When are the Directors of a Company liable?

Generally, not often. The business judgment rule generally prevents a court from holding a corporation’s directors liable for making a bad business decision. This rule evolved from common law, and in Florida, it is codified under Florida Statute §607.0830 and §607.0831.

This statute provides that a director must complete his duties in good faith, with ordinary care, and in a manner he believes to be in the best interest of the corporation. However, breaching one of these duties does not make a director instantly liable for monetary damages. In addition, the plaintiff must also prove the director’s breach consists of one of the following: (1) a knowing criminal violation; (2) a transaction involving an “improper personal benefit;” (3) an improper distribution to shareholders; (4) conscious disregard for the best interest of the corporation; or (5) willful misconduct.

The courts have given directors wide discretion to make business decisions and generally are reluctant to substitute the director’s judgment for that of their own.

If you are a shareholder or director in Miami-Dade, Broward, Monroe, Collier or Lee County Florida, schedule a consultation with the experienced attorneys at EPGDLaw today, located in beautiful Coral Gables. Call us at (786) 837-6787 or e-mail us to determine whether you have a claim or whether the business judgment rule applies as a legal defense.

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Categories: Business Law