We can help you improve your corporate governance procedures, board meeting minutes, and stockholder communications. Improving corporate governance can substantially reduce the risk of potentially costly director and officer liability. The Board of Directors of a corporation is required to meet two primary fiduciary duties to the corporation and its stockholders: (i) the duty of care and (ii) the duty of loyalty.
The duty of care is usually met when a director exercises that degree of diligence and care that a reasonably prudent person would exercise in promoting the best interests of the corporation and its stockholders. The Board of Directors of a corporation should establish a record demonstrating the satisfaction of the duty of care by, among other things, (i) seeking to inform itself about all significant information related to any business decisions, (ii) critically examining the information and advice made available to it, (iii) engaging in open and substantive discussions about decisions, (iv) when necessary, retaining outside expertise (such as accountants, consultants, and attorneys) to assist in decision-making, and (v) documenting the process and decisions with properly-written minutes of each Board meeting.
The duty of loyalty is usually met when a director does not put any personal interest ahead of the interests of the corporation or its stockholders. Directors breach their duty of loyalty if they stand on both sides of a transaction or otherwise stand to receive a benefit not shared with other stockholders. The decisions of each director of a corporation must be motivated by an honest belief that such decisions are in the best interests of the corporation’s stockholders, rather than the narrow interests of any of the corporation’s directors and officers.
We can also assist you in updating your corporation's Articles of Incorporation, Bylaws and Stockholders Agreements. With all of the complexity involved in operating and managing a business, one area that sometimes gets overlooked is making sure that basic corporate documents are up to date. Unfortunately, outdated corporate documents can sometimes lead to legal disputes about whether actions taken by directors and executive officers were appropriately authorized. In certain more severe cases, outdated corporate documents can cause a delay in completing a capital raise or a merger.
The Articles, Bylaws and Stockholders Agreements of a corporation should meet three goals: (i) they should clearly and accurately reflect how the Board of Directors runs the business, (ii) they should provide the maximum protection from liability available under law for the Board of Directors, and (iii) they should place the desired level of restrictions on stockholder transfers (such as those restrictions required to safeguard a corporation’s Subchapter S election).
This website provides general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to retain an attorney for advice on specific legal issues.