Standard of Care for Officers in Discharge of Duties; Reasonable Reliances

1. Law
2. Georgia Code
3. Public Utilities and Public Transportation
4. Electrical Service
5. Electric Membership Corporations and Foreign Electric Cooperatives
6. Directors and Officers
7. Standard of Care for Officers in Discharge of Duties; Reasonable Reliances

1. 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 electric membership 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 electric membership corporation or by legal counsel, public accountants, investment bankers, 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 electric membership corporation as evaluated under paragraph (3) of subsection (a) of Code Section 46-3-305, 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 46-3-305;
   3. Affect any rights to which the electric membership 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, §46-3-303.1, enacted by Ga. L. 1988, p. 1451, § 1; Ga. L. 2020, p. 85, § 4/SB 373.)

The 2020 amendment, effective July 1, 2020, rewrote this Code section, which read: "(a)(1) A director shall discharge his duties as director, including his duties as a member of a committee:

"(A) In good faith; and

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

"(2) In discharging his duties, a director 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 electric membership corporation whom the director reasonably believes to be reliable and competent in the matters presented;

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

"(C) A committee of the board of directors of which he is not a member if the director reasonably believes the committee merits confidence.

"(3) A director is not acting in good faith if he has knowledge concerning the matter in question that makes unwarranted the reliance otherwise permitted by paragraph (2) of this subsection.

"(4) A director is not liable for any action taken as a director or any failure to take any action if he performed the duties of his office in compliance with this subsection.

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

"(A) In good faith; and

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

"(C) A committee of the board of directors of which he is not a member if the director reasonably believes the committee merits confidence.

"(2) In discharging his 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 electric membership corporation whom the officer reasonably believes to be reliable and competent in the matters presented; or

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

"(3) An officer is not acting in good faith if he has knowledge concerning the matter in question that makes unwarranted the reliance otherwise permitted by paragraph (2) of this subsection.

"(4) An officer is not liable for any action as an officer or any failure to take any action if he performed the duties of his office in compliance with this subsection.

"(c) The general standards of care and conduct for actions of directors or officers of electric membership corporations, which actions occur on July 1, 1988, shall be as provided in this Code section and not as provided in Code Section 46-3-303.

"(d) This Code section shall not relieve any director or officer from liability for the payment of taxes."

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."

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