CHAPTER 24-9
LOANS; OBLIGATIONS; DISTRIBUTIONS

24-9-1 Loans; Guarantees; Suretyship.

(A)    Prerequisites. A corporation may lend money to, guarantee an obligation of, become a surety for, or otherwise financially assist a person, if the transaction, or a class of transactions to which the transaction belongs, is approved by the affirmative vote of a majority of the directors present and:

(1)    Is in the usual and regular course of business of the corporation;

(2)    Is with, or for the benefit of, a related corporation, an organization in which the corporation has a financial interest, an organization with which the corporation has a business relationship, or an organization to which the corporation has the power to make donations;

(3)    Is with, or for the benefit of, an officer or other employee of the corporation or a subsidiary, including an officer or employee who is a director of the corporation or a subsidiary, and may reasonably be expected, in the judgment of the board, to benefit the corporation; or

(4)    Has been approved by:

(a)    The holders of two-thirds of the voting power of the shares entitled to vote which are owned by persons other than the interested person or persons, or

(b)    The unanimous affirmative vote of the holders of all outstanding shares, whether or not entitled to vote.

(B)    Interest; security. A loan, guarantee, surety contract, or other financial assistance under subdivision 1 may be with or without interest and may be unsecured or may be secured in any manner, including, without limitation, a grant of a security interest in shares of the corporation.

(C)    Banking authority not granted. This Section does not grant any authority to act as a bank or to carry on the business of banking.

24-9-2 Advances.

A corporation may, without a vote of the directors, advance money to its directors, officers, or employees to cover expenses that can reasonably be anticipated to be incurred by them in the performance of their duties and for which they would be entitled to reimbursement in the absence of an advance.

24-9-3 Indemnification.

(A)    Definitions.

(1)    For purposes of this Section, the terms defined in this subdivision have the meanings given them.

(2)    “Corporation” includes a Tribal or foreign corporation that was the predecessor of the corporation referred to in this Section in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.

(3)    “Official capacity” means 1) with respect to a director, the position of director in a corporation, 2) with respect to a person other than a director, the elective or appointive office or position held by an officer, member of a committee of the board, or the employment relationship undertaken by an employee of the corporation, and 3) with respect to a director, officer, or employee of the corporation who, while a director, officer, or employee of the corporation, is or was serving at the request of the corporation or whose duties in that position involve or involved service as a director, officer, partner, trustee, employee, or agent of another organization or employee benefit plan, the position of that person as a director, officer, partner, trustee, employee, or agent, as the case may be, of the other organization or employee benefit plan.

(4)    “Proceeding” means a threatened, pending, or completed civil, criminal, administrative, arbitration, or investigative proceeding, including a proceeding by or in the right of the corporation.

(5)    “Special legal counsel” means counsel who has not represented the corporation or a related corporation, or a director, officer, member of a committee of the board, or employee, whose indemnification is in issue.

(B)    Indemnification mandatory; standard.

(1)    Subject to the provisions of Section 24-9-3 (D), a corporation shall indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of the person against judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys fees and disbursements, incurred by the person in connection with the proceeding, if, with respect to the acts or omissions of the person complained of in the proceeding, the person:

(a)    Has not been indemnified by another organization or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys fees and disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions;

(b)    Acted in good faith;

(c)    Received no improper personal benefit and Section 24-6-19, if applicable, has been satisfied;

(d)    In the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and

(e)    In the case of acts or omissions occurring in the official capacity described in Section 24-9-3 (A), paragraph (3), clause (a) or (b), reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions occurring in the official capacity described in Section 24-9-3 (A), paragraph (3), clause (c), reasonably believed that the conduct was not opposed to the best interests of the corporation. If the person’s acts or omissions complained of in the proceeding relate to conduct as a director, officer, trustee, employee, or agent of an employee benefit plain, the conduct is not considered to be opposed to the best interests of the corporation if the person reasonably believed that the conduct was in the best interests of the participants or beneficiaries of the employee benefit plain.

(2)    The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contenders or its equivalent does not, of itself, establish that the person did not meet the criteria set forth in this subdivision.

(C)    Advances. Subject to the provisions of Section 24-9-3 (D), if a person is made or threatened to be made a party to a proceeding the person is entitled, upon written request to the corporation, to payment or reimbursement by the corporation of reasonable expenses, including attorney’s fees and disbursements, incurred by the person in advance of the final disposition of the proceeding (a) upon receipt by the corporation of a written affirmation by the person of a good faith belief that the criteria for indemnification set forth in Section 24-9-3 (B) have been satisfied and a written undertaking by the person to repay all amounts so paid or reimbursed by the corporation, if it is ultimately decided that the criteria for indemnification have not been satisfied, and (b) after a determination that the facts then known to those making the determination would not preclude indemnification under this Section. The written undertaking required by paragraph (a) infra, is an unlimited general obligation of the person making it, but need not be secured and shall be accepted without reference to financial ability to make the repayment.

(D)    Prohibition or limit on indemnification or advances. The articles or bylaws either may prohibit indemnification or advances of expenses otherwise required by this Section or may impose conditions on indemnification or advances of expenses in addition to the conditions contained in Section 24-9-3 (B) and Section 24-9-3 (C) including, without limitation, monetary limits on indemnification or advances of expenses, if the conditions apply equally to all persons or to persons within a given class. A prohibition or limit on indemnification or advances may not apply to or affect the right of a person to indemnification or advances of expenses with respect to any acts or omissions of the person occurring prior to the effective date of a provision in the articles or the date of adoption of a provision in the bylaws establishing the prohibition or limit on indemnification or advances.

(E)    Reimbursement to witnesses. This Section does not require, or limit the ability of, a corporation to reimburse expenses, including attorney’s fees and disbursements, incurred by a person in connection with an appearance as a witness in a proceeding at a time when the person has not been made or threatened to be made a party to a proceeding.

(F)    Determination of eligibility.

(1)    All determinations of whether indemnification of a person is required because the criteria set forth in Section 24-9-3 (B) have been satisfied and whether a person is entitled to payment or reimbursement of expenses in advance of the final disposition of a proceeding as provided in Section 24-9-3 (C) shall be made:

(a)    By the board by a majority of a quorum; directors who are at the time parties to the proceeding shall not be counted for determining either a majority or the presence of a quorum;

(b)    If a quorum under clause (a) cannot be obtained, by a majority of a committee of the board, consisting solely of two or more directors not at the time parties to the proceeding duly designated to act in the matter by a majority of the full board including directors who are parties;

(c)    If a determination is not made under clause (a) or (b), by special legal counsel, selected either by a majority of the board or a committee by vote pursuant to clause (a) or (b) or, if the requisite quorum of the full board cannot be obtained and the committee cannot be established, by a majority of the full board including directors who are parties;

(d)    If a determination is not made under clauses (a) to (c), by the shareholders, excluding the votes of shares held by parties to the proceeding; or

(e)    If an adverse determination is made under clauses (a) to (d) or under paragraph (2), or if no determination is made under clauses (a) to (d) or under paragraph (2) within 60 days after (1) the later to occur of the termination of a proceeding or a written request for indemnification to the corporation or (2) a written request for an advance of expenses, as the case may be, by a court or entity of competent jurisdiction, which may be the same court or entity in which the proceeding involving the persons liability took place, upon application of the person and any notice the court or entity requires. The person seeking indemnification or payment or reimbursement of expenses pursuant to this clause has the burden of establishing that the person is entitled to indemnification or payment or reimbursement of expenses.

(2)    With respect to a person who is not, and was not at the time of the acts or omissions complained of in the proceedings, a director, officer, or person possessing, directly or indirectly, the power to direct or cause the direction of the management or policies of the corporation, the determination whether indemnification of this person is required because the criteria set forth in Section 24-9-3 (B) have been satisfied and whether this person is entitled to payment or reimbursement of expenses in advance of the final disposition of a proceeding as provided in Section 24-9-3 (C) may be made by an annually appointed committee of the board, having at least one member who is a director. The committee shall report at least annually to the board concerning its actions.

(G)    Insurance. A corporation may purchase and maintain insurance on behalf of a person in that person’s official capacity against any liability asserted against and incurred by the person in or arising from that capacity, whether or not the corporation would have been required to indemnify the person against the liability under the provisions of this section.

(H)    Disclosure. A corporation that indemnities or advances expenses to a person in accordance with this Section in connection with a proceeding by or on behalf of the corporation shall report to the shareholders in writing the amount of the indemnification or advance and to whom and on whose behalf it was paid not later than the next meeting of shareholders.

(I)    Indemnification of other persons. Nothing in this Section shall be construed to limit the power of the corporation to indemnify other persons by contract or otherwise.

24-9-4 Distributions.

(A)    When permitted. The board may authorize and cause the corporation to make a distribution only if the board determines, in accordance with Section 24-9-4 (B), that the corporation will be able to pay its debts in the ordinary course of business after making the distribution and the board does not know before the distribution is made that the determination was or has become erroneous, and the corporation may make the distribution if it is able to pay its debts in the ordinary course of business after making the distribution. The effect of a distribution on the ability of the corporation to pay its debts in the ordinary course of business after making the distribution shall be measured in accordance with Section 24-9-4 (C). The right of the board to authorize, and the corporation to make, distributions may be prohibited, limited, or restricted by or the rights and priorities of persons to receive distributions may be established by, the articles or bylaws or an agreement.

(B)    Determination presumed proper. A determination that the corporation will be able to pay its debts in the ordinary course of business after the distribution is presumed to be proper if the determination is made in compliance with the standard of conduct provided in Section 24-6-18 on the basis of financial information prepared in accordance with accounting methods, or a fair valuation or other method, reasonable in the circumstances. No liability under Section 24-6-18 or Section 24-9-7 will accrue if the requirements of this subdivision have been met.

(C)    Effect measured.

(1)    In the case of a distribution made by a corporation in connection with a purchase, redemption, or other acquisition of its shares, the effect of the distribution shall be measured as of the date on which money or other property is transferred, or indebtedness payable in installments or otherwise is incurred, by the corporation, or as of the date on which the shareholder ceases to be a shareholder of the corporation with respect to the shares, whichever is the earliest.

(2)    The effect of any other distribution shall be measured as of the date of its authorization if payment occurs 120 days or less following the date of authorization or as of the date of payment if payment occurs more than 120 days following the date of authorization.

(3)    Indebtedness of a corporation incurred or issued in a distribution in accordance with this Section to a shareholder who as a result of the transaction is no longer a shareholder is on a parity with the indebtedness of the corporation to its general unsecured creditors, except to the extent subordinated, agreed to, or secured by a pledge of any assets of the corporation or a related corporation, or subject to any other agreement between the corporation and the shareholder.

(4)    Sections 24-9-4 to 24-9-7 supersede all other laws of the Nation with respect to distributions.

(D)    Restrictions.

(1)    A distribution may be made to the holders of a class or series of shares only if:

(a)    All amounts payable to the holders of shares having a preference for the payment of that kind of distribution, other than those holders who give notice to the corporation of their agreement to waive their rights to that payment, are paid; and

(b)    The payment of the distribution does not reduce the remaining net assets of the corporation below the aggregate preferential amount payable in the event of liquidation to the holders of shares having preferential rights, unless the distribution is made to those shareholders in the order and to the extent of their respective priorities or the holders of shares who do not receive distributions in that order give notice to the corporation of their agreement to waive their rights to that distribution. A determination that the payment of the distribution does not reduce the remaining net assets of the corporation below the aggregate preferential amount payable in the event of liquidation to the holders of shares having preferential rights is presumed to be proper if the determination is made in compliance with the standard of conduct provided in Section 24-6-18 on the basis of financial information prepared in accordance with accounting methods, or a fair valuation, or other methods, reasonable in the circumstances. Liability under Section 24-6-18 or Section 24-9-7 will not arise if the requirements of this paragraph are met.

(2)    If the money or property available for distribution is insufficient to satisfy all preferences, the distributions shall be made pro-rata according to the order of priority of preferences by classes and by series within those classes unless those holders who do not receive distributions in that order give notice to the corporation of their agreement to waive their rights to that distribution.

24-9-5 Powers to Acquire Shares.

(A)    When permitted; status of shares. A corporation may acquire its own shares, subject to Section 24-9-4 and Section 24-9-5 (C). If the corporation pledges the shares to secure payment of the redemption price thereof, then the corporation shall not be deemed to have acquired the shares for the purposes of this subdivision until the pledge is released. Shares acquired by a corporation constitute authorized but unissued shares of the corporation, unless the articles provide that they shall not be reissued, in which case the number of authorized shares is reduced by the number of shares acquired.

(B)    Statement of cancellation. If the number of authorized shares of a corporation is reduced by an acquisition of its shares, the corporation shall, no later than the time it makes its next annual report to shareholders or, if no report is made, no later than three months after the end of the fiscal year in which the acquisition occurs, file with the Tribal Secretary a statement of cancellation showing the reduction in the authorized shares. The statement shall contain:

(1)    The name of the corporation;

(2)    The number of acquired shares canceled, itemized by classes and series; and

(3)    The aggregate number of authorized shares itemized by classes and series, after giving effect to the cancellation.

(C)    Limitation on share purchases. A publicly-held corporation shall not, directly or indirectly, purchase or agree to purchase any shares entitled to vote from a person (or two or more persons who act as a partnership, limited partnership, syndicate, or other group pursuant to any written or oral agreement, arrangement, relationship, understanding, or otherwise for the purpose of acquiring, owning, or voting shares of the publicly-held corporation) who beneficially owns more than five percent of the voting power of the publicly-held corporation for more than the market value thereof if the shares have been beneficially owned by the person for less than two years, unless the purchase or agreement to purchase is approved at a meeting of shareholders by the affirmative vote of the holders of a majority of the voting power of all shares entitled to vote or the publicly-held corporation makes an offer, of at least equal value per share, to all holders of shares of the class or series and to all holders of any class or series into which the securities may be converted. For purposes of determining the period that shares have been beneficially owned by a person:

(1)    Shares acquired by the person by gift from a donor are deemed to have first become beneficially owned by the person when the shares were acquired by the donor;

(2)    Shares acquired by a trust from the settlor of the trust, or shares acquired from the trust by a beneficiary of the trust, are deemed to have first become beneficially owned by the trust or the beneficiary when the shares were acquired by the settlor; and

(3)    Shares acquired by an estate or personal representative as a result of the death or incapacity of a person, or shares acquired from the estate or personal representative by an heir, devisee, or beneficiary of the deceased or incapacitated person, are deemed to have first become beneficially owned by the estate, personal representative, heir, devisee, or beneficiary when the shares were acquired by the deceased or incapacitated person.

24-9-6 Liability of Shareholders for Illegal Distributions.

(A)    Liability. A shareholder who receives a distribution made in violation of the provisions of Section 24-9-4 is liable to the corporation, its receiver or other person winding up its affairs, or a director under Section 24-9-7 (B) but only to the extent that the distribution received by the shareholder exceeded the amount that properly could have been paid under Section 24-9-4.

(B)    Statute of limitations. An action shall not be commenced under this Section more than two years from the date of the dissolution.

24-9-7 Liability of Directors for Illegal Distributions.

(A)    Liability. In addition to any other liabilities, a director who is present at a meeting and fails to vote against, or who consents in writing to, a distribution made in violation of Section 24-9-4 or a restriction contained in the articles or bylaws or an agreement, and who fails to comply with the standard of conduct provided in Section 24-6-18, is liable to the corporation jointly and severally with all other directors so liable and to other directors under Section 24-9-7 (C), but only to the extent that the distribution exceeded the amount that properly could have been paid under Section 24-9-4.

(B)    Contribution from shareholders. A director against whom an action is brought under this Section with respect to a distribution may implead in that action all shareholders who received the distribution and may compel pro-rata contribution from them in that action to the extent provided in Section 24-9-6 (A).

(C)    Impleader, contribution from directors. A director against whom an action is brought under this section with respect to a distribution may implead in that action all other directors who voted for or consented in writing to the distribution and may compel pro-rata contribution from them in that action.

(D)    Statute of limitations. An action shall not be commenced under this Section more than two years from the date of the distribution.