Legal Question in Business Law in California

Due to section 145(f) of Delaware General Corporation Law, the retroactive amendment of the indemnification clause has limits. How about in California?


Asked on 6/09/11, 2:54 pm

3 Answers from Attorneys

California comes at it a bit differently. It has provisions governing when a corporation MAY indemnify an officer or director, on an ad hoc basis, and then provides that anything in the articles, by-laws, etc. that calls for the corporation to indemnify is invalid if it is inconsistent with the law governing when ad hoc indemnification (e.g., by board resolution regarding a particular case). It also requires that, even where there is an indemnity agreement or provision in a contract, by-laws, etc., the board must make a determination that indemnification in a particular case is consistent with the indemnity provisions of the code. Take a look at Corporations Code section 9246, paragraphs (e) and (g) in particular.

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Answered on 6/09/11, 3:32 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Corporations Code section 317 covers the indemnification of corporate agents, including directors, officers and employees. It is structured somewhat differently than the Delaware law, so if you are a potentially-indemnified person and sufficiently interested, it would be worth your while to look up and read the entire (somewhat lengthy) text of 317 to see how it works.

317(d) seems to give an agent who prevails on the merits a right to indemnification, and buried in 317(g) are provisions that the right to indemnity shall continue to inure to a former agent and to the agent's heirs and successors.

California corporate bylaws often contain provisions that the corporation shall indemnify its directors and officers to the full extent permitted by Corporations Code section 317.

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Answered on 6/09/11, 3:35 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Corporations Code section 9246, mentioned by Mr. McCormick, is part of the nonprofit religious corporations law. Assuming you are referring to a general-purpose for-profit corporation, you want to refer to 317, not 9246.

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Answered on 6/09/11, 4:03 pm


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