Directors & Officers Flashcards
Duty of Care
Directors must discharge their duties
1) in good faith,
2) in a manner the Director reasonably believes to be in the best interests of the corporation, and
3) with the care that a person in a like position would reasonably believe appropriate under the circumstances.
Business Judgment Rule
A court will not second guess the decisions of a director/officer, so long as the decisions are made:
1) in good faith,
2) with care an ordinarily prudent person in a like position would exercise under similar circumstnaces, and
3) in a manner they reasonably believes to be in the best interests of the corporation
Duty of Loyalty
Director must act in the best interests of the corporation and without personal conflict.
Breach of Duty of Loyalty
1) entering into conflicting transactions
2) usurping corporate opportunity
3) competing with the corporation
4) trading on inside information
Conflicting Interest Transaction
Will not be set aside if:
1) full disclosure of material facts
2) approved by majority of disinterested shareholders/directors
3) transaction as a whole was fair to the corporation
Fairness in Conflicting Transaction
1) terms/price were comparable to (fair price) what corp would receive in arms length transaction
2) transaction as a whole was beneficial to the corporation (beneficial)
3) it was fair in terms of the director’s dealings with the corporation (fair dealing)
BOD Meeting
Can only act if quorum is present. A majority of BOD is necessary to make a quorum.
Quorum Requirements
1) majority of BOD
2) quorum present at time vote is taken
3) directors participating must be able to simultaneously hear each other
Voting Objections
Present directors are deemed to have assented unless objects at meeting, dissents in meeting minutes, or delivers written notice.
Waiver of Notice for Meeting
A director may waive notice in signed writing or by attending the meeting.
