Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) A company or a related body corporate must not exempt a person (whether directly or through an interposed entity) from a liability to the company incurred as an officer or auditor of the company.
Note: This section is modified for the director of a wholesale CCIV: see subsection 1224D(7). This section has an extended operation in relation to officers and auditors of the corporate director of a CCIV: see section 1225E.
When indemnity for liability (other than for legal costs) not allowed
(2) A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company:
(a) a liability owed to the company or a related body corporate;
(b) a liability for a pecuniary penalty order under section 1317G or a compensation order under section 961M, 1317H, 1317HA, 1317HB, 1317HC or 1317HE;
(c) a liability that is owed to someone other than the company or a related body corporate and did not arise out of conduct in good faith.
This subsection does not apply to a liability for legal costs.
When indemnity for legal costs not allowed
(3) A company or related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against legal costs incurred in defending an action for a liability incurred as an officer or auditor of the company if the costs are incurred:
(a) in defending or resisting proceedings in which the person is found to have a liability for which they could not be indemnified under subsection (2); or
(b) in defending or resisting criminal proceedings in which the person is found guilty; or
(c) in defending or resisting proceedings brought by ASIC or a liquidator for a court order if the grounds for making the order are found by the court to have been established; or
(d) in connection with proceedings for relief to the person under this Act in which the Court denies the relief.
Paragraph (c) does not apply to costs incurred in responding to actions taken by ASIC or a liquidator as part of an investigation before commencing proceedings for the court order.
Note 1: Paragraph (c)--This includes proceedings by ASIC for an order under section 206C, 206D, 206E or 206EAA (disqualification), section 232 (oppression), section 961M, 1317E, 1317G, 1317H, 1317HA, 1317HB, 1317HC or 1317HE (civil penalties) or section 1324 (injunction).
Note 2: The company may be able to give the person a loan or advance in respect of the legal costs (see section 212).
(4) For the purposes of subsection (3), the outcome of
proceedings is the outcome of the proceedings and any appeal in relation to
the proceedings.