(a) A director who votes for or assents to a distribution made in violation of section 6.40 or the articles of incorporation is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating section 6.40 or the articles of incorporation if it is established that he did not perform his duties in compliance with section 8.30. In any proceeding commenced under this section, a director has all of the defenses ordinarily available to a director.
(b) A director held liable under subsection (a) for an unlawful distribution is entitled to contribution:
(1) from every other director who could be held liable under subsection (a) for the unlawful distribution; and
(2) from each shareholder for the amount the shareholder accepted knowing the distribution was made in violation of section 6.40 or the articles of incorporation.
(c) A proceeding under this section is barred unless it is commenced within two years after the date on which the effect of the distribution was measured under section 6.40(e) or (g).
Subchapter D
Officers
8.40 Required Officers
(a) A corporation has the officers described in its bylaws or appointed by the board of directors in accordance with the bylaws.
(b) A duly appointed officer may appoint one or more officers or assistant officers if authorized by the bylaws or the board of directors.
(c) The bylaws or the board of directors shall delegate to one of the officers responsibility for preparing minutes of the directors' and shareholders' meetings and for authenticating records of the corporation.
(d) The same individual may simultaneously hold more than one office in a corporation.
8.41 Duties of Officers
Each officer has the authority and shall perform the duties set forth in the bylaws or, to the extent consistent with the bylaws, the duties prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of other officers.
8.42 Standards of Conduct for Officers
(a) An officer with discretionary authority shall discharge his duties under that authority:
(1) in good faith;
(2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(3) in a manner he reasonably believes to be in the best interests of the corporation.
(b) In discharging his duties an officer is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(1) one or more officers or employees of the corporation whom the officer reasonably believes to be reliable and competent in the matters presented; or
(2) legal counsel, public accountants, or other persons as to matters the officer reasonably believes are within the person's professional or expert competence.
(c) An officer is not acting in good faith if he has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.
(d) An officer is not liable for any action taken as an officer, or any failure to take any action, if he performed the duties of his office in compliance with this section.
/* A standard quite similar to that for directors. */
8.43 Resignation and Removal of Officers
(a) An officer may resign at any time by delivering notice to the corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the corporation accepts the future effective date, its board of directors may fill the pending vacancy before the effective date if the board of directors provides that the successor does not take office until the effective date.
(b) A board of directors may remove any officer at any time with or without cause.
8.44 Contract Rights of Officers
(a) The appointment of an officer does not itself create contract rights.
(b) An officer's removal does not affect the officer's contract rights, if any. with the corporation. An officer's resignation does not affect the corporation's contract rights, if any, with the officer.
/* This separates the appointment of office from the compensation related to the office. */
Subchapter E
INDEMNIFICATION
INTRODUCTORY COMMENT
The indemnification provisions of the Model Act are among the most complex and important in the entire Act. Subchapter E of chapter 8 is an integrated treatment of this subject and strikes a balance between important social policies.
Indemnification provides financial protection by the corporation for its directors, officers and employees against expenses and liabilities incurred by them in connection with proceedings based on an alleged breach of some duty in their service to or on behalf of the corporation. Today, when both the amount and the cost of litigation have skyrocketed, it would be difficult or impossible to persuade responsible persons to serve as directors if they were compelled to bear personally the cost of vindicating the propriety of their conduct in every instance in which it might be challenged.
Indemnification if permitted too broadly, may violate basic tenets of public policy. It is inappropriate to permit management to use corporate funds to avoid the consequences of wrongful conduct or conduct involving bad faith. A director, officer, or employee who acted wrongfully or in bad faith should not expect to receive assistance from the corporation for legal or other expenses and should be required to satisfy not only any judgment entered against him but also expenses incurred in connection with the proceeding from his personal assets. Any other rule would tend to encourage socially undesirable conduct.
A further policy issue is raised in connection with indemnification against liabilities or sanctions imposed under express provisions of state or federal civil or criminal statutes. A shift of these liabilities from the individual director or officer to the corporation by way of indemnification may in some instances be viewed as frustrating the public policy of those statutes which expressly impose the sanctions on the director or officer.
The fundamental issue that must be addressed by an indemnification statute is the establishment of policies consistent with these broad principles: to ensure that indemnification is permitted only where it will further accepted corporate goals and to prohibit indemnification where it might protect or encourage wrongful or improper conduct. As phrased by one commentator, the goal of indemnification is to "seek the middle ground between encouraging fiduciaries to violate their trust, and discouraging them from serving at all." Johnston, "Corporate Indemnification and Liability Insurance for Directors and Officers," 33 BusLaw 1993, 1994 (1978). The increasing number of suits against directors, the increasing cost of defense, and the increasing emphasis on broadening membership of boards of directors of public companies all militate in favor of establishing workable arrangements to protect directors and officers against liability for action taken in good faith to the extent consistent with broad public policy.
8.50 Subchapter Definitions
In this subchapter:
(1) "Corporation" includes any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a corporation or an individual who, while a director of a corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. A director is considered to be serving an employee benefit plan at the corporation's request if his duties to the corporation also impose dutie
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