Directors’ Duties in The USA

>> General Powers and Duties in The USA

You must act within the powers imposed DGCL (title 8). As a company director you are required to act in accordance with the powers delegated by the Articles.

There is the potential to delegate responsibilities in a variety of ways, including to officers of the company and also to specific committees established by the board of directors.

Duties – Skill and Care

In exercising directors’ powers, you are required to exhibit a certain degree of care, diligence and skill that a reasonable director would exercise in the same circumstances.

Duties – General

As a company director, you must act in a way which you think is most likely to promote the success of the company. You need to consider a number of statutory factors relating to corporate requirements, including the long term consequences of your decisions, the company’s reputation and the interests of other stakeholders such as employees and the community.

  • you owe a duty of care, which generally requires a director to act diligently in order to become and remain fully informed, and bring relevant information to the attention  of other directors
  • you are required to fulfil a duty of loyalty, acting in the best interests of the Company  and its shareholders
  • you have a duty to act in good faith in all dealings for the Company
  • please note that the general duties of the Manager of an LLC will be outlined in the LLC Operating agreement, in addition to considering the above
  • you also have a duty to declare any conflicts of interest. In some cases the conflict can be noted and you can remove yourself from any decision making within the company upon the relevant matter. However if the conflict is of a more fundamental or continuing nature then you may need to resign your position. If in doubt, seek advice

Other duties

There are many other areas of law that impose duties on directors and senior managers. Matters likely to be of particular relevance, depending upon the nature of the entity and its activities, are set out below:

  • while specific corporate documents typically set out the balance of power between directors, shareholders, employees and other stakeholders and managers for an LLC, additional duties are owed by members of the board of Directors of a corporation or Managers of a LLC as a whole. Delaware does not specify the detailed duties of the directors of the corporation or Managers of a LLC; rather the corporation or LLC decides the duties
  • it should be noted that in addition to directors, officers are regularly appointed in US companies to take up specific roles and duties, designated within the constitutional documents of the company. For example, there is a requirement that one of the officers of the company (normally the secretary) undertakes the duty to record the proceedings of the meetings of the shareholders and directors in a book to be kept for that purpose
  • in the case of LLC entities with more than one shareholder, it is possible to contractually agree that the directors owe their duties to their appointing shareholder only, not to the shareholders collectively
  • in the US, all employees are protected under the US Department of Labour, Occupational Safety & Health Administration (OSHA) regulations. It contains occupational safety and health standards which have been found  to be national consensus standards or established Federal standards. It covers a wide range of matters and although directors are  not specified for liability for breaches, employers can face significant for repeated  or wilful violations
  • like all employees, you must comply with Anti-Bribery and Corruption (ABC) legislation, including the UK Bribery Act and the US Foreign Corrupt Practices Act, and must understand, follow and promote the company’s policies

Latest version updated 10th April 2018

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