of trust wholly for the benefit of the
corporation. It includes a duty to disclose
the information to those who have a right
to know the facts.
The duty of good faith is comprised
of: (1) a general baseline conception,
instantiate at conception. The baseline
conception consists of four elements:
(1) subjective honesty or sincerity;
(2) non-violation of generally accepted
standards of decency applicable to the
conduct of business; (3) non-violation
of generally accepted basic business
norms; (4) and fidelity to office.
do not cover all types of improper mana-
gerial conduct.
manner that he reasonably believes to
be in the best interest of the corporation,
with a view towards maximizing corpo-
rate profit and shareholder gain.
act fairly when he acts in his own
self-interest or the self-interest of an
associate or family member.
provided for good faith in the discharge
of the duties of directors.
certain conditions the corporation has
the power to indemnify the costs and
outcome to litigation and other proceed-
ings, providing the manager acted in
good faith. Courts have been reluctant to
allow corporations and managers to avoid
the duty of good faith even by agreement.
Disinterested directors, for example,
are frequently involved in making cor-
porate decisions involving the conduct
of other directors or officers. The duty
of loyalty is typically inapplicable to
these directors because by hypothesis
they have no material, financial ties to
either the directors whose transaction or
conduct is at issue or to the transaction
or conduct itself. As a result of the busi-
ness judgment rule, typically it is also
very difficult to prove that the directors
have violated the duty of care.
determine whether the approving direc-
motive of favoring their colleague.
well as majority members in limited
liability companies are well advised to
conduct business with a keen awareness
of the threat of potential shareholder
actions. Several steps are available to
reduce or eliminate the possibility of a
shareholder suit or oppression action:
ficient details about proposed actions
to allow for any owner or member to
participate and have a voice.
and required.
with the mechanism by which
compensation is determined.
be examined for appropriateness,
reasonableness and allowability.
should be disclosed, noticed for
appropriate consideration by the
managing members or the entire
membership, by the board of directors
or shareholders, and objectively
considered.
corporate insiders and the potential
for self-dealing should be delegated
to third-party neutrals, frequently
lawyers retained by the corporation
or limited liability company for
that purpose.
4 Id.
5 Id.
6 Id.
7 Id.
8 Id. at 59.
9 Id.