This review list is offered to educate you about the document and to aid you in preparing it. Director indemnification is a right that all directors are entitled to in exchange for their time, energy, money, and good reputation being invested in your company. In today’s litigious environment, this indemnification is a straightforward and reasonable approach to safeguard them, their assets, and their peace of mind while supporting your organization.
Director’s liability insurance is available but is often relatively costly in today’s world. We urge that you utilize this document proactively to demonstrate to your director(s), especially internal ones, that you care about their problems just as much as you do about your company’s.
Sign several copies, one for each signing director, one for the corporate minute book, and one for the company’s director or directors’ file.
Director Indemnity Agreement
Director Indemnity Agreement
In consideration of the Director acting as a director of _____________(“Corporation”), the Corporation agrees:
1. To indemnify and save harmless the Director from and against all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by the Director in respect of any civil, criminal or administrative action or proceeding to which the Director is made a party by reason of the Director being or having been a director or officer of the Corporation; and
2. To undertake to obtain the approval of a court, if required, to indemnify and save harmless the Director from and against all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by the Director in respect of any action by or behalf of the Corporation to procure a judgment in its favor to which the Director is made a party by reason of being or having been a director or officer of the Corporation, except where the Director has failed to act honestly and in good faith with a view to the best interests of the Corporation or, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, where the Director did not have reasonable grounds for believing that his conduct was lawful.
This Indemnity shall inure to the benefit of the Director and his heirs, executors, administrators and other legal representatives and shall be binding upon the Corporation and its respective heirs, executors, successors and assigns.
_______________________ ________________________
CEO & President Director:_______________________
Date
Director Indemnity Agreement
Review ListThis review list is provided to inform you about the document in question and assist you in its preparation. Director indemnity is a right all directors deserve for devoting their time, energy, money, and good name to your organization. In this litigious world, this indemnity is a simple and fair way to protect them, their assets, and their peace of mind, while assisting your enterprise.
Director’s liability insurance is available but tends to be expensive in this day and age. We recommend you use this document pro-actively to show your director (s), including inside ones, that you care about their concerns as you wish them to care about those of your company.
Sign multiple copies with an original to be retained by each signing director, one to be held with the corporate minute book, and another in the director or directors’ file at the company.
Frequently Asked Questions
What is a Director Indemnity Agreement?
A Director Indemnity Agreement is a contract in which a corporation agrees to indemnify and save harmless a director from certain costs, charges, and expenses. These expenses include amounts paid to settle an action or satisfy a judgment reasonably incurred by the director in respect of civil, criminal, or administrative actions or proceedings. The agreement applies when the director is made a party by reason of being or having been a director or officer of the corporation.
What expenses does a Director Indemnity Agreement cover?
The agreement covers all costs, charges, and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by the director. This applies to civil, criminal, or administrative actions or proceedings to which the director is made a party. The coverage is triggered by the director's role as a director or officer of the corporation.
Does a Director Indemnity Agreement cover actions brought by the corporation itself?
Yes, but with a condition. The corporation undertakes to obtain court approval, if required, to indemnify the director for costs, charges, and expenses in respect of an action by or on behalf of the corporation to procure a judgment in its favor. This exception applies where the director has failed to act honestly and in good faith with a view to the best interests of the corporation.
What is the standard of conduct required for indemnification under a Director Indemnity Agreement?
The director must have acted honestly and in good faith with a view to the best interests of the corporation. If the director failed to meet this standard, indemnification is not available, particularly in actions by or on behalf of the corporation to procure a judgment in its favor. The agreement explicitly excludes indemnification in such cases.
When is court approval required for indemnification under a Director Indemnity Agreement?
Court approval is required, if necessary, for indemnification in respect of an action by or on behalf of the corporation to procure a judgment in its favor. The corporation undertakes to obtain such approval. This is distinct from other actions where court approval may not be required.
Who is covered by a Director Indemnity Agreement?
The agreement covers a person acting as a director of the corporation. It also extends to situations where the person is or has been a director or officer of the corporation. The indemnity applies when the person is made a party to an action or proceeding by reason of that role.
What types of legal proceedings are covered by a Director Indemnity Agreement?
The agreement covers civil, criminal, and administrative actions or proceedings. It applies when the director is made a party to such proceedings by reason of being or having been a director or officer. The coverage includes costs, charges, and expenses reasonably incurred in connection with these proceedings.
Are there any exclusions to indemnification in a Director Indemnity Agreement?
Yes, indemnification is excluded where the director has failed to act honestly and in good faith with a view to the best interests of the corporation. This exclusion specifically applies in the context of an action by or on behalf of the corporation to procure a judgment in its favor. The agreement does not provide indemnification in such circumstances.
What does 'save harmless' mean in a Director Indemnity Agreement?
The phrase 'save harmless' means that the corporation agrees to protect the director from financial loss. Together with indemnify, it signifies that the corporation will cover costs, charges, and expenses as specified in the agreement. This ensures the director is not personally burdened by certain liabilities arising from their role.
Is a Director Indemnity Agreement the same as directors and officers insurance?
No, a Director Indemnity Agreement is a contract between the corporation and the director, whereas directors and officers insurance is a separate insurance policy. The agreement outlines the corporation's obligation to indemnify the director for certain costs and expenses. The article does not address insurance policies.
