Q&As

Can a company pay for or indemnify one of its directors in relation to a fine which has been imposed on such director following civil or criminal proceedings?

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Published on LexisPSL on 20/06/2018

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • Can a company pay for or indemnify one of its directors in relation to a fine which has been imposed on such director following civil or criminal proceedings?

We assume in this Q&A that the company is a private company limited by shares.

A company is generally prohibited from indemnifying its directors against any liability in connection with any negligence, default, breach of duty or trust in relation to the company (section 232(1) of the Companies Act 2006 (CA 2006)). However, directors can be protected from liability by the acquisition and maintenance of insurance by the company for its directors against liabilities and by the company giving qualifying indemnities to its directors against certain liabilities (CA 2006, s 232(2)).

Accordingly, a company may purchase a directors’ and officers’ insurance policy (D&O policy)

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