2013 Indiana Code TITLE 28. FINANCIAL INSTITUTIONS ARTICLE 13. CORPORATE GOVERNANCE CHAPTER 11. STANDARDS OF CONDUCT FOR DIRECTORS
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IC 28-13-11
Chapter 11. Standards of Conduct for Directors
IC 28-13-11-1
Discharge of duties; good faith; ordinary prudence; best interests
of corporation
Sec. 1. A director shall, based on facts then known to the director,
discharge the duties of a director, including the director's duties as a
member of a committee:
(1) in good faith;
(2) with the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and
(3) in a manner the director reasonably believes to be in the best
interests of the corporation.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-2
Right to rely on data and other information; financial statements
and data
Sec. 2. In discharging the director's duties, a director is entitled to
rely on information, opinions, reports, or statements, including
financial statements and other financial data, if prepared or presented
by:
(1) at least one (1) officer or employee of the corporation whom
the director reasonably believes to be reliable and competent in
the matters presented;
(2) legal counsel, public accountants, or other persons as to
matters the director reasonably believes are within the person's
professional or expert competence; or
(3) a committee of the board of directors of which the director
is not a member if the director reasonably believes the
committee merits confidence.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-3
Bad faith; knowledge making reliance on information unwarranted
Sec. 3. A director is not acting in good faith if the director has
knowledge concerning the matter in question that makes reliance
otherwise permitted by section 2 of this chapter unwarranted.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-4
Best interests of corporation; factors considered
Sec. 4. A director may, in considering the best interests of a
corporation, consider the effects of any action on shareholders,
employees, suppliers, and customers of the corporation, and the
communities in which offices or other facilities of the corporation
are located, and any other factors the director considers pertinent.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-5
Exemption from personal liability; inapplicability in departmental
proceedings
Sec. 5. (a) A director is not liable for any action taken as a
director, or any failure to take any action, unless:
(1) the director has breached or failed to perform the duties of
the director's office under sections 1 through 4 of this chapter;
and
(2) the breach or failure to perform constitutes willful
misconduct or recklessness.
(b) The exemption from liability provided by this section does not
apply to any proceeding brought by the department against a director.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-6
Legislative intent; business judgment and discretion of directors;
corporate takeovers
Sec. 6. (a) In enacting this article, the general assembly
established corporate governance rules for Indiana corporations,
including in this chapter the standards of conduct applicable to
directors of Indiana corporations, and the corporate constituent
groups and interests that a director may take into account in
exercising the director's business judgment. The general assembly
intends to reaffirm certain of these corporate governance rules to
ensure that the directors of Indiana corporations, in exercising their
business judgment, are not required to approve a proposed corporate
action if the directors in good faith determine, after considering and
weighing as they consider appropriate the effects of the action on the
corporation's constituents, that the action is not in the best interests
of the corporation.
(b) In making a determination under this section, directors are not
required to consider the effects of a proposed corporate action on any
particular corporate constituent group or interest as a dominant or
controlling factor. Without limiting the generality of this section,
directors are not required to redeem any rights under or to make
inapplicable a shareholder rights plan adopted under IC 28-13-2-5,
or to take or decline to take any other action under this article, solely
because of the effect such action might have on a proposed
acquisition of control of the corporation or the amounts that might be
paid to shareholders under the acquisition.
(c) Certain judicial decisions in Delaware and other jurisdictions,
which might otherwise be looked to for guidance in interpreting the
duties of directors of corporations, including decisions relating to
potential change of control transactions that impose a different or
higher degree of scrutiny on actions taken by directors in response to
a proposed acquisition of control of the corporation, are inconsistent
with the proper application of the business judgment rule under this
article. Therefore, the general assembly intends:
(1) to reaffirm that this section allows directors the full
discretion to weigh the factors enumerated in section 4 of this
chapter as they consider appropriate; and
(2) to protect both directors and the validity of corporate action
taken by the directors in the good faith exercise of their
business judgment after reasonable investigation.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-7
Additional considerations affecting board actions or
recommendations; approval of majority of disinterested directors;
conclusive presumption of validity
Sec. 7. (a) In taking or declining to take any action, or in making
or declining to make any recommendation to the shareholders of the
corporation with respect to any matter, a board of directors of a
corporation may, in the board's discretion, consider both the short
term and long term best interests of the corporation.
(b) The board of directors shall take into account, and weigh as
the directors consider appropriate, the effects of the action or
recommendation on the corporation's shareholders and the other
corporate constituent groups and interests listed or described in
section 4 of this chapter, as well as any other factors considered
pertinent by the directors under section 4 of this chapter.
(c) If a determination is made under this section with the approval
of a majority of the disinterested directors of the board of the
directors, that determination shall conclusively be presumed to be
valid unless, after reasonable investigation, it can be demonstrated
that the determination was not made in good faith.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-8
Disinterested persons; director or shareholder of corporation
Sec. 8. (a) For the purposes of section 7 of this chapter, a director
is disinterested if:
(1) the director does not have a conflict of interest, within the
meaning of section 9(a) of this chapter, in connection with the
action or recommendation in question;
(2) in connection with matters described in IC 28-13-8 the
director is disinterested (as defined in IC 28-13-8-4(d)); and
(3) in connection with any matter involving or otherwise
affecting a transaction under IC 28-1-7, IC 28-1-8, or IC 28-3-2
that would result in a change of the person or persons that have
control (as defined in IC 28-2-14-6) over the corporation if the
director is not an employee of the corporation or an affiliate or
associate of or was not nominated or designated as a director by
a person proposing the transaction.
(b) A person may be disinterested under this section even though
the person is a director or shareholder of the corporation.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-9
Conflict of interest transactions; direct or indirect interest of
director; nonvoidability by corporation; voting for authorization,
approval, or ratification
Sec. 9. (a) A conflict of interest transaction is a transaction with
the corporation in which a director of the corporation has a direct or
indirect interest. Unless otherwise provided under federal or state
laws, regulations, or rules, a conflict of interest transaction is not
voidable by the corporation solely because of the director's interest
in the transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the director's
interest were disclosed or known to the board of directors or a
committee of the board of directors and the board of directors
or committee authorized, approved, or ratified the transaction.
(2) The material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to
vote and they authorized, approved, or ratified the transaction.
(3) The transaction was fair to the corporation.
(b) For purposes of subsection (a), a director of the corporation
has an indirect interest in a transaction if:
(1) another entity in which the director has a material financial
interest or in which the director is a general partner is a party to
the transaction; or
(2) another entity of which the director is a director, an officer,
or a trustee is a party to the transaction and the transaction is, or
is required to be, considered by the board of directors of the
corporation.
(c) For purposes of subsection (a)(1), a conflict of interest
transaction is authorized, approved, or ratified if the transaction
receives the affirmative vote of a majority of the directors on the
board of directors or on the committee who have no direct or indirect
interest in the transaction, but a transaction may not be authorized,
approved, or ratified under this section by a single director. If a
majority of the directors who have no direct or indirect interest in the
transaction vote to authorize, approve, or ratify the transaction, a
quorum is present for the purpose of taking action under this section.
The presence of, or a vote cast by, a director with a direct or indirect
interest in the transaction does not affect the validity of any action
taken under subsection (a)(1) if the transaction is otherwise
authorized, approved, or ratified as provided in that subsection.
(d) For purposes of subsection (a)(2), shares owned by or voted
under the control of a director who has a direct or indirect interest in
the transaction, and shares owned by or voted under the control of an
entity described in subsection (b), may be counted in a vote of
shareholders to determine whether to authorize, approve, or ratify a
conflict of interest transaction.
As added by P.L.14-1992, SEC.163.
IC 28-13-11-10
Unlawful distribution; liability of director; right to contribution
Sec. 10. (a) Subject to section 5 of this chapter, a director who
votes for or assents to a distribution made in violation of this article
or the articles of incorporation is personally liable to the corporation
for the amount of the distribution that exceeds what could have been
distributed without violating this article or the articles of
incorporation.
(b) A director held liable for an unlawful distribution under
subsection (a) is entitled to contribution:
(1) from every other director who voted for or assented to the
distribution, subject to section 5 of this chapter; and
(2) from each shareholder for the amount the shareholder
accepted.
As added by P.L.14-1992, SEC.163.
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