Board of Directors
Serving as a Director of a Florida Corporation, LLC or Partnership
Some people think that serving as a director of a corporation is easy and routine. This view can be reinforced by the fact that some directors are not even full-time employees of the corporation and may hold other positions with other companies. But in reality, all directors are saddled with real corporate responsibility.
Directors are chosen to serve by the ultimate owners of the company—the shareholders. The board of directors is entrusted by the shareholders to make appropriate, informed decisions.
Directors have a duty to carry out their responsibilities with due care for the well-being of the corporation and its shareholders. In Florida, directors can exercise “business judgment,” without facing legal liability for decisions that turned out poorly in hindsight. But directors can be successfully sued if they make reckless, uniformed decisions or if they willfully disregard the known, adverse consequences of their actions.
Directors also have a responsibility not to engage in selfish transactions with the corporation, or to permit conflicts of interest to interfere with their responsibilities. If a director has a personal financial interest in a particular issue, he or she should disclose it to the other directors and abstain from voting. A director may benefit from a transaction with the corporation only if the other, disinterested directors have voted on and ratified it.
Directors face the greatest personal risk if the corporation fails. In the event of a failure, it is only logical to blame all company management, including the directors. In bankruptcy, a lawsuit may be filed against the directors seeking damages for causing the company to go out of business. Similarly, disappointed shareholders may bring suit blaming the directors for the loss in value of their shares. For these reasons, as a condition of service, any director should require the corporation to provide directors’ and officers’ liability insurance and agree to indemnify the board for their actions.