Corporations Act. Australia
A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company:
(a) a liability owed to the company or a related body corporate;
(b) a liability for a pecuniary penalty order under section 1317G or a compensation order under section 961M, 1317H, 1317HA or 1317HB;
(c) a liability that is owed to someone other than the company or a related body corporate and did not arise out of conduct in good faith.
This subsection does not apply to a liability for legal costs.
When indemnity for legal costs not allowed
(3) A company or related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against legal costs incurred in defending an action for a liability incurred as an officer or auditor of the company if the costs are incurred:
(a) in defending or resisting proceedings in which the person is found to have a liability for which they could not be indemnified under subsection (2); or
(b) in defending or resisting criminal proceedings in which the person is found guilty; or
(c) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found by the court to have been established; or
(d) in connection with proceedings for relief to the person under this Act in which the Court denies the relief.
Paragraph (c) does not apply to costs incurred in responding to actions taken by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order.
Note: 1: Paragraph (c) — This includes proceedings by ASIC for an order under section 206C, 206D, 206E or 206EAA (disqualification), section 232 (oppression), section 961M, 1317E, 1317G, 1317H, 1317HA or 1317HB (civil penalties) or section 1324 (injunction).
Note: 2: The company may be able to give the person a loan or advance in respect of the legal costs (see section 212).
(4) For the purposes of subsection (3), the outcome of proceedings is the outcome of the proceedings and any appeal in relation to the proceedings.
199B Insurance premiums for certain liabilities of director, secretary, other officer or auditor
(1) A company or a related body corporate must not pay, or agree to pay, a premium for a contract insuring a person who is or has been an officer or auditor of the company against a liability (other than one for legal costs) arising out of:
(a) conduct involving a wilful breach of duty in relation to the company; or
(b) a contravention of section 182 or 183.
This section applies to a premium whether it is paid directly or through an interposed entity.
(2) An offence based on subsection (1) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
199C Certain indemnities, exemptions, payments and agreements not authorised and certain documents void
(1) Sections 199A and 199B do not authorise anything that would otherwise be unlawful.
(2) Anything that purports to indemnify or insure a person against a liability, or exempt them from a liability, is void to the extent that it contravenes section 199A or 199B.
Division 2 — Termination payments
200 Interpreting this Division
For the purposes of this Division, in determining whether a benefit is given:
(a) give a broad interpretation to benefits being given, even if criminal or civil penalties may be involved; and
(b) the economic and commercial substance of conduct is to prevail over its legal form.
200AA Meaning of managerial or executive office
If the company is a disclosing entity
(1) For a company to which section 300A applies for the previous financial year for the company, a person holds a managerial or executive office in the company during the current financial year if the person’s details were included in the directors’ report for that previous financial year for the company in accordance with paragraph 300A(1)(c).
Note: A person holding a managerial or executive office ceases to do so if the person’s details are not included in the next directors’ report. However, this is not relevant to whether the person has retired from an office or position in the company (see paragraph 200A(1)(f)).
(2) The person is taken to hold the managerial or executive office for the whole of the current financial year unless and until the person retires from an office or position in the company before the end of that year.
Note: Retires has an extended meaning (see section 200A).
Otherwise
(3) For a body corporate not covered by subsection (1), a managerial or executive office for the body corporate is:
(a) an office of director of the body corporate; or
(b) any other office or position in connection with the management of the body corporate’s affairs that is held by a person who also holds an office of director of the body corporate or a related body corporate.
200AB Meaning of benefit
(1) For the purposes of this Division, a benefit includes any of the following:
(a) a payment or other valuable consideration;
(b) any kind of real or personal property;
(c) any legal or equitable estate or interest in real or personal property;
(d) any legal or equitable right;
(e) a thing specified in regulations made for the purposes of this paragraph.
Note: For specification by class, see subsection 13(3) of the Legislative Instruments Act 2003.
(2) However, for the purposes of this Division, a benefit does not include a thing specified in regulations made for the purposes of this subsection.
Note: For specification by class, see subsection 13(3) of the Legislative Instruments Act 2003.
200A When benefit given in connection with retirement from an office or position
General rules
(1) For the purposes of this Division:
(a) a benefit is given in connection with a person’s retirement from an office or position if the benefit is given:
(i) by way of compensation for, or otherwise in connection with, the loss by the person of the office or position; or
(ii) in connection with the person’s retirement from the office or position; and
(b) giving a benefit includes:
(i) if the benefit is a payment — making the payment; and
(ii) if the benefit is an interest in property — transferring the interest; and
(c) a person gives a benefit even if the person is obliged to give the benefit under a contract; and
(d) a pension or lump sum is paid or payable in connection with the person’s retirement from an office or position if the pension