Liability of Directors, Trustees and Officers

Directors, Officers and Trustees Part 2 Three-Fold Duties of Directors

• Duty of obedience
 Liability of Directors, Trustees and Officers
• Duty of diligence
 Contracts Between Corporations with • Duty of loyalty
Inter-Locking Duties
 Disloyalty of a Director

Executive Committee
Source: http:/ /theins titute.ieee.org

*Property of STI K0026 *Property of STI K0026

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Contracts Between Corporations with Inter-
Disloyalty of a Director
Locking Duties
• The contracts for inter-locking duties are considered Doctrine of Corporate Opportunity
valid
• All the conditions prescribed on inter-locking
directors must be in accordance to the corporation in
which he has nominal interest
• Contract can be ratified by the vote of the Source: http:/ / www.bprovos t.com

stockholders representing at least 2/3s of the • States that if a director acquires for himself a
outstanding capital stock business opportunity belonging to the
corporation, the director is guilty of disloyalty
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 Disloyalty of a Director Executive Committee

Situations When Doctrine is Inapplicable • A body created by the by-laws and composed of
• Does not preclude a director from engaging in a not less than three appointed members of the
distinct enterprise of the same general class of Board
business as the one his corporation is engaged in • Has all the authority of the Board to the extent
provided for in the resolution of the Board or in
• Does not apply when the opportunity is one that
the by-laws
is not essential to the corporation’s business
• When the corporation is no longer able to avail
itself of the opportunity
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Executive Committee Executive Committee

• Its decisions are not subject to appeal to the Limitations on the Powers of the Executive
Board Committee
• If the executive committee is not validly • It cannot act on the following:
constituted, the members may be considered as
o Approval for any action for which the
de facto officers
shareholder’s approval is also required
o Filling up of Board vacancies

Source: http:/ / www.londondiplomaticas s oc.com

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 Executive Committee

Limitations on the Powers of the Executive

Committee
• It cannot act on the following:
o Amendment or repeal of by-laws
o Amendment or repeal of any resolution of the
Board
o Distribution of cash dividends to shareholders

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