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Corporations • Directors and Officers
CORP#026
Legal Definition
Directors have a (1) duty to manage, (2) duty of care, (3) duty of loyalty, and (4) duty to disclose.
Plain English Explanation
We'll dive into each of these a bit more in their own cards, but in general directors have the following duties:
(1) Duty to manage. If you think of directors like captains of a ship, then they can't be so hands-off that they let the ship crash into a reef. They are in charge of steering the company (or at least appointing someone else to steer).
(2) Duty of care. Put simply: directors have a duty to give a shit about the company.
(3) Duty of loyalty, meaning they are expected to put the company's interests above their own.
(4) Duty to disclose, meaning they are expected to share important information about the company with their fellow directors.
(1) Duty to manage. If you think of directors like captains of a ship, then they can't be so hands-off that they let the ship crash into a reef. They are in charge of steering the company (or at least appointing someone else to steer).
(2) Duty of care. Put simply: directors have a duty to give a shit about the company.
(3) Duty of loyalty, meaning they are expected to put the company's interests above their own.
(4) Duty to disclose, meaning they are expected to share important information about the company with their fellow directors.
Visual Aids
Related Concepts
Can a corporation indemnify an officer or director who is held liable to their own corporation?
Can a corporation indemnify an officer or director who successfully defends themselves against a lawsuit from another party?
How can a director defend against a claim that they breached their duty of loyalty?
What are some common examples of permissive indemnification?
What are the statutory requirements of board of directors meetings?
What are the statutory requirements of directors?
What duties do officers have to the corporation and shareholders?
What is the business judgment rule?
What is the duty of care?
What is the duty of loyalty?
What is the duty to disclose?
What is the duty to manage?
When do officers and directors often seek indemnification?
Who decides whether a corporation will indemnify a director or officer?
