An employer recently tried to immediately appeal a decision requiring it to advance funds to a corporate director, officer, and employee. Forsgren Fisher attorneys Matthew Forsgren, Virginia McCalmont, and Caitlinrose Fisher argued to the Minnesota Court of Appeals that the employer could not immediately appeal the decision. This past week, the Minnesota Court of Appeals agreed and dismissed the appeal for lack of jurisdiction. See Order, Power Dynamics Gasket Co. v. Chad Wall, No. A20-1580 (Jan. 12, 2021).

The concepts of advancement and indemnification involving corporate officers, directors, and employees are commonly misunderstood among practitioners. The misunderstandings are largely due to the complexity of statutes and caselaw interpreting advancement and indemnification obligations.

Advancement is a mechanism for certain defined individuals to receive funds on a temporary basis so long as important, specified criteria are met. Advancement essentially functions as a loan made pursuant to what is called an undertaking. The loan is meant to provide funding for expenses such as legal fees and expenses. Advancement allows a person to defend herself or himself when the person has been threatened to be or is made part of a proceeding (as defined by statute) relating to acts arising out of the individual’s official capacity. Indemnification at its essence is the ultimate determination about whether an individual must repay the advance. Bottom line: if available, advancement can make or break a case for an individual in connection with a proceeding—even one brought by the individual’s employer—because advancement allows for the person the financial means to defend herself or himself.

There are many skilled practitioners at firms that handle these complex advancement and indemnification issues. Forsgren Fisher is one such firm. Regardless of what side of such an issue you may find yourself, we can help counsel you before, during, and after advancement and indemnification proceedings.