O.C.G.A. § 14-2-854 (2019)
Court ordered indemnification and advances for expenses
(a) A director who is a party to a proceeding because he or she is a director may apply for indemnification or advance for expenses to the court conducting the proceeding or to another court of competent jurisdiction. After receipt of an application and after giving any notice it considers necessary, the court shall:
(1) Order indemnification or advance for expenses if it determines that the director is entitled to indemnification or advance for expenses under this part; or
(2) Order indemnification or advance for expenses if it determines, in view of all the relevant circumstances, that it is fair and reasonable to indemnify the director or to advance expenses to the director, even if the director has not met the relevant standard of conduct set forth in subsections (a) and (b) of Code Section 14-2-851, failed to comply with Code Section 14-2-853, or was adjudged liable in a proceeding referred to in paragraph (1) or (2) of subsection (d) of Code Section 14-2-851, but if the director was adjudged so liable, the indemnification shall be limited to reasonable expenses incurred in connection with the proceeding.
(b) If the court determines that the director is entitled to indemnification or advance for expenses under paragraph (1) of subsection (a) of this Code section, it shall also order the corporation to pay the director’s reasonable expenses to obtain court ordered indemnification or advance for expenses. If the court determines that the director is entitled to indemnification or advance for expenses under paragraph (2) of subsection (a) of this Code section, it may also order the corporation to pay the director’s reasonable expenses to obtain court ordered indemnification or advance for expenses.
(c) The court may summarily determine, without a jury, a corporation’s obligation to advance expenses.
History
(Code 1981, § 14-2-854, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1989, p. 946, § 35; Ga. L. 1996, p. 1203, § 5; Ga. L. 2006, p. 825, § 4/SB 469.)
Annotations
COMMENT Source: Model Act, § 8.54. Section 14-2-854 permits court-ordered indemnification in three situations: (1) a director entitled to mandatory indemnification may enforce that entitlement by judicial proceeding (in which case the court may also order the corporation to pay the reasonable expenses incurred in connection with the proceeding); (2) indemnification at the court’s discretion is permitted in all cases whether or not the director met the requisite standard of conduct in Section 14-2-851 or is otherwise ineligible for indemnification; and (3) a director secures a court order for advancement of expenses. Indemnification with respect to derivative suits or improper benefit is limited to expenses by the last clause of Section 14-2-854(2), except that subsection (2) of the Model Act has been modified to permit court-ordered indemnification of amounts paid in a judgment if the shareholders have authorized such indemnification pursuant to Section 14-2-856. This has no counterpart in former Georgia law, but is designed to parallel the director exculpatory provisions of the Code. Subsection (3) is new and has no counterpart in either the Model Act or former Georgia law. It permits a director to sue for expense advancement pursuant to charter, bylaw or other provision committing the corporation to advance expenses. This permits a director to enforce previously bargained for contract rights to expense advancement in the proceeding in which the expenses are being incurred. Application for indemnification under Section 14-2-854 may be made either to the court in which the proceeding was heard or to another court of appropriate jurisdiction. For example, a defendant in a criminal action who has been convicted but believes that indemnification would be proper could apply either to the court which heard the criminal action or bring an action against the corporation in another court. A decision by the board of directors not to oppose the request for indemnification is governed by the general standards of conduct found in Section