Directors

Question 1

Directors have both a duty of ____ and ____ duty

Answer 1

1. Duty of care (reasonableness, but BJR; only dishonesty results in breach)
2. Fiduciary duty (need to demonstrate reliance when suing on this theory)

Question 2

Directors breach their duty of care when:

Answer 2

Board inattention results in a loss (note: not negligence) because
(a) failed to implement oversight system
(b) failed to follow oversight procedures
In Del can eliminate duty in articles.

Question 3

Directors violate their fiduciary duty (of loyalty) when:

Answer 3

1. engage in self-dealing

2. engage in corporate waste

Question 4

Self dealing contracts are:

Answer 4

Valid if fair, and voidable if unfair, with the burden on the interested director to demonstrate fairness.

Question 5

Defense tactics to hostile takeovers

Answer 5

1. Poison Pill

2. Lock-up (agree to merger with other company of director’s choice)