SENATE BILL REPORT

SB 5102

BYSenators Talmadge, Deccio and Barr

Limiting personal liability of directors of for profit corporations.

Senate Committee on Judiciary

Senate Hearing Date(s):March 4, 1987

Senate Staff:Dick Armstrong (786-7460)

AS OF FEBRUARY 25, 1987

BACKGROUND:

Many corporations are experiencing difficulty in getting qualified persons to serve on their board of directors because of lawsuits by shareholders claiming the directors are personally liable for acts or omissions performed in official capacities. 

SUMMARY:

Statutes on for-profit corporations are amended to allow the articles of incorporation to include a provision eliminating or limiting the personal liability of a director for damages caused by any action taken by the director in good faith. Such provisions may not limit a director's liability for acts involving intentional misconduct, such as a knowing violation of the law or knowing breach of the director's fiduciary duty to the corporation.

Indemnification of directors of for-profit corporations in circumstances beyond those currently stated in the statute is allowed if such further indemnification is authorized by the articles of incorporation, or a bylaw or resolution adopted by the shareholders.  Such provisions may not be used to allow indemnification of a director for intentional misconduct.

Fiscal Note:      none requested