Can a board of directors be held personally liable?

Board members can generally be held personally liable for breach of fiduciary duties, particularly in cases involving egregious neglect of the Board member's oversight responsibilities or the receipt of a personal benefit from the organization's assets or resources (sometimes referred to as private inurement).

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Checklist for Potential Director and Officer Liability Issues

King Washington Checklist for Potential Director and Officer Liability Issues

Name: King Washington Checklist for Potential Director and Officer Liability Issues
Brand: US Legal Forms
Rating: 4.83 (311 reviews)

Category:

Corporations - Due Diligence

State:

Multi-State

County:

King

Control #:

US-DD01408

Format:

Instant download

Description

This due diligence checklist lists liability issues for future directors and officers in a company regarding business transactions.

How to fill out King Washington Checklist For Potential Director And Officer Liability Issues?

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FAQ

Limited liability protects shareholders, directors, officers and employees against personal liability for actions taken in the name of the corporation and corporate debts. Ordinarily, an officer of the corporation, whether also a shareholder, director or employee, cannot be held personally liable.

Directors' liability is generally based on the director's duty of care and fiduciary duty. In the family corporation, two other theories of liability are also important: piercing the corporate veil and liability for personal actions. In this section, we discuss these four types of liability.

A corporation is an incorporated entity designed to limit the liability of its owners (called shareholders). Generally, shareholders are not personally liable for the debts of the corporation. Creditors can only collect on their debts by going after the assets of the corporation.

Directors and officers have two main fiduciary duties: the duty of loyalty and the duty of care. The duty of loyalty is a responsibility to act in the best interest of the corporation, even when that action may conflict with a personal interest.

Personal Liability of Officers and Directors Breach their duty of care to the corporation. Breach their duty of loyalty to the corporation. Misappropriate a corporate asset for personal use or use by another business. Commingle personal and business assets.

Typically, a corporate officer isn't held personally liable, as long as his or her actions fall within the scope of their position and the parameters of the law. An officer of a corporation may serve on the board of directors or fulfill a managerial role.

It is now well settled that corporate directors, officers, and employees can be held criminally liable for any criminal acts that they personally commit regardless of whether they were acting in furtherance of the corporation's interests.

Board members can generally be held personally liable for breach of fiduciary duties, particularly in cases involving egregious neglect of the Board member's oversight responsibilities or the receipt of a personal benefit from the organization's assets or resources (sometimes referred to as private inurement).

Specifically, Directors can be held personally liable based on three fiduciary duties: the duty of care, the duty of loyalty, and the duty of obedience. Unfortunately, many board members seem to be unaware of their fiduciary responsibilities for the organization for which they volunteer.

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King Washington Checklist for Potential Director and Officer Liability Issues

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