§ 12:1-831 — Standards of liability for directors

§1-831. Standards of liability for directors
A. A director shall not be liable to the corporation or its shareholders for any
decision to take or not to take action, or any failure to take any action, as a director, unless
the party asserting liability in a proceeding establishes both of the following:
(1) No defense interposed by the director based on R.S. 12:1-832, a provision in the
articles of incorporation authorized by R.S. 12:1-202(B)(6), the protection afforded by R.S.
12:1-861 for action taken in compliance with R.S. 12:1-862 or R.S. 12:1-863, or the
protection afforded by R.S. 12:1-870, precludes liability.
(2) The challenged conduct consisted or was the result of one of the following:
(a) Action not in good faith.
(b) A decision that the director did not reasonably believe to be in the best interests
of the corporation, or as to which the director was not informed to an extent the director
reasonably believed appropriate in the circumstances.
(c) A lack of objectivity due to the director's familial, financial, or business
relationship with, or a lack of independence due to the director's domination or control by,
another person having a material interest in the challenged conduct, 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, and 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.
(d) 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
therefore.
(e) 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 shareholders that is
actionable under applicable law.
B.(1) The party seeking to hold the director liable for money damages, shall also
have the burden of establishing both of the following:
(a) Harm to the corporation or its shareholders has been suffered.
(b) The harm suffered was proximately caused by the director's challenged conduct.
(2) The party seeking to hold the director liable for other money payment under a
legal remedy, such as compensation for the unauthorized use of corporate assets, shall also
have whatever persuasion burden may be called for to establish that the payment sought is
appropriate in the circumstances.
(3) The party seeking to hold the director liable for other money payment under an
equitable remedy, such as profit recovery by or disgorgement to the corporation, shall also
have whatever persuasion burden may be called for to establish that the equitable remedy
sought is appropriate in the circumstances.
C. Nothing contained in this Section shall be construed to do any of the following:
(1) In any instance where fairness is at issue, such as consideration of the fairness
of a transaction to the corporation under R.S. 12:1-861(B)(3), 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 another provision of this
Chapter, such as the provisions governing the consequences of an unlawful distribution under
R.S.12:1-833 or a transactional interest under R.S. 12:1-861.
(3) Affect any rights to which the corporation or a shareholder may be entitled under
another statute of this state or the United States.

Legislative History

Acts 2014, No. 328, §1, eff. Jan. 1, 2105; Acts 2016, No. 442, §1.