Document Type
Legislative Notes
Abstract
A definition of a corporate director's legal duty and corresponding potential for personal liability involves a delicate balance. Such a definition should insure that the corporation's directors will adequately represent the shareholders' interests, yet it must not so rigidly impose liability on the directors that talented individuals will be discouraged from becoming directors. At the same time, some certainty in the application of a standard may be as important for directors as a lack of rigidity. The Ohio legislature has used The Model Business Corporations Act as its source in an effort to achieve this balance through Senate Bill 174.
S.B. 174 creates a statutory standard of care for directors of business corporations and for trustees of nonprofit corporations. This statutory standard of care has expanded upon the standard of care already present in Ohio case law.
Although directors and trustees of corporations already had the authority to create a committee or committees of directors or trustees, S.B. 174 extends to these committees of directors and committees of trustees the privilege of holding meetings via electronic communications equipment. This privilege has already been granted the full board of directors and board trustees. In addition, the bill recognizes that much of the day-to-day authority for running the corporation has been delegated by the directors or trustees to the officers and employees of the corporation.
The bill also contains a new provision that allows contracts between an interested trustee and the nonprofit corporation he serves. This addition to Ohio law regarding nonprofit corporations parallels an already existing provision regarding business corporations.
Recommended Citation
Bailey, Dennis L.
(1981)
"S.B. 174: Ohio Defines a New Standard of Care for Corporate Directors,"
University of Dayton Law Review: Vol. 7:
No.
1, Article 16.
Available at:
https://ecommons.udayton.edu/udlr/vol7/iss1/16
Publication Date
10-1-1981
