N.Y. Partnership Law § 115-c: Indemnification of general partner in actions in the right of a limited partnership to procure a judgment in its favor

§ 115-c. Indemnification of general partner in actions in the right of

a limited partnership to procure a judgment in its favor. 1. No

provision made to indemnify general partners for the defense of any

action brought pursuant to section one hundred fifteen-a of this

article, whether contained in the articles of limited partnership,

agreement or otherwise, nor any award of indemnification by a court,

shall be valid unless consistent with this section.

2. A limited partnership may indemnify any general partner, made a

party to an action in the right of a limited partnership to procure a

judgment in its favor by reason of the fact that he, his testator or

intestate was a general partner in the limited partnership, against the

reasonable expenses, including attorneys' fees, actually and necessarily

incurred by him in connection with the defense of such action, or in

connection with an appeal therein, except in relation to matters as to

which such general partner is adjudged to have breached his duty to the

limited partnership.

3. The indemnification authorized under subdivision two of this

section shall in no case include

(a) amounts paid in settling or otherwise disposing of a threatened

action, or pending action with or without court approval, or

(b) expenses incurred in defending a threatened action, or pending

action which is settled or otherwise disposed of without court approval.

4. A general partner who has been wholly successful on the merits or

otherwise in the defense of an action of the character described in

subdivision two of this section shall be entitled to indemnification as

authorized in subdivisions two and three of this section.

5. Except as provided in subdivision four of this section, any

indemnification under subdivision two, unless ordered by a court under

subdivision six, shall be made by the limited partnership only if

authorized in the specific case

(a) by a majority of all the general partners, excluding any partners

who are parties to such action, upon a finding that the general partner

to be indemnified has met the standard of conduct set forth in

subdivision two, or,

(b) if a majority of general partners who are not parties to such

action is not obtainable with due diligence by the general partner or

partners, upon the opinion of independent legal counsel that

indemnification is proper in the circumstances because the standard of

conduct set forth in subdivision two has been met by the general partner

to be indemnified.

6. (a) Notwithstanding the failure of the limited partnership to

provide indemnification, and despite any contrary determination by the

general partners, indemnification shall be awarded by a court to the

extent authorized under subdivisions two and four of this section.

Application therefor may be made, in every case, either

(i) in the action in which the expenses were incurred or other amounts

were paid, or

(ii) to the supreme court in a separate proceeding, in which case the

application shall set forth the disposition of any previous application

made to any court for the same relief and also reasonable cause for the

failure to make application for such relief in the action in which the

expenses were incurred or other amounts were paid.

(b) The application shall be made in such manner and form as may be

required by the applicable rules of court or, in the absence thereof, by

direction of a court to which it is made. Such application shall be on

notice to the limited partnership, given through a general partner, if

any, other than the general partner making the application. The court

may also direct that notice be given at the expense of the limited

partnership, to the limited partners and such other persons as it may

designate in such manner as it may require. When there is no general

partner other than those making the application, notice shall be given,

as herein provided, to the limited partners.

(c) When indemnification is sought by judicial action, the court may

allow a general partner such reasonable expenses, including attorneys'

fees, during the pendency of the litigation as are necessary in

connection with his defense therein, if the court shall find that the

defendant has by his pleadings or during the course of the litigation

raised genuine issues of fact or law.

7. Expenses incurred in defending an action of the character described

in subdivision two of this section may be paid voluntarily by the

limited partnership in advance of the final disposition of such action

if authorized under subdivision five of this section.

8. All expenses incurred in defending an action which are allowed by

the court under subdivisions six or seven of this section shall be

repaid in case the general partner receiving such advancement or

allowance is ultimately found, under the procedure set forth in this

section, not to be entitled to indemnification or, where indemnification

is granted, to the extent the expenses so advanced by the general

partnership or allowed by the court exceed the indemnification to which

he is entitled.

9. No indemnification, advancement or allowance shall be made under

this section in any circumstance where it appears

(a) that indemnification would be inconsistent with a provision of the

certificate of limited partnership, agreement, partnership resolution or

other proper partnership action, in effect at the time of accrual of the

alleged cause of action asserted in the threatened or pending action in

which the expenses were incurred or other amounts were paid, which

prohibits or otherwise limits indemnification; or

(b) if there has been a settlement approved by the court, that the

indemnification would be inconsistent with any condition with respect to

indemnification expressly imposed by the court in approving the

settlement.