Sec. 12.5. (a) A director shall, based on facts then known to the director, discharge the duties as a director, including the director’s duties as a member of a committee:

(1) in good faith;

Terms Used In Indiana Code 27-1-7-12.5

  • Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
  • articles of incorporation: includes both the original articles of incorporation and any and all amendments thereto, except where the original articles of incorporation only are expressly referred to, and includes articles of merger, consolidation and reinsurance, and in case of corporations, heretofore organized, articles of reorganization filed in the office of the secretary of state, and all amendments thereto. See Indiana Code 27-1-2-3
  • Contract: A legal written agreement that becomes binding when signed.
  • 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.
  • corporation: as used in this chapter and IC 27-1-8, means any company organized or reorganized under the provisions of this article and any company organized or reorganized under the provisions of any statute of this state enacted prior to March 8, 1935. See Indiana Code 27-1-7-1
  • Insurance: means a contract of insurance or an agreement by which one (1) party, for a consideration, promises to pay money or its equivalent or to do an act valuable to the insured upon the destruction, loss or injury of something in which the other party has a pecuniary interest, or in consideration of a price paid, adequate to the risk, becomes security to the other against loss by certain specified risks; to grant indemnity or security against loss for a consideration. See Indiana Code 27-1-2-3
  • member: means one who holds a contract of insurance or is insured in an insurance company other than a stock corporation. See Indiana Code 27-1-2-3
  • person: includes individuals, corporations, associations, and partnerships; personal pronoun includes all genders; the singular includes the plural and the plural includes the singular. See Indiana Code 27-1-2-3
  • Quorum: The number of legislators that must be present to do business.
  • shareholder: means one who is a holder of record of shares of stock in a corporation, unless the context otherwise requires. See Indiana Code 27-1-2-3
  • Trustee: A person or institution holding and administering property in trust.
(2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

(3) in a manner the director reasonably believes to be in the best interests of the corporation.

     (b) In discharging the director’s duties, a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

(1) one (1) or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;

(2) legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the person’s professional or expert competence; or

(3) a committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.

     (c) A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.

     (d) A director may, in considering the best interests of a corporation, consider the effects of any action on shareholders, members, policyholders, agents, employees, suppliers, and customers of the corporation, and the communities in which offices or other facilities of the corporation are located, and any other factors the director considers pertinent.

     (e) A director is not liable for any action taken as a director, or any failure to take any action, unless:

(1) the director has breached or failed to perform the duties of the director’s office under subsections (a) through (d); and

(2) the breach or failure to perform constitutes willful misconduct or recklessness.

     (f) A conflict of interest transaction is a transaction with the corporation in which a director of the corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the corporation solely because of the director’s interest in the transaction if any one (1) of the following is true:

(1) The material facts of the transaction and the director’s interest were disclosed or known to the board of directors or a committee of the board of directors and the board of directors or committee authorized, approved, or ratified the transaction.

(2) The material facts of the transaction and the director’s interest were disclosed or known to the shareholders entitled to vote and they authorized, approved, or ratified the transaction.

(3) The transaction was fair to the corporation.

     (g) For purposes of subsection (f), a director of the corporation has an indirect interest in a transaction if:

(1) another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction; or

(2) another entity of which the director is a director, officer, or trustee is a party to the transaction and the transaction is, or is required to be, considered by the board of directors of the corporation.

     (h) For purposes of subsection (f)(1), a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the directors on the board of directors (or on the committee) who have no direct or indirect interest in the transaction, but a transaction may not be authorized, approved, or ratified under this section by a single director. If a majority of the directors who have no direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, a quorum is present for the purpose of taking action under this section. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any action taken under subsection (f)(1) if the transaction is otherwise authorized, approved, or ratified as provided in subsection (f)(1).

     (i) For purposes of subsection (f)(2), shares owned by or voted under the control of a director who has a direct or indirect interest in the transaction, and shares owned by or voted under the control of an entity described in subsection (g), may be counted in a vote of shareholders to determine whether to authorize, approve, or ratify a conflict of interest transaction.

     (j) Subject to subsection (e), a director who votes for or assents to a payment in the form of a dividend or otherwise to the corporation’s shareholders made in violation of this article or the articles of incorporation is personally liable to the corporation for the amount of the payment that exceeds what could have been paid without violating this article or the articles of incorporation.

     (k) A director held liable for an unlawful payment under subsection (j) is entitled to contribution:

(1) from every other director who voted for or assented to the distribution, subject to subsection (e); and

(2) from each shareholder for the amount the shareholder accepted.

     (l) The purchase and holding of a contract of insurance or annuity or a certificate in a group policy by a director does not constitute a conflict of interest.

As added by P.L.266-1987, SEC.4.

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