Director Indemnity Agreements are essential risk management tools in South African corporate governance, designed to protect directors while performing their duties. These agreements are implemented when appointing new directors or updating existing indemnification arrangements to ensure compliance with current legislation. The Director Indemnity Agreement must carefully balance the protections afforded to directors with the limitations imposed by the Companies Act 71 of 2008, particularly Section 78(6) regarding prohibited indemnifications. The document typically includes provisions for legal cost advancement, D&O insurance requirements, claims procedures, and the scope of covered events. It's particularly relevant in today's complex business environment where directors face increased scrutiny and potential liability from various stakeholders, regulatory bodies, and third parties.
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1. Parties: Identification of the company and the director(s) entering into the indemnity agreement
2. Background: Context of the agreement, director's appointment, and company's authority to provide indemnification
3. Definitions: Key terms including 'Claims', 'Losses', 'Indemnified Events', 'Excluded Events', and other relevant definitions
4. Scope of Indemnification: Detailed description of what events, actions, and circumstances are covered by the indemnity
5. Limitations and Exclusions: Statutory limitations and specific exclusions as per Companies Act Section 78(6)
6. Insurance Obligations: Company's obligations regarding D&O insurance maintenance and claims
7. Claims Procedure: Process for making claims under the indemnity, including notification requirements and timelines
8. Duration and Survival: Term of the indemnity and survival of obligations after directorship ends
9. Company's Rights and Obligations: Company's rights in defending claims and obligations to advance legal costs
10. Governing Law and Jurisdiction: Confirmation of South African law and jurisdiction for disputes
11. General Provisions: Standard clauses including amendments, assignments, notices, and severability
1. Multiple Jurisdictions: Additional provisions for directors serving on boards of international subsidiaries or operating in multiple jurisdictions
2. Special Positions: Additional provisions for directors holding specific positions (e.g., CEO, CFO) or serving on special committees
3. Tax Indemnity: Specific indemnification for tax-related liabilities where relevant to the director's role
4. Regulatory Compliance: Special provisions for regulated industries (e.g., financial services, mining)
5. Third Party Rights: Provisions extending indemnity benefits to director's estate, heirs, or legal representatives
6. Alternative Dispute Resolution: Mediation or arbitration procedures as alternative to court proceedings
1. Schedule 1: Insurance Details: Specifications of required D&O insurance coverage, including minimum limits and key terms
2. Schedule 2: Corporate Authorization: Board resolution or other corporate authorization for the indemnity
3. Schedule 3: Excluded Events: Detailed list of events and circumstances explicitly excluded from indemnification
4. Schedule 4: Claims Procedure: Detailed procedure for making and processing indemnification claims
5. Appendix A: Form of Claim Notice: Template for director to notify company of claims under the indemnity
6. Appendix B: Related Positions: List of additional positions held by director covered under the indemnity (e.g., subsidiary boards, committee roles)
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