Directors of Florida corporations owe fiduciary duties to the corporation and its shareholders. Breach of these duties can subject directors to personal liability. The two core fiduciary duties are:
Duty of Care
The Florida Business Corporation Act requires directors to discharge their duties:
- In good faith.
- With the care an ordinarily prudent person in a like position would use under similar circumstances.
- In a manner the director reasonably believes is in the best interests of the corporation. A director must apply the duty of care standard when making decisions or acting on behalf of the corporation.
A director may breach the duty of care by taking an improper action or by not taking action in a situation where a careful person would have taken action, and the failure to act results in harm to the company and was based on the director's willful ignorance or gross negligence.
In determining what he reasonably believes to be the best interests of the corporation, a director may consider:
- The long-term prospects and interests of the corporation and its shareholders.
- The interests of the corporation's employees, suppliers, and customers.
- The interests of the communities in which the corporation operates.
- The economy of the state or nation.
Florida courts recognize that directors sometimes must take business risks to promote the best interests of the corporation and its shareholders. Courts have been particularly careful not to impose liability for a decision that seems wrong only with the benefit of hindsight and without a showing of gross negligence.
Duty of Loyalty
The duty of loyalty requires directors to act in good faith for the benefit of the corporation and its shareholders (and not for their own interest).
Decisions or transactions by directors involving a conflict of interest or self-dealing are not protected by the business judgment rule. If a director holds a personal interest in an action, a court will not presume the director acted in the best interest of the corporation. In this case, the burden of proving that the transaction is fair and reasonable may fall on the directors.
For more information about the imposition of personal liability on directors of a corporation and how to avoid liability and protect yourself from such personal liability, call us to speak with our knowledgeable Florida business litigation attorneys at Rosenthal Law Group today.