Standards of Conduct for Officers

  1. Law
  2. Georgia Code
  3. Corporations, Partnerships, and Associations
  4. Nonprofit Corporations
  5. Directors and Officers
  6. Officers
  7. Standards of Conduct for Officers

Checkout our iOS App for a better way to browser and research.

  1. Unless a different standard is prescribed by law, an officer shall perform his or her duties as an officer in good faith and with the degree of care an ordinarily prudent person in a like position would exercise under similar circumstances.
  2. In performing his or her duties, an officer may rely upon:
    1. Officers, employees, or agents of the corporation whom the officer reasonably believed to be reliable and competent in the functions performed; and
    2. Information, data, opinions, reports, or statements provided by officers, employees, or agents of the corporation or by legal counsel, public accountants, investment bankers, religious authorities, ministers, priests, rabbis, or other persons as to matters involving the skills, expertise, or knowledge reasonably believed to be reliable and within such person's professional or expert competence.
  3. There shall be a presumption that the process an officer followed in arriving at decisions was done in good faith and that such officer exercised ordinary care; provided, however, that this presumption may be rebutted by evidence that such process constitutes gross negligence by being a gross deviation from the standard of care of an officer in a like position under similar circumstances.
  4. Nothing contained in this Code section shall:
    1. In any instance when fairness is at issue, such as consideration of the fairness of a transaction to the corporation as evaluated under paragraph (4) of subsection (c) of Code Section 14-3-865, alter the burden of proving the fact or lack of fairness otherwise applicable;
    2. Alter the fact or lack of liability of an officer under the Official Code of Georgia Annotated, including the governance of the consequences of a conflicting interest transaction under Code Section 14-3-865;
    3. Affect any rights to which the corporation or its members may be entitled under another law of this state or of the United States; or
    4. Deprive an officer of the applicability, effect, or protection of the business judgment rule.

(Code 1981, §14-3-842, enacted by Ga. L. 1991, p. 465, § 1; Ga. L. 2004, p. 508, §§ 66, 68; Ga. L. 2020, p. 85, § 2/SB 373.)

The 2020 amendment, effective July 1, 2020, rewrote this Code section, which read: "Unless a different standard is prescribed by law:

"(1) An officer with discretionary authority shall discharge his or her duties under that authority:

"(A) In a manner he or she believes in good faith to be in the best interests of the corporation; and

"(B) With the care an ordinarily prudent person in a like position would exercise under similar circumstances;

"(2) In discharging his or her duties an officer is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

"(A) One or more officers or employees of the corporation whom the officer reasonably believes to be reliable and competent in the matters presented; or

"(B) Legal counsel, public accountants, or other persons as to matters the officer reasonably believes are within the person's professional or expert competence;

"(3) In the instances described in paragraph (2) of this Code section, an officer is not entitled to rely if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by paragraph (2) of this Code section unwarranted; and

"(4) An officer is not liable to the corporation, any member, or other person for any action taken or not taken as an officer, if the officer performed the duties of his or her office in compliance with this Code section." See Editor's note for applicability.

Editor's notes.

- Ga. L. 2020, p. 85, § 6/SB 373, not codified by the General Assembly, provides that: "This Act shall apply only to causes of action arising on or after July 1, 2020."

Law reviews.

- For article, "The Development of Nonprofit Corporation Law and an Agenda for Reform," see 34 Emory L.J. 617 (1985). For article, "What Duty of Care Does a Homeowner Association Owe Its Members?," see 22 Ga. St. Bar J. 19 (Dec. 2016).

COMMENT

This section is based on its Business Code counterpart. Like section 14-3-830, this section contains an introductory proviso that is in neither the Model Act nor the Business Code. The proviso is intended to acknowledge the existence of other laws that may establish different standards for certain activities engaged in by officers, such as investment of corporate funds.

RESEARCH REFERENCES

Am. Jur. 2d.

- 18B Am. Jur. 2d, Corporations, §§ 1426 et seq.

C.J.S.

- 10 C.J.S., Beneficial Associations, § 34. 14 C.J.S., Charities, § 92 et seq. 19 C.J.S., Corporations, §§ 558, 562 et seq., 575, 576. 77 C.J.S., Religious Societies, § 44 et seq.

ALR.

- Validity of individual contract by director to put or maintain a designated person in office, 12 A.L.R. 1070; 45 A.L.R. 795.

Power of directors to sell property of corporation without consent of stockholders, 60 A.L.R. 1210.

Right of stockholder, director, officer, or agent, of a corporation to engage in a similar or competing business, 64 A.L.R. 782.

Authority of corporate officer to employ agent or broker to sell property, 159 A.L.R. 796.

What business opportunities are in "line of business" of corporation for purposes of determining whether a corporate opportunity was presented, 77 A.L.R.3d 961.

Duty of corporate directors to exercise "informed" judgment in recommending responses to merger or tender offers, 46 A.L.R.4th 887.


Download our app to see the most-to-date content.