Small Question in the Big Statute: Does Section 402 of Sarbanes-Oxley Prohibit Defense Advancements, A
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Authors
Bulan, Cynthia
Issue Date
2006
Volume
39
Issue
Type
Journal Article
Language
Keywords
Alternative Title
Abstract
INTRODUCTION|Prior to the passage of the Sarbanes-Oxley Act of 2002, if an officer or director of a publicly traded corporation were sued as a result of his position as an officer or director of the corporation, he had several potential means of paying for his defense. The sued officer or director could, of course, pay for his own defense. Directors and Officer's Liability ("D&O") Insurance provided another possible source for defense costs. However, historically D&O policies have been indemnification policies, not liability policies which would require the insurer to assume the defendant officer's or director's defense. Many state statutes, however, permit a corporation to advance defense costs to the defendant officer or director upon the condition that the officer or director execute an undertaking in which he agrees to repay any costs advanced if later it is found that the officer or director was not entitled to indemnification from the corporation. With the passage of Sarbanes-Oxley, this last option, sometimes referred to as "advancement rights," may no longer be legal...
Description
Citation
39 Creighton L. Rev. 357 (2005-2006)
Publisher
Creighton University School of Law