X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Corporate indemnification and advancement of legal expenses are distinct rights, with advancement being a narrower and more provisional contractual benefit. By relieving corporate officials from the personal financial burden of paying ongoing expenses arising from lawsuits and investigations, advancement is widely recognized as an important corollary to indemnification as an inducement to secure able individuals to corporate service.

The decision by a corporation to grant advancement of expenses incurred by an officer or director (and sometimes other employees and agents) in defending civil, criminal, administrative or investigative actions is essentially a decision to advance credit to corporate officials because amounts advanced to them must be repaid if it is subsequently determined that they are not entitled to be indemnified. But mandatory and unconditional advancement agreements can engender what one court called a “maddening” outcome: a corporate obligation to fund the legal expenses of an individual the board believes has acted against the interests of the corporation or even criminally.[FOOTNOTE 1] As recent decisions illustrate, it is worth pausing to consider the implications of mandatory advancement rights, as opposed to advancement grants in which the board retains some discretion to exercise business judgment on whether and how to condition the advancement of credit to corporate officials.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.