When Officers Must Indemnify The Corporation

by Allen Matkins
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Much attention is focused on the power of corporations to indemnify corporate officers and other agents.  In California, this is addressed by Corporations Code Section 317, which establishes the power to provide indemnification, and Section 204(a)(11) which allows corporations to include a provision in the articles authorizing indemnification in excess of that expressly permitted by Section 317.  To the extent that an officer is also an employee, she may be entitled to indemnification by virtue of Section 2802 of the California Labor Code.

Sometimes, however, the shoe is on the other foot and the corporation has a right to be indemnified by its officers.  Corporations Code Section 25505 is one example.  That statute provides that a corporation that is liable under the Corporate Securities Law has a right of indemnification against any of its principal executive officers, directors, and controlling persons whose willful violation of any provision of the CSL gave rise to the corporation’s liability.  The corporation must be on its toes because Section 25508 requires that an action to enforce indemnification must be brought before the expiration of one year after final judgement based upon the liability for which the right of indemnification exists.

Petition of Right

On today’s date in 1628, King Charles I consented (“Soit droit fait come est desire”) to the Petition of Right.  This petition foreshadowed some of the issues that led to our own revolution and Constitution.   You can read the entire petition here.  I’ve copied some of the key provisions below:

They doe therefore humblie pray your most Excellent Majestie, that no man hereafter be compelled to make or yeild any Guift Loane Benevolence Taxe or such like Charge without comon consent by Acte of Parliament, And that none be called to make aunswere or take such Oath or to give attendance or be confined or otherwise molested or disquieted concerning the same or for refusall thereof . . . And that your Majestie would be pleased to remove the said Souldiers and Mariners and that your people may not be soe burthened in tyme to come. And that the aforesaid Comissions for proceeding by Martiall Lawe may be revoked and annulled. And that hereafter no Comissions of like nature may issue forth to any person or persons whatsoever to be executed as aforesaid, lest by colour of them any of your Majesties Subjects be destroyed or put to death contrary to the Lawes and Franchise of the Land.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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