Permissive Indemnification and Advancement of Expenses.

Ala. Code tit. 10A, ch. 1, art. 6, div. C

in effect

Ala. Code § 10A-1-6.21 Permissive Indemnification.

10A-1-6.21. Permissive Indemnification. (a) An enterprise may indemnify a governing person, former governing person, or delegate who was, is, or is threatened to be made a respondent in a proceeding to the extent permitted by Section 10A-1-6.22 if it is determined in accordance with Section 10A-1-6.23 that: (1) the person: (A) acted in good faith; and (B) reasonably believed: (i) in the case of conduct in the person’s official capacity that the person’s conduct was in the enterprise’s best interests; and (ii) in all other cases, that the person’s conduct was not opposed to the enterprise’s best interests; and (C) in the case of a criminal proceeding, did not have a reasonable cause to believe the person’s conduct was unlawful; (2) with respect to expenses, the amount of expenses is reasonable; and (3) indemnification should be paid. (b) Action taken or omitted by a governing person or delegate with respect to an employee benefit plan in the performance of the person’s duties for a purpose reasonably believed by the person to be in the interests of the participants in and beneficiaries of the plan is for a purpose that is not opposed to the best interests of the enterprise. (c) Action taken or omitted by a delegate to another enterprise for a purpose reasonably believed by the delegate to be in the interest of the other enterprise or its owners or members is for a purpose that is not opposed to the best interests of the enterprise. (d) A person does not fail to meet the standard under subsection (a)(1) solely because of the termination of a proceeding by: (1) judgment; (2) order; (3) settlement; (4) conviction; or (5) a plea of nolo contendere or its equivalent. (Act 2009-513, p. 967, §52.)

Ala. Code § 10A-1-6.22 General Scope of Permissive Indemnification.

10A-1-6.22. General Scope of Permissive Indemnification. (a) Except as otherwise provided by subsection (d) and subject to subsection (b), an enterprise may indemnify a governing person, former governing person, or delegate against a judgment, penalty, settlement, or fine, including an excise or similar tax or an excise tax assessed against the person regarding an employee benefit plan, and against reasonable expenses actually incurred by the person in connection with a proceeding. (b) Indemnification under this chapter of a person who is found liable to the enterprise or is found liable because the person improperly received a personal benefit: (1) is limited to reasonable expenses actually incurred by the person in connection with the proceeding; and (2) may not be made in relation to a proceeding in which the person has been found liable for: (A) willful or intentional misconduct in the performance of the person’s duty to the enterprise; (B) breach of the person’s duty of loyalty owed to the enterprise; or (C) an act or omission not committed in good faith that constitutes a breach of a duty owed by the person to the enterprise. (c) A governing person, former governing person, or delegate is considered to have been found liable in relation to a claim, issue, or matter only if the liability is established by an order, including a judgment or decree of a court, and all appeals of the order are exhausted or foreclosed by law. (d) Notwithstanding any other provision of this chapter, an enterprise may not indemnify or advance expenses to a person if the indemnification or advancement conflicts with a restriction in the enterprise’s governing documents. (Act 2009-513, p. 967, §52.)

Ala. Code § 10A-1-6.23 Manner for Determining Permissive Indemnification.

10A-1-6.23. Manner for Determining Permissive Indemnification. (a) Except as otherwise provided by subsections (b) and (c), the determinations required under Section 10A-1-6.21(a) must be made by: (1) a majority vote of a quorum composed of the governing persons who at the time of the vote are disinterested and independent; (2) if a quorum described by subsection (a)(1) cannot be obtained, a majority vote of a committee of the board of directors of the enterprise designated to act in the matter by a majority vote of the governing persons and composed of at least one governing person who at the time of the vote is disinterested and independent; (3) special legal counsel selected by the board of directors of the enterprise, or selected by a committee of the board of directors, by vote in accordance with subdivision (1) or subdivision (2) or, if a quorum described by subdivision (1) cannot be obtained and a committee described by subdivision (2) cannot be established, by a majority vote of the governing persons of the enterprise; (4) a majority of the membership interests that are entitled to vote on the transactions by virtue of not being owned by or under control of the governing persons constitutes a quorum for purposes of taking action under this section; or (5) a unanimous vote of the owners or members of the enterprise. (b) If special legal counsel determines under subsection (a)(3) that a person meets the standard under Section 10A-1-6.21(a)(1), the special legal counsel shall determine whether the amount of expenses is reasonable under Section 10A-1-6.21(a)(2) but may not determine whether indemnification should be paid under Section 10A-1-6.21(a)(3). The determination whether indemnification should be paid must be made in a manner specified by subsection (a)(1), (2), (4), or (5). (c) A provision contained in the governing documents of the enterprise, a resolution of the owners, members, or governing authority, or an agreement that requires the indemnification of a person who meets the standard under Section 10A-1-6.21(a)(1) constitutes a determination under Section 10A-1-6.21(a)(3) that indemnification should be paid even though the provision may not have been adopted or authorized in the same manner as the determinations required under Section 10A-1-6.21(a). The determinations required under Section 10A-1-6.21(a)(1) and (2) must be made in a manner provided by subsection (a). (Act 2009-513, p. 967, §52.)

Ala. Code § 10A-1-6.24 Advancement of Expenses.

10A-1-6.24. Advancement of Expenses. (a) An enterprise may pay or reimburse reasonable expenses incurred by a governing person, former governing person, or delegate that was, is, or is threatened to be made a respondent in a proceeding in advance of the final disposition of the proceeding without making the determinations required under Section 10A-1-6.21(a) after the enterprise receives: (1) written affirmation by the person of the person’s good faith belief that the person has met the standard of conduct necessary for indemnification under this article; and (2) written undertaking by or on behalf of the person to repay the amount paid or reimbursed if the final determination is that the person has not met that standard or that indemnification is prohibited by Section 10A-1-6.22. (b) A provision in the governing documents of the enterprise, a resolution of the owners, members, or governing authority, or an agreement that requires the payment or reimbursement permitted under this section authorizes that payment or reimbursement after the enterprise receives an affirmation and undertaking described by subsection (a). (c) The written undertaking required by subsection (a)(2) must be an unlimited general obligation of the person but need not be secured and may be accepted by the enterprise without regard to the person’s ability to make repayment. (d) An enterprise may not advance expenses to or reimburse expenses of a person if the advancement or reimbursement conflicts with a restriction in the enterprise’s governing documents. (Act 2009-513, p. 967, §52.)

Ala. Code § 10A-1-6.25 Indemnification and Advancement of Expenses to Persons Other Than Governing Persons.

10A-1-6.25. Indemnification and Advancement of Expenses to Persons Other Than Governing Persons. (a) Notwithstanding any other provision of this chapter but subject to subsection (d) and to the extent consistent with other law, an enterprise may indemnify and advance expenses to a person who is not a governing person, including an officer, employee, agent, or delegate, as provided by: (1) the enterprise’s governing documents; (2) general or specific action of the enterprise’s governing authority; (3) resolution of the enterprise’s owners or members; (4) contract; or (5) common law. (b) An enterprise shall indemnify and advance expenses to an officer to the same extent that indemnification or advancement of expenses is required under this chapter for a governing person. (c) A person described by subsection (a) may seek indemnification or advancement of expenses from an enterprise to the same extent that a governing person may seek indemnification or advancement of expenses under this chapter. (d) The certificate of formation of an enterprise may restrict the circumstances under which the enterprise must or may indemnify a person under this section. (Act 2009-513, p. 967, §52; Act 2016-379, §4.)

Ala. Code § 10A-1-6.26 Permissive Indemnification of and Reimbursement of Expenses to Witnesses.

10A-1-6.26. Permissive Indemnification of and Reimbursement of Expenses to Witnesses. Notwithstanding any other provision of this chapter, an enterprise may pay or reimburse reasonable expenses incurred by a governing person, officer, employee, agent, delegate, or other person in connection with that person’s appearance as a witness or other participation in a proceeding at a time when the person is not a respondent in the proceeding. (Act 2009-513, p. 967, §52.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026