(a) Each member of the board of directors, when discharging the duties of a director, shall act:
(1) In good faith; and
(2) In a manner the director reasonably believes to be in the best interests of the corporation.
(b) The members of the board of directors or a committee of the board, when becoming informed in connection with their decision-making function or devoting attention to their oversight function, shall discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.
(c) In discharging board or committee duties, a director shall disclose, or cause to be disclosed, to the other board or committee members information not already known by them but known by the director to be material to the discharge of their decision-making or oversight functions; provided, that disclosure shall not be required to the extent that the director reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule.
(d) In discharging board or committee duties, a director who does not have knowledge that makes reliance unwarranted may rely on:
(1) The performance by any of the persons specified in subsection (e)(1) or (3) of this section to which the board may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board's functions that are delegable under applicable law; or
(2) Information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in subsection (e) of this section.
(e) A director may rely, in accordance with subsection (d) or (e) of this section, on:
(1) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided;
(2) Legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the director reasonably believes are matters:
(A) Within the particular person's professional or expert competence; or
(B) As to which the particular person merits confidence; or
(3) A committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) A director shall not be liable to the corporation or its shareholders for any decision to take or not to take action, or any failure to take any action, as a director, unless the party asserting liability in a proceeding establishes that:
(1) None of the following, if interposed as a bar to the proceeding by the director, precludes liability:
(A) Any provision in the articles of incorporation authorized by § 29- 302.02(b)(4);
(B) The protection afforded by § 29-306.71 for action taken in compliance with § 29-306.72 or § 29-306.73; or
(C) The protection afforded by § 29-306.80; and
(2) The challenged conduct consisted or was the result of:
(A) Action not in good faith;
(B) A decision:
(i) Which the director did not reasonably believe to be in the best interests of the corporation; or
(ii) As to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances;
(C) A lack of objectivity due to the director's familial, financial, or business relationship with, or a lack of independence due to the director's domination or control by, another person having a material interest in the challenged conduct:
(i) Which relationship or which domination or control could reasonably be expected to have affected the director's judgment respecting the challenged conduct in a manner adverse to the corporation; and
(ii) After a reasonable expectation to such effect has been established, the director has not established that the challenged conduct was reasonably believed by the director to be in the best interests of the corporation; or
(D) A sustained failure of the director to devote attention to ongoing oversight of the business and affairs of the corporation, or a failure to devote timely attention, by making, or causing to be made, appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need therefore; or
(E) Receipt of a financial benefit to which the director was not entitled or any other breach of the director's duties to deal fairly with the corporation and its shareholders that is actionable under applicable law.
(b) The party seeking to hold the director liable:
(1) For money damages, shall also have the burden of establishing that:
(A) Harm to the corporation or its shareholders has been suffered; and
(B) The harm suffered was proximately caused by the director's challenged conduct;
(2) For other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, shall also have whatever persuasion burden may be called for to establish that the payment sought is appropriate in the circumstances; or
(3) For other money payment under an equitable remedy, such as profit recovery by or disgorgement to the corporation, shall also have whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances.
(c) This section shall not:
(1) In any instance where fairness is at issue, such as consideration of the fairness of a transaction to the corporation under § 29-306.71(b)(3), alter the burden of proving the fact or lack of fairness otherwise applicable;
(2) Alters the fact or lack of liability of a director under another section of this chapter, such as the provisions governing the consequences of an unlawful distribution under § 29-306.32 or a transactional interest under § 29- 306.71; or
(3) Affects any rights to which the corporation or a shareholder may be entitled under another law of the District or the United States.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to § 29-304.60(a) or § 29-312.09(a) shall be personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating § 29-304.60(a) or § 29-312.09(a) if the party asserting liability establishes that when taking the action the director did not comply with § 29-306.30.
(b) A director held liable under subsection (a) of this section for an unlawful distribution shall be entitled to:
(1) Contribution from every other director who could be held liable under subsection (a) of this section for the unlawful distribution; and
(2) Recoupment from each shareholder of the pro-rata portion of the amount of the unlawful distribution the shareholder accepted, knowing the distribution was made in violation of § 29-304.60(a) or § 29-312.09(a).
(c) A proceeding to enforce:
(1) The liability of a director under subsection (a) of this section shall be barred unless it is commenced within 2 years after the date:
(A) On which the effect of the distribution was measured under § 29- 304.60(e) or (g);
(B) As of which the violation of § 29-304.60(a) occurred as the consequence of disregard of a restriction in the articles of incorporation; or
(C) On which the distribution of assets to shareholders under § 29-312.09(a) was made; or
(2) Contribution or recoupment under subsection (b) of this section shall be barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under subsection (a) of this section.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
