Directors and officers of a corporation owe three basic fiduciary duties to the corporation and its shareholders: duty of loyalty, duty of care and duty of good faith. These duties require senior management to put the interests of the corporation ahead of their personal interests, use ordinary care in making business decisions and act in good faith. However, under Florida law, a breach of one of these duties does not automatically make a director or officer liable to the company or its shareholders.
Business Judgment Rule
This rule prevents a court from questioning the business decisions of directors and officers, even if their decisions turned out badly. If senior leadership made informed business decisions and honestly believed their actions were in the company’s best interests, the business judgment rule will protect them from liability.
Proving Director/Officer Liability
To overcome the business judgment rule, the plaintiff must prove that the directors and/or officers breached at least one of these fiduciary duties, and that breach consisted of one of the following:
- a criminal violation
- a transaction involving an “improper personal benefit” (e.g., self-dealing)
- an improper distribution to stockholders
- a deliberate disregard for the best interests of the company
- willful misconduct
Proof of gross negligence does not overcome the protection of the business judgment rule. The plaintiff must prove criminal, willful or reckless misconduct on the part of the directors and officers. Only money damages are available in actions for breach of fiduciary duty.
Consult the Tampa Business Attorneys at Lieser Skaff Alexander
Our experienced business lawyers have handled cases concerning mismanagement and misappropriation of assets, failure to distribute assets, improper distribution of assets, failure to account, fraud and conflict of interest. We can help develop a compliance oversight system to ensure that corporate decisions are covered by the business judgment rule. We can also provide legal guidance to a shareholder who feels that fiduciary duties have been violated.