#Fiduciary duties corporate officers directors

[andrewjbernhard]

Fraud by Corporate Officers and Directors in Florida: Legal Implications and Protections

Corporate fraud by officers and directors can have serious legal and financial consequences. In Florida, corporate leaders must uphold fiduciary duties to avoid misrepresentation, embezzlement, and insider trading. Learn about it here.

Corporate fraud, particularly when committed by officers and directors of a company, can have devastating consequences. It not only harms shareholders and employees but can also damage the company’s reputation and lead to significant legal and financial liabilities. In Florida, as in many states, the legal framework for holding corporate officers and directors accountable for fraudulent actions…

[third-new]

Grabar Law Office Investigates Claims on Behalf of Long-Term Shareholders of Expensify, Inc. (EXFY) by Investing.com

Philadelphia, Pennsylvania– (Newsfile Corp. – December 29, 2024) – The Grabar Law Office is investigating whether certain officers and directors of Slow down Inc. (NASDAQ: NASDAQ: ) breached their fiduciary duties owed to the company. Current Explain shareholders who own shares of Reduce stock on or near the November 11, 2021 IPO date, may seek corporate restructuring, return money to the…

[newtras]

Grabar Law Office Investigates Claims on Behalf of Long-Term Shareholders of Expensify, Inc. (EXFY) by Investing.com

Philadelphia, Pennsylvania– (Newsfile Corp. – December 29, 2024) – The Grabar Law Office is investigating whether certain officers and directors of Slow down Inc. (NASDAQ: NASDAQ: ) breached their fiduciary duties owed to the company. Current Explain shareholders who own shares of Reduce stock on or near the November 11, 2021 IPO date, may seek corporate restructuring, return money to the…

[satrthere]

Grabar Law Office Investigates Claims on Behalf of Long-Term Shareholders of Expensify, Inc. (EXFY) by Investing.com

Philadelphia, Pennsylvania– (Newsfile Corp. – December 29, 2024) – The Grabar Law Office is investigating whether certain officers and directors of Slow down Inc. (NASDAQ: NASDAQ: ) breached their fiduciary duties owed to the company. Current Explain shareholders who own shares of Reduce stock on or near the November 11, 2021 IPO date, may seek corporate restructuring, return money to the…

[markyosef]

Understanding the New York Business Corporation Law: Key Updates and What They Mean for Your Business

Introduction:

The New York Business Corporation Law (BCL) is a critical set of legal guidelines that governs the formation, operation, and dissolution of corporations within the state. As one of the most significant jurisdictions in the United States for business, New York’s legal framework for corporations is crucial for anyone involved in business ownership, corporate governance, or corporate legal practice.

Understanding the BCL’s provisions is essential for business owners, investors, and legal professionals to ensure compliance and avoid legal pitfalls. The law has undergone several updates to address evolving business practices and challenges, making it more important than ever to stay informed about its changes.

In this blog, we will examine the BCL, highlight the key updates in recent years, and discuss what these changes mean for businesses operating in New York.

What is the New York Business Corporation Law (BCL)?

The New York Business Corporation Law provides a detailed framework for the creation, operation, and governance of corporations within the state. It regulates various aspects of corporate life, including the duties and responsibilities of corporate directors, the rights of shareholders, corporate financing, and mergers and acquisitions.

The BCL is designed to ensure that corporations operate fairly and transparently while providing clear rules for resolving disputes and managing corporate affairs. These rules affect both large publicly traded companies and smaller privately held corporations.

Key Provisions of the BCL:

Formation and Structure: The BCL outlines the requirements for incorporating a business in New York, such as the filing of a certificate of incorporation and details regarding the corporation’s structure. It specifies that a corporation must have at least one director and one officer, as well as detailing the procedures for electing these corporate leaders.Key Update: New amendments to the BCL have simplified the incorporation process, particularly for small and closely held businesses. By streamlining administrative steps, these updates make it easier for businesses to get started, particularly for entrepreneurs looking to launch new ventures.

Corporate Governance: Corporate governance regulations within the BCL govern the actions of a corporation’s board of directors and officers. The law lays out their duties and powers, as well as guidelines for holding shareholder meetings and voting on corporate matters. It also governs corporate decisions on issues like stock issuance, shareholder rights, and corporate restructuring.Key Update: Recent changes emphasize greater shareholder participation in corporate governance, especially regarding voting procedures and shareholder proposals. These updates are designed to encourage transparency and greater involvement by shareholders in the decision-making processes of large corporations.

Fiduciary Duties: The BCL mandates that directors and officers owe fiduciary duties to the corporation and its shareholders, including the duty of care, duty of loyalty, and duty of good faith. This ensures that those managing the corporation make decisions with the best interests of the company in mind.Key Update: Recent updates to the BCL have clarified these duties, particularly in relation to corporate crises or difficult decision-making scenarios. Corporate officers and directors are now expected to make informed decisions and take appropriate steps to safeguard the business, especially when facing market downturns or shareholder dissent.

Mergers and Acquisitions: The BCL includes provisions regulating mergers, acquisitions, and reorganizations, such as how to handle shareholder approval and what steps are required to complete such transactions. It governs the process of merging two or more corporations, acquisition of assets, and other forms of corporate restructuring.Key Update: Changes have been made to simplify cross-border mergers and acquisitions, with provisions now allowing smoother integration for international deals. Additionally, regulations have been added to protect minority shareholders during mergers, ensuring that their rights are preserved in corporate restructuring.

Shareholder Rights: The BCL guarantees shareholders specific rights, such as voting on key corporate decisions, inspecting corporate records, and engaging in derivative actions on behalf of the corporation. These rights give shareholders a voice in corporate governance and ensure they are treated fairly.Key Update: The BCL has been amended to enhance protections for minority shareholders, such as stricter rules around the disclosure of executive compensation and related-party transactions. These updates aim to ensure more transparency in corporate practices and prevent conflicts of interest from undermining shareholder interests.

Corporate Finance: The law provides a detailed framework for corporate financing, including the issuance of stock, bonds, and other financial instruments. The BCL specifies the process for raising capital through equity and debt offerings and ensures that shareholders’ rights are protected during financial transactions.Key Update: One significant change in recent years has been a simplification of rules around the issuance of shares, especially for smaller companies and startups. These updates make it easier for businesses to raise capital through equity offerings while maintaining compliance with regulatory requirements.

Dissolution and Liquidation: The BCL also provides procedures for the voluntary dissolution of a corporation and the liquidation of its assets. In the case of involuntary dissolution, the law sets guidelines for how the state can intervene to dissolve corporations that are non-compliant or fail to meet regulatory standards.Key Update: The law now includes provisions that make it easier for businesses to dissolve in an orderly manner. This helps ensure that businesses that are no longer viable can exit the market efficiently, minimizing potential legal complications for business owners and investors.

Key Updates to the BCL and What They Mean for Businesses:

Increased Transparency and Disclosure: One of the most important updates to the BCL is the push for increased transparency in corporate operations. With the updated regulations, businesses are required to provide more comprehensive disclosures regarding executive compensation, related-party transactions, and other financial matters.For business owners, this means that they must be more diligent in their reporting practices and ensure that their financial statements are clear and accessible to shareholders. It also encourages more responsible corporate behavior and fosters trust between businesses and their stakeholders.

Strengthened Corporate Governance: The BCL’s updates in corporate governance provide greater authority to shareholders in decision-making. The inclusion of more detailed shareholder voting rights, including proxy voting and shareholder proposals, is aimed at enhancing accountability within corporations.This change impacts corporate executives and directors by increasing their responsibility to shareholders. They must ensure that decisions are made with transparency and that shareholders are given an appropriate voice in corporate affairs.

Easier Capital Raising for Smaller Companies: The simplification of rules surrounding capital raising, including stock issuance, will benefit small businesses and startups. By easing some of the regulatory burden, these changes make it easier for businesses to raise capital and fund their operations. This is a welcome change for entrepreneurs who often face difficulty navigating complex regulations when starting out.

Improved Protection for Minority Shareholders: The recent updates to the BCL enhance protections for minority shareholders, particularly in the areas of corporate transactions, executive compensation, and shareholder meetings. These changes ensure that the interests of minority shareholders are not overshadowed by the actions of controlling shareholders or corporate executives.

Conclusion:

New York's Business Corporation Law has undergone significant updates that are designed to improve corporate governance, increase transparency, and simplify corporate procedures for businesses of all sizes. For business owners, legal professionals, and investors operating in New York, it is essential to stay informed of these changes to ensure compliance and make the most of the new opportunities they offer.

Whether you are forming a new business, navigating corporate governance, or raising capital, understanding the BCL’s provisions and recent updates will help you make informed decisions and avoid legal complications. In today’s fast-paced business environment, staying ahead of regulatory changes is crucial to running a successful and compliant business.

By adapting to these new rules, businesses can strengthen their operations, protect shareholder rights, and create a more transparent and accountable corporate environment in New York.

[joeraetzer]

Preemptive Rights: Anti-Dilution of Shares

In corporations and closely held companies, ownership is determined by the number of shares held. For example, a shareholder owning 1,000 shares in a company with 10,000 total shares has a 10% ownership stake. However, this ownership percentage can be threatened by dilution, a common concern for minority shareholders. For example, if the company issued an additional 10,000 shares, that 10% stake would then drop to 5% of the company. The Impact of Shareholder Dilution Shareholder dilution occurs when a corporation issues additional shares, reducing the ownership percentage of existing shareholders. Dilution can erode voting power and investment value, making it a frequent tactic in minority shareholder oppression or squeeze-outs. To combat such risks, preemptive rights can provide protection for shareholders. What Are Preemptive Rights? Preemptive rights, sometimes called anti-dilution provisions, grant shareholders the opportunity to purchase a proportional share of any new stock issuance before it is made available to others. These rights safeguard a shareholder’s ownership percentage by allowing them to maintain their stake in the company. Preemptive rights can be included in: - Shareholder agreements. - Governing documents such as bylaws or articles of incorporation. - Securities, merger, or option agreements. Preemptive rights protect shareholders against damages from dilution, particularly when new shares are sold below their fair value. These rights may: - Preserve ownership percentage and voting power. - Protect early investors from value loss due to lower-priced new shares. - Serve as an incentive for early or high-risk investors. Preemptive Rights in Texas In Texas, preemptive rights are not automatically granted to all shareholders. Their availability depends on when a corporation was formed and its governing documents: - Corporations formed before September 1, 2003: Shareholders have preemptive rights unless explicitly excluded in the articles of incorporation or bylaws. - Corporations formed on or after September 1, 2003: Shareholders do not have preemptive rights unless explicitly provided for in the governing documents. Preemptive rights are more commonly granted to majority shareholders, early investors or as an incentive in funding rounds. However, these provisions can complicate efforts to raise capital quickly, particularly in times of financial difficulty in the capital markets. Exceptions to Preemptive Rights Under Texas law (Texas Business Organizations Code § 21.204), certain stock issuances are exempt from preemptive rights unless stated otherwise in the share certificates. Exemptions include: - Shares issued as compensation to directors, officers, or employees. - Shares issued to satisfy conversion or option rights tied to compensation. - Shares authorized in the Certificate of Formation and issued within 180 days of incorporation. - Shares issued for non-monetary consideration. These exceptions highlight the limitations of preemptive rights. Even with such rights, shareholders without the financial means to purchase additional shares may still face dilution. Legal Remedies for Shareholder Dilution Because preemptive rights are not a comprehensive safeguard, minority shareholders experiencing dilution or oppression may need to explore alternative legal remedies. Potential claims include: - Breach of Fiduciary Duty: For issuing shares below fair market value or causing loss of value to the corporation. - Derivative Lawsuits: Pursuing damages on behalf of the corporation. - Individual Claims: Addressing breaches of fiduciary duty, trust, or conversion of stock. - Breach of Contract: Based on shareholder agreements. - Fraud: Claims of fraudulent inducement or securities fraud. - Ultra Vires Actions: Challenging unauthorized corporate acts. Legal action can be subject to specific statutes of limitations. For example, claims based on preemptive rights in Texas must be filed within 1 year of written notice of the violation or four years from the stock issuance. Preventing Disputes and Oppression To mitigate risks of shareholder disputes, dilution, and litigation, corporations should: - Establish Clear Bylaws: Define how and when new shares can be issued. - Grant Preemptive Rights Strategically: Ensure these rights are balanced with the corporation’s need for financial flexibility. - Enforce Fiduciary Duties: Directors must act in the corporation's best interest when issuing shares. In short, the decision to include preemptive rights in corporate governance requires careful consideration. While these provisions can protect against dilution and foster investor confidence, they can also limit a corporation’s agility in raising capital. For minority shareholders, understanding the protections available and exploring legal remedies for unfair dilution is crucial. Corporations and shareholders alike should consult experienced attorneys to navigate preemptive rights, shareholder agreements and strategies to balance ownership protection with financial flexibility. Joseph J Raetzer Raetzer PLLC Read the full article

[wtii]

General Commercial Insurance vs. Directors and Officers Insurance for Small Business Protection

In today's complex business landscape, small companies face various risks that can threaten their stability and growth. To safeguard against these risks, it is crucial to understand the different types of insurance available. Two of the most essential forms of coverage for small businesses are general commercial insurance and directors and officers insurance. This article explores these two types of insurance, their key differences, and how they can work together to provide comprehensive protection for small companies, including insights into builders risk insurance Ontario for businesses in the construction sector.

Understanding General Commercial Insurance

General commercial insurance is a broad category of coverage designed to protect businesses from a wide array of risks. This type of insurance typically covers property damage, liability claims, and other business interruptions. For small businesses, having general commercial insurance is vital, as it helps mitigate the financial impact of unforeseen events.

Key Features of General Commercial Insurance

Property Coverage: This includes protection for physical assets like buildings, equipment, and inventory. In case of theft, fire, or natural disasters, general commercial insurance can help cover repair and replacement costs.

Liability Protection: General commercial insurance also provides liability coverage, protecting businesses against claims made by third parties for bodily injury or property damage. This is particularly important for small companies, as legal claims can lead to significant financial losses.

Business Interruption: This feature ensures that businesses can continue operations during unexpected closures, such as those caused by natural disasters. Compensation for lost income during this period can be crucial for small companies.

The Importance of Directors and Officers Insurance

While general commercial insurance covers a broad range of business risks, it does not typically protect the personal assets of directors and officers in the event of legal actions against them. This is where directors and officers insurance comes into play.

Key Features of Directors and Officers Insurance

Personal Liability Protection: Directors and officers insurance protects individual leaders from personal liability resulting from decisions made on behalf of the company. This type of insurance is essential for small company insurance, as it helps safeguard the personal assets of those in leadership roles.

Legal Defense Costs: In the event of lawsuits alleging wrongful acts, such as mismanagement or breach of fiduciary duty, directors and officers insurance covers legal defense costs. This protection is critical, as legal fees can quickly escalate and become burdensome for small companies.

Reputation Protection: By having directors and officers insurance, small companies can demonstrate their commitment to ethical governance and responsible management, which can positively influence investor confidence and public perception.

Comparing General Commercial Insurance and Directors and Officers Insurance

While both types of insurance serve essential purposes, they protect against different risks and are not interchangeable. Here’s a comparative overview:

Coverage Scope: General commercial insurance offers broader coverage for physical and operational risks, while directors and officers insurance specifically protects individuals in leadership positions.

Claim Types: General commercial insurance covers claims related to property damage and general liability, whereas directors and officers insurance addresses claims related to management decisions and corporate governance.

Financial Protection: General commercial insurance protects the business’s assets, while directors and officers insurance shields personal assets of company leaders.

Builders Risk Insurance Ontario: A Specialized Coverage

For small construction companies operating in Ontario, builders risk insurance is an essential addition to both general commercial insurance and directors and officers insurance. Builders risk insurance provides coverage for buildings under construction, ensuring that materials and equipment are protected from various risks, such as theft, vandalism, and weather-related damages.

Why Builders Risk Insurance Matters

Project Coverage: Builders risk insurance is specifically designed to cover properties while they are under construction, making it an essential part of small company insurance for construction-related businesses.

Flexibility: This insurance can be tailored to fit the unique needs of construction projects, providing coverage for specific risks that may not be included in general commercial insurance policies.

Peace of Mind: Knowing that a project is covered can provide construction company owners with peace of mind, allowing them to focus on delivering quality work without the fear of financial loss due to unforeseen events.

Conclusion

In conclusion, small businesses must navigate a complex array of risks that can threaten their stability and success. Understanding the differences between general commercial insurance and directors and officers insurance is essential for comprehensive protection. While general commercial insurance provides broad coverage for operational risks, directors and officers insurance safeguards the personal assets of company leaders. For those in the construction sector, incorporating builders risk insurance Ontario is equally important to ensure project-specific coverage.

By taking a proactive approach to insurance, small companies can protect themselves against potential threats and foster a secure environment for growth and success. A well-rounded insurance portfolio that includes general commercial insurance, directors and officers insurance, and builders risk insurance will help small businesses thrive in today's competitive landscape.

[insideoutvietnam]

VENTYX STOCK NOTICE: Ventyx (Nasdaq: VTYX) Shareholders are Reminded to Contact BFA Law about Investigation into the Board for Insider Trading Scheme and Avoiding Substantial Losses

NEW YORK, June 15, 2024 (GLOBE NEWSWIRE) — If you are a shareholder of Ventyx Biosciences (NASDAQ: VTYX), you are encouraged to submit your information by visiting https://www.bfalaw.com/cases/ventyx-biosciences-inc-investigation. Why is Ventyx Being Investigated by BFA? Directors and officers of a company owe fiduciary duties to the corporation and its stockholders. Bleichmar Fonti & Auld LLP is…

[professionalutilities1]

What are the introductory laws for company incorporation in the UK?

Laws for Company Incorporation in the UK The Companies Act of 2006 covers the vast bulk of company formation regulations in the United Kingdom. This Act creates the legal foundation for the establishment, management, and dissolution of corporations in the UK. The Companies Act of 2006 addresses the following main issues:

Company Formation: The Act outlines how to incorporate a corporation, including the name, place for its registered office, directors, shareholders, and required share capital. Director Duties and Responsibilities: The Act outlines board members' obligations, including their fiduciary responsibility to act in the firm's best interests, use reasonable care, skill, and diligence, and prevent conflicts of interest. Shareholder Rights and Meetings: The Act establishes shareholders' rights, which include the ability to vote, request financial information, and attend and vote at general meetings. It also provides the procedures for holding general meetings and passing resolutions. Corporate Governance: To ensure successful corporate governance standards, the Act mandates yearly financial statements, auditor nominations, and director reports. It also contains legislation governing corporate director compensation and transparency requirements. Capital and shareholder protection: The Act specifies guidelines for establishing, distributing, and maintaining share capital. It also creates legislation to protect shareholders' interests, such as laws governing shareholder remedies, share buybacks, and prohibitions on financial aid for share purchases.

[mariacallous]

More than three days after OpenAI was thrown into chaos by Sam Altman’s sudden firing from his post as CEO, one big question remains unanswered: Why?

Altman was removed by OpenAI’s nonprofit board through an unconventional governance structure that, as one of the company’s cofounders, he helped to create. It gave a small group of individuals wholly independent of the ChatGPT maker's core operations the power to dismiss its leadership, in the name of ensuring humanity-first oversight of its AI technology.

The board’s brief and somewhat cryptic statement announcing Altman’s departure said the directors had “concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.” Altman was replaced by CTO Mira Murati, who was appointed interim CEO. Greg Brockman, like Altman an OpenAI cofounder, was removed from his post as chair of the board and quit the company in solidarity with Altman several hours later.

There have been many twists and turns since Friday, with Altman making a failed attempt to return as CEO, the board replacing Murati as interim CEO with Twitch cofounder Emmett Shear, Microsoft announcing it would hire Altman and Brockman, and almost every OpenAI employee threatening to quit unless Altman returned.

None of them have shed much light on what Altman did or did not do that triggered the board to eject him. An OpenAI staff member speaking on condition of anonymity on Monday says that the board has communicated virtually nothing about its thinking throughout the crisis.

Dwindling Possibilities

Along the roller-coaster ride of the past few days, several possible reasons for Altman’s removal have been seemingly eliminated. In a memo to staff sent over the weekend, OpenAI’s chief operating officer, Brad Lightcap, said that the board’s decision “was not made in response to malfeasance or anything related to our financial, business, safety, or security/privacy practices. This was a breakdown in communication between Sam and the board.”

That appeared to rule out the possibility that Altman had been felled by a conventional corporate scandal involving duplicity or rule-breaking related to financial or other workplace policies. It helped fuel a hypothesis that gained ground in some corners of the AI community over the weekend that OpenAI cofounder and chief scientist Ilya Sutskever and his fellow board members had instead acted out of fear that OpenAI was taking risks by developing its technology too hastily.

OpenAI’s odd governance structure was designed to give its board the power to rein in its for-profit arm. The directors’ primary fiduciary duty is to the company’s founding mission: “To ensure that artificial general intelligence benefits all of humanity.” Some following the drama saw hints in recent interviews by Sutskever about OpenAI’s research that he might have been anticipating a breakthrough that raised safety concerns. The New York Times reported that unnamed sources said Sutskever had become more concerned that OpenAI’s technology could be dangerous and felt Altman should be more cautious.

Yet on Monday those theories too appeared to be put to rest. In a post on X in the early hours of the morning, the board’s new interim CEO, Emmett Shear, wrote that before he accepted the job he’d asked why Altman was removed. “The board did not remove Sam over any specific disagreement on safety,” he wrote. “Their reasoning was completely different from that.” Shear didn’t offer any information on what the reasoning had been instead.

Sutskever himself then appeared to quash the possibility he and the board had acted out of fears that Altman wasn’t taking proper care with OpenAI’s technology, when his name appeared among the nearly 500 staff members on a letter threatening to quit if Altman wasn’t restored. Within hours some 95 percent of the company had signed up.

Sutskever also wrote in a post on X that he deeply regretted his role in the board’s actions, again seeming to negate the idea he’d had major safety concerns. “I deeply regret my participation in the board's actions. I never intended to harm OpenAI. I love everything we've built together and I will do everything I can to reunite the company,” he wrote.

Continuing Mystery

Late on Monday, Microsoft CEO Satya Nadella, whose company has pledged more than $10 billion in investment to OpenAI, said he was also in the dark about the board’s reasoning for acting against Altman. In a televised interview on Bloomberg, he said he hadn’t been told of any issues by anyone from OpenAI’s board. “Therefore I remain confident in Sam and his leadership and capability, and that's why we want to welcome him to Microsoft,” he said.

Late on Monday, the fourth day of the OpenAI upheaval, the original reason for the board’s decision to fire Altman remains unclear.

Before he was removed as CEO, Altman sat on OpenAI’s board alongside Brockman, Sutskever, and three outsiders: Adam D’Angelo, CEO of Quora, which has its own chatbot, Poe, built in part on OpenAI technology; Tasha McCauley, CEO of GeoSim Systems; and Helen Toner, an expert on AI and foreign relations at Georgetown’s Center for Security and Emerging Technology. McCauley is on the UK board of Effective Ventures, a group affiliated with effective altruism, and Toner used to work for the US-based effective-altruism group Open Philanthropy.

Altman and his cofounders created OpenAI as a nonprofit counterweight to corporate AI development labs. By creating a for-profit unit to draw commercial investors in 2019 and launching ChatGPT almost a year ago, he oversaw its transformation from a quirky research lab into a company that vies with Google and other giants not just scientifically but also in the marketplace.

Earlier this month, Altman capped off that transformation by hosting the company’s first developer conference, where he announced a kind of app store for chatbots. Somewhere along that trajectory, his board apparently saw reason for concern and decided they had to act.

[joeraetzer]

Fiduciary Duties: Minority Shareholder Rights

Officers, directors, managers, controlling shareholders and other key individuals in corporations and business entities often have obligations toward minority owners as outlined in the organization’s foundational documents (e.g., bylaws, operating agreements). For example, control persons may be required to provide minority investors access to the company’s books and records. Additionally, state laws impose specific duties, such as holding annual shareholder meetings, for the benefit of minority owners. Beyond these clear-cut responsibilities, control persons may also be obligated to prioritize the interests of minority owners over their own. These are known as fiduciary duties, which arise in relationships where one party places special trust and reliance on the judgment of another, such as between a director and a shareholder. Fiduciary duties generally apply to directors, officers, and controlling shareholders of corporations. However, in LLCs or partnerships, such duties may be restricted or entirely waived through organizational documents. Assuming fiduciary duties are applicable, the primary obligations include (for ease of reference, this article focuses on Delaware law. Each state may have varying standards so always consult with a local attorney): - The Duty of Care - The Duty of Loyalty - The Duty of Good Faith 1. The Duty of Care The duty of care requires control persons to make informed decisions based on thorough consideration of relevant information. This includes a responsibility to evaluate alternatives and rely on employees or advisors with a critical and discerning perspective. Decisions made under this duty benefit from the business judgment rule, which protects actions taken in good faith, on an informed basis, and in the honest belief that they serve the company’s best interests. 2. The Duty of Loyalty The duty of loyalty obligates control persons to prioritize the interests of the company and its owners over their own. They must avoid exploiting their position of trust, confidence, or insider knowledge for personal gain. This includes refraining from actions that provide personal benefits not shared by the company or its other owners. Conflicts of interest that can violate the duty of loyalty typically fall into two categories: - Interestedness: When a control person benefits from a transaction that is not equally advantageous to the company and its other owners. - Lack of Independence: When a control person indirectly benefits from a transaction or is beholden to another individual who stands to benefit. Courts assess whether such benefits are material and likely to influence a control person’s objectivity. A decision remains valid if a majority of disinterested and independent control persons approve it, even if some control persons are conflicted. 3. The Duty of Good Faith The duty of good faith requires control persons to act prudently and responsibly, demonstrating the care a reasonable person in a similar role would exercise under comparable circumstances. Failing to act in good faith, even if not unlawful, includes actions driven by improper motives or those producing grossly inequitable outcomes. This duty encompasses a commitment to making decisions free from self-interest or conflicting priorities that undermine the company’s best interests. The standard for good faith may be influenced by an individual’s expertise or knowledge. For instance, a finance expert might be held to a higher standard when relying on third-party valuations. Historically, courts treated the duty of good faith as a distinct obligation. However, it is now often regarded as a component of the duty of loyalty. book a consult Raetzer PLLC Joseph J Raetzer

[joannematousek]

Understanding D&O Liability Policy Uses and Benefits

A directors and officers liability (D&O) insurance policy is critical for protecting a company's leadership team from legal liability claims. The level of power, influence, and responsibility inherent to leadership positions exposes directors and officers to various litigation risks, making it essential to have protections in place.

A D&O liability policy protects an organization's leadership from liability for legal claims made against company directors and officers while acting within the capacity of their corporate roles. These claims can concern various allegations, including wrongful termination, theft of intellectual property, breach of fiduciary duty, and mismanagement of company funds. A D&O policy covers legal defense expenses, settlements or judgments, and other expenditures associated with these claims. Without this coverage, the organization and its leadership team could incur financial harm or loss.

A D&O policy typically includes three types of coverage: Side A, Side B, and Side C. The foremost provides financial protection to directors and officers when their company cannot or declines to pay for indemnification coverage, an agreement wherein the organization covers claim-related fees and expenses. The inability to indemnify leadership can occur when a business goes bankrupt or becomes insolvent or if its bylaws prohibit the indemnification of officers and directors.

Side B coverage applies to the opposite scenario, reimbursing a company for any legal expenses incurred by claims against indemnified directors and officers. This coverage protects the company's assets against risk rather than those of its directors and officers. Similar in purpose, Side C coverage is also called entity coverage because it protects the company from financial losses when a lawsuit against its management also names the business itself. For public companies, its coverage is limited to claims for alleged wrongful acts related to the business' securities.

In today's competitive job market, Side A and Side B D&O coverage represent a key component of benefits packages capable of attracting and retaining high-level leadership talent. Assurance that their personal finances are safe from liability lawsuits helps leadership personnel focus on their work and make decisions confidently. Additionally, D&O policies demonstrate the business' resolve toward good corporate governance.

The same basic principle also applies to an organization’s investors. Investors often request a position on the company's board of directors in exchange for their investment, which leads them to favor businesses with robust D&O liability insurance to mitigate risk and lower their exposure to lawsuits. Some even consider it a requirement. It is common practice for institutional investors to include a D&O policy provision in startup funding contracts, stipulating that the investee must acquire this insurance no later than 90 days after the financing closes.

Regardless of financing needs, a D&O liability policy is equally critical for small businesses as it is for large corporations. Businesses of any size can become the subject of expensive lawsuits, but those filed by customers, suppliers, and other third parties represent the most potentially devastating to private entities. With less financial muscle compared to larger companies, small businesses are particularly vulnerable to lawsuits that may incur high costs. In today's litigious society, D&O insurance also safeguards the financial security of small-business owners and key decision-makers whose personal wealth is linked to their company's financial health.

[mystlnewsonline]

Pomerantz Law Firm Investigates Claims On Behalf of Investors of Medical Properties Trust, Inc.

SHAREHOLDER ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of Medical Properties Trust, Inc. - MPW NEW YORK (STL.News) Pomerantz LLP is investigating claims on behalf of investors of Medical Properties Trust, Inc. ("MPT" or the "Company") (NYSE: MPW).  Such investors are advised to contact Robert S. Willoughby at newaction@pomlaw.com or 888-476-6529, ext. 7980. The investigation concerns whether MPT and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. Click here for information about joining the class action. On February 23, 2023, MPT announced its fourth quarter and full-year 2022 financial results.  Among other items, the Company disclosed an impairment of approximately $171 million on four properties leased to Prospect Medical Holdings and announced a plan to write off about $112 million in unbilled rent from the same client. On this news, MPT's stock price fell $1.06 per share, or 8.69%, to close at $11.14 per share on February 23, 2023. Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com. CONTACT: Robert S. Willoughby Pomerantz LLP rswilloughby@pomlaw.com 888-476-6529 ext. 7980 SOURCE: Pomerantz LLC via PR Newswire Read the full article

[likeawildthing]

Let’s talk about the legality of AO3 a non-profit organization and what that means for your donation dollars, shall we? I have seen...way too many posts on my dash knocking AO3 and I thought I’d just write something up instead of adding to yet another misinformed post. Here we go.

I’m not a CFO, but I am a business graduate, work at a for-profit organization with a similar governance structure as AO3, and I spend two months of each year assessing the fiscal health of non-profit organizations. In that volunteer work I look at: how efficiently volunteer dollars are being spent, whether the agency is meeting their targets in terms of people served, the overall organizational heath, and efficacy of services rendered. 

All boring, but essentially it’s making sure donations go to the healthiest organization with the fittest program. 

AO3 is a 501(c) corp. “A  501c3 is considered a charity, and the IRS allows donors to take a tax deduction for contributions of goods, cash and other assets.” This type of organization “can make a profit from its operations, but if the entity consistently makes a significant annual profit, the IRS might remove its tax-exempt status. For this reason, tax-exempt organizations try to operate at or near a break-even basis.” (x)

This is just, the basic legal requirement. They make too much money, they lose non-profit status. As a non-profit could pay staff. In fact, AO3 makes a distinction between volunteers and staff. Does this mean anyone at AO3 is profiting? From the FAQ:

"The OTW is an all-volunteer organization, so everyone serving is doing so on voluntary basis. At the same time, our roles have differing levels of responsibility and commitment, which we distinguish by using the terms volunteer and staff.Generally, a volunteer serves as part of a pool (e.g. tag wranglers, coders, testers, translators) or a workgroup with specific and focused tasks to complete. Pool volunteers typically are not required to attend meetings; workgroup volunteers may be expected to do so. Volunteers do not hold a vote within their respective committee unless they also serve as committee staff.Staff serve on an OTW committee, are expected to attend meetings, and actively participate in committee business and projects. The time required of staff is often higher than for volunteers. Also, after nine months of service as staff, an individual is eligible to run for a seat on the Board of Directors.”

and 

“No, no one in the Organization for Transformative Works receives monetary compensation for their work.”

These aren’t just claims AO3 can make arbitrarily. Non-profits are sometimes subjected to the roughest financial scrutiny during a financial audit. Lying about this and getting caught would result in hefty fines or even the loss of the non-profit status, which would kill the site. Immediately. I checked, and AO3 does an independent financial audit every year, as well as files financial statements. They aren’t lying or hiding money.

Additionally, if you know anything about corporation governance structure, AO3 is run by board and committee. No one person can make financial decisions, and no one person can secretly siphon off donations. 

“The Board treasurer is specifically responsible for the creation and implementation of the OTW’s budget, but the Board must vote to approve the budget, as well as any unplanned expenditures. For smaller transactions, the Board will delegate responsibility to OTW’s committees to determine what goods and services may be necessary.”

Each board member, legally, has a duty of care:  "directors and officers of a corporation in making all decisions in their capacities as corporate fiduciaries, must act in the same manner as a reasonably prudent person in their position would.” What does this mean for non-profits? Board members must 

1. Have a keen interest in the fiscal affairs of the nonprofit, including its overall, current financial position, the reliability of the reports the board receives, and the effectiveness of the nonprofit’s management of incoming and outgoing funds.

2. Require regular, timely and complete financial reports from internal finance staff or contract staff and expect the board to hold staff accountable for meeting the standards of timely reporting (for example, providing financial statements no later than three weeks after the close of the prior accounting period).

3. Ask critical questions about the financial reports the board receives, including budgets, periodic financial statements, the annual Form 990 and annual, sometimes audited, financial statements.

If you care to look, AO3 does...all of this. Above and beyond, actually. I looked. Here are their 990s, board meeting minutes, independent audits, financial statements, and prior strategic planning benchmarks.

Regarding fiscal responsibility, non-profits (healthy ones anyway) should use financial ratios to determine the health and long-term viability of the organization. Here’s a simplified version. What both of these articles (or any article worth its salt) will confirm is that it’s important to keep a reserve for future viability. AO3 calls this its “rainy day fun” or “financial reserves.” 

Yes, AO3 is creating a conservative investment portfolio. Yes, they have long-term plans which include server upgrades. This isn’t predatory or misleading, this is literally business 101. The healthiest non-profit organizations don’t try to make a profit, but they are smart with the money they earn: 

Step 1. Earn income (1-2 fund drives a year, completely voluntarily, stop if funds are received early. completely on par with an organization this size. Think about your NPR radio station.)

Step 2. Have a budget with enough capital for operating expenses (enough cash flow to pay bills as they come up) and a small portion for regular savings. 

Step 3. Invest intelligently to keep a healthy margin in reserve for long-term strategic planning. Have a strategic plan which includes capital expenditures (investing back into the organization). 

This right here? Maintaining a healthy reserve for capital expenditures? Creating a marginal income without earning too much to risk losing 501c3 status? Running on volunteers to avoid ethical concerns? That’s how you operate an organization that takes donor funds seriously, that is a good steward of its resources, and which will be here in 3, 5, 10 years. 

You don’t have to donate. I’m not actually advocating either way. Just putting in my experience. There are amazing ways to support your favorite fic authors that don’t involve donating to AO3. However, if you do choose to, rest assured that it appears that AO3 is doing everything from a healthy organization perspective and that your donor dollars are treated with respect. 

Thank you for coming to my TED talk.

[rjzimmerman]

Disclosure: I am a retired partner of the law firm, Foley & Lardner, which prepared this report. My interest in the article is hopefully the same as everyone else’s: learning something. Nothing more.

Excerpt:

On May 26, 2021, a Dutch court ordered Royal Dutch Shell Plc (“Shell”) to cut its greenhouse gas emissions by 45% (from 2019 levels) by 2030. Shell had previously pledged to reduce its emissions by 20% (from 2016 levels) by 2030 and to reach net-zero emissions by 2050. The Dutch court held that this commitment was insufficient based on the “very serious threat” that Shell’s carbon emissions pose to Dutch residents.

The Dutch court held that Shell’s greenhouse gas reduction plan failed to meet its obligations under Dutch and international law. In its reasoning, the court explained that:

[Shell] has an obligation, ensuing from the unwritten standard of care pursuant to … Dutch Civil Code to contribute to the prevention of dangerous climate change through the corporate policy it determines for the Shell group. For the interpretation of the unwritten standard of care, use can be made of … human rights, specifically the right to life and the right to respect for private and family life, as well as soft law endorsed by [Shell], such as the UN Guiding Principles on Business and Human Rights, the UN Global Compact and the [Organisation for Economic Co-Operation and Development] Guidelines for Multinational Enterprises…. [Shell] violates this obligation or is at risk of violating this obligation with a hazardous and disastrous corporate policy for the Shell group, which in no way is consistent with the global climate target to prevent a dangerous climate change for the protection of mankind, the human environment and nature.

Although the case is a significant legal decision, the reasoning behind it is unlikely to get traction in U.S. courts any time soon. First, while the U.S. Environmental Protection Agency regulates air emissions, including greenhouse gas emissions, U.S. law does not include broad standards of care based on human rights or subject companies to United Nations-based guidelines or principles. Second, in the U.S., the duty of care in the corporate context is a fiduciary duty that applies to a company’s officers and directors and mandates the exercise of care in making decisions based on adequate information and a good faith belief that the decisions are in the best interest of the company and its stockholders. Importantly, however, outside of special circumstances like insolvency, this duty only extends to the company and its stockholders. U.S. law, therefore, does not encompass the same duty of care suggested by the Dutch court. Certain states allow companies to take other stakeholders, including employees and the general public, into consideration in their decisions, but these “constituency” statutes do not create breachable fiduciary duties to those stakeholders. Third, a challenge to a company’s actions on the basis of breach of fiduciary duty must overcome the business judgment rule. This common law rule establishes a presumption that in making business decisions, directors acted on an informed basis and in the honest belief that the action was in the best interest of the company and its stockholders. The focus is not on the decision itself but rather on the process to come to the decision; and, if the process is rational or employed in a good faith effort to advance corporate interests, U.S. courts will be hesitant to intervene.