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Corporations • Directors and Officers
CORP#036
Legal Definition
Yes. A corporation must indemnify a director or officer where they successfully defend themselves in a lawsuit related to their role within the corporation.
Plain English Explanation
In other cards, you'll learn about circumstances where a corporation has the discretion to indemnify one of its directors or officers if they want to. But there is one circumstance where corporations are legally required to pay for the costs associated with litigation. That circumstance is anytime one of their directors or officers is sued in relation to their job and wins.
Hypothetical
Hypo 1: Bob is a director at HypoCorp. Amy is a shareholder. Amy feels like Bob has done a horrible job and hurt the profitability of HypoCorp, so Amy sues Bob personally. Bob is forced to pay court fees and hire an attorney to defend himself. The court rules in Bob's favor, finding Amy's claims meritless. Result: HypoCorp must indemnify Bob and pay all the reasonable costs associated with defending himself from Amy's lawsuit.
Related Concepts
Can a corporation indemnify an officer or director who is held liable to their own corporation?
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?
