Hi there. A Directors Indemnity Agreement, also known as a Deed of Indemnity, is a very common agreement entered into between a director of a company and the company. It establishes when the company will indemnify the director for personal liabilities or legal costs incurred while that director is performing their role. Entering into a Deed of Indemnity can be done regardless of whether a company has one or many directors.

By the very nature of what a Deed of Indemnity aims to achieve, there is always going to be an inherent conflict. This is because it is in the interests of a director to maximise the benefits available to them, whereas a company will look to limit its exposure and risk. Note that, in Australia, it is an offence against the corporations laws for a director to cause a company to enter into an agreement that confers unreasonable personal benefits on a director.

When it comes to executing a legal document, the wording and format of the execution page needs to clearly specify how the document is being executed. Documents that are not executed properly may not be valid or legally binding. For a proprietary company that has a sole director who is also the sole company secretary, that director can sign any legal document in order to validly bind the company. It follows that, for a Deed of Indemnity, the sole director must sign the deed for the company to be bound. However, if the sole director is not also the sole company secretary (e.g. if the company has not appointed a secretary), additional steps are required in order to properly execute the document.

Suggested way forward

A lawyer can advise you of your powers as a sole director and what you should do to ensure the Deed of Indemnity is effective. By pressing the “Consult a Lawyer” button, LawAdvisor can help you search for experienced lawyers and obtain fee proposals for their services. Costs for legal advice and representation will vary between providers based on experience and the scope of services.