Directors’ Duties in The USA

>> Legal Framework in The USA

As a director, you must act in a way most likely to promote the success of the business, which in most cases should mean carrying out the will and acting in the interests of the entity’s shareholder(s), having regard to the company’s employees, trading partners, responsibilities to the state and other applicable factors.

To promote the success of the company, you need wide powers. However, you face serious penalties if you abuse those powers or use them irresponsibly.

In the USA, the duties of the directors for corporations are codified by the corporation’s state of formation. Most states have enacted their own statute modelled after the Model Business Corporation Act and is called the Business Corporation Act, Business Corporation Law or a similar name. For example, Title 8 of the Delaware code is called the Delaware General Corporation Law (DGCL).

The duties of Managers for LLCs are codified by the local state Limited Liability Company laws.

Latest version updated 10th April 2018

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