Director FAQ: Fiduciary Duties
Corporate directors are fiduciaries with duties of care and loyalty to the corporation. Directors who fulfill these duties are less likely to be sued successfully for decisions that have poor outcomes, thanks to a legal doctrine known as the business judgment rule. Standards for fulfilling fiduciary duties vary according to circumstances, including economic state (solvent or insolvent) and concentration of ownership (controlling vs. noncontrolling). This memo covers the fiduciary duties of loyalty and care; the business judgment rule; special situations (controlled entities and distressed entities); and guidance and resources for fiduciary excellence.
This resource can help your board to
- become familiar with fiduciary duties as required by state law,
- understand how courts make decisions in cases brought against directors, and
- establish leading practices for board decision making to limit liability exposure.
Most relevant audiences: new directors, general counsel, corporate secretaries