Drafting Drag along Triggers in International Shareholders Agreements
Drafting cross-border drag-along triggers requires verifiable voting thresholds, explicit cash valuation floors, and deeded power-of-attorney execution clamp mechanics.
Director Indemnity Survival
Meaning
Contractual protection that ensures a company continues to cover the legal costs and liabilities of its directors even after they leave their positions. The director indemnity survival clause is found in the articles of association or a separate deed to protect former officers from claims relating to their past decisions.
Obligation Persistence
The duty of the company to defend the director remains in force for a period of years that matches the statute of limitations for legal claims. This protection is necessary because lawsuits against a board of directors often arrive long after the specific transaction or corporate event has concluded.
Release Exception
A settlement agreement between the company and an outgoing director usually includes a clause that preserves these indemnity rights while releasing other claims. This carveout ensures that the director is not left without financial support if a third party or a regulatory body brings an action for acts performed during their tenure. The company agrees to pay for legal counsel and any settlements provided the director acted in good faith.
This right remains valid even if the company changes ownership or undergoes a corporate restructuring. The survival of the indemnity is a personal right that cannot be cancelled without the consent of the director.
Indemnity Limit
The survival of these rights is often capped by the total amount of insurance coverage available to the company. If the business becomes insolvent, the former director may have to rely on their own resources or a separate policy to cover the costs.