Directors of all corporations – including family owned businesses – owe a fiduciary duty of loyalty to the company. This duty requires a director to put the interests of the company ahead of his or her personal interest and not to divert corporate opportunities or assets for his or her own benefit.  Many state statutes further address potential conflicts of interest and allow for such conflicting interest transactions as long as the director makes prior disclosure and obtains the approval of all non-interested directors or shareholders before embarking on the transaction.  This statutory process protects the corporation from the potential damage of a self-interested deal by one or more directors.  It also provides cover for the director when acting for his or her own benefit as long as the director makes the proper prior disclosures and receives the needed approval.
Continue Reading Beware of Conflicting Interest Transactions in Family Business Management