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Duty of Loyalty
From Wikipedia, the free encyclopedia
Duty of Loyalty is a term used in corporate law to describe a fiduciary's loyalty to a corporation.
Section 8.60 of The Model Business Corporation states there is a conflict of interest when the director knows that at the time of a commitment that he or a related person is 1) a party to the transaction or 2) has a beneficial financial interest in the transaction that the interest.
- A key player and the corporation are on opposite sides of the transaction
- The key player has helped influence the corporation's decisions to enter the transaction
- The key player's personal financial interest are at least potentially in conflict with the financial interests of the corporation.
- By showing approval by a majority of disinterested directors
- Showing ratification by shareholders (MBCA 8.63)
- Showing transaction was inherently fair (MBCA 8.61)