Senate Bill No. 125
(By Senators Wooton and Minard)
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[Introduced February 25, 1993; referred to the Committee
on the Judiciary.]
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A BILL to amend and reenact section nine, article one, chapter
thirty-one of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, relating to indemnification
of corporate officers, directors, employees and agents; and
release of directors for the breach of any fiduciary duty.
Be it enacted by the Legislature of West Virginia:
That section nine, article one, chapter thirty-one of the
code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted to read as follows:
ARTICLE 1. BUSINESS AND NONPROFIT CORPORATIONS.
§31-1-9. Indemnification of officers, directors, employees and
agents.
(a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation) by reason of thefact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines, taxes and penalties and interest thereon, and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of
any action or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or
proceeding, that such person did have reasonable cause to believe
that his conduct was unlawful.
(b) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding by or in
the right of the corporation to procure judgment in its favor by
reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at therequest of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the
defense or settlement of such action or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or
matter, including, but not limited to, taxes or any interest or
penalties thereon, as to which such person shall have been
adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to the
extent that the court in which such action or proceeding was
brought shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity
for such expenses which such court shall deem proper.
(c) To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits or
otherwise in defense of any action or proceeding referred to in
subsection (a) or (b), or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under subsection (a) or (b) (unless
ordered by a court) shall be made by the corporation only asauthorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in subsection (a) or (b). Such
determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not
parties to such action or proceeding, or (2) if such a quorum is
not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (3) by the shareholders or members.
(e) Expenses (including attorneys' fees) incurred in
defending a civil or criminal action or proceeding may be paid by
the corporation in advance of the final disposition of such
action or proceeding as authorized in the manner provided in
subsection (d) upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to
be indemnified by the corporation as authorized in this section.
(f) The indemnification provided by this section shall not
be deemed exclusive of any other rights to which any shareholder
or member may be entitled under any bylaw, agreement, vote of
shareholders, members or disinterested directors or otherwise,
both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors andadministrators of such a person.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this section.
(h) If the stockholders of a corporation so provide by
proper bylaw or resolution, the directors of the corporation may
be relieved from personal liability to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as
directors: Provided, That such provisions shall not eliminate or
limit the liability of a director (1) for any breach of the
director's duty of loyalty to the corporation or its
stockholders, (2) for acts or omissions involving bad faith or
which involve intentional misconduct or a knowing violation of
law, (3) for any transaction from which the director derived an
improper personal benefit. No such provisions may eliminate or
limit the liability of a director for any act or omission
occurring prior to the effective date of the provision. All
references in this subsection to a director also refer to a
member of the governing body of a corporation which is notauthorized to issue capital stock.
NOTE: The purpose of this bill is to permit the
stockholders of a corporation to relieve corporate directors from
any liability to the corporation or its stockholders for breaches
of fiduciary duty. Exceptions are provided.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.