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Corporate Law: Duty of Loyalty and Conflicts of Interest

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Questions and Answers

What is the primary objective of a director's duty of loyalty under CBCA s. 122(1)(a)?

Acting in the best interests of the corporation.

Can a director's duty of care be overridden by a unanimous shareholder agreement under CBCA s. 122(3)?

No, the duty of care cannot be overridden.

What is the standard of care required of directors under CBCA s. 122(1)(b)?

The care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances.

What is the significance of the business judgment rule (BJR) in relation to a director's duty of care?

The BJR only protects directors if they have been scrupulous in their deliberations and demonstrated diligence. Signup and view all the answers

What is the fiduciary duty that requires directors to act honestly and in good faith?

Duty of loyalty. Signup and view all the answers

Can a shareholder ratification override a director's breach of fiduciary duties?

No, shareholder ratification cannot override a director's breach of fiduciary duties. Signup and view all the answers

What is the consequence of a director's failure to disclose a conflict of interest?

The director may be in breach of their fiduciary duties. Signup and view all the answers

What is the purpose of the statutory test under CBCA s. 122(1)?

To codify the fiduciary duties of directors and officers. Signup and view all the answers

What is the consequence of a director's failure to exercise care, diligence, and skill?

The director may be liable for breach of their duty of care. Signup and view all the answers

What is the significance of UPM-Kymmene Inc v. UPM-Kymmene Miramichi Inc (Ont CA, 2004) in relation to a director's duty of care?

It emphasizes the need for directors to proceed cautiously and educate themselves thoroughly on non-urgent matters. Signup and view all the answers