How to Fill Out the NVCA Indemnification Agreement: Advancement and Exclusions

The NVCA Indemnification Agreement is a model contract published by the National Venture Capital Association that a startup signs with an individual director or officer, promising to pay that person’s legal defense costs and liabilities arising from their corporate role. The current version was updated in July 2020 and is available as a downloadable Word document on the NVCA’s model legal documents page.¹ It is built on Delaware General Corporation Law Section 145 and is designed to turn the statute’s discretionary protections into binding obligations the company cannot later walk back.²

Who Signs It and When

The agreement is executed one-to-one. Each director and each named officer signs a separate contract with the company, authorized by a board resolution and countersigned by an officer of the corporation. Venture capital firms placing a partner on a portfolio company’s board typically require the signed agreement as a condition of accepting the seat.

Coverage reaches anyone serving as a director, officer, employee, or agent, and extends to people the company asks to serve in similar roles at subsidiaries, partnerships, joint ventures, trusts, or employee benefit plans. That scope tracks Section 145, which authorizes indemnification for any person involved in a proceeding “by reason of the fact that the person is or was a director, officer, employee or agent of the corporation.”² The NVCA model is drafted to work for both directors and officers, though some companies prepare slightly different versions for each role.

What the Agreement Covers

Protection applies to any legal proceeding tied to the person’s corporate role, whether civil, criminal, administrative, or investigative. That includes shareholder derivative suits, SEC investigations, regulatory enforcement actions, and ordinary commercial litigation naming the individual alongside the company. The clock starts when a formal legal threat arrives, not only when a case reaches trial, so coverage runs from demand letters through appeals.

Covered costs include attorney fees, court costs, expert witness fees, travel for depositions and hearings, judgments entered against the individual, fines, penalties, and settlement payments. One important narrowing: in derivative suits, where shareholders sue on the company’s behalf, Delaware law limits indemnification to defense expenses only. Judgments and settlements in a derivative action are not covered unless a court specifically determines the individual deserves broader protection despite being found liable.²

Why the Agreement Exists at All

Section 145 says a Delaware corporation may indemnify a director or officer who acted in good faith and reasonably believed their conduct served the company’s best interest, and may advance expenses before a case concludes.² “May” is the problem. A future board, perhaps installed by a hostile acquirer, could simply decline to pay. The statute does make indemnification mandatory in one scenario: when the director or officer wins the case on the merits or otherwise, the company must reimburse all reasonable expenses.³ Everything else is discretionary by default.

The NVCA agreement closes that gap. It contractually converts the discretionary pieces of Section 145 into obligations, so the individual never has to rely on a future board’s goodwill or interpretation of what “may” means on a given Tuesday.

Advancement of Expenses

This is often the most valuable term in the agreement. Corporate litigation defense routinely runs into the hundreds of thousands of dollars in the early stages alone, and without advancement, even a well-off director could be pressured into settling a meritless claim rather than funding years of defense out of pocket.

Under the model, the company must advance expenses within a set number of days after receiving invoices from the individual. SEC filings of agreements based on the NVCA template show advancement deadlines as short as ten days.⁴ In exchange, the individual signs an undertaking: a written promise to repay any advanced amounts if a final determination establishes they were not entitled to indemnification. Delaware law requires that undertaking as a condition of advancement.²

Two protections for the individual are worth knowing. The undertaking is unsecured, and the company cannot condition advancement on proof of ability to repay. And the repayment obligation only arises after a final court decision with no further right of appeal, not after an interim ruling or preliminary finding.⁴

How to Request Payment When a Claim Hits

The individual triggers the agreement by sending the corporation written notice of the claim, describing the nature of the proceeding and the expenses or liabilities at issue. Expense invoices and the signed undertaking go with the notice. From there, the company has to determine whether the individual met the required standard of conduct, meaning good faith and a reasonable belief that their actions served the company’s best interest.

That determination can be made in several ways: by a majority of disinterested directors, by a committee of disinterested directors, by independent legal counsel engaged for the purpose, or by the stockholders. After a change of control, where new ownership may be hostile to former leadership, the agreement typically requires independent counsel to make the call rather than the new board, which keeps the process honest.⁵

Two features tilt the process toward the individual. There is a presumption of proper conduct, placing the burden on the company to show otherwise. And if the decision-maker fails to reach a determination within the contractual deadline, many agreements deem that silence an approval.⁴ If the company refuses to pay after the deadline passes, the individual can sue to enforce the agreement.

What the Agreement Does Not Cover

Standard NVCA-style exclusions keep the agreement from becoming a blank check:

Short-swing profit liability under Section 16(b) of the Securities Exchange Act. Insiders must disgorge profits from paired purchases and sales of company equity securities within a six-month window, and good faith is no defense. Agreements exclude these amounts because the law treats the disgorgement as returning money the insider never should have had.⁶
Lawsuits the individual initiates against the company without prior board approval. The exception is a suit to enforce the indemnification agreement itself.
Fraud or intentional misconduct established by a final judgment. In that scenario, indemnification is off the table and any previously advanced funds must be repaid.

The line is honest business judgment that turned out badly on one side, illegal or disloyal conduct on the other.

How It Interacts With D&O Insurance and Venture Funds

A director facing a claim may have several sources of protection in play at once: the company’s indemnification obligation, the company’s Directors and Officers liability insurance policy, and in some cases the venture fund’s own insurance or indemnification arrangements. The NVCA agreement sets a clear order. The company is the “indemnitor of first resort,” which means it must advance and pay the full amount of covered expenses before anyone looks to the fund for contribution. The company also waives any right to seek reimbursement from the fund for what it pays.⁷

That ordering reflects how venture investing actually works. VC directors sit on multiple boards, and funds need to cap their exposure to any one portfolio company. Making the company pay first prevents the startup from quietly shifting its financial responsibilities onto the fund that appointed the director. The fund becomes a backstop only when the company’s assets and insurance genuinely run out.

Most venture-backed startups also carry D&O insurance covering defense costs and settlements for claims against leadership. The indemnification agreement typically requires the individual to cooperate with the insurance carrier so claims process efficiently. D&O policies generally mirror the agreement’s exclusions, which keeps the two protections running in parallel rather than at cross-purposes.

What to Customize Before Signing

The NVCA’s own introductory notes describe the document as a template to be tailored to each company’s situation.⁸ The terms most commonly adjusted:

Advancement timeline. Publicly filed versions show deadlines ranging from ten to thirty days after invoices are received.
Determination deadline. The window within which the company must decide whether the standard of conduct was met, and the consequence if it misses the deadline.
State of incorporation. The model is written for Delaware. Companies incorporated elsewhere need to align the agreement with their home state’s indemnification statute, which may impose different limits.
Change of control definition. The specific triggers that shift the determination to independent counsel, typically a specified percentage of voting power acquired, a board majority shift, or a merger.⁵
Venture fund provisions. Whether a specific fund is named as the secondary indemnitor and whether the first-resort language venture investors expect is included.

Execution itself is straightforward. A board resolution authorizes the contract, the company and the individual each sign, the agreement is dated, and the original is kept with corporate records. For companies that later go public, these agreements are typically filed as exhibits to SEC registration statements, which is why so many signed examples are publicly accessible on EDGAR.

1
National Venture Capital Association. Model Legal Documents
2
Delaware Code Online. Delaware Code Title 8, Chapter 1, Subchapter IV
3
FindLaw. Delaware Code Title 8 Corporations 145 – Indemnification of Officers, Directors and Agents; Insurance
4
U.S. Securities and Exchange Commission. Form of Indemnification Agreement
5
U.S. Securities and Exchange Commission. Mountain Lake Acquisition Corp. Indemnity Agreement
6
eCFR. 17 CFR 240.16b-3 – Transactions Between an Issuer and Its Officers or Directors
7
U.S. Securities and Exchange Commission. Boingo Wireless, Inc. – Indemnification Agreement
8
National Venture Capital Association. NVCA Indemnification Agreement