What are the fiduciary duties of directors and officers?

In Texas, directors and officers of a corporation owe a fiduciary duty to the corporation and its shareholders. A fiduciary duty is an ethical obligation to act in the best interests of the corporation and its shareholders and not for personal gain or benefit. This means that directors and officers must exercise the highest degree of care and loyalty to the corporation. The three main fiduciary duties for directors and officers in Texas are the duty of care, duty of loyalty, and duty of obedience. The duty of care requires directors and officers to exercise the same degree of care and diligence in managing the corporation’s affairs as a prudent person would under similar circumstances. This means they must put the interests of the corporation ahead of their own and make decisions with some level of research and investigation. The duty of loyalty requires directors and officers to act in good faith, for the benefit of the corporation. This includes avoiding any conflict of interest between the corporation’s interest and their own. The duty of obedience requires directors and officers to comply with all applicable laws and regulations, as well as the corporation’s bylaws and governing documents. This means they must remain focused on the business purpose and objectives of the corporation. If a director or officer fails to meet these fiduciary duties, they can be held liable both criminally and civilly. Criminal liability typically results in fines and jail time, while civil liability typically results in paying damages to the corporation or the shareholders.

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What are the fiduciary duties of directors and officers?

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