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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

DGCL Sec. 145 - Indemnification of Directors and Other Agents

As we learned in the Agency Course, agents acting within the scope of their agency have a common law right of indemnification.  Section 145 authorizes the corporation to indemnify agents of the corporation (including directors, officers, and other agents) under certain conditions. 

The statute envisions that directors seeking indemnification may well create conflicts as directors seek the approval of their fellow directors for indemnification. Consequently, the statute requires specific procedures prior to board approval of any such payments. These procedures attempt to mimic an arm's length approval of such payments by enlisting independent directors and/or unaffiliated stockholders. Note the analogue between an approval for purposes of ยง145 and agency law's approach to approving conflicted agent transactions.