California Indemnity Agreement between Corporation and Directors and/or Officers: A Comprehensive Overview Keywords: California, indemnity agreement, corporation, directors, officers Introduction to California Indemnity Agreement In California, an indemnity agreement serves as a legal contract between a corporation and its directors and/or officers, offering financial protection and indemnification to these individuals. This agreement is designed to limit personal liability, providing assurance to directors and officers that they will be defended and reimbursed for legal expenses incurred while performing their duties on behalf of the corporation. The California Indemnity Agreement is governed by the California Corporations Code and must adhere to its specific provisions. Types of California Indemnity Agreements 1. Standard Indemnification Agreement: This type of agreement provides directors and officers with indemnification coverage for any expenses, including legal fees, judgments, fines, and settlements, arising from claims, suits, or proceedings related to their official duties. It ensures that directors and officers will not suffer financial losses due to their actions taken on behalf of the corporation. 2. Advancement of Expenses Agreement: This agreement ensures that directors and officers have access to immediate funds to cover legal expenses incurred during the course of their duties. It grants the corporation's commitment to advancing reasonable costs and charges, such as attorney fees, court fees, and related expenses, before the final resolution of any legal matter. 3. Indemnity and Insurance Agreement: This agreement combines both indemnification and insurance coverage for directors and officers. It provides an additional layer of protection by securing insurance policies, commonly known as Directors and Officers (D&O) insurance, to further safeguard against potential liability. Key Provisions of a California Indemnity Agreement 1. Scope of Indemnification: The agreement explicitly outlines the scope of indemnification provided by the corporation. It defines the types of claims, suits, or proceedings covered, ensuring that directors and officers are protected against liabilities arising from their official capacities. 2. Standard of Conduct: It establishes the standard of conduct expected from directors and officers while performing their duties. Compliance with applicable laws, regulations, and the corporation's bylaws is typically emphasized. 3. Procedures for Seeking Indemnification: The agreement outlines the procedures to be followed by directors and officers when seeking indemnification, including notice requirements and documentation submission processes. This ensures that the corporation has the necessary information to evaluate claims promptly. 4. Advancement of Expenses: If an advancement agreement is included, it specifies the conditions and limitations under which director and officer expenses will be advanced by the corporation. 5. Defense and Settlement: The agreement addresses the corporation's duty to provide legal defense to directors and officers. It also sets guidelines for settlement negotiations, ensuring directors and officers have a say in the decision-making process. 6. Non-Exclusivity and Survival Clause: The agreement may include a clause emphasizing that the indemnification provided is non-exclusive, meaning directors and officers are not limited to the agreement alone for their protection. Furthermore, it specifies that the indemnification provisions will continue to apply, even if the director or officer is no longer serving in their capacity. Conclusion California Indemnity Agreements between corporations and directors and/or officers are crucial documents that establish the understanding of financial protection and reimbursement between parties. These agreements protect directors and officers from personal liability, offering assurance and supporting their decision-making while acting on behalf of the corporation. Various types of agreements, including standard indemnification agreements, advancement of expenses agreements, and indemnity and insurance agreements, cater to different indemnification needs.
California Indemnity Agreement between corporation and directors and / or officers
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Although similar to a hold harmless agreement, an indemnity agreement is an arrangement whereby one party agrees to pay the other party for any damages regardless of who is at fault.
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.
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 ...
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.
The indemnity may cover liability incurred by the director to any person other than the company or an associated company. This may include both legal costs and the financial costs of an adverse judgement.
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.
Aside from difficulties associated with the clarity of meaning and operation of such clauses, two common problems encountered are: the party giving the indemnity does not have the financial capacity to fund the loss; or. the party giving the indemnity is exposed to an uninsured liability.
Indemnification is protection against loss or damage. When a contract is breached, the parties look to its indemnity clause to determine the compensation due to the aggrieved party by the nonperformer. The point is to restore the damaged party to where they would have been if not for the nonperformance.