Utah Code 16-6a-906. Determination and authorization of indemnification of directors

(1)

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Terms Used In Utah Code 16-6a-906

board of directors: means the body authorized to manage the affairs of a domestic or foreign nonprofit corporation. See Utah Code 16-6a-102
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.
Director: includes , unless the context requires otherwise, the estate or personal representative of a director. See Utah Code 16-6a-901
Expenses: includes attorneys' fees. See Utah Code 16-6a-901
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}
Member: includes :

(i)	"voting member"; and

(ii)

a shareholder in a water company. See Utah Code 16-6a-102

Nonprofit corporation: includes any domestic or foreign entity that is a predecessor of a nonprofit corporation by reason of a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction. See Utah Code 16-6a-901

Person: means an:

(a)	individual; or

(b)

entity. See Utah Code 16-6a-102

Proceeding: means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. See Utah Code 16-6a-901

Quorum: The number of legislators that must be present to do business.

Vote: includes authorization by:

(a)	written ballot; and

(b)	written consent. See Utah Code 16-6a-102 voting member: includes a "shareholder" if the nonprofit corporation has shareholders. See Utah Code 16-6a-102
(a)	A nonprofit corporation may not indemnify a director under Section 16-6a-902 unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because the director has met the standard of conduct set forth in Section 16-6a-902.

(b)

A nonprofit corporation may not advance expenses to a director under Section 16-6a-904 unless:

(i)	authorized in the specific case after the written affirmation and undertaking required by Subsections 16-6a-904(1)(a) and (1)(b) are received; and

(ii)	the determination required by Subsection 16-6a-904(1)(c) has been made.

(2)

(a)

The determinations required by Subsection (1) shall be made:

(i)	by the board of directors by a majority vote of those present at a meeting at which a quorum is present if only those directors not parties to the proceeding are counted in satisfying the quorum;

(ii)

if a quorum cannot be obtained under Subsection (2)(a)(i), by a majority vote of a committee of the board of directors:

(A)	designated by the board of directors; and

(B)	consisting of two or more directors not parties to the proceeding; or

(iii)

by persons listed in Subsection (3).

(b)	The directors who are parties to the proceeding may participate in the designation of directors for the committee described in Subsection (2)(a)(ii).

(3)

(a)

The determination required to be made by Subsection (1) shall be made by a person described in Subsection (3)(b) if:

(i)

(A)	a quorum cannot be obtained in accordance with Subsection (2)(a)(i); and

(B)	a committee cannot be established under Subsection (2)(a)(ii); or

(ii)	even if a quorum is obtained or a committee is designated, a majority of the directors constituting the quorum or committee directs.

(b)

If a condition described in Subsection (3)(a) is met, the determination required to be made by Subsection (1) shall be made:

(i)

by independent legal counsel selected by:

(A)	a vote of the board of directors or the committee in the manner specified in Subsection (2)(a)(i) or (ii); or

(B)	if a quorum of the full board cannot be obtained and a committee cannot be established, by independent legal counsel selected by a majority vote of the full board of directors; or

(ii)

by the voting members, but a voting member may not vote on the determination if the voting member is:

(A)	a director; and

(B)	at the time seeking indemnification.

(4)

(a)	Except as provided in Subsection (4)(b), an authorization of indemnification and advance of expenses shall be made in the same manner as the determination that indemnification or advance of expenses is permissible.

(b)	Notwithstanding Subsection (4)(a), if the determination that indemnification or advance of expenses is permissible is made by independent legal counsel, authorization of indemnification and advance of expenses shall be made by the body that selected the independent legal counsel.

Enacted by Chapter 300, 2000 General Session

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