Can board of directors be 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

Wake North Carolina Checklist for Potential Director and Officer Liability Issues

Name: Wake North Carolina 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:

Wake

Control #:

US-DD01408

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Instant download

Description

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

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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 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.

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).

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.

If you're a CEO or other business executive, you could be held personally liable for actions taken by your company. Leaders can be held personally responsible for debts or criminally liable for illegal or noncompliant activities, even without direct knowledge of such events.

As indicated above, directors and officers generally owe fiduciary duties to the corporation and its shareholders. However, when the corporation becomes insolvent, fiduciary duties are also owed to the creditors.

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.

Directors & Officers (D&O) Liability insurance is designed to protect the people who serve as directors or officers of a company from personal losses if they are sued by the organization's employees, vendors, customers or other parties.

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Wake North Carolina Checklist for Potential Director and Officer Liability Issues

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