California Corporations Code 17704.08 – (a) A limited liability company shall reimburse for any payment …
(a) A limited liability company shall reimburse for any payment made and indemnify for any debt, obligation, or other liability incurred by a member of a member-managed limited liability company or the manager of a manager-managed limited liability company in the course of the member’s or manager’s activities on behalf of the limited liability company, if, in making the payment or incurring the debt, obligation, or other liability, the member or manager complied with the duties stated in Section 17704.09.
(b) Except as provided in subdivision (g) of Section 17701.10, a limited liability company may reimburse for any payment made and may indemnify for any debt, obligation, or other liability incurred by a person not identified in subdivision (a), including, without limitation, any officer, employee, or agent of the limited liability company, in the course of that person’s activities on behalf of the limited liability company.
Terms Used In California Corporations Code 17704.08
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Person: includes a corporation as well as a natural person. See California Corporations Code 18
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
(c) A limited liability company may purchase and maintain insurance on behalf of any person against liability asserted against or incurred by that person even if, under subdivision (g) of Section 17701.10, the operating agreement could not eliminate or limit the person’s liability to the limited liability company for the conduct giving rise to the liability.
(d) (1) Without limiting subdivision (a), to the extent that an agent of a limited liability company has been successful on the merits in defense or settlement of any claim, issue, or matter in any proceeding in which the agent was or is a party or is threatened to be made a party by reason of the fact that the person is or was an agent of the limited liability company, if the agent acted in good faith and in a manner that the agent reasonably believed to be in the best interests of the limited liability company and its members, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith.
(2) For purposes of this subdivision, the following terms have the following meanings:
(A) “Agent” means any person who is or was a member of a member-managed limited liability company, manager of a manager-managed limited liability company, officer, employee, or other agent of the limited liability company, or is or was serving at the request of the limited liability company as a manager, director, officer, employee, or agent of another foreign or domestic corporation, limited liability company or foreign limited liability company, partnership, joint venture, trust, or other enterprise, or was a manager, director, officer, employee, or agent of a foreign or domestic limited liability company, partnership, joint venture, trust, or other enterprise that was a predecessor of the limited liability company or of another enterprise at the request of the predecessor entity or other enterprise.
(B) “Expenses” include, without limitation, the attorney’s fees and any expenses of establishing a right to indemnification under this subdivision.
(C) “Proceeding” means any threatened, pending, or completed action or proceeding, whether civil, criminal, administrative, or investigative.
(Amended by Stats. 2015, Ch. 775, Sec. 8. (AB 506) Effective January 1, 2016.)