Who foots the bill? Remarks on the corporate indemnification

Maria Elisabete Ramos

Keywords

corporate governance; litigation culture; legal defense costs; directors’ protection; corporate indemnification 

Abstract

In the USA, the” Indemnification” by the corporation means the corporation reimburses a defendant who is a corporate officer or director for expenses incurred in defending against a claim or prosecution.

This article characterizes this way of directors’ protection by reference to the USA court rulings, the Model Business Corporation Act and the Principles of Corporate Governance.

The answer to the question who pays the legal defence expenses must consider the D&O Insurance, especially Side A and Side B coverages.

This article argues that the changes in the European litigation culture may trigger an increased interest on the corporate indemnification.