In a corporation, officers and directors are tasked with making corporate decisions and protecting corporate interests. Shareholders invest their money with an expectation that investment will be managed in the shareholders’ best interests. As part of this arrangement, shareholders trust attorneys to advise company directors and officers as they make important decisions regarding corporate governance. When shareholders feel malpractice has been committed, they may institute legal actions against corporate attorneys, officers and directors who they allege have been negligent in handling their responsibilities. We serve clients throughout Tulsa and Northeastern Oklahoma when facing these types of actions.
Good Faith and Possessing Adequate Information for Corporate Decisions
Director and Officer liability generally revolves around two core concepts: acting in good faith and possessing adequate information. The law regarding what type of action or inaction will be considered not in good faith is an ever changing standard which is always fact-specific. Acting in bad faith does not always mean the director or officer is financially motivated to make the decision. Examples of bad faith can be acting or failing to act out of a motive other than the best interests of the company, where it is so far outside of the realm of reason that it cannot be explained on any other grounds, or systematic inattention to significant corporate “red flags” potentially resulting in harm to the corporation.
Steps that directors can take to avoid liability for claims based on allegations of bad faith may include:
Establishing internal reporting
Control mechanisms to help maintain knowledge of events or issues that may have a significant effect on the company.
Directors must also ensure that decisions are based on adequate information. In other words, to be deemed adequately informed regarding a given business decision, the directors must have informed themselves of all information reasonably available which is material to the decision.
If you are sued in your capacity as a director or officer, there are a number of steps you can take to protect your rights and help ensure the best possible outcome: immediately retaining counsel, retaining outside counsel independent of the corporation, understanding the protections available to you, and preserving all the documents you can.
We work to resolve our clients’ needs as efficiently as possible. We will always look for the most effective solution. Call 918-582-3400 or contact us online to schedule an appointment at our Tulsa office.