Faculty of Economic and Financial Sciences
AUITING AND INTERNAL CONTROL 2014
UNIT 4
,Department of Commercial
Accounting
Companies Act 2008
Lesson 2
2
, Department of Commercial
Accounting
SECTION 78: Indemnification and directors’ insurance
What is indemnity? Do you remember the indemnity forms that your
parents signed for school trips? What were they all about?
A company can indemnify a director against liability in certain situations.
A company can also take insurance to cover losses related to some actions
by a director
A company may not indemnify a director for:
o A liability arising from failure to
a) Act in good faith and for proper purpose
b) Act in the best interest of the company
c) Act with care, skill and diligence
o A fine imposed to a director who is convicted in terms of national legislation.
AUITING AND INTERNAL CONTROL 2014
UNIT 4
,Department of Commercial
Accounting
Companies Act 2008
Lesson 2
2
, Department of Commercial
Accounting
SECTION 78: Indemnification and directors’ insurance
What is indemnity? Do you remember the indemnity forms that your
parents signed for school trips? What were they all about?
A company can indemnify a director against liability in certain situations.
A company can also take insurance to cover losses related to some actions
by a director
A company may not indemnify a director for:
o A liability arising from failure to
a) Act in good faith and for proper purpose
b) Act in the best interest of the company
c) Act with care, skill and diligence
o A fine imposed to a director who is convicted in terms of national legislation.
