Duty of Directors and Officers to Act in Good Faith; Reliance on Financial Information Prepared by Others; Presumption of Good Faith

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. Duty of Directors and Officers to Act in Good Faith; Reliance on Financial Information Prepared by Others; Presumption of Good Faith

1. A director shall perform his or her duties as a director 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 a director may rely upon:
   1. Officers, employees, or agents of the electric membership corporation whom the director 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 a director followed in arriving at decisions was done in good faith and that such director 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 a director 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 a director 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 a director of the applicability, effect, or protection of the business judgment rule.

(Code 1933, § 34C-613, enacted by Ga. L. 1981, p. 1587, § 1; Ga. L. 2020, p. 85, § 3/SB 373.)

The 2020 amendment, effective July 1, 2020, rewrote this Code section, which read: "Directors and officers shall discharge the duties of their respective positions in good faith and with that degree of diligence, care, and skill which ordinarily prudent men would exercise under similar circumstances in like positions. In discharging their duties, directors and officers, when acting in good faith, may rely upon financial information concerning the electric membership corporation when such information is represented to them by the president of the electric membership corporation or by the employee of the electric membership corporation having charge of its books of account, or in the form of a written report by an independent or certified public accountant or firm of such accountants, to be correct and to reflect fairly the financial condition of the electric membership corporation."

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."

RESEARCH REFERENCES

Am. Jur. 2d.

- 19 Am. Jur. 2d, Corporations, §§ 1345, 1483-1487, 1490-1492, 1494-1506, 1521-1529, 1531-1574, 1576-1608, 1610-1644, 1646-1651, 1653-1656, 1658-1660, 1663-1678, 1684-1697.

C.J.S.

- 19 C.J.S., Corporations, §§ 476-481, 484-486, 489, 491-513, 515, 516, 518-523.

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