Format: Word; Rich Text

Description

Indemnification is where the company reimburses a director or officer for the attorneys' fees and costs, and potentially judgments, incurred in connection with claims arising out of the director's or officer's service to the company. Tennessee Indemnification of Corporate Director is a legal provision that aims to protect directors serving on the board of corporations registered in Tennessee. It provides a layer of financial security and reassurance to directors, allowing them to fulfill their duties without constant fear of personal liability. Under Tennessee law, there are two main types of indemnification available to corporate directors: 1. Mandatory Indemnification: Corporations are required to indemnify directors against litigation expenses, including attorney's fees, judgments, fines, and settlements if the director successfully defends a legal action related to their service for the corporation. This holds true even if the director is no longer serving on the board at the time the indemnification becomes necessary. 2. Permissive Indemnification: Corporations have the option to indemnify directors in other situations, even if they do not meet the requirements for mandatory indemnification. Permissive indemnification may occur when the director acted in good faith, believed their actions to be in the best interest of the corporation, and did not engage in willful misconduct or intentionally illegal activities. This type of indemnification is at the corporation's discretion. It is important to note that indemnification is not granted if a legal action or proceeding concludes that the director received improper personal financial benefit, willfully violated their duty of loyalty to the corporation, or acted in bad faith or recklessness. Indemnification does not cover any amount paid in settlements or judgments to the corporation itself. Directors should also be aware that under Tennessee law, they have the right to request advancement of expenses from the corporation before a final decision has been reached in legal proceedings. This advancement provides the director with immediate access to funds for legal fees and other expenses incurred during the case. Tennessee Indemnification of Corporate Director is a crucial component of attracting qualified individuals to serve on corporate boards in the state. It provides directors with the confidence to make informed decisions, participate actively in the corporation's operations, and contribute to its success without constantly worrying about personal liability. This indemnification system helps foster a business-friendly environment that encourages talented individuals to serve in leadership roles, ultimately benefiting the corporation and its shareholders.

Tennessee Indemnification of Corporate Director is a legal provision that aims to protect directors serving on the board of corporations registered in Tennessee. It provides a layer of financial security and reassurance to directors, allowing them to fulfill their duties without constant fear of personal liability. Under Tennessee law, there are two main types of indemnification available to corporate directors: 1. Mandatory Indemnification: Corporations are required to indemnify directors against litigation expenses, including attorney's fees, judgments, fines, and settlements if the director successfully defends a legal action related to their service for the corporation. This holds true even if the director is no longer serving on the board at the time the indemnification becomes necessary. 2. Permissive Indemnification: Corporations have the option to indemnify directors in other situations, even if they do not meet the requirements for mandatory indemnification. Permissive indemnification may occur when the director acted in good faith, believed their actions to be in the best interest of the corporation, and did not engage in willful misconduct or intentionally illegal activities. This type of indemnification is at the corporation's discretion. It is important to note that indemnification is not granted if a legal action or proceeding concludes that the director received improper personal financial benefit, willfully violated their duty of loyalty to the corporation, or acted in bad faith or recklessness. Indemnification does not cover any amount paid in settlements or judgments to the corporation itself. Directors should also be aware that under Tennessee law, they have the right to request advancement of expenses from the corporation before a final decision has been reached in legal proceedings. This advancement provides the director with immediate access to funds for legal fees and other expenses incurred during the case. Tennessee Indemnification of Corporate Director is a crucial component of attracting qualified individuals to serve on corporate boards in the state. It provides directors with the confidence to make informed decisions, participate actively in the corporation's operations, and contribute to its success without constantly worrying about personal liability. This indemnification system helps foster a business-friendly environment that encourages talented individuals to serve in leadership roles, ultimately benefiting the corporation and its shareholders.