O.C.G.A. § 14-2-850 (2019)
Definitions
As used in this part, the term:
(1) ‘‘Corporation’’ includes any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.
(2) ‘‘Director’’ or ‘‘officer’’ means an individual who is or was a director or officer, respectively, of a corporation or who, while a director or officer of the corporation, is or was serving at the
CORPORATIONS & PARTNERSHIPS corporation’s request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity. A director or officer is considered to be serving an employee benefit plan at the corporation’s request if his or her duties to the corporation also impose duties on, or otherwise involve services by, the director or officer to the plan or to participants in or beneficiaries of the plan. Director or officer includes, unless the context otherwise requires, the estate or personal representative of a director or officer.
(3) ‘‘Disinterested director’’ means a director who at the time of a vote referred to in subsection (c) of Code Section 14-2-853 or a vote or selection referred to in subsection (b) or (c) of Code Section 14-2-855 or subsection (a) of Code Section 14-2-856 is not:
(A) A party to the proceeding; or
(B) An individual who is a party to a proceeding having a familial, financial, professional, or employment relationship with the director whose indemnification or advance for expenses is the subject of the decision being made with respect to the proceeding, which relationship would, in the circumstances, reasonably be expected to exert an influence on the director’s judgment when voting on the decision being made.
(4) ‘‘Expenses’’ includes counsel fees.
(5) ‘‘Liability’’ means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding.
(6) ‘‘Official capacity’’ means:
(A) When used with respect to a director, the office of director in a corporation; and
(B) When used with respect to an officer, as contemplated in Code Section 14-2-857, the office in a corporation held by the officer. Official capacity does not include service for any other domestic or foreign corporation or any partnership, joint venture, trust, employee benefit plan, or other entity.
(7) ‘‘Party’’ means an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding.
(8) ‘‘Proceeding’’ means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative and whether formal or informal.
History
(Code 1981, § 14-2-850, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1996, p. 1203, § 5.)
Annotations
Law reviews. - For article, ‘‘Corporate Governance in the Aftermath of the Insurance Crisis,’’ see 39 Emory L.J. 1155 (1990).
For review of 1996 corporation, partnership, and association legislation, see 13 Ga. St. U. L. Rev. 70.
COMMENT Source: Model Act, § 8.50. The definitions set forth in Section 14-2-850 apply to Part 5 and have no application elsewhere in the Code. Former law did not provide a set of definitions. A special definition of ‘‘corporation’’ is included in Part 5 to make it clear that predecessor entities that have been absorbed in mergers or other transactions are included within the definition. The approach of this subsection is similar to that of former § 14-2-156(i), as amended in 1975, which expressly covered successor corporations in business combinations. A special definition of ‘‘director’’ is included in Part 5 to make it clear that a person who is or was a director is covered by this part while serving at the corporation’s request in another enterprise. The purpose of this definition is to give directors the benefits of the protection of this part while serving at the corporation’s request in a responsible position in employee benefits plans, trade associations, nonprofit or charitable entities, foreign or domestic entities, and other kinds of profit or nonprofit ventures. This is consistent with former § 14-2-156(a). The only significant departure from former law is the addition of the second sentence of Section 14-2-850(2), which makes clear that a director who is serving as a fiduciary of an employee benefit plan is nevertheless viewed as acting as a director for purposes of this part. Former Georgia law authorized indemnification of officers, agents and employees. The Code provides for such authorization in Section The estate or personal representative of a director is entitled to the rights of indemnification possessed by the director himself. See the last sentence of Section 14-2-850(2). The phrase, ‘‘unless the context requires otherwise,’’ was added to make clear that the estate or personal representative did not have the right to participate in directoral decisions whether to grant indemnification authorized in this part. ‘‘Expenses’’ is defined to include counsel fees to avoid repeated references to such fees every time ‘‘expenses’’ appears throughout the part. ‘‘Liability’’ is defined for convenience, to avoid repeated references to recoverable items throughout the part. Even though the definition of ‘‘liability’’ includes both expenses and amounts paid to satisfy or to settle substantive claims, indemnification against substantive claims is not allowed in several provisions in Part 5. For example, indemnification in suits brought by or in the name of the corporation is limited to actions other than those where the director is held liable for specified actions, and to cases where shareholder approval is obtained. See Sections 15-2-851(d) and 14-2-856. The definition of ‘‘liability’’ permits the indemnification only of ‘‘reasonable expenses incurred.’’ The intention is that any portion of expenses falling outside the perimeter of reasonableness should not be indemnified, and that, if necessary, an allocation of expenses should be made. By contrast, unlike former § 14-2-156(a), Section 14-2-850(4) provides that amounts paid to settle or satisfy substantive claims are not subject to a reasonableness test. Since payment of these amounts is permissive, a special limitation of ‘‘reasonableness’’ for settlements is inappropri-
CORPORATIONS & PARTNERSHIPS
ate. Further, it is undesirable to base the statutory test of power to indemnify on an affirmative finding that a settlement is reasonable. Indeed, the grant of authority to indemnify only those settlements that are ‘‘reasonable’’ would suggest an ‘‘all or nothing’’ approach inconsistent with the basic philosophy of indemnification of ‘‘reasonable’’ expenses. ‘‘Penalties’’ and ‘‘fines’’ are expressly included within the definition of ‘‘liability’’ so that in appropriate cases these items may also be indemnified. See Section