Board Member Duties

What do board member duties encompass?

The duties of board members, including independent board chairs or special committee members, encompass a wide range of responsibilities in corporate and board of directors governance and operations in Florida. These duties primarily involve fiduciary responsibilities, such as care and loyalty, and ensuring the company adheres to Florida and federal laws and regulations. In addition, the board members must act in the company’s and its shareholders’ best interests, make informed decisions, and avoid conflicts of interest.

One example where corporate executives or boards of directors may require counsel on the duties of board members is when there are concerns about potential conflicts of interest, which could impact the board’s ability to make unbiased decisions.

Need help with a matter related to duties of board members? Schedule your consultation today with a top corporate and board of directors governance and operations attorney.

Which Florida and federal laws and regulations apply to the duties of board members?

In Florida, several laws and regulations govern the duties of board members, including independent board chairs and special committee members. The Florida Business Corporation Act (FBCA) and Florida Limited Liability Company Act (FLLCA) set forth the legal framework for board members’ duties in corporations and LLCs. These laws establish the general standards of conduct for directors and officers, including their fiduciary duties and responsibilities related to the duties of care and loyalty.

Additionally, board members must comply with federal laws such as the Sarbanes-Oxley Act, which imposes specific requirements on public companies, including financial reporting and internal controls. In some industries, sector-specific regulations may also apply, further guiding the duties and responsibilities of board members. By understanding and adhering to these state and federal laws, board members can fulfill their roles effectively and ensure they act in the company’s and its shareholders’ best interests.

What are common issues regarding the duties of board members that lead to litigation?

The following issues are among the most common in litigation involving the duties of board members:

• Breach of Fiduciary Duty: Board members must act in the company’s and its shareholders’ best interest. Failure to fulfill this duty can result in litigation.
• Conflicts of Interest: Board members must avoid situations where their interests conflict with their duties to the company. Conflicts of interest can lead to legal disputes and damage the company’s reputation.
• Failure to Properly Oversee Management: Board members oversee the management team and hold them accountable for their actions. A lack of proper oversight can result in litigation and negative consequences for the company.
• Inadequate Financial Controls: Boards must ensure proper financial controls are in place to prevent fraud or financial mismanagement. Failure to do so can lead to legal action.

What measures minimize the risk of litigation over the duties of board members?

Implementing the following strategies may help mitigate risk:

• Establish a Strong Corporate Governance Framework: Implementing a robust corporate governance structure, including well-defined roles and responsibilities, can help prevent disputes and misunderstandings.
• Provide Ongoing Training and Education: Regular training and education for board members can help them understand their duties and responsibilities and keep them updated on changes in laws and regulations.
• Implement a Comprehensive Conflicts of Interest Policy: A clear policy on conflicts of interest can help board members identify potential issues and take appropriate action to avoid legal disputes.
• Conduct Regular Board Evaluations: Periodic evaluations of the board’s performance can help identify areas for improvement and ensure that board members are fulfilling their duties.
• Encourage Open Communication and Transparency: Fostering a culture of open communication and transparency within the boardroom can help board members address potential issues before they escalate into legal disputes.
• Seek Expert Advice When Necessary: Consulting with legal and financial experts can help board members make informed decisions and avoid potential legal pitfalls.

When a set of facts is appropriate to meet litigation requirements, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies.

To determine whether your unique situation may necessitate litigation, please contact our office to set up your initial consultation.

Frequently Asked Questions

1. What is the fiduciary duty of board members in Florida?

Board members have a fiduciary duty to act in the organization’s and its stakeholders’ best interest. This fiduciary duty is wide-ranging and includes the duty of care, which requires them to make informed decisions, and the duty of loyalty, which obligates them to avoid conflicts of interest.

1. How can a board ensure effective oversight of management in Florida?

Boards can ensure effective oversight by establishing clear reporting lines, conducting regular performance evaluations of senior management, and maintaining open communication channels between the board and management to address concerns and identify areas for improvement.

1. What are the potential liabilities for board members who fail to fulfill their duties in Florida?

Board members who fail to fulfill their fiduciary duties may face personal liability for financial losses incurred by the organization. In some cases, they may also face civil or criminal penalties for violating applicable laws and regulations, such as those governing securities or environmental compliance.

Have more questions about governance or operations for your business?

Crucially, this overview of the duties of board members does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.

Here are some blogs written by JB attorneys that provide more information about the duties of board members:

• Sole Proprietorships, Corporations and LLC’s: Choosing the Entity Form that is Right for you
• Important Things to Know When Serving on a Board of Directors (jimersonfirm.com)
• Manager Managed v. Member Managed LLCs