Bill to Provide Greater Indemnification Protections to Corporate Officials Awaits Approval by the Governor

On January 10, 2011, the New Jersey Senate and Assembly each passed an amendment to the New Jersey Business Corporation Act (S2493 and A3254) designed to protect the rights of corporate directors and officers to receive indemnification for costs incurred during civil, criminal, administrative or investigative actions, suits or proceedings, arising from the directors’ and officers’ activities on behalf of their corporations. The bill, which has been sent to Governor Christie for approval, provides that a director’s or officer’s right to indemnification or advancement of expenses, as set forth in a corporation’s certificate of incorporation or bylaws, may not be eliminated or weakened by amendments to the certificate of incorporation or bylaws after the occurrence of an act or omission, unless there is an explicit authorization at the time of the act or omission of such a right to retroactively eliminate or limit the applicable indemnification or advancement. The amendment was modeled on a recent amendment to the General Corporation Law in Delaware, and it is designed to help make it easier for companies to conduct business in New Jersey.