Colorado § 7-109-102 - Authority to indemnify directors.

§ 7-109-102. Authority to indemnify directors.

(1) Except as provided in subsection (4) of this section, a corporation may indemnify an individual made a party to a proceeding, because the individual is or was a director, against liability incurred in the proceeding if:

(a) The individual's conduct was in good faith; and

(b) The individual reasonably believed:

(I) In the case of conduct in an official capacity with the corporation, that the conduct was in the corporation's best interests; and

(II) In all other cases, that the conduct was at least not opposed to the corporation's best interests; and

(c) In the case of any criminal proceeding, the individual had no reasonable cause to believe the individual's conduct was unlawful.

(2) A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in or beneficiaries of the plan is conduct that satisfies the requirement of subparagraph (II) of paragraph (b) of subsection (1) of this section. A director's conduct with respect to an employee benefit plan for a purpose that the director did not reasonably believe to be in the interests of the participants in or beneficiaries of the plan shall be deemed not to satisfy the requirements of paragraph (a) of subsection (1) of this section.

(3) The termination of a proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent does not, of itself, create a presumption that the director did not meet the relevant standard of conduct described in this section.

(4) A corporation may not indemnify a director under this section:

(a) In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under subsection (1) of this section; or

(b) In connection with any other proceeding charging that the director derived an improper personal benefit, whether or not involving action in an official capacity, in which proceeding the director was adjudged liable on the basis that the director derived an improper personal benefit.

(5) Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.

Source: L. 93: Entire article added, p. 790, § 1, effective July 1, 1994. L. 2004: (1) and (4) amended, p. 1500, § 265, effective July 1. L. 2019: (1), (3), and (4)(a) amended, (SB 19-086), ch. 166, p. 1937, § 38, effective July 1, 2020.

ANNOTATION

Directors qualify for corporate indemnification if they are sued at least in part because, or by reason of the fact that, they are or were directors of a corporation. Weisbart v. Agri Tech, Inc., 22 P.3d 954 (Colo. App. 2001).

Corporation is prohibited from indemnifying a director only when the director has been found "liable" to the corporation; when jury found former director breached a duty to the corporation but refused to award the corporation damages because of a lack of causation, indemnification was not prohibited. Waskel v. Guaranty Nat'l Corp., 23 P.3d 1214 (Colo. App. 2000) (declining to follow Quark, Inc. v. Harley, 141 F.3d 1185 (10th Cir. 1998)).