A.R.S. § 10-3853

Planned Communities & Condominiums

Advance for expenses

Planned Communities & Condominiums · Text verified 2026-07-25

In plain English: The association may pay or reimburse a director's reasonable expenses before a proceeding ends if the director gives a written affirmation of their good-faith belief that they met the required standard of conduct and a written promise to repay the advance if it turns out they were not entitled to indemnification. That repayment promise is a general obligation of the director but does not have to be secured and can be accepted without regard to the director's ability to repay. These advances must be authorized consistent with the directors' or officers' standard-of-conduct sections, and this section does not govern advances to outside directors, which are handled under section 10-3852.

10-3853. Advance for expenses

A. A corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if both of the following conditions exist:

1. The director furnishes to the corporation a written affirmation of the director's good faith belief that the director has met the standard of conduct described in section 10-3851 or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation pursuant to section 10-3202, subsection B, paragraph 1.

2. The director furnishes the corporation with a written undertaking, executed personally or on the director's behalf, to repay the advance if the director is not entitled to mandatory indemnification under section 10-3852 and it is ultimately determined that the director did not meet the standard of conduct.

B. The undertaking required by subsection A, paragraph 2 of this section is an unlimited general obligation of the director but need not be secured and may be accepted without reference to financial ability to make repayment.

C. Authorizations of payments under this section shall be made in a manner consistent with section 10-3830 or 10-3842.

D. This section does not apply to advancement of expenses to or for the benefit of an outside director. Advances to outside directors shall be made pursuant to section 10-3852.

Source: A.R.S. § 10-3853 — Arizona State Legislature