Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Business Crimes BulletinLJN NewslettersNewsSections

The Case for Non-Discretionary Advancement Policies

By Marjorie J. Peerce and Nathaniel I. Kolodny
July 30, 2008

You have recently been appointed General Counsel of a publicly traded Delaware corporation. A few months into your tenure, the Board asks whether the company should establish a policy for the automatic advancement of defense costs to officers or directors involved in company-related litigation. Your answer is that incorporating a non-discretionary advancement policy into the bylaws would be in the long-term best interests of the company.

A non-discretionary advancement provision would require the company to advance all legal expenses for any officer or director involved in any civil, criminal, administrative or investigative proceeding arising because the person is or was an officer or director of the company. Any advancement of defense costs would be conditioned upon their signing an undertaking to repay, as required by state law, and upon such other terms the company may choose to include in its advancement provision (see below). You know that advancing legal costs can be very expensive ' you have witnessed the dramatic increase in Department of Justice (DOJ) and SEC investigations into the conduct of officers and directors of public companies, not to mention the ever present reality of shareholder and derivative suits. Nevertheless, you think the risk of large legal bills is outweighed by significant potential benefits to the company.

This premium content is locked for Business Crimes Bulletin subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The DOJ's Corporate Enforcement Policy: One Year Later Image

The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.

The DOJ's New Parameters for Evaluating Corporate Compliance Programs Image

The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.

Use of Deferred Prosecution Agreements In White Collar Investigations Image

This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.

Bankruptcy Sales: Finding a Diamond In the Rough Image

There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.

Compliance Officers: Recent Regulatory Guidance and Enforcement Actions and Mitigating the Risk of Personal Liability Image

This article explores legal developments over the past year that may impact compliance officer personal liability.