[Anonymous]

So if an officer is sued by stockholders, can a corporation pay for their legal fees or not?

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Ninja Notes:

-Corporations can pay for their Officers’ legal fees in defending a lawsuit brought on them from carrying out their normal duties

-Exception: If shareholders bring a suit against the officers, the corporation cannot help defend them

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Ninja MCQ:

Under the Revised Model Business Corporation Act, which of the following statements is correct regarding corporate officers of a public corporation?

Incorrect

A. An officer may not simultaneously serve as a director.

B. A corporation may be authorized to indemnify its officers for liability incurred in a suit of stockholders.

C. Stockholders always have the right to elect a corporation’s officers.

D. An officer of a corporation is required to own at least one share of the corporation’s stock.

B; Officers of a corporation can be held liable to the corporation for failure to carry out their duties in a non-negligent fashion. The liability is enforced by means of a “derivative action lawsuit,” in which the corporation (plaintiff) sues the officers for damages. However, the Model Business Corporation Act permits the corporation to indemnify the officers for any liability incurred in such a lawsuit (except for acts which constitute a deliberate breach of the fiduciary duty of good faith).