LIMITATIONS ON LIABILITY, INDEMNIFICATION AND ADVANCEMENT OF LEGAL DEFENSES
RCW 23B.08.320 enables corporations to include in their articles of incorporations, provisions that eliminate or limit personal liability of company directors for malfeasance. However, such provisions cannot extend to intentional misconduct, known violations of law, liability for unlawful distributions, or for any transactions in which a director or officer will receive benefits to which one is not legally entitled. There are several statutory provisions in the RCW that address conduct deemed intentional or knowing. The RCW does not have an exculpatory provision for company officers.
The RCW includes several statutory provisions that address the rights of directors[1] and officers[2] to indemnification against liability, and expenses, upon the finding that the conduct of the director or officer at issue is consistent with the basic standards of conduct, set forth in RCW 23B.08.300 for directors, and RCW 23B.08.420 for officers. RCW 23B.08.530 affords mandatory indemnification of directors, which is triggered upon a successful defense on the merits. RCW 23B.08.530 and RCW 23B.08.603 apply to the advancement of defense expenses to directors, subject to an undertaking that any amounts advance be repaid, if it is ultimately determined that such director’s conduct did not meet the appropriate standard of conduct. Finally, RCW 23B.08.580 permits corporations to purchase and maintain insurance to protect current and former directors and officers against liability assert, whether or not the company would otherwise be authorized to indemnify such directors and officers.
[1] See RCW 23B.08.510, RCW 23B.08.520, RCW 23B.08.550and RCW 23B.08.560 all pertainning to directors
[2] See RCW 23B.08.570 pertaining to officers, employees and agents.
The RCW includes several statutory provisions that address the rights of directors[1] and officers[2] to indemnification against liability, and expenses, upon the finding that the conduct of the director or officer at issue is consistent with the basic standards of conduct, set forth in RCW 23B.08.300 for directors, and RCW 23B.08.420 for officers. RCW 23B.08.530 affords mandatory indemnification of directors, which is triggered upon a successful defense on the merits. RCW 23B.08.530 and RCW 23B.08.603 apply to the advancement of defense expenses to directors, subject to an undertaking that any amounts advance be repaid, if it is ultimately determined that such director’s conduct did not meet the appropriate standard of conduct. Finally, RCW 23B.08.580 permits corporations to purchase and maintain insurance to protect current and former directors and officers against liability assert, whether or not the company would otherwise be authorized to indemnify such directors and officers.
[1] See RCW 23B.08.510, RCW 23B.08.520, RCW 23B.08.550and RCW 23B.08.560 all pertainning to directors
[2] See RCW 23B.08.570 pertaining to officers, employees and agents.