Every public company is required to have a board of directors, a group of individuals assigned to act as a governing body that represents the shareholders. Though the structure and powers of each company’s board will be unique, their role generally includes hiring and terminating senior executives, setting policies regarding dividends, options and executive compensation, and helping to establish and support the organization’s goals and mission.
Being a business director represents significant fiduciary duties, and in today’s litigious society board members often find themselves the targets of lawsuits accusing them of failing to warn of drug side effects or other product defects, failing to protect against data security breaches, and failing to instill a culture that prevents or properly responds to sexual harassment or other forms of employment discrimination. Business directors are even facing lawsuits regarding overly optimistic statements about business outcomes.
This type of litigation is one of the primary reasons that organizations establish themselves as corporations or limited liability companies: the business structure is designed to protect business directors from personal liability. If your company’s business directors have been named in a lawsuit, there is a legal doctrine known as the “corporate shield” that protects them from liability for the debts and obligations of the company. Though there are exceptions to this rule in cases where a business director fails to pay employees, commits fraud or engages in acts outside the scope of their corporate duties, an experienced business attorney will be able to act on your behalf of your business directors, defending them against litigation.
The other legal tenet that can come into play when a business director is sued is the “business judgment rule.” This rule is applied if a director is accused of failing in their duty of care to the organization. If your business’ directors are accused of this type of violation, the case will rest upon the court’s evaluation of whether the director’s decisions were made in good faith, with reasonable care and with the reasonable belief that the actions were in the organization’s best interests.
If your company is facing a lawsuit targeting your business directors, you need an experienced law firm that has deep knowledge of corporate law and a record of successfully defending against this type of charge. To set up a time for a consultation, contact our office today.