§ 504.832 — Standards of liability for directors

Iowa § 504.832

• Jurisdiction: Iowa
• Title XII: BUSINESS ENTITIES
• Ch. 504: REVISED IOWA NONPROFIT CORPORATION ACT

Text

1. A director shall not be liable to the corporation or its members for any decision to take
or not to take action, or any failure to take any action, as director, unless the party asserting
liability in a proceeding establishes both of the following:
a. That section 504.202, subsection 2, paragraph “d”, or section 504.901 or the protection
affordedbysection504.833or504.836,ifinterposedasabartotheproceedingbythedirector,
does not preclude liability.
b. That the challenged conduct consisted or was the result of one of the following:
(1) Action not in good faith.
(2) A decision that satisfies one of the following:
(a) That the director did not reasonably believe to be in the best interests of the
corporation.
(b) Astowhichthedirectorwasnotinformedtoanextentthedirectorreasonablybelieved
appropriate in the circumstances.
(3) A lack of objectivity due to the director’s familial, financial, or business relationship
with, or lack of independence due to the director’s domination or control by, another person
having a material interest in the challenged conduct which also meets both of the following
criteria:
(a) Which relationship or which domination or control could reasonably be expected to
have affected the director’s judgment respecting the challenged conduct in a manner adverse
to the corporation.
(b) After a reasonable expectation to such effect has been established, the director shall
not have established that the challenged conduct was reasonably believed by the director to
be in the best interests of the corporation.
(4) A sustained failure of the director to devote attention to ongoing oversight of the
business and affairs of the corporation, or a failure to devote timely attention, by making,
or causing to be made, appropriate inquiry, when particular facts and circumstances of
significant concern materialize that would alert a reasonably attentive director to the need
therefor.
(5) Receipt of a financial benefit to which the director was not entitled or any other breach
of the director’s duties to deal fairly with the corporation and its members that is actionable
under applicable law.
2. a. A party seeking to hold a director liable for money damages shall also have the
burden of establishing both of the following:
(1) That harm to the corporation or its members has been suffered.
(2) The harm suffered was proximately caused by the director’s challenged conduct.
b. A party seeking to hold a director liable for other money payment under a legal
remedy, such as compensation for the unauthorized use of corporate assets, shall also have
whatever burden of persuasion that may be called for to establish that the payment sought
is appropriate in the circumstances.
c. A party seeking to hold a director liable for other money payment under an equitable
remedy, such as profit recovery by or disgorgement to the corporation, shall also have
whatever burden of persuasion that may be called for to establish that the equitable remedy
sought is appropriate in the circumstances.
3. This section shall not do any of the following:
a. In any instance where fairness is at issue, such as consideration of the fairness of a
transaction to the corporation under section 504.833, alter the burden of proving the fact or
lack of fairness otherwise applicable.
b. Alter the fact or lack of liability of a director under another section of this chapter,

such as the provisions governing the consequences of a transactional interest under section