A Delaware court has ruled in favor of Minnie Sarwal, the former CEO of Nephrosant, Inc., regarding her right to indemnification for legal expenses incurred while defending against claims made by the company. The ruling, issued on October 19, 2026, clarifies the terms of the Indemnification Agreement between Sarwal and Nephrosant, which has implications for corporate governance and the financial responsibilities of companies in similar situations.

The case, titled Minnie Sarwal v. Nephrosant, Inc., C.A. No. 2026-0756-LM, centers on whether Sarwal is entitled to advancement of legal fees for her defense against counterclaims made by Nephrosant. The court's decision is significant for corporate officers and directors, as it outlines the conditions under which they may receive legal expense coverage when facing litigation.

In 2020, Sarwal entered into an Indemnification Agreement with Nephrosant, which stipulated that the company would cover legal expenses incurred by her in connection with any legal proceedings. The agreement included specific provisions regarding the advancement of expenses and conditions under which indemnification would be granted. Disputes arose when Sarwal sought advancement for expenses related to both her defense against claims made by Nephrosant and her own affirmative claims against the company.

The court addressed three main issues in the case: whether the success requirement in Section 12(d) of the Indemnification Agreement limits Sarwal's right to advancement under Section 8, whether she could receive advancement for expenses related to both her affirmative claims and her defense against the company's claims, and the extent to which she could recover fees incurred while enforcing her advancement rights.

In its ruling, the court found that the success requirement in Section 12(d) applies only to ultimate indemnification and does not condition the advancement of expenses under Section 8. The court stated, "Section 12(d)'s success requirement governs only the ultimate indemnification of expenses incurred in enforcing rights under the Agreement. It does not make success in an underlying action a condition to advancement under Section 8." This means Sarwal is entitled to advancement of her legal fees and expenses incurred while defending against the claims made by Nephrosant.

Furthermore, the court ruled that Sarwal could receive advancement for expenses that supported both her affirmative claims and her defense against the company's claims, as long as the work was reasonably necessary for her defense. However, she is not entitled to advancement for fees solely related to her affirmative claims. The court granted her motion for summary judgment in part and denied Nephrosant's cross-motion for summary judgment, except for the determination that fees attributable solely to her affirmative claims are not advanceable.

The ruling has significant implications for corporate governance and the treatment of indemnification agreements. It clarifies that corporate officers may receive advancement for legal expenses incurred in defending against claims made by the company, even if those claims arise in the context of litigation initiated by the officer. This decision reinforces the principle that the right to advancement is distinct from indemnification, allowing officers to fund their defense while the merits of the case are being resolved.

Going forward, this ruling may impact how companies structure their indemnification agreements and the extent to which they are willing to advance legal expenses for their officers and directors. It also sets a precedent for future cases involving indemnification and advancement rights, emphasizing the importance of clear contractual language in such agreements.

As for what’s next, it remains to be seen whether Nephrosant will appeal the decision. The court's ruling provides a framework for understanding the rights of corporate officers in similar situations, and it may lead to further legal challenges regarding indemnification and advancement rights in Delaware and beyond.