AB 1355, as introduced, Wilk. Limited liability companies: indemnification: agents.
Existing law requires a corporation, nonprofit public benefit corporation, nonprofit mutual benefit corporation, nonprofit religious corporation, or consumer cooperative corporation to indemnify its agent, as defined, in proceedings, as defined, for the successful defense or settlement of claims brought against the agent by reason of his or her agent status.
Existing law, the California Revised Uniform Limited Liability Company Act, which becomes operative on January 1, 2014, governs the formation and operation of limited liability companies. The act requires a limited liability company to indemnify a member of a member-managed limited liability company or the manager of a manager-managed limited liability company for any liability incurred in the course of the member’s or manager’s activities on behalf of the limited liability company, if specified conditions are met. Existing law authorizes a limited liability company to purchase and maintain insurance on behalf of a member or manager of the limited liability company against liability asserted against or incurred by the member or manager in that capacity or arising from that status.
This bill would require a limited liability company to indemnify its agent, as defined, in proceedings, as defined, for the successful defense or settlement of claims brought against the agent by reason of his or her agent status.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 17704.08 of the Corporations Code is
2amended to read:
(a) A limited liability company shall reimburse for
4any payment made and indemnify for any debt, obligation, or other
5liability incurred by a member of a member-managed limited
6liability company or the manager of a manager-managed limited
7liability company in the course of the member’s or manager’s
8activities on behalf of the limited liability company, if, in making
9the payment or incurring the debt, obligation, or other liability,
10the member or manager complied with the duties stated in Section
1117704.09.
12(b) A limited liability company may purchase and maintain
13insurance on behalf of a member or manager of the limited liability
14company against liability asserted against or incurred by the
15member or manager in that capacity or arising from that status
16even if,
under subdivision (g) of Section 17701.10, the operating
17agreement could not eliminate or limit the person’s liability to the
18limited liability company for the conduct giving rise to the liability.
19(c) (1) To the extent that an agent of a limited liability company
20has been successful on the merits in defense or settlement of any
21claim, issue, or matter in any proceeding in which the agent was
22or is a party or is threatened to be made a party by reason of the
23fact that the person is or was an agent of the limited liability
24company, if the agent acted in good faith, in a manner the agent
25believed to be in the best interests of the limited liability company
26and its members, the agent shall be indemnified against expenses
27actually and reasonably incurred by the agent in connection
28therewith.
29(2) For purposes of this subdivision, the following terms have
30the following meaning:
P3 1(A) “Agent” means any person who is or was a member,
2manager, employee, or other agent of the limited liability company,
3or is or was serving at the request of the limited liability company
4as a member, manager, director, officer, employee or agent of
5another foreign or domestic corporation, limited liability company
6or foreign limited liability company, partnership, joint venture,
7trust, or other enterprise, or was a member, manager, director,
8officer, employee or agent of a foreign or domestic corporation,
9limited liability company or foreign limited liability company,
10partnership, joint venture, trust, or other enterprise that was a
11predecessor of the limited liability company or of another
12
enterprise at the request of the predecessor corporation or other
13enterprise.
14(B) “Expenses” includes without limitation the attorney’s fees
15and expenses of establishing a right to indemnification under this
16subdivision.
17(C) “Proceeding” means any threatened, pending, or completed
18action or proceeding, whether civil, criminal, administrative, or
19investigative.
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