Question

Assume that in your capacity as a director of XYZ Inc. you make an informed good...

Assume that in your capacity as a director of XYZ Inc. you make an informed good faith decision to vote for an initiative that generated an adverse income for the company’s profits. The company’s chartering documents do not include a social purpose. The shareholders intend to sue you individually along with other board members for breach of fiduciary duties. How might a court analyze this situation?  

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Answer #1

Directors are agent of the company elected by Shareholders, and can act on behalf of the company, represent the company, take decisions for day to day functioning etc. Any decision taken by Directors in good faith for the company is binding on the Shareholder's.

In the given case, a Director made an informed good faith decision to vote for an Initiative that generated an Adverse Income for the Company's Profits.

Even though the Company's Chartering Documents do not inlcude any Social Purpose, Shareholders suit against the Director will not hold strong since the Director is well within his power to make such decision.

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