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.
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.