An Irvine business lawyer can explain that when you structure a business as a corporation, you will have certain fiduciary responsibilities, namely to the corporation itself and to the stockholders. An Irvine business attorney can explain the following fiduciary duties.
Duty of Obedience
This duty recognizes the responsibility that directors and officers have to a corporation. The governing documents as well as local law set out the obligations of these parties which they must abide with. This duty is particularly important in the non-profit context in which parties must follow the guidelines related to the purposes of the charity and donation procedures.
Duty of Loyalty
Another important duty that officers and directors have is to be loyal to the corporation and the shareholders. This means that they must put the interests of the business above their own personal interests. They should avoid conflicts of interest or trying to take advantage of an opportunity presented to the business for their own personal gain. There are some exceptions, such as the business waiving its interest to an opportunity and then the officer or director being free to take advantage of it.
Duty of Care
Officers and directors represent the business. As such, they must use great care when acting in this role. This requires them to act as a reasonably prudent individual in carrying out the duties that are assigned to them. Good faith is usually a defense to any allegations of violating this duty. Even if the officer’s or director’s actions ultimately harmed the company, he or she cannot usually be held liable if acting in good faith under the business judgment rule.
Good Faith and Fair Dealing
This special duty requires officers and directors to act with good faith, fairness and honesty in fulfilling their obligations.
Duty of Disclosure
Officers and directors have a duty to disclose certain information about the business to each other and to shareholders so that they can all make informed decisions. Disclosures are often necessary when considering acquisitions or mergers.
If you would like more information on this topic, contact an Irvine business lawyer from Daily Aljian LLP.