Kentucky Statutes 271B.8-300 – General standards for directors — Directors of a public benefit corporation
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(1) A director shall discharge his duties as a director, including his duties as a member of a committee:
(a) In good faith;
(b) On an informed basis; and
(c) In a manner he honestly believes to be in the best interests of the corporation.
(2) A director shall be considered to discharge his duties on an informed basis if he makes, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, inquiry into the business and affairs of the corporation, or into a particular action to be taken or decision to be made.
(3) In discharging his duties a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the corporation whom the director honestly believes to be reliable and competent in the matters presented;
(b) Legal counsel, public accountants, or other persons as to matters the director honestly believes are within the person’s professional or expert competence; or
(c) A committee of the board of directors of which he is not a member, if the director honestly believes the committee merits confidence.
(4) A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (3) of this section unwarranted.
(5) In addition to any other limitation on a director’s liability for monetary damages contained in any provision of the corporation’s articles of incorporation adopted in accordance with subsection (2)(d) of KRS § 271B.2-020, any action taken as a director, or any failure to take any action as a director, shall not be the basis for monetary damages or injunctive relief unless:
(a) The director has breached or failed to perform the duties of the director’s office in compliance with this section; and
(b) In the case of an action for monetary damages, the breach or failure to perform constitutes willful misconduct or wanton or reckless disregard for the best interests of the corporation and its shareholders.
(6) A person bringing an action for monetary damages under this section shall have the burden of proving by clear and convincing evidence the provisions of subsection (5)(a) and (b) of this section, and the burden of proving that the breach or failure to perform was the legal cause of damages suffered by the corporation.
(7) Nothing in this section shall eliminate or limit the liability of any director for any act or omission occurring prior to July 15, 1988.
(8) In a public benefit corporation:
(a) The board of directors shall manage or direct the business and affairs of the public benefit corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit or public benefits identified in its articles of incorporation;
(b) A director of the public benefit corporation shall not, by virtue of the public benefit provisions set forth in the corporation’s articles of incorporation, have any duty to any person on account of any interest of the person in the public benefit or public benefits identified in the articles of incorporation or on account of any interest materially affected by the corporation’s conduct;
(c) With respect to a decision implicating the balance requirement in paragraph (a) of this subsection, a director shall act in conformity with subsection (1) of this section; and
(d) The articles of incorporation of a public benefit corporation may include a provision that any disinterested failure to satisfy this subsection shall not constitute an act or omission not in good faith or a breach of the duty of loyalty.
Effective:June 29, 2017
History: Amended 2017 Ky. Acts ch. 28, sec. 7, effective June 29, 2017. — Created
1988 Ky. Acts ch. 23, sec. 85, effective January 1, 1989; and ch. 224, sec. 8, effective July 15, 1988.
Formerly codified as KRS § 271A.202.
(a) In good faith;
Terms Used In Kentucky Statutes 271B.8-300
- Action: includes all proceedings in any court of this state. See Kentucky Statutes 446.010
- Articles of incorporation: include amended and restated articles of incorporation and articles of merger. See Kentucky Statutes 271B.1-400
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Corporation: may extend and be applied to any corporation, company, partnership, joint stock company, or association. See Kentucky Statutes 446.010
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Directors: when applied to corporations, includes managers or trustees. See Kentucky Statutes 446.010
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Person: includes individual and entity. See Kentucky Statutes 271B.1-400
- Public benefit: means a positive effect or reduction of negative effects on one (1) or more categories of persons, entities, communities, or interests other than stockholders in their capacities as stockholders. See Kentucky Statutes 271B.1-400
- Public benefit corporation: means a for-profit corporation that is intended to produce a public benefit and to operate in a responsible manner, balancing the stockholders' pecuniary interests, the best interests of those materially affected by the corporation's conduct, and the public benefit identified in its articles of incorporation. See Kentucky Statutes 271B.1-400
- Public benefit provisions: means the provisions of articles of incorporation authorized by KRS §. See Kentucky Statutes 271B.1-400
(b) On an informed basis; and
(c) In a manner he honestly believes to be in the best interests of the corporation.
(2) A director shall be considered to discharge his duties on an informed basis if he makes, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, inquiry into the business and affairs of the corporation, or into a particular action to be taken or decision to be made.
(3) In discharging his duties a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the corporation whom the director honestly believes to be reliable and competent in the matters presented;
(b) Legal counsel, public accountants, or other persons as to matters the director honestly believes are within the person’s professional or expert competence; or
(c) A committee of the board of directors of which he is not a member, if the director honestly believes the committee merits confidence.
(4) A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (3) of this section unwarranted.
(5) In addition to any other limitation on a director’s liability for monetary damages contained in any provision of the corporation’s articles of incorporation adopted in accordance with subsection (2)(d) of KRS § 271B.2-020, any action taken as a director, or any failure to take any action as a director, shall not be the basis for monetary damages or injunctive relief unless:
(a) The director has breached or failed to perform the duties of the director’s office in compliance with this section; and
(b) In the case of an action for monetary damages, the breach or failure to perform constitutes willful misconduct or wanton or reckless disregard for the best interests of the corporation and its shareholders.
(6) A person bringing an action for monetary damages under this section shall have the burden of proving by clear and convincing evidence the provisions of subsection (5)(a) and (b) of this section, and the burden of proving that the breach or failure to perform was the legal cause of damages suffered by the corporation.
(7) Nothing in this section shall eliminate or limit the liability of any director for any act or omission occurring prior to July 15, 1988.
(8) In a public benefit corporation:
(a) The board of directors shall manage or direct the business and affairs of the public benefit corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit or public benefits identified in its articles of incorporation;
(b) A director of the public benefit corporation shall not, by virtue of the public benefit provisions set forth in the corporation’s articles of incorporation, have any duty to any person on account of any interest of the person in the public benefit or public benefits identified in the articles of incorporation or on account of any interest materially affected by the corporation’s conduct;
(c) With respect to a decision implicating the balance requirement in paragraph (a) of this subsection, a director shall act in conformity with subsection (1) of this section; and
(d) The articles of incorporation of a public benefit corporation may include a provision that any disinterested failure to satisfy this subsection shall not constitute an act or omission not in good faith or a breach of the duty of loyalty.
Effective:June 29, 2017
History: Amended 2017 Ky. Acts ch. 28, sec. 7, effective June 29, 2017. — Created
1988 Ky. Acts ch. 23, sec. 85, effective January 1, 1989; and ch. 224, sec. 8, effective July 15, 1988.
Formerly codified as KRS § 271A.202.