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CORPORATIONS ACT 2001 - SECT 199A
Indemnification and exemption of officer or auditor
Exemptions not allowed
(1) A company or a related body corporate must not
exempt a person (whether directly or through an interposed entity) from a
liability to the company incurred as an officer or auditor of the company.
When indemnity for liability (other than for legal costs) not allowed
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 liability owed to the company or a
related body corporate;
- a liability for a pecuniary penalty order under section 1317G or a
compensation order under section 1317H;
- 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:
defending or resisting proceedings in which the person is found to have a
liability for which they could not be indemnified under subsection (2);
- in defending or resisting criminal proceedings in which the person is
found guilty; or
- 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
- 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 or 206E (disqualification), section 232
(oppression), section 1317E, 1317G or 1317H (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.
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