In a previous post, I reviewed the statutory standard of conduct for directors under Minnesota law. In this second part of a four-part series, I will review the standard of conduct for officers. Section 302A.361 of the Minnesota Business Corporation Act states that:
An officer shall discharge the duties of an office in good faith, in a manner the officer reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
Managers of a Minnesota LLC have the same standard of conduct under Section 322B.69 of the Minnesota Limited Liability Company Act.
As with directors, this statutory duty is often explained as two duties – a “duty of loyalty” and a “duty of care.” In general, breaches of the duty of loyalty often involve an officer entering into a transaction on behalf of the company, and the transaction is one in which the officer has a financial or personal interest. In this case, the officer may not have acted in a way that he or she “reasonably believed” to be “in the best interests of the corporation.”
As with directors, breaches of the duty of care by an officer typically involve the officer making a decision without the care that “an ordinarily prudent person in a like position would exercise under similar circumstances,” that is, making a decision without adequate information or proper analysis of the information. Unlike directors, officers are normally responsible for the day-to-day managerial tasks of the company, but this does not remove the duty of care they must mind when making their decisions.
In the next post, I will review the duties owed from one shareholder to another.
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Related Posts:
Standard of Conduct of Corporate Directors
Shareholder Duties in a Closely-Held Corporation
Company Signatures to Member Control and Buy-Sell Agreements
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