Kentucky Statutes 271B.8-510 – Authority to indemnify
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(1) Except as provided in subsection (4) of this section, a corporation may indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if:
(a) He conducted himself in good faith; and
(b) He honestly believed:
1. In the case of conduct in his official capacity with the corporation, that his conduct was in its best interests; and
2. In all other cases, that his conduct was at least not opposed to its best interests; and
(c) In the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful.
(2) A director’s conduct with respect to an employee benefit plan for a purpose he reasonably believed to be in the interests of the participants in and beneficiaries of the plan shall be conduct that satisfies the requirement of subsection (1)(b)2. of this section.
(3) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not be, of itself, determinative that the director did not meet the standard of conduct described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or
(b) In connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him.
(5) Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation shall be limited to reasonable expenses incurred in connection with the proceeding.
Effective: June 24, 2015
History: Amended 2015 Ky. Acts ch. 34, sec. 8, effective June 24, 2015. — Created
1988 Ky. Acts ch. 23, sec. 95, effective January 1, 1989.
(a) He conducted himself in good faith; and
Terms Used In Kentucky Statutes 271B.8-510
- Action: includes all proceedings in any court of this state. See Kentucky Statutes 446.010
- Conviction: A judgement of guilt against a criminal defendant.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Corporation: may extend and be applied to any corporation, company, partnership, joint stock company, or association. See Kentucky Statutes 446.010
- Employee: includes an officer but not a director. See Kentucky Statutes 271B.1-400
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- Individual: means a natural person and includes the estate of an incompetent or deceased individual. See Kentucky Statutes 271B.1-400
- Nolo contendere: No contest-has the same effect as a plea of guilty, as far as the criminal sentence is concerned, but may not be considered as an admission of guilt for any other purpose.
- Plea: In a criminal case, the defendant's statement pleading "guilty" or "not guilty" in answer to the charges, a declaration made in open court.
- Proceeding: includes civil suit and criminal, administrative, and investigatory action. See Kentucky Statutes 271B.1-400
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
(b) He honestly believed:
1. In the case of conduct in his official capacity with the corporation, that his conduct was in its best interests; and
2. In all other cases, that his conduct was at least not opposed to its best interests; and
(c) In the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful.
(2) A director’s conduct with respect to an employee benefit plan for a purpose he reasonably believed to be in the interests of the participants in and beneficiaries of the plan shall be conduct that satisfies the requirement of subsection (1)(b)2. of this section.
(3) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not be, of itself, determinative that the director did not meet the standard of conduct described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or
(b) In connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him.
(5) Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation shall be limited to reasonable expenses incurred in connection with the proceeding.
Effective: June 24, 2015
History: Amended 2015 Ky. Acts ch. 34, sec. 8, effective June 24, 2015. — Created
1988 Ky. Acts ch. 23, sec. 95, effective January 1, 1989.