What type of claims may a corporation not indemnify grounds for?

A corporation is generally allowed to indemnify its directors and officers for expenses and judgments incurred while acting in their official capacity, provided they acted in good faith and in a manner they reasonably believed to be in the best interests of the corporation. However, when a director is found liable to the corporation itself, indemnification is typically not permitted. This is to ensure that directors are accountable for breaches of their fiduciary duties or misconduct that harm the corporation.

The rationale behind this restriction is to prevent a situation where a director who has acted against the interests of the corporation can escape the consequences of their actions by having the corporation pay for their legal defenses. Thus, if a director is found liable for actions taken in their capacity, especially if those actions were detrimental to the corporation, indemnifying them would undermine the trust and accountability expected from corporate leadership.

In contrast, the other options — claims related to employment contracts, regulatory compliance, and claims made by shareholders — typically do not fall under the strict prohibition against indemnification in the same way. For instance, indemnification can still be available in the case of employment contracts or regulatory compliance as these may not involve misfeasance towards the corporation itself. Claims made by shareholders may also be subject to different standards concerning indemn