Virginia Code 13.1-697: Authority to indemnify.
A. Except as provided in subsection D, a corporation may indemnify an individual who is a party to a proceeding because the individual is or was a director against liability incurred in the proceeding if:
Terms Used In Virginia Code 13.1-697
- 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: includes any corporation and any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction. See Virginia Code 13.1-696
- Employee: includes , unless otherwise provided in the bylaws, an officer but not a director. See Virginia Code 13.1-603
- Expenses: means reasonable expenses of any kind that are incurred in connection with a matter. See Virginia Code 13.1-603
- 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. See Virginia Code 13.1-603
- Liability: means the obligation to pay a judgment, settlement, penalty, fine, including any excise tax assessed with respect to an employee benefit plan, or expenses incurred with respect to a proceeding. See Virginia Code 13.1-696
- 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.
- Official capacity: means (i) when used with respect to a director, the office of director in a corporation and (ii) when used with respect to an officer, as contemplated in § Virginia Code 13.1-696
- Party: means an individual who was, is, or is threatened to be made a defendant or respondent in a proceeding. See Virginia Code 13.1-696
- 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: means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative and whether formal or informal. See Virginia Code 13.1-696
- 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.
1. The director:
a. Conducted himself in good faith; and
b. 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; or
2. The director engaged in conduct for which broader indemnification has been made permissible or obligatory as authorized by subsection C of § 13.1-704.
B. A director’s conduct with respect to an employee benefit plan for a purpose he believed to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subdivision A 1 b (2).
C. The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director did not meet the relevant standard of conduct described in this section.
D. Unless ordered by a court under subsection C of § 13.1-700.1 or broader indemnification has been made permissible or obligatory as authorized by subsection C of § 13.1-704, a corporation may not indemnify a director under this section:
1. In connection with a proceeding by or in the right of the corporation except for expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard under subsection A; or
2. In connection with any other proceeding charging improper personal benefit to the director, 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.
Code 1950, § 13.1-3.1; 1968, c. 570; 1975, c. 500; 1979, c. 99; 1985, c. 522; 2005, c. 765; 2019, c. 734.