On March 12, 2025, the Second Department issued a decision in Billings v. Billings Props., Inc., 2025 NY Slip Op. 01339, holding that a corporate officer should not have been allowed to use corporate funds to pay for the defense of claims against her personally without obtaining an undertaking to repay those funds, explaining:
Pursuant to Business Corporation Law § 723(c), expenses incurred in defending a civil or criminal action or proceeding may be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount as, and to the extent, required by Business Corporation Law § 725(a). Where a corporation has no statutory authority to act, it will be enjoined from acting unlawfully regardless of the balance of factors enumerated under the standard test for injunctive relief. Here, it is undisputed that the defendant failed to secure an undertaking prior to having BPI pay expenses incurred in advance of the final disposition. Accordingly, upon reargument, the court erred in adhering to its original determination denying those branches of the plaintiff’s motion which were to direct the defendant to return to BPI all funds that BPI had expended on her legal fees in this action and to restrain her from using BPI’s funds to pay her legal fees in this action.
(Internal quotations and citations omitted).