Duties of Directors

Your corporation's directors are held accountable to use "reasonable business judgment" in directing and overseeing the activities of the corporation. They have fiduciary obligations which cannot be breached. Directors can be held accountable to the shareholders if they fail to properly fulfill their duties or otherwise act against hte interests of the corporation.

Responsibiliites In Making Business Decisions. In order to fulfill their duties to the corporation and shareholders, directors are bound to use reasonable care and business judgment. Their performance will be based upon what a prudent person would decide under the circumstances. Their decisions do not necessarily need to pan out to be successful, as long as their business judgment was resonable under the circumstances at the time that the relevent decision was made.

Reliance On Professionals. Directors can, and often should rely upon input and advice from professionals, such as accountants, business consultants and lawyers. However, Directors cannot blindly rely upon this advice. they must make reasonable inquiry into such advice and the factual basis upon which such advice is given.

Duty of Loyalty. Directors must make all decisions in the best interest of the corporation and not based upon their own self interests or the interests of other parties. Directors generally cannot personally profoit to the detriment of the corporation. In any situation where a director stands to benefit personally, full disclosure of this personal benefit should be made prior to the making of such decisions. Transactions where a director stands to gain personally are not necessarily invalid, but will be specially scrutinized for fairness to the corporation and to determine whether the director's personal interests were properly disclosed prior to the making of the relevent decision.

Meetings. it is necessary for the Board to meet regularly and to be kept informed concerning the ongoing activities of the corporation. Meetings should be held at least quarterly, and may be necessary on even a more frequent basis depending upon the activities and pending transactions of the corporation. Special meetings should be held or consents obtained for special activities that arise between regularly scheduled meetings.

Corporate Opportunities. A director breaches her duty of loyalty to the corporation if the director takes a business opoortunity that is within the scope of the corporation's potential business for himself or presents it to another party without first giving the corporation an opportunity to fairly consider the busienss opportunity. All such opportunities should be presented first to the corporation and fully considered.

Our Small Business E-Book provides you with numerous resources and documents that should be used on a regular basis to document the activities of your Board of Directors.

 

 

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