Chapter 2: Formation, Administration and Dissolution of Companies
Part F: Governance of companies
s78: Indemnification and directors' insurance
- (3A) Subsection (3) does not apply to a private or personal liability company if-
- (a) a single individual is the sole shareholder and sole director of that company; or
- (b) two or more related individuals are the only shareholders of that company, and there are no directors of the company other than one or more of those individuals.
- (1) In this section, "director" includes a former director and an alternate director, and:
- (a) a prescribed officer; or
- (b) a person who is a member of a committee of a board of a company, or of the audit committee of a company,
- irrespective of whether or not the person is also a member of the company's board.
- (2) Subject to subsections (4) to (6), any provision of an agreement, the Memorandum of Incorporation or rules of a company, or a resolution adopted by a company, whether express or implied, is void to the extent that it directly or indirectly purports to:
- (a) relieve a director of:
- (i) a duty contemplated in section 75 or 76; or
- (ii) liability contemplated in section 77; or
- (b) negate, limit or restrict any legal consequences arising from an act or omission that constitutes willful misconduct or willful breach of trust on the part of the director.
- (3) Subject to subsection (3A), a company may not directly or indirectly pay any fine that may be imposed on a director of the company, or on a director of a related company, as a consequence of that director having been convicted of an offence, unless the conviction was based on strict liability.
- (4) Except to the extent that a company's Memorandum of Incorporation provides otherwise, the company:
- (a) may advance expenses to a director to defend litigation in any proceedings arising out of the director's service to the company; and
- (b) may directly or indirectly indemnify a director for expenses contemplated in paragraph (a), irrespective of whether it has advanced those expenses, if the proceedings:
- (i) are abandoned or exculpate the director; or
- (ii) arise in respect of any liability for which the company may indemnify the director, in terms of subsections (5) and (6).
- (5) Except to the extent that the Memorandum of Incorporation of a company provides otherwise, a company may indemnify a director in respect of any liability arising other than as contemplated in subsection (6).
- (6) A company may not indemnify a director in respect of:
- (a) any liability arising:
- (i) in terms of section 77(3)(a), (b) or (c); or
- (ii) from wilful misconduct or wilful breach of trust on the part of the director; or
- (b) any fine contemplated in subsection (3).
- (7) Except to the extent that the Memorandum of Incorporation of a company provides otherwise, a company may purchase insurance to protect:
- (a) a director against any liability or expenses for which the company is permitted to indemnify a director in accordance with subsection (5); or
- (b) the company against any contingency including, but not limited to:
- (i) any expenses:
- (aa) that the company is permitted to advance in accordance with subsection (4)(a); or
- (bb) for which the company is permitted to indemnify a director in accordance with subsection (4)(b); or
- (ii) any liability for which the company is permitted to indemnify a director in accordance with subsection (5).
- (8) A company is entitled to claim restitution from a director of the company or of a related company for any money paid directly or indirectly by the company to or on behalf of that director in any manner inconsistent with this section.
Related Sections
s75: Director's personal financial interests
s76: Standards of directors conduct
s77: Liability of directors and prescribed officers
Related Regulations
No related regulations.
Related Notes
No related note.
Related Forms
No related forms.