As a director of a company, you are tasked with making important decisions that can greatly impact the success of the business. However, with that responsibility also comes the risk of potential legal action being taken against you for any mistakes or misconduct that may occur. To protect directors from these risks, many companies have implemented director indemnity agreements.
A director indemnity agreement is a legal document that outlines the terms of indemnity that a company is willing to provide for its directors in the event of legal action being taken against them. This agreement ensures that directors are protected from personal liability for any actions taken on behalf of the company, as long as those actions were taken in good faith and in the best interests of the company.
If you are a director of a company, it is important to have a solid indemnity agreement in place to protect yourself from any potential legal risks. Here is an example of a director indemnity agreement:
[COMPANY NAME]
DIRECTOR INDEMNITY AGREEMENT
This Director Indemnity Agreement (the “Agreement”) is made on [DATE] between [COMPANY NAME] (the “Company”) and [DIRECTOR NAME] (the “Director”).
WHEREAS, the Director is willing to serve as a member of the board of directors of the Company (the “Board”) and to perform the duties of such office; and
WHEREAS, the Company desires to indemnify the Director to the fullest extent permitted by law against any liability arising from the performance of the Director’s duties as a member of the Board;
NOW, THEREFORE, the parties hereto agree as follows:
1. Indemnification. The Company shall indemnify the Director to the fullest extent permitted by law against any and all expenses, including attorneys’ fees, judgments, fines, penalties, and amounts paid in settlement, arising from any claim, demand, action, suit, or proceeding made or brought against the Director by reason of the fact that the Director is or was a member of the Board or an officer of the Company.
2. Standard of Conduct. The Company’s obligation to indemnify the Director shall be subject to the Director having acted in good faith and in a manner the Director reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, the Director had no reasonable cause to believe the conduct was unlawful.
3. Advance of Expenses. The Company shall advance to the Director all expenses incurred in defending any action or proceeding for which indemnification is required under this Agreement, subject to the Director’s undertaking to repay such advances if it is determined that the Director is not entitled to indemnification.
4. Scope of Agreement. This Agreement shall apply to any and all claims against the Director that arose prior to or after the execution of this Agreement, but shall not apply to any claim or proceeding initiated by the Director against the Company or any of its affiliates.
5. Term of Agreement. This Agreement shall continue in effect for so long as the Director is a member of the Board or an officer of the Company, and shall continue in effect after the Director ceases to be a member of the Board or an officer of the Company with respect to any claim or proceeding arising from the Director’s service as a member of the Board or an officer of the Company.
6. Severability. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable by any court of competent jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of [STATE].
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
[COMPANY NAME]
By: _________________________________
Title: ________________________________
[DIRECTOR NAME]
By: _________________________________
Title: ________________________________
As a director, it is important to carefully review and understand the terms of any indemnity agreement before signing it. If you have any questions or concerns, you should consult with legal counsel to ensure that your interests are protected.