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2018 Georgia Code 14-2-857 | Car Wreck Lawyer

Link to State of Georgia Official Statute 2018 Georgia Code Annotated (sourced from legal.resource.org)
O.C.G.A. 14-2-857 Case Law from Google Scholar Amendments to OCGA 14-2-857

TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

Section 2. Business Corporations, 14-2-101 through 14-2-1703.

ARTICLE 8 DIRECTORS AND OFFICERS

14-2-857. Indemnification of officers, employees, and agents.

  1. A corporation may indemnify and advance expenses under this part to an officer of the corporation who is a party to a proceeding because he or she is an officer of the corporation:
    1. To the same extent as a director; and
    2. If he or she is not a director, to such further extent as may be provided by the articles of incorporation, the bylaws, a resolution of the board of directors, or contract except for liability arising out of conduct that constitutes:
      1. Appropriation, in violation of his or her duties, of any business opportunity of the corporation;
      2. Acts or omissions which involve intentional misconduct or a knowing violation of law;
      3. The types of liability set forth in Code Section 14-2-832; or
      4. Receipt of an improper personal benefit.
  2. The provisions of paragraph (2) of subsection (a) of this Code section shall apply to an officer who is also a director if the sole basis on which he or she is made a party to the proceeding is an act or omission solely as an officer.
  3. An officer of a corporation who is not a director is entitled to mandatory indemnification under Code Section 14-2-852, and may apply to a court under Code Section 14-2-854 for indemnification or advances for expenses, in each case to the same extent to which a director may be entitled to indemnification or advances for expenses under those provisions.
  4. A corporation may also indemnify and advance expenses to an employee or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract.

(Code 1981, §14-2-857, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1989, p. 946, § 37; Ga. L. 1996, p. 1203, § 5.)

COMMENT

Source: Model Act, § 8.56. There was no counterpart in former Georgia law.

Section 14-2-857 correlates the general legal principles relating to the indemnification of officers, employees, and agents of the corporation with the limitations on indemnification in Part 5. This correlation may be summarized in general terms as follows:

(1) Part 5 (except for Section 14-2-857) applies only to, and limits the indemnification of, directors.

(2) An officer, agent or employee of a corporation who is not a director may be indemnified by the corporation on a discretionary basis to the same extent as though he were a director, and, in addition, may have additional indemnification rights apart from Part 5. (Subsection (2).) The public policy limits of subsection (2) leave public policy determinations as to what are permissible limits, in a particular case, to the courts. For example, in Koster v. Warren, 297 F.2d 418, 423 (9th Cir. 1961), the court allowed indemnification of an officer and an employee, both of whom pleaded nolo contendere to an antitrust indictment at the corporation's request, the court reasoning that they had foregone their personal right to defend for the corporation's benefit. On the other hand, the court indicated in dicta that an agreement in advance by the corporation to indemnify anyone convicted of a antitrust violations would be against public policy. Implicit in these limits is the general public policy of Georgia, which prohibits indemnification or exculpation where fraud or deliberate violations of criminal laws are present. Sovereign Camp W.O.W. v. Heflin, 188 Ga. 234, 3 S.E.2d 559, 560 (1939) (dicta that law does not permit contracting against fraud or contravention of public policy); Jaffe v. Davis, 134 Ga. App. 651, 215 S.E.2d 533 (1975) (lease cannot exculpate from willful or reckless acts amounting to actual intent); Restatement Contracts 2d §§ 195 - 96; Restatement of Agency, § 222.1.

(3) A director who is also an officer, employee, or agent of the corporation is limited to his indemnification rights under Part 5 and is therefore treated the same way as other directors. (Subsection (2) by negative inference). Such an officer/director is limited to this rights under Part 5 even though he is sued solely in his capacity as an officer.

(4) An officer of the corporation (but not employees or agents generally) who is not a director has the mandatory right of indemnification granted to directors under Section 14-2-852 and the right to apply for court-ordered indemnification under Section 14-2-854. (Subsection (1)).

The rights of employees or agents may derive from principles of agency, the doctrine of respondeat superior, or collective bargaining or other contractual agreement, rather than from the statute. Indemnification of employees or agents may appropriately protect the person indemnified from liabilities incurred while serving at the corporation's request as a director, officer, partner, trustee, or agent of another commercial, charitable, or nonprofit enterprise.

The broad grant of indemnification in Section 14-2-857(2) may be limited by appropriate provisions in the articles of incorporation.

Note to 1996 Amendment This section was amended to reflect the 1994 changes to section 8.58 of the Revised Model Business Corporation Act. See 49 Bus. Law. 741 (Feb. 1994) and 49 Bus. Law. 1823 (Aug. 1994). Readers are referred to the official comments to the Revised Model Business Corporation Act for more extensive discussion of the text of this section. These amendments repealed former section 14-2-857 in its entirety. Where the former section provided broad (and vague) power to a corporation to indemnify officers within the limits of public policy, the amendments make the limits of public policy clear - relying on the limits imposed on shareholder authorization of indemnification of directors as the limit. New subsection (c) retains the authorization of an officer to apply for indemnification formerly provided in subsection (a).

Cross-References Articles of incorporation, see § 14-2-202 and Article 10, Part 1. Bylaws, see § 14-2-206 and Article 10, Part 2. "Employee" defined, see § 14-2-140. "Expenses" defined, see § 14-2-850. Officer standards of conduct, see § 14-2-842.

RESEARCH REFERENCES

Am. Jur. 2d.

- 18B Am. Jur. 2d, Corporations, § 1624.

ALR.

- Attorneys' fees and other expenses incident to controversy respecting internal affairs of corporation as charge against the corporation, 39 A.L.R.2d 580.

Insurance: construction of policy or bond indemnifying directors or officers of corporation for expenses incurred in defending actions brought against them in their capacity as such, 49 A.L.R.3d 1250.

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