What Protections Are Available for Officers, Directors, and Shareholders in a Closely Held Corporation?
Insurance for Directors and Officers and indemnification of Directors and Officers for all but the most serious and willful errors is available.
How to: Incorporating Insurance for Directors and Officers
Incorporation documents can spell out the extent and conditions for the company to pay back officers and/or directors for any losses to them personally for their action on behalf of the corporation. These conditions must be properly written into the articles of organization and/or by-laws. The “new” incorporation law effective July 1, 2004 has language spelling out the extent of “permissible indemnification,” of directors for their actions representing corporations. Under Section 8.52, a corporation must indemnify any director who is “wholly successful” in defending litigation. This very limited mandatory protection, among others, is good reasons for a corporate “legal audit”, particularly if you have not brought your previously set up corporation in line with the new law.