Director Indemnity Agreement Canada

Indemnification agreements offer several advantages over the inclusion of compensation rules in the company`s articles of association or other organizational documents. Unlike a company`s articles of association which can be unilaterally amended by the directors (subject to confirmation by the company`s shareholders at a later date), a compensation agreement is a bilateral agreement between the director/manager and the company, which cannot be amended to remove the compensation protection without the agreement of the director or senior managers. This right may take on additional importance in the event of a change in control of the company, which allows the new owners of the company to amend the articles of association in order to modify or remove the rights of compensation. In addition, an agreement allows the parties to define more precisely the conditions and conditions under which compensation, cost advance and other safeguards granted to the director or senior managers are to be managed. This is usually not the case when compensation rights are included in a company`s articles of association. In the ongoing efforts to attract highly qualified individuals as directors and senior managers, indemnification agreements granted to Canadian public limited companies have become an increasingly common way to supplement the protection generally afforded to their directors and senior managers with directors` and executives` liability insurance (D&O-Insurance) and articles of indemnification rights. Generally speaking, indemnification agreements provide the director or senior managers with autonomous contractual set-off for debts arising from this function, as well as advance fees and certain other rights. When developing indemnification agreements, care should be taken to ensure that the agreement strikes the right balance between the interests of each director or his or her principal staff, the interests of the company, and the legal limitation periods imposed by the company`s current statute (such as the Canada Business Corporations Act and other similar provincial statutes). Below is a summary of several points to consider when preparing a compensation agreement for directors and senior executives: the content of this article should provide a general guide on the subject. .

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