198Indemnification and exemption of officer or auditor

198 Indemnification and exemption of officer or auditor

(1) Exemptions not allowed (cf Corporations Act s 199A (1))

A co-operative or a related corporation must not exempt a person (whether directly or through an interposed entity) from a liability to the co-operative incurred as an officer or auditor of the co-operative.

(2) When indemnity for liability (other than for legal costs) not allowed (cf Corporations Act s 199A (2))

A co-operative or a related corporation 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 co-operative:

(a) a liability owed to the co-operative or a related corporation;

(b) a liability that is owed to someone other than the co-operative or a related corporation and did not arise out of conduct in good faith.

This subsection does not apply to a liability for legal costs.

(3) When indemnity for legal costs not allowed (cf Corporations Act s 199A (3))

A co-operative or related corporation 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 co-operative 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 the Registrar 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 Law in which the court denies the relief.

Paragraph (c) does not apply to costs incurred in responding to actions taken by the Registrar or a liquidator as part of an investigation before commencing proceedings for the court order.

(4) Meaning of outcome of proceedings (cf Corporations Act s 199A (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.