Corporations

Question 1

Duty of Loyalty

Answer 1

a director must discharge her duties in good faith and with the reasonable belief that her actions are in the best interest of the corporation

Question 2

Duty of Care

Answer 2

a director must also use the care that a person in like position would reasonably believe appropriate under the circumstances

Question 3

In discharging her duties, director is entitled to rely on information, opinions, reports, or statements if prepared or presented by:

Answer 3

(1) corporate officers or employees whom the director reasonably believes to be reliable and competent; (2) legal counsel, accountants, or other persons as to matters the director reasonably believes are within such person’s professional competence; or (3) a committee of the board of which the director is not a member, if the director reasonably believes the committee merits confidence

Question 4

Conflicting (“Self-Dealing”) Transactions

Answer 4

any transaction between the corporation and (1) one of its directors, (2) that director’s close relative, or (3) another business of the director’s

Question 5

Fairness Factors [self-dealing transaction]

Answer 5

in determining whether a transaction is fair, courts look to factors such as adequacy of the consideration, corporate need to enter into the transaction, financial position of the corporation, and available alternatives