Turinas & Bird, LLC

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Why All Companies (large and small) Should Think About Director and Officer Indemnification and Advancement

August 10, 2015 by Alison Bird 1 Comment

indemnification agreements and advancesWhile pursuing the upside of a growth stage company, it’s easy to forget to hedge against downside risks. Corporate officers and directors can face immense financial liabilities if sued in connection with their service to the corporate entity. With this in mind, the prudent officer/ director will ensure entitlement to indemnification for legal expenses AND advancement of funds to cover their defense.

What is Indemnification? Advancement?

So, what exactly is advancement and how is that different from Indemnification? Although the terms are often used interchangeably, there is a difference. Indemnification refers to the ultimate obligation of the corporate entity to pay, among other things, the legal costs of a proceeding involving a director/officer. Advancement is the obligation of the corporate entity to pay those costs as they are incurred.

Whether or not you are entitled to indemnification or advancement is governed by state law. In Delaware, for instance, corporate entities have great flexibility in their ability to indemnify officers. While there are some mandatory indemnification obligations by statute, most authority is permissive, which means it has to be drafted into documents in order to apply. Officers and directors who have not ensured adequate indemnification AND advancement rights have been created might find themselves depleting their own personal savings to pay for the costs of litigation. Worse yet, if those individuals don’t have adequate funds to defend themselves, they might not be able to defend themselves at all. Knowing these risks, the next question is what potential officers and directors should do to ensure that personal assets are protected from litigation costs associated with the duties performed in their corporate capacity. [Read more…]

Filed Under: Corporate Law Tagged With: director indemnification, indemnification agreement, indemnification and advancement, officer indemnification

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Turinas & Bird, LLC
"When I am considering hiring a lawyer, I look at whether they spend time to assess my pain factors, listening to what our needs are going to be. I want problem-solvers rather than over-analyzers, who understand my priorities as well as my issues. Other lawyers look solely at legal issues. Turinas & Bird looks at both the legal issues and practical issues, and then form a strategy. Among other things, I rely on them as an accessible sounding board. They function as our outsourced general counsel."
Bruce Groves President, Emilcott Associates, Inc.
Turinas & Bird, LLC
"When I am considering hiring a lawyer, I look at whether they spend time to assess my pain factors, listening to what our needs are going to be. I want problem-solvers rather than over-analyzers, who understand my priorities as well as my issues. Other lawyers look solely at legal issues. Turinas & Bird looks at both the legal issues and practical issues, and then form a strategy. Among other things, I rely on them as an accessible sounding board. They function as our outsourced general counsel."
Bruce Groves President, Emilcott Associates, Inc.
Turinas & Bird, LLC
"Turinas & Bird is our go-to law firm for our expansion to have a permanent presence in North America. Alice’s experiences as a lawyer in both the US and the UK, our headquarters country, have been invaluable to us. I also appreciate her genuine concern for our issues, and how she understands the challenges in providing professional services to global consumer products companies."
Fiona Blades CEO, MESH Planning
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"With Turinas & Bird, I got exactly what I wanted, from the right person, and knew my company’s interests were well-protected, on our company’s most significant international transaction. Unlike her counterparts at a large law firm, Alice gives us her full attention without needlessly running up the bill. In addition to having significant corporate and international experience, she is friendly, conscientious, quick to understand new situations, and nimble in navigating the best way through a challenging problem. Her advice is straightforward: ‘This is what we need to do to protect your company and achieve your goals.'"
Dr. Ed Guy CTO, Practice Unite
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"When we co-principals of our consulting firm needed a shareholders agreement, I chose Turinas & Bird because of Alice Turinas’ practical, problem-solving approach. From discussions I had with her before she was aware that we were looking for legal advice, it was evident that she had deep experience with joint ventures and co-ownership issues. Alice laid out our choices in a clear, jargon-free way, so we could have our agreement tailored to suit our needs and priorities. Since then she has also advised on client agreements involving intellectual property matters, and has proven once again to be pleasant, responsive and practical. I am confident that she puts our company’s interests before her own; for her, we are not just another source of billable hours."
Beth Williams Principal, Forward Focus, Inc.
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Heather Ibrahim Leathers Co-founder, Digitod
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Kimberly Eads Managing Member, Vital Development LLC
Turinas & Bird, LLC
"Alice Turinas has a wide range of technology skills and startup business experience. Thanks to that, she has offered valuable suggestions, and I know Turinas & Bird can handle our needs as we grow. Because I like an answer that addresses the ‘ins’ and ‘outs’ of an issue, Alice made sure that I had a good understanding of the available options, and not just the strict legal answer. And while other firms lack a personal touch and thoroughness, Alice is warm, outgoing and willing to go the extra mile. The results have been excellent: our issues were well understood, and the outcome has been far better than my expectation."
Ryan Gyure CEO, Cannonball Projects, Inc.
Turinas & Bird, LLC
"Alice Turinas enabled us to close the sale of our business by the end of the year, saving us from paying substantially higher taxes had we completed the sale later. This was quite a feat, since she was not only dealing with the buyer, but also obtaining consent to the sale from the national franchise of which our business was a part. There were times when we doubted whether everything could get done before year end, but somehow, with her help, it was finished before our deadline."
MaryAnn & Peter Stajk former owners of a retail battery distributor
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Helen Allison Group Vice President-Legal (Corporate IT), Wyndham Worldwide Corporation

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