Advancement Rights: Are You Covered?

Philadelphia partner Doug Raymond’s Legal Brief column for the First Quarter 2010 issue of Directors & Boards magazine, written with associate Audrey Burns, discusses advancement rights – the right to have litigation costs for defending claims arising from board actions paid by the corporation. As the authors note in the column, the law in Delaware is far from certain as to the scope and limitations of these rights, especially in light of two recent cases out of the Chancery Court. These cases “emphasize the need to thoughtfully review expense advancement and indemnification rights and to monitor developments in this area.” They also advise directors to consider indemnification agreements for clarity: “indemnification agreements can include detailed provisions defining the types of conduct for which advancement and indemnification are available, the method for determining whether a director is eligible for advancement and indemnification, the priority of payments, and the remedies available to directors for nonpayment.”