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Corporations • Directors and Officers
CORP#035
Legal Definition
No. A corporation may never indemnify a director or officer who is held liable to their own corporation.
Plain English Explanation
When a director or officer gets sued while performing their job, they will usually ask the company to indemnify them for the costs related to the lawsuit, meaning they will ask the company to pay for the attorney, judgment, etc. However, what happens if a director or officer does something so stupid that the company they work for sues them and wins? It would be silly to expect the company to cover those costs after they just got done suing them, and so they don't.
In other words, indemnification doesn't apply to the costs associated with lawsuits arising from a director or officer's own company based on their liability to the company, if they lose and are held liable.
In other words, indemnification doesn't apply to the costs associated with lawsuits arising from a director or officer's own company based on their liability to the company, if they lose and are held liable.
Related Concepts
Can a corporation indemnify an officer or director who successfully defends themselves against a lawsuit from another party?
How can a director defend against a claim that they breached their duty of loyalty?
What are some common examples of permissive indemnification?
What are the statutory requirements of board of directors meetings?
What are the statutory requirements of directors?
What duties do directors have to the corporation and shareholders?
What duties do officers have to the corporation and shareholders?
What is the business judgment rule?
What is the duty of care?
What is the duty of loyalty?
What is the duty to disclose?
What is the duty to manage?
When do officers and directors often seek indemnification?
Who decides whether a corporation will indemnify a director or officer?
