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O.C.G.A. § 14-3-851 — Authority to indemnify director involved in legal proceeding | Georgia Code
O.C.G.A. § 14-3-851 (2018) Copy Cite Official Site Syfertize CourtListener Scholar Amendments

TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

Section 3. Nonprofit Corporations, 14-3-101 through 14-3-1703.

ARTICLE 8 DIRECTORS AND OFFICERS

14-3-851. Authority to indemnify director involved in legal proceeding.

  1. Except as otherwise provided in this Code section, a corporation may indemnify an individual who is a party to a proceeding because the individual is or was a director against liability incurred in the proceeding if:
    1. He or she conducted himself or herself in good faith; and
    2. He or she reasonably believed:
      1. In the case of conduct in his or her official capacity, that his or her conduct was in the best interests of the corporation;
      2. In all other cases, that his or her conduct was at least not opposed to the best interests of the corporation; and
      3. In the case of any criminal proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful.
  2. A director's conduct with respect to an employee benefit plan for a purpose the director believed in good faith to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirements of subsection (a) of this Code section.
  3. The termination of a proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this Code section.
  4. A corporation may not indemnify a director under this Code section:
    1. In connection with a proceeding by or in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under this Code section; or
    2. In connection with any other proceeding with respect to conduct for which the director was adjudged liable on the basis that personal benefit was improperly received by the director, whether or not involving action in the director's official capacity.

(Code 1981, §14-3-851, enacted by Ga. L. 1991, p. 465, § 1; Ga. L. 1997, p. 1165, § 14.)

COMMENT

Note to 1997 Amendments Amendments were made to conform the definitions to changes made in the Business Corporation Code in 1996. Comments to the 1996 amendments to the comparable provisions of the Business Corporation Code are applicable to these provisions.

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Code Section 14-2-852, are included in the annotations for this Code section.

Right to indemnification.

- The pastor, as a director of a church corporation, was entitled to mandatory indemnification of the reasonable expenses incurred in the defense of a liquidation proceeding; however, the indemnification must be proportionate to the extent that the pastor was successful in the claims against him. Crocker v. Stevens, 210 Ga. App. 231, 435 S.E.2d 690 (1993), cert. denied, 511 U.S. 1053, 114 S. Ct. 1613, 128 L. Ed. 2d 340 (1994) (decided under former § 14-2-852).

Church corporation's liability to pastor, who, as a director, was a defendant in a liquidation proceeding, would have priority in the distribution of the corporate assets. Crocker v. Stevens, 210 Ga. App. 231, 435 S.E.2d 690 (1993), cert. denied, 511 U.S. 1053, 114 S. Ct. 1613, 128 L. Ed. 2d 340 (1994) (decided under former § 14-2-852).

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