Officers and Directors have greater liability than Shareholders and you should remember to address this in your corporate formation documents. There are very important provisions relating to limitation of liability of officers and directors of the company because officers and directors of […]
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Protecting Officers and Directors in Your Formation Documents

October 8, 2015

Officers and Directors have greater liability than Shareholders and you should remember to address this in your corporate formation documents.

There are very important provisions relating to limitation of liability of officers and directors of the company because officers and directors of the company face greater liabilities than a shareholder or a passive director in the company. And there are specific provisions that need to be in the formation documents including the articles of incorporation, the certificate of incorporation, in order to limit liability and to provide for so-called indemnification of officers and directors in the event they are sued in their capacity.

If an investor or some other party dealing with the company is looking for someone to make them whole for some actual or perceived loss, they might sue not only the company but also the officers and directors of the company personally.

It’s very important to have specific provisions that provide additional protection to officers and directors within the formation of a company. In a lot of cases, that language is simply missing, or it’s inadequate.

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