§ 7-108-402 — Standards of liabilities for directors

(1) A director is liable, as a
director, to the corporation or to its shareholders for money damages or other
money payment for any act, omission to act, or decision only if the party asserting
liability establishes in a proceeding that the challenged act, omission, or decision:

(a) Was not in good faith;

(b) Was one that the director did not rationally believe to be in the best
interests of the corporation;

(c) Was one as to which the director was at least grossly negligent, unless
the articles of incorporation change the standard of liability to knowing misconduct,
knowing violation of law, or negligence;

(d) Was one as to which the director failed to make or cause to be made
appropriate inquiry, when particular facts or circumstances of significant concern
came to the attention of the director that would have alerted a reasonably attentive
director to the need for inquiry;

(e) Consisted of or resulted from a sustained or systematic failure by the
director to exercise oversight of the business and affairs of the corporation;

(f) Subject to section 7-108-501, was a breach of the director's duty of
loyalty to the corporation, including by directly or indirectly receiving an improper
personal benefit; or

(g) Consisted of or resulted from a vote or assent specified in section 7-108-405.

(2) In addition to the requirements of subsection (1) of this section, the party
seeking to hold the director liable has:

(a) With respect to money damages, the burden of establishing that the
money damages were:

(I) Suffered by the corporation or its shareholders; and

(II) Caused by the director's challenged conduct;

(b) With respect to other money payment under a legal remedy, such as
compensation for the unauthorized use of corporate assets, whatever persuasion
burden may be called for to establish that the money payment sought is
appropriate in the circumstances; or

(c) With respect to other money payment under an equitable remedy, such as
profit recovery by or disgorgement to the corporation, whatever persuasion burden
may be called for to establish that the equitable remedy sought is appropriate in
the circumstances.

(3) A director liable under this section for money damages or for other
money payment may offset against the liability any gain to the corporation that the
director establishes arose out of the same transaction, unless the offset is against
public policy.

Legislative History

Source: L. 2019: Entire part amended with relocations, (SB 19-086), ch. 166, p. 1931, � 35, effective July 1, 2020.