|
Article C: Exemption, Indemnification and Insurance
|
|
|
258. (a) A company may not exempt an office holder
from liability for breach of his fiduciary duty towards it.
|
Authority of company to grant
|
|
(b) A company may exempt
an office holder from liability for breach of his duty of care towards it only
in accordance with the provisions of this chapter.
(c) A company may
indemnify or insure the liability of an office holder only in accordance with
the provisions of this Chapter.
|
exemption, indemnification and insurance
|
|
259. A company may exempt in advance an office
holder from liability in whole or in part, for damage flowing from breach of his
duty of care towards it, if a provision to that effect is laid down in the
articles of association.
|
Authorization to grant exemption
|
|
260. (a) A company may, if one of the provisions
specified in subsection (b) is laid down in the articles of association,
indemnify an office holder for debts or expenses as specified in paragraphs (1)
and (2) imposed upon such office holder due to an act done by virtue of his
being an office holder of the company:
1) a financial liability
imposed upon him for the benefit of another person pursuant to a judgment,
including a judgment given in the matter of a compromise or an arbitral award
approved by the court;
2) reasonable litigation
expenses, including attorney’s fees, incurred by the office holder or charged to
him by the court, in a proceeding filed against him by or on behalf of the
company or by any other person, or for a criminal charge from which he was
acquitted or for a criminal charge in which he was found guilty of an offense
not requiring proof of criminal intent.
(b) A provision in the
articles of association regarding indemnity may be one of the following:
1) a provision permitting
the company to give an undertaking in advance to indemnify its office holder,
provided that such undertaking be limited to types of events that in the opinion
of the board of directors can be foreseen at the time of granting the
undertaking to indemnify, and to a sum determined by the board of directors as
reasonable in the circumstances of the case (hereinafter an “indemnity
undertaking”);
2) a provision permitting
the company to indemnify its office holder ex post facto (hereinafter
“authorization for indemnity”).
|
Permission regarding indemnity
|
|
261. A company may, if an appropriate provision has
been laid down in the articles of association, enter into a contract to insure
the liability of an office holder therein for obligation imposed upon him due to
an act performed by him by virtue of his being an office holder, in any of the
following instances:
(1) breach of duty of
care towards the company or towards any other person;
(2) breach of fiduciary
duty towards the company, provided that the office holder acted in good faith
and had reasonable foundation for presuming that the act would not harm the good
of the company;
(3) a financial liability
imposed upon him for the benefit of another person.
|
Liability insurance
|
|
262. (a) In a private
company the shares of which are divided into classes, the resolution to include
a provision in the articles of association regarding an exemption or indemnity
shall require the approval of a class meeting in addition to the approval of the
general meeting.
(b) In a public company
in which an office holder is a holder of control as defined in section 268, the
resolution of the general meeting to include a provision in the articles of
association regarding an exemption, indemnity or insurance shall require the
approval of shareholders who do not have personal interests in the approval of
the resolution, as required for an extraordinary transaction, pursuant to the
provisions of section 275(3)(a), in addition to the majority required for
alteration of the articles of association.
|
Alteration of articles of association
|
|
263. Neither a provision of the articles of association permitting the
company to enter into a contract to insure the liability of an office
holder, nor a provision in the articles of association or a resolution
of the board of directors permitting the indemnification of an office
holder, nor a provision in the articles of association exempting an
office holder from liability towards the company shall be valid, where
such insurance, indemnification or exemption relates to one of the
following:
(1) breach of fiduciary
duty, other than as provided in section 261(3);
(2) breach of a duty of
care committed intentionally or recklessly;
(3) an act done with
intent to make unlawful personal profit;
(4) a fine or forfeit
imposed upon such office holder.
|
Invalid provisions |
|
264. (a) A provision in the articles of association
or in a contract or stipulated in any other manner purporting to contract out of
the provisions of this article, directly or indirectly, shall be invalid.
(b) An undertaking to
indemnify or to insure the liability of an office holder due to the breach of a
fiduciary duty towards the company shall not be valid, nor shall an office
holder accept, directly or indirectly, such an undertaking; receiving such an
undertaking shall constitute a breach of fiduciary duty.
|
No contracting out
|
