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California Corporations Code Section 317

Legal Research Home > California Laws > Corporations Code > California Corporations Code Section 317

317.  (a) For the purposes of this section, "agent" means any person
who is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other
enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation
of the corporation or of another enterprise at the request of the
predecessor corporation; "proceeding" means any threatened, pending
or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without
limitation attorneys' fees and any expenses of establishing a right
to indemnification under subdivision (d) or paragraph (4) of
subdivision (e).
   (b) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the corporation to
procure a judgment in its favor) by reason of the fact that the
person is or was an agent of the corporation, against expenses,
judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with the proceeding if that person
acted in good faith and in a manner the person reasonably believed to
be in the best interests of the corporation and, in the case of a
criminal proceeding, had no reasonable cause to believe the conduct
of the person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in the best interests of
the corporation or that the person had reasonable cause to believe
that the person's conduct was unlawful.
   (c) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending, or completed action by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that the
person is or was an agent of the corporation, against expenses
actually and reasonably incurred by that person in connection with
the defense or settlement of the action if the person acted in good
faith, in a manner the person believed to be in the best interests of
the corporation and its shareholders.
   No indemnification shall be made under this subdivision for any of
the following:
   (1) In respect of any claim, issue or matter as to which the
person shall have been adjudged to be liable to the corporation in
the performance of that person's duty to the corporation and its
shareholders, unless and only to the extent that the court in which
the proceeding is or was pending shall determine upon application
that, in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for expenses and then
only to the extent that the court shall determine.
   (2) Of amounts paid in settling or otherwise disposing of a
pending action without court approval.
   (3) Of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
   (d) To the extent that an agent of a corporation has been
successful on the merits in defense of any proceeding referred to in
subdivision (b) or (c) or in defense of any claim, issue, or matter
therein, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
   (e) Except as provided in subdivision (d), any indemnification
under this section shall be made by the corporation only if
authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because
the agent has met the applicable standard of conduct set forth in
subdivision (b) or (c), by any of the following:
   (1) A majority vote of a quorum consisting of directors who are
not parties to such proceeding.
   (2) If such a quorum of directors is not obtainable, by
independent legal counsel in a written opinion.
   (3) Approval of the shareholders (Section 153), with the shares
owned by the person to be indemnified not being entitled to vote
thereon.
   (4) The court in which the proceeding is or was pending upon
application made by the corporation or the agent or the attorney or
other person rendering services in connection with the defense,
whether or not the application by the agent, attorney or other person
is opposed by the corporation.
   (f) Expenses incurred in defending any proceeding may be advanced
by the corporation prior to the final disposition of the proceeding
upon receipt of an undertaking by or on behalf of the agent to repay
that amount if it shall be determined ultimately that the agent is
not entitled to be indemnified as authorized in this section. The
provisions of subdivision (a) of Section 315 do not apply to advances
made pursuant to this subdivision.
   (g) The indemnification authorized by this section shall not be
deemed exclusive of any additional rights to indemnification for
breach of duty to the corporation and its shareholders while acting
in the capacity of a director or officer of the corporation to the
extent the additional rights to indemnification are authorized in an
article provision adopted pursuant to paragraph (11) of subdivision
(a) of Section 204. The indemnification provided by this section for
acts, omissions, or transactions while acting in the capacity of, or
while serving as, a director or officer of the corporation but not
involving breach of duty to the corporation and its shareholders
shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement,
vote of shareholders or disinterested directors, or otherwise, to the
extent the additional rights to indemnification are authorized in
the articles of the corporation. An article provision authorizing
indemnification "in excess of that otherwise permitted by Section 317"
or "to the fullest extent permissible under California law" or the
substantial equivalent thereof shall be construed to be both a
provision for additional indemnification for breach of duty to the
corporation and its shareholders as referred to in, and with the
limitations required by, paragraph (11) of subdivision (a) of Section
204 and a provision for additional indemnification as referred to in
the second sentence of this subdivision. The rights to indemnity
hereunder shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit
of the heirs, executors, and administrators of the person. Nothing
contained in this section shall affect any right to indemnification
to which persons other than the directors and officers may be
entitled by contract or otherwise.
   (h) No indemnification or advance shall be made under this
section, except as provided in subdivision (d) or paragraph (4) of
subdivision (e), in any circumstance where it appears:
   (1) That it would be inconsistent with a provision of the
articles, bylaws, a resolution of the shareholders, or an agreement
in effect at the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits
indemnification.
   (2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
   (i) A corporation shall have power to purchase and maintain
insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in that capacity
or arising out of the agent's status as such whether or not the
corporation would have the power to indemnify the agent against that
liability under this section. The fact that a corporation owns all or
a portion of the shares of the company issuing a policy of insurance
shall not render this subdivision inapplicable if either of the
following conditions are satisfied: (1) if the articles authorize
indemnification in excess of that authorized in this section and the
insurance provided by this subdivision is limited as indemnification
is required to be limited by paragraph (11) of subdivision (a) of
Section 204; or (2) (A) the company issuing the insurance policy is
organized, licensed, and operated in a manner that complies with the
insurance laws and regulations applicable to its jurisdiction of
organization, (B) the company issuing the policy provides procedures
for processing claims that do not permit that company to be subject
to the direct control of the corporation that purchased that policy,
and (C) the policy issued provides for some manner of risk sharing
between the issuer and purchaser of the policy, on one hand, and some
unaffiliated person or persons, on the other, such as by providing
for more than one unaffiliated owner of the company issuing the
policy or by providing that a portion of the coverage furnished will
be obtained from some unaffiliated insurer or reinsurer.
   (j) This section does not apply to any proceeding against any
trustee, investment manager, or other fiduciary of an employee
benefit plan in that person's capacity as such, even though the
person may also be an agent as defined in subdivision (a) of the
employer corporation. A corporation shall have power to indemnify
such a trustee, investment manager, or other fiduciary to the extent
permitted by subdivision (f) of Section 207.

Last modified: February 22, 2013