West's North Carolina General Statutes Annotated Currentness
Chapter 55. North Carolina Business Corporation Act (Refs & Annos)
 Article 8. Directors and Officers
 Part 3. Standards of Conduct
 § 55-8-30. General standards for directors

(a) A director shall discharge his duties as a director, including his duties as a member of a committee:

(1) In good faith;

(2) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

(3) In a manner he reasonably believes to be in the best interests of the corporation.

(b) In discharging his duties a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

(1) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;

(2) Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within their professional or expert competence; or

(3) A committee of the board of directors of which he is not a member if the director reasonably believes the committee merits confidence.

(c) A director is not entitled to the benefit of subsection (b) if he has actual knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.

(d) A director is not liable for any action taken as a director, or any failure to take any action, if he performed the duties of his office in compliance with this section. The duties of a director weighing a change of control situation shall not be any different, nor the standard of care any higher, than otherwise provided in this section.

(e) A director's personal liability for monetary damages for breach of a duty as a director may be limited or eliminated only to the extent permitted in G.S. 55-2-02(b)(3), and a director may be entitled to indemnification against liability and expenses pursuant to Part 5 of Article 8 of this Chapter.

CREDIT(S)

Added by Laws 1989, c. 265, § 1. Amended by Laws 1993, c. 552, § 11, eff. Oct. 1, 1993.

NORTH CAROLINA COMMENTARY

Although the word “fiduciary” is no longer used in describing the duty owed by a director to a corporation, there is no intent to change North Carolina law in this area. The decision not to bring forward the language stating that a director shall “be deemed to stand in a fiduciary relation to the corporation” in former G.S. 55-35 is not intended to modify in any way the duty of directors recognized under the former law. Removal of the word “fiduciary” was solely because of confusion in other jurisdictions between the corporate and the trust standards of fiduciary duty. This Act does not attempt to define the full range of a director's duty, since the language chosen might be used to limit the standard under which directors should act.

Former G.S. 55-35 provided that officers and directors stand in a fiduciary relation “to the corporation and to its shareholders.” The drafters decided not to bring forward the words “and to its shareholders” in order to avoid an interpretation that there is a duty running directly from directors to the shareholders that would give shareholders a direct right of action on claims that should be asserted derivatively

The drafters noted the dictum in Snyder v. Freeman, 300 N.C. 204, 266 S.E.2d 593 (1980), suggesting that directors owe a fiduciary duty to creditors. The drafters considered adding a new section 55-8-34 expressly stating that the directors do not have any such duty to creditors; but, because of the complexities and novelty of such a provision, they finally decided not to add the new section but instead to express in this Comment their opinion that in general no such duty exists.

Subsection (c) of this section is different from the Model Act in two respects. First, it requires “actual” knowledge for a director to be denied the right of reliance under subsection (b); and, second, it says more specifically that a director who has such knowledge is not “entitled to the benefits of subsection (b)” instead of saying that such director is not “acting in good faith.”

Subsection (e) of the section was added to the Model Act's provisions to clarify the two points covered. It should be noted that a provision in the articles of incorporation that limits director's monetary liability for a breach of the duty of due care does not affect the duty of due care itself.

CROSS REFERENCES

State Trust Company Charter Act; responsibility of directors, see § 55-8-30.

LAW REVIEW COMMENTARIES

Atherton v. FDIC: The Final Word on Bank Officer and Director Liability? Stacey Taylor Kern, 2, N.C. Banking Inst. 149, (1998).

Bank Officer And Director Liability. Stacey Taylor Kern, 2 N.C. Banking Inst. 149, (1998).

Corporate Law and Director Liability. 24 Wake Forest L.Rev. 141, (1989).

Evolution of Corporate Combination Law. Nelson Ferebee Taylor, 76 N.C.L.Rev. 687, (1998).

First Union v. Sun Trust and the Delaware Experience: An Analysis of Deal Protection Measures. Paul A. Kuebler, 80 N.C.L.Rev. 2109, (2002).

First Union v. Sun Trust Banks: The Fight for Wachovia and Its Impact on North Carolina Corporate Law. Carrie A. O'Brien, 6 N.C. Banking Inst. 335, (2002).

The Scope Of The Duties Of Bank Directors Faced With Bids For Acquisition. Todd Hammond Eveson, 3 N.C. Banking Inst. 367, (1999).

LIBRARY REFERENCES

Corporations and Business Organizations 1840.
Westlaw Topic No. 101.

RESEARCH REFERENCES

ALR Library

54 ALR 4th 1098, Testamentary Direction to Devisee to Pay Stated Sum of Money to Third Party as Creating Charge or Condition or as Imposing Personal Liability on Devisee for Nonpayment.

Encyclopedias

Strong's N.C. Index 4th, Banks & Other Financial Inst. § 436, Criminal Offenses.

Strong's N.C. Index 4th, Banks & Other Financial Inst. § 437, Responsibility of Directors.

Strong's N.C. Index 4th, Corporations § 92, Number.

Strong's N.C. Index 4th, Corporations § 99, Standards of Conduct; Discharge of Duty, Generally.

Strong's N.C. Index 4th, Corporations § 101, Generally; Limitation on Liability.

Strong's N.C. Index 4th, Corporations § 102, Generally; Limitation on Liability--Indemnification.

Strong's N.C. Index 4th, Corporations § 105, Generally--Misappropriation of Corporate Opportunity.

Treatises and Practice Aids

Fletcher Cyclopedia Law of Private Corporations § 840, Statutes Governing Fiduciary Duty.

Fletcher Cyclopedia Law of Private Corporations § 1032, Standard of Care for Business Corporation Directors and Officers.

North Carolina Corporation Law and Practice § 15:24, Selection of Committees.

North Carolina Corporation Law and Practice § 16:14, Directors' Discharge of Duties--Fiduciary Duty; Good Faith; Reliance on Information.

North Carolina Corporation Law and Practice § 16:18, Power of Directors to Authorize Distributions.

North Carolina Corporation Law and Practice § 16:19, Responsibilities and Liabilities of Directors and Officers to Corporation.

North Carolina Corporation Law and Practice § 16:20, Responsibilities and Liabilities of Directors to Creditors.

North Carolina Corporation Law and Practice § 16:25, Committees of Directors.

North Carolina Corporation Law and Practice § 17:15, Right to Sue Officers.

North Carolina Law of Damages § 14:2, Directors and Officers; Liability Under Business Corporation Act.

North Carolina Law of Damages § 14:4, Directors and Officers; Fiduciary Obligations.

NOTES OF DECISIONS

Breach of fiduciary duty 8-12
Breach of fiduciary duty - In general 8
Breach of fiduciary duty - Conditions precedent 9
Breach of fiduciary duty - Duty to minority shareholders 10
Breach of fiduciary duty - Fraud 11
Breach of fiduciary duty - Self-dealing 12
Business judgment rule, personal liability 18
Conditions precedent, breach of fiduciary duty 9
Co-operative corporations or associations, fiduciary duty 6
Defective incorporation or organization, personal liability 15
Derivative suits 21-23
Derivative suits - In general 21
Derivative suits - Excuse for failure to demand 22
Derivative suits - Summary judgment 23
Duty to creditors, fiduciary duty 4
Duty to minority shareholders 3, 10
Duty to minority shareholders - Breach of fiduciary duty 10
Duty to minority shareholders - Fiduciary duty 3
Excuse for failure to demand, derivative suits 22
Expert testimony, fiduciary duty 7
Fiduciary duty 1-7
Fiduciary duty - In general 1
Fiduciary duty - Co-operative corporations or associations 6
Fiduciary duty - Duty to creditors 4
Fiduciary duty - Duty to minority shareholders 3
Fiduciary duty - Expert testimony 7
Fiduciary duty - Personal liability 2
Fiduciary duty - Trust-fund doctrine 5
Fraud, breach of fiduciary duty 11
Interference with or injuries in contractual relations, personal liability 16
Jurisdiction and venue 29
Knowledge of directors 24
Liability of officer defectively or falsely certifying acknowledgment, personal liability 19
Participation in unauthorized or wrongful acts of corporation, personal liability 20
Personal liability 2, 15-20
Personal liability - Business judgment rule 18
Personal liability - Defective incorporation or organization 15
Personal liability - Fiduciary duty 2
Personal liability - Interference with or injuries in contractual relations 16
Personal liability - Liability of officer defectively or falsely certifying acknowledgment 19
Personal liability - Participation in unauthorized or wrongful acts of corporation 20
Personal liability - Reliance on legal or accounting advice 17
Persons liable 28
Pleadings 30
Presumptions and burden of proof, usurping corporate opportunities 14
Punitive damages 27
Reliance on legal or accounting advice, personal liability 17
Review 31
Right to sue 25
Rights and remedies of dissenting stockholders 26
Self-dealing, breach of fiduciary duty 12
Summary judgment, derivative suits 23
Trust-fund doctrine, fiduciary duty 5
Usurping corporate opportunities 13-14
Usurping corporate opportunities - In general 13
Usurping corporate opportunities - Presumptions and burden of proof 14

1. Fiduciary duty--In general

Under North Carolina law, director's statutory duty of good faith to corporation includes requirement that director always discharge responsibilities of his or her office with undivided loyalty to corporation. In re Brokers, Inc., 2007, 363 B.R. 458. Corporations And Business Organizations 1844; Corporations And Business Organizations 1845

Allegations by golf club corporation that two individuals had been principal owners, directors, and officers of both the golf club corporation and the development corporation from which the golf club corporation purchased the newly-constructed golf club facilities were adequate to allege that the individuals owed a fiduciary duty to the golf club corporation, as element for stating a claim of breach of fiduciary duty, relating to alleged nondisclosure of latent defects in the construction. Governors Club, Inc. v. Governors Club Ltd. Partnership, 2002, 152 N.C.App. 240, 567 S.E.2d 781, affirmed 357 N.C. 46, 577 S.E.2d 620. Corporations And Business Organizations 1923

Directors of a corporation generally owe a fiduciary duty to the corporation, and where it is alleged that directors have breached this duty, the action is properly maintained by the corporation rather than any individual creditor or stockholder. Governors Club, Inc. v. Governors Club Ltd. Partnership, 2002, 152 N.C.App. 240, 567 S.E.2d 781, affirmed 357 N.C. 46, 577 S.E.2d 620. Corporations And Business Organizations 1811; Corporations And Business Organizations 1907

Under special circumstances, director of corporation stands in fiduciary relationship to shareholder in acquisition of shareholder's stock. Lazenby v. Godwin, 1979, 253 S.E.2d 489, 40 N.C.App. 487. Corporations And Business Organizations 1892(1)

Person, such as officer or director of corporation, who occupies place of trust or fiduciary relation, should not put himself in position in which self interest conflicts with any duty he owes to those for whom he acts, and on purchasing property of those to whom he owes fiduciary duty he must affirmatively show full disclosure and fair dealing. Underwood v. Stafford, 1967, 155 S.E.2d 211, 270 N.C. 700. Corporations And Business Organizations 1888

Promoters of a corporation occupy a relation of trust and confidence toward the corporation which they are calling into existence as well as to each other, and they are required to exercise the same good faith as directors and other fiduciaries. Wilson v. McClenny, 1964, 136 S.E.2d 569, 262 N.C. 121. Corporations And Business Organizations 1116

2. ---- Personal liability, fiduciary duty

CERCLA liability could not be asserted against officer and director of corporation, on grounds that she breached fiduciary duty owed to state as creditor incurring CERCLA obligations; North Carolina corporate law did not recognize existence of fiduciary obligation owed by officer to creditor. State ex rel. Howes v. W.R. Peele, Sr. Trust, 1995, 876 F.Supp. 733, clarification denied 889 F.Supp. 849. Corporations And Business Organizations 1993

Directors and officers are personally liable for corporate obligations incurred by them on behalf of corporation, or by others with their acquiescence, if at that time they were aware that corporate charter was suspended. Charles A. Torrence Co. v. Clary, 1995, 121 N.C.App. 211, 464 S.E.2d 502. Corporations And Business Organizations 1992

Shareholder, president and director of marketing of corporation whose charter had been suspended was not liable for corporation's debt to service provider, where he had no knowledge, at time debt was incurred on behalf of corporation, that corporate charter was suspended. Charles A. Torrence Co. v. Clary, 1995, 121 N.C.App. 211, 464 S.E.2d 502. Corporations And Business Organizations 1686; Corporations And Business Organizations 1992

3. ---- Duty to minority shareholders, fiduciary duty

Under North Carolina law, corporate directors, officers and majority shareholders owe fiduciary duties to minority shareholders. Umstead v. Durham Hosiery Mills, Inc., 1984, 578 F.Supp. 342. Corporations And Business Organizations 1526(3); Corporations And Business Organizations 1811

Under North Carolina law, fiduciary duty owed by controlling shareholders to minority shareholder did not require controlling shareholders to behave as fiduciaries when structuring partnership that was entirely separate business venture. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 1526(3)

Under North Carolina law, majority shareholders' fiduciary duty to minority shareholder who was president of corporation did not extend to all subsequent business dealings between those parties. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 1526(3)

Under North Carolina law, majority shareholders' agreement to enter into partnership agreement with minority shareholder did not impose fiduciary duty on majority shareholders to propose partnership in good faith, where no partnership was entered into. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 1526(3)

A controlling shareholder owes a fiduciary duty to minority shareholders. Farndale Co., LLC v. Gibellini, 2006, 176 N.C.App. 60, 628 S.E.2d 15. Corporations And Business Organizations 1526(3)

Even if parent corporation's majority stockholder had acted innocently and in good faith, he could not retain profits which assertedly had been diverted from such corporation and into a subsidiary corporation solely owned by such stockholder. Meiselman v. Meiselman, 1982, 295 S.E.2d 249, 58 N.C.App. 758, affirmed as modified and remanded 307 S.E.2d 551, 309 N.C. 279. Corporations And Business Organizations 1559

4. ---- Duty to creditors, fiduciary duty

As a general rule under North Carolina law, directors of a corporation do not owe a fiduciary duty to creditors of the corporation, and such a duty exists only when the corporation is insolvent, is in declining circumstances and verging on insolvency, or where such facts establish circumstances that amount practically to a dissolution. Angell v. Kelly, 2004, 336 F.Supp.2d 540. Corporations And Business Organizations 1993

Alleged representation by corporate debtor's officers/directors, that if plaintiff creditors executed release agreement which would allow then-solvent corporation to merge with acquiring corporation, plaintiff creditors would have priority over all of acquired corporation's other creditors, did not create a fiduciary relationship under North Carolina law between officers/directors and plaintiff creditors, as to corporation's post-merger unconditional guarantee of acquiring corporation's repayment of debt under revolving credit and term agreement with another creditor, which guarantee had priority over plaintiff creditors' claims under promissory notes. Angell v. Kelly, 2004, 336 F.Supp.2d 540. Corporations And Business Organizations 1993

In North Carolina, corporate officers and directors occupy a fiduciary position with respect to stockholders and creditors, and are thus charged with the preservation and proper distribution of the corporation's assets. Angell v. Kelly, 2004, 336 F.Supp.2d 540. Corporations And Business Organizations 1811; Corporations And Business Organizations 1993

Under North Carolina law, corporation may be “balance sheet” insolvent, yet solvent on cash flow basis, and balance sheet insolvency, without more, is insufficient to give rise to fiduciary duty on part of officers and directors toward corporate creditors, as long as officers and directors are acting in good faith in running business. In re Maxx Race Cards, Inc., 1998, 266 B.R. 74. Corporations And Business Organizations 2851

Under North Carolina law, officers and directors of debtor-corporation did not owe fiduciary duty to corporate creditors, such as was required to support breach of fiduciary duty claim by Chapter 7 trustee, merely because they continued to operate corporation when it was allegedly “balance sheet” insolvent; trustee did not present any evidence of specific acts of bad faith by officers and directors, such as in prolonging corporation's existence in order to recover amounts owed to them. In re Maxx Race Cards, Inc., 1998, 266 B.R. 74. Corporations And Business Organizations 2857

Ordinarily, the duties and liabilities of directors run directly to the corporation and indirectly to its shareholders; they do not run to third parties, such as creditors. Oberlin Capital, L.P. v. Slavin, 2001, 147 N.C.App. 52, 554 S.E.2d 840. Corporations And Business Organizations 1811

As a general rule, directors of a corporation do not owe a fiduciary duty to creditors of the corporation. Oberlin Capital, L.P. v. Slavin, 2001, 147 N.C.App. 52, 554 S.E.2d 840. Corporations And Business Organizations 1811

A corporate director can breach a fiduciary duty to a creditor if the transaction at issue occurs under circumstances amounting to a “winding-up” or dissolution of the corporation. Oberlin Capital, L.P. v. Slavin, 2001, 147 N.C.App. 52, 554 S.E.2d 840. Corporations And Business Organizations 1993

Lender's claim that corporation president breached a fiduciary duty he owed to lender was not a cognizable claim in action resulting from president's concealment of financial difficulties that resulted in corporation seeking Chapter 11 bankruptcy protection; lender failed to allege that loan agreement occurred during a “winding up” or dissolution, and lender's right to purchase stock in the future did not create a duty for president to treat it as a shareholder. Oberlin Capital, L.P. v. Slavin, 2001, 147 N.C.App. 52, 554 S.E.2d 840. Corporations And Business Organizations 1984; Corporations And Business Organizations 1993

Generally, directors of corporation do not owe fiduciary duty to creditors of corporation, but directors of insolvent corporation cannot as creditors of such corporation secure to themselves a preference, and they must share ratably in distribution of company's assets. Whitley v. Carolina Clinic, Inc., 1995, 118 N.C.App. 523, 455 S.E.2d 896, review denied 340 N.C. 363, 458 S.E.2d 197. Corporations And Business Organizations 1957; Corporations And Business Organizations 1993; Corporations And Business Organizations 2857

5. ---- Trust-fund doctrine, fiduciary duty

North Carolina adheres to “trust fund doctrine” which means, in a sense, that assets of corporation are regarded as a trust fund, and officers and directors occupy fiduciary position with respect to stockholders and creditors, so as to charge officers and directors with preservation and proper distribution of corporation's assets. Underwood v. Stafford, 1967, 155 S.E.2d 211, 270 N.C. 700. Corporations And Business Organizations 2851

6. ---- Co-operative corporations or associations, fiduciary duty

Jury question existed as to whether agricultural cooperative owed duty to holder of revolving fund certificate; holder accepted certificate as partial consideration for 25% share it held in cooperative's predecessor corporation, cooperative recognized certificate as capital contribution on its balance sheet, and holder had right to expect cooperative to exercise its discretion in good faith since certificate was redeemable at cooperative's discretion and since cooperative refused to reveal financial information about itself to holder. HAJMM Co. v. House of Raeford Farms, Inc., 1989, 379 S.E.2d 868, 94 N.C.App. 1, review allowed 382 S.E.2d 439, 325 N.C. 271, affirmed in part as modified , reversed in part 403 S.E.2d 483, 328 N.C. 578. Agriculture 6

Once holder of revolving fund certificate established that agricultural cooperative owed it a fiduciary duty and that duty was breached, which amounted to constructive fraud, burden of proof shifted to cooperative to prove that they acted in open, fair and honest manner. HAJMM Co. v. House of Raeford Farms, Inc., 1989, 379 S.E.2d 868, 94 N.C.App. 1, review allowed 382 S.E.2d 439, 325 N.C. 271, affirmed in part as modified , reversed in part 403 S.E.2d 483, 328 N.C. 578. Agriculture 6

Punitive damages issue was properly submitted to jury after jury found that defendants had a fiduciary duty to holder of revolving fund certificate and that agricultural cooperative's refusal to retire certificate was not open, fair or honest transaction; breach of fiduciary duty amounted to evidence sufficient to prove constructive fraud, thus justifying punitive damages. HAJMM Co. v. House of Raeford Farms, Inc., 1989, 379 S.E.2d 868, 94 N.C.App. 1, review allowed 382 S.E.2d 439, 325 N.C. 271, affirmed in part as modified , reversed in part 403 S.E.2d 483, 328 N.C. 578. Agriculture 6

7. ---- Expert testimony, fiduciary duty

Expert witness may not opine that fiduciary relationship exists or has been breached, though expert may give opinion that under circumstances, one party has reposed special confidence in another party, or that one party should act in good faith toward another party, or that one party must act with due regard for interests of other party. HAJMM Co. v. House of Raeford Farms, Inc., 1991, 403 S.E.2d 483, 328 N.C. 578. Evidence 506; Evidence 512

Expert was improperly permitted to give his opinion that there was fiduciary relationship between holders of revolving fund certificate and corporation which issued certificate, that corporation breached its fiduciary duty, and that the corporation's board of directors abused its discretion; whether there was fiduciary duty was ultimate jural relationship at issue. HAJMM Co. v. House of Raeford Farms, Inc., 1991, 403 S.E.2d 483, 328 N.C. 578. Evidence 506

Admission of expert's testimony that corporation which issued revolving fund certificate breached its fiduciary duty to holders of certificate by refusing to retire certificate was harmless error; substantial admissible testimony together with documentary evidence was compelling in favor of holder on existence of fiduciary relationship, breach of fiduciary duty and abuse of discretion and provided solid basis for award of punitive damages. HAJMM Co. v. House of Raeford Farms, Inc., 1991, 403 S.E.2d 483, 328 N.C. 578. Appeal And Error 1050.1(12)

Expert witness' testimony that directors of agricultural cooperative abused their discretion in failing to redeem holder's revolving fund certificate did not improperly remove question of fiduciary duty from jury, as jury had to determine whether holder had placed special confidence and faith in corporate defendants to act in its interest, particularly in light of complexity of case and specialized knowledge necessary to understand use of revolving fund certificates in agricultural cooperatives. HAJMM Co. v. House of Raeford Farms, Inc., 1989, 379 S.E.2d 868, 94 N.C.App. 1, review allowed 382 S.E.2d 439, 325 N.C. 271, affirmed in part as modified , reversed in part 403 S.E.2d 483, 328 N.C. 578. Evidence 512

8. Breach of fiduciary duty--In general

Golf club corporation's allegations stated a claim that two individuals, who had been principal owners, directors, and officers of both the golf club corporation and the development corporation from which the golf club corporation purchased the newly-constructed golf club facilities, breached a fiduciary duty to the golf club corporation, relating to latent defects in the construction; golf club corporation alleged that the individuals failed to disclose the latent defects, that they misrepresented the contents of agreements pursuant to which club members purportedly released the developer from any warranties, that those agreements were not the result of arm's-length bargaining between the corporation and the developer, and that the legal counsel the individuals had selected for the corporation, in connection with the purchase of the facilities, was not independent of the developer. Governors Club, Inc. v. Governors Club Ltd. Partnership, 2002, 152 N.C.App. 240, 567 S.E.2d 781, affirmed 357 N.C. 46, 577 S.E.2d 620. Corporations And Business Organizations 1923

Evidence in suit by Insurance Commissioner as liquidator alleging breach of fiduciary duty to and negligent mismanagement of insurer supported conclusions that director and chief executive officer (CEO) of insurer and its parent corporation proximately caused insurer's insolvency by permitting parent corporation to utilize insurer's funds to pay the parent corporation's debts guarantied by director, failing to pay dividends to insurer's borrower thereby causing default, and holding limited partnership units until value to insurer diminished. State ex rel. Long v. ILA Corp., 1999, 132 N.C.App. 587, 513 S.E.2d 812. Insurance 1408

For corporate director to breach fiduciary duty to creditor, transaction at issue must occur under circumstances amounting to “winding-up” or dissolution of corporation, and balance sheet insolvency, absent such circumstances, is insufficient to give rise to breach of fiduciary duty to creditors of corporation. Whitley v. Carolina Clinic, Inc., 1995, 118 N.C.App. 523, 455 S.E.2d 896, review denied 340 N.C. 363, 458 S.E.2d 197. Corporations And Business Organizations 2857

Medical clinic was solvent on cash flow basis and was continuing to conduct its business in good faith at time that payments of deferred compensation were made to individual physician-shareholders and directors of clinic, pursuant to clinic's nonqualified deferred compensation plan, and thus shareholders and directors breached no fiduciary duty to lessor, as corporate creditor, by accepting deferred compensation payments; at time those payments were made, clinic was meeting its obligations, including rent, and had reduced its indebtedness to primary secured creditor by two to three million dollars, and there was no evidence that clinic had planned to cease doing business when it did. Whitley v. Carolina Clinic, Inc., 1995, 118 N.C.App. 523, 455 S.E.2d 896, review denied 340 N.C. 363, 458 S.E.2d 197. Corporations And Business Organizations 2857

Directors of corporation have duty to administer the trust assumed by them for mutual benefit of all parties interested, and, when directors receive an advantage to themselves not common to all, they are guilty of a plain breach of trust. Meiselman v. Meiselman, 1982, 295 S.E.2d 249, 58 N.C.App. 758, affirmed as modified and remanded 307 S.E.2d 551, 309 N.C. 279. Corporations And Business Organizations 1874

9. ---- Conditions precedent, breach of fiduciary duty

Shareholders, who alleged that several of company's officers and directors breached fiduciary duty to shareholders by maintaining market price of company's shares at artificially high levels and in issuing false or misleading financial statements, alleged an individual, rather than derivative, cause of action, and, therefore, demand upon company was not prerequisite to prosecution of their claims. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Securities Regulation 132

10. ---- Duty to minority shareholders, breach of fiduciary duty

Under North Carolina law, failure to comply with statutory procedures required for corporate merger constitutes breach of director's fiduciary duty as well as breach of majority shareholders' duty to minority. Clark v. B.H. Holland Co., Inc., 1994, 852 F.Supp. 1268. Corporations And Business Organizations 1556; Corporations And Business Organizations 2654

Majority shareholders in closely held corporation, by voting to approve amendment to corporation's articles of incorporation to allow a stock issuance, were responsible for corporation's recapitalization, and thus, their actions proximately caused alleged injury to minority shareholders in breach of fiduciary action that alleged that the issuance of new shares was intended to squeeze minority shareholders out of the corporation. Farndale Co., LLC v. Gibellini, 2006, 176 N.C.App. 60, 628 S.E.2d 15. Corporations And Business Organizations 1556

Majority shareholder who served as both director and as chairman of the board of directors breached his fiduciary duty to minority shareholder when majority shareholder made preferential payments after minority shareholder's investment in company. Freese v. Smith, 1993, 110 N.C.App. 28, 428 S.E.2d 841. Corporations And Business Organizations 1556

11. ---- Fraud, breach of fiduciary duty

Fraud exists when there is breach of fiduciary duty. Stone v. Martin, 1987, 355 S.E.2d 255, 85 N.C.App. 410, appeal dismissed , review denied 360 S.E.2d 105, 320 N.C. 638. Fraud 7

In action against president and manager of closely held family corporation on ground that he had committed actual and constructive fraud in purchasing shares of other members of family without disclosing that there was an impending sale of corporate assets which greatly increased value of the stock, jury question was presented as to whether there was a fiduciary relationship between defendant and plaintiffs, and whether, although plaintiffs were also directors, they did not have equal access to information concerning sale of assets so that defendant had duty to disclose the offer to purchase. Lazenby v. Godwin, 1979, 253 S.E.2d 489, 40 N.C.App. 487. Corporations And Business Organizations 1939

12. ---- Self-dealing, breach of fiduciary duty

Under North Carolina law, transaction between director and corporation in which the director has a self-interest or conflict is particularly suspect. In re Brokers, Inc., 2007, 363 B.R. 458. Corporations And Business Organizations 1885

13. Usurping corporate opportunities--In general

Under North Carolina law, claim for usurpation or “misappropriation of business opportunity” only lies against corporate officers or partners who usurp business opportunity that rightfully belongs to corporation or partnership. Madey v. Duke University, 2004, 336 F.Supp.2d 583. Corporations And Business Organizations 1883; Partnership 97

Under North Carolina law, corporate opportunity doctrine arises from duties of good faith and loyalty, and holds that director or officer cannot divert opportunities that belong to corporation. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 1883

Under North Carolina law, in determining whether corporate opportunity was usurped, trial court must examine whether opportunity was functionally related to corporation's business and whether corporation held interest or expectancy in opportunity. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 1883

In determining whether a corporate fiduciary has usurped a corporate opportunity, and thus that the corporate transaction in which he or she has entered is not just and reasonable to the corporation, a trial court is to examine not only whether disputed opportunity is functionally related to corporation's business, but also whether corporation has an interest or expectancy in opportunity. Meiselman v. Meiselman, 1983, 307 S.E.2d 551, 309 N.C. 279. Corporations And Business Organizations 1562; Corporations And Business Organizations 1883

14. ---- Presumptions and burden of proof, usurping corporate opportunities

Under North Carolina law, fiduciary charged with having usurped corporate opportunity bears burden of establishing that transaction is just and reasonable to corporation because it was not opportunity or corporate transaction that the corporation itself would have wanted. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 1910

15. Personal liability--Defective incorporation or organization

Shareholders, directors and officers of pretended corporation which is neither de jure nor a de facto corporation are generally held personally and individually liable for debts of pretended corporation, without any reference to whether persons sought to be held liable actively participated in contracting the debt. Charles A. Torrence Co. v. Clary, 1995, 121 N.C.App. 211, 464 S.E.2d 502. Corporations And Business Organizations 1652; Corporations And Business Organizations 1965

16. ---- Interference with or injuries in contractual relations, personal liability

Defendants, as either directors or stockholders, were privileged to cause a corporation not to renew plaintiff's contract as president if, in securing such action, they did not employ any improper means and if they acted in good faith to protect the interests of the corporation, and if they so acted, plaintiff could not maintain an action against them for wrongful interference with the contractual relation existing between him and the corporation. Wilson v. McClenny, 1964, 136 S.E.2d 569, 262 N.C. 121. Labor And Employment 914

Directors of an insurance company could not be subjected to liability for wrongful interference with contractual relations based on their securing discharge of corporate president on the assumption that it might prejudice the corporation to retain as president a man with a drinking problem who had been committed to a state institution as an inebriate. Wilson v. McClenny, 1964, 136 S.E.2d 569, 262 N.C. 121. Labor And Employment 913

An error in judgment, if any, by corporate directors in determining that corporate president's use of alcohol rendered him unfit to perform his duties and prejudiced the business of the corporation could not be used as a basis for imposing liability upon the directors for interference in contractual relations through securing the discharge of plaintiff as corporate president. Wilson v. McClenny, 1964, 136 S.E.2d 569, 262 N.C. 121. Labor And Employment 913

17. ---- Reliance on legal or accounting advice, personal liability

Evidence supported conclusions that director and chief executive officer (CEO) of insurer and its parent corporation did not rely on the advice of legal and accounting professionals in connection with loans by insurer resulting from director's breach of fiduciary duty to insurer; thus, director's statutory right to rely on their advice did not protect him from liability to Insurance Commissioner as liquidator. State ex rel. Long v. ILA Corp., 1999, 132 N.C.App. 587, 513 S.E.2d 812. Insurance 1407

Directors of insurer were entitled to rely upon safe harbor of outside accountant's advice; accountant's report was thorough, comprehensive, and performed by fully qualified professionals, its decision to use data that was not particular to a state was based upon a facially logical determination that it was better practice to use more mature data than immature data from that state alone, and officers agreed with accountant's decision. State v. Custard, 2010, 2010 WL 1035809, Unreported. Insurance 1133

18. ---- Business judgment rule, personal liability

Whether majority shareholders acted in good faith in completing de facto of corporate merger, so as to be protected from liability by business judgment rule, was fact question precluding summary judgment in suit filed by majority shareholder alleging breach of fiduciary duty. Clark v. B.H. Holland Co., Inc., 1994, 852 F.Supp. 1268. Federal Civil Procedure 2513

Unsupported general allegations that minority shareholder and former officer agreed to assume a share of corporate debt were not adequate to oppose summary judgment motion in absence of evidence confirming existence of alleged agreement and noncompliance with any agreement. Clark v. B.H. Holland Co., Inc., 1994, 852 F.Supp. 1268. Federal Civil Procedure 2513

Under North Carolina law, corporate director was not entitled to benefit of business judgment rule as to transactions with corporation in which he had direct financial interest, and by which he received, following corporate principal's death and dispute as to ownership of corporation, more than $575,000 in corporate funds and promissory note for another $2.5 million more. In re Brokers, Inc., 2007, 363 B.R. 458. Corporations And Business Organizations 1885

Under North Carolina law, business judgment rule operates primarily as rule of evidence or judicial review and creates, first, an initial evidentiary presumption that, in making decision, directors acted with due care and in good faith, in the honest belief that their action was in best interest of corporation, and second, absent rebuttal of this initial presumption, a powerful substantive presumption that decision by a loyal and informed board will not be overturned by court unless it cannot be attributed to any rational business purpose. In re Brokers, Inc., 2007, 363 B.R. 458. Corporations And Business Organizations 1910

Summary judgment of another corporation's claim against debtor corporate president for reimbursement of insurance costs incurred by other corporation was precluded by fact issues as to whether debtor or debtor's corporation was obligated to reimburse other corporation. In re Silverman, 1993, 155 B.R. 362. Federal Civil Procedure 2513

Corporate directors may be held personally liable for gross neglect of their duties, mismanagement, fraud and deceit resulting in loss to a third person, but not for errors of judgment made in good faith. Oberlin Capital, L.P. v. Slavin, 2001, 147 N.C.App. 52, 554 S.E.2d 840. Corporations And Business Organizations 1966; Corporations And Business Organizations 1972

Statute protecting director from liability for actions in compliance with the Business Corporation Act does not abrogate the common law business judgment rule. State ex rel. Long v. ILA Corp., 1999, 132 N.C.App. 587, 513 S.E.2d 812. Corporations And Business Organizations 1521

Business judgment rule did not protect director and chief executive officer (CEO) of insurer and its parent corporation from liability to insurer's liquidator for breach of fiduciary duty to and negligent mismanagement of insurer; director was a leading participant in a plan to benefit himself and his interests at the expense of the insurer. State ex rel. Long v. ILA Corp., 1999, 132 N.C.App. 587, 513 S.E.2d 812. Insurance 1132

19. ---- Liability of officer defectively or falsely certifying acknowledgment, personal liability

Director of corporation was not liable for any misrepresentations made in applications of payment signed by other director where director, acted only in her capacity as notary when signing application. Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 1988, 374 S.E.2d 385, 323 N.C. 559, rehearing denied 377 S.E.2d 235, 324 N.C. 117. Acknowledgment 48

20. ---- Participation in unauthorized or wrongful acts of corporation, personal liability

Where corporation engaged in business of commission merchant misapplies proceeds of goods sold on consignment, its officers, who knowingly participated in the wrong, are individually liable. Cone v. United Fruit Growers' Ass'n, 1916, 88 S.E. 860, 171 N.C. 530. Corporations And Business Organizations 1970

21. Derivative suits--In general

Under North Carolina law, minority shareholder could not directly recover against majority shareholders that allegedly usurped corporate opportunity or converted corporate opportunity; recovery had to be pursued through corporation derivatively. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 2179

Under North Carolina law, minority shareholder's motion that corporation retain counsel to investigate alleged usurpation of corporate opportunity, which died for lack of second, satisfied demand requirement, established that any further demand would be futile, and entitled shareholder to bring claims derivatively on behalf of corporation. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 2188; Corporations And Business Organizations 2190(1)

Under North Carolina law, corporation lacked standing to pursue claim for majority shareholders' alleged breach of executory contract with minority shareholder to enter into partnership, and thus minority shareholder could not assert derivative claim for breach of contract, where corporation was not party to contract and was not harmed by breach. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 2179

Under North Carolina law, majority shareholders' fiduciary duty did not extend to structuring of partnership that was entirely separate business venture, and thus minority shareholder excluded from partnership could not recover in derivative action against majority shareholders, where corporation had no expectancy of benefit from partnership. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 1526(3)

On claim that majority shareholder breached his fiduciary duty by usurping a corporate opportunity, adversely interested party must demonstrate that transaction at issue was “just and reasonable” to corporation at time when entered into and approved. Meiselman v. Meiselman, 1983, 307 S.E.2d 551, 309 N.C. 279. Corporations And Business Organizations 1590

22. ---- Excuse for failure to demand, derivative suits

Under North Carolina law, shareholder normally must demand redress from corporate management before filing derivative lawsuit, or plead circumstances making any demand futile. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 2037; Corporations And Business Organizations 2040(1)

Under North Carolina law, futility doctrine does not allow shareholder to bring claim directly against corporation, but simply allows shareholder to bring derivative claim without first making demand on corporate management. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 2040(1)

23. ---- Summary judgment, derivative suits

Summary judgment of minority shareholder's derivative action against majority shareholders for breach of fiduciary duty to corporation was precluded by fact issues as to whether majority shareholders breached duty of loyalty by diverting lease opportunity from corporation to another corporation controlled by majority shareholders. In re Silverman, 1993, 155 B.R. 362. Federal Civil Procedure 2513

Summary judgment of minority shareholder's derivative claim against majority shareholders for usurpation of corporate opportunity was precluded by fact issues as to whether lease that had been negotiated by minority shareholder, but which benefitted another corporation, was functionally related to corporation's business and whether corporation held interest in the opportunity. In re Silverman, 1993, 155 B.R. 362. Federal Civil Procedure 2513

Summary judgment of minority shareholder's claim for punitive damages against majority shareholders in connection with derivative claims was precluded by fact issues as to whether majority shareholders breached fiduciary duty to corporation. In re Silverman, 1993, 155 B.R. 362. Federal Civil Procedure 2513

24. Knowledge of directors

Shareholders' complaint, alleging that principal shareholder, officer, trustee of company's pension plan, trustee of company's employee profit-sharing plan, and public accounting partnership, which audited financial records and certified financial statements of company, knowingly assisted former officers and directors of the company in scheme, which was designed to maintain market price for company's stock at artificially high levels, and that they had knowledge of this scheme, stated a cause of action for conspiratorial aiding and abetting liability under statute and SEC rule, prohibiting use of any deceptive device or contrivance in connection with the purchase and sale of any security. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Securities Regulation 60.56

Representations made by subcontractor's director in applications for payment, that certain specialty items had been purchased and stored in warehouse, were not based on personal knowledge that they were false, and thus director could not be held liable in fraud, where no evidence existed to show that contractor had any knowledge, information or belief that specialty items were not in warehouse, and where transcript revealed that he had no knowledge about specialty items at time he swore to statements in applications for payment. Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 1988, 374 S.E.2d 385, 323 N.C. 559, rehearing denied 377 S.E.2d 235, 324 N.C. 117. Fraud 13(2)

Instruction, that law charged corporate directors with actual knowledge of company's affairs and held them responsible for damages sustained by others by reason of their negligence, fraud, or deceit, and that cognizance of directors was immaterial, unlawfully suggested to jury that directors and managing officers were chargeable with omniscient knowledge of company's affairs and were liable for damages to third parties resulting from simple negligence. Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 1988, 374 S.E.2d 385, 323 N.C. 559, rehearing denied 377 S.E.2d 235, 324 N.C. 117. Corporations And Business Organizations 2009

Subcontractor's director's certification in application for payment, that certain items had been purchased and stored to best of his knowledge, information and belief, was sufficient to submit issue of whether subcontractor was grossly negligent in making such certification to jury, where such items had not been purchased and stored, where director totally lacked knowledge of whether such items had been purchased and stored, and where director failed to inquire of employee concerning specifics in applications of payment to which he subscribed and swore. Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 1988, 374 S.E.2d 385, 323 N.C. 559, rehearing denied 377 S.E.2d 235, 324 N.C. 117. Fraud 64(3)

25. Right to sue

Under North Carolina law, corporate officer who negotiated lease could not directly recover against defendants that allegedly breached their fiduciary duty to corporation by converting lease that was to be corporate asset; officer had to proceed on behalf of corporation derivatively. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 2223

Under North Carolina law, corporate officer's allegation that direct recovery against corporation was necessary to achieve fair distribution of proceeds to which he was allegedly entitled did not entitle officer to assert direct action, where no evidence indicated that proceeds of derivative action would not be distributed fairly. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 2223

Under North Carolina law, corporate shareholder may normally enforce claim belonging to corporation only through shareholder derivative suit brought on behalf of corporation. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 2028

26. Rights and remedies of dissenting stockholders

Appraisal remedy available under North Carolina law to a shareholder dissenting from corporate merger is not the exclusive remedy and statute did not preclude dissenting shareholders from pursuing claims under Federal Securities Law antifraud Rule 10b-5, common-law fraud and for breach of fiduciary duty. Umstead v. Durham Hosiery Mills, Inc., 1984, 578 F.Supp. 342. Corporations And Business Organizations 2671(2); Securities Regulation 60.34

Minority shareholders' complaint charging majority shareholder and certain officers and directors with making certain mailings, in connection with proposed corporate merger, that misrepresented market price, omitted material financial information, etc. stated cause of action under Racketeer Influenced and Corrupt Organization Act although a more definite statement was required identifying with particularity the alleged conduct which qualified as a pattern of racketeering activity. Umstead v. Durham Hosiery Mills, Inc., 1984, 578 F.Supp. 342. Commerce 80

Under Racketeer Influenced and Corrupt Organizations Act, the enterprise must be an entity separate and distinct from the pattern of activity in which it engages and, hence, since majority shareholder and his counsel were not part of the corporation they could not be considered part of the enterprise, for purpose of minority shareholder's claim based on securities fraud in connection with merger, but the corporation and directors and officers could collectively be deemed the requisite enterprise. Umstead v. Durham Hosiery Mills, Inc., 1984, 578 F.Supp. 342. Commerce 80

Dissenting shareholders challenging “freeze-out” merger failed to establish breach of fiduciary duty on part of directors; each of shareholders' contentions could be traced to dispute over value of minority shares, which was question to be determined at statutory appraisal proceeding. IRA for Benefit of Oppenheimer v. Brenner Companies, Inc., 1992, 419 S.E.2d 354, 107 N.C.App. 16, review denied 424 S.E.2d 401, 332 N.C. 666. Corporations And Business Organizations 2669; Corporations And Business Organizations 2671(1)

Statutory appraisal is not dissenting shareholder's exclusive remedy when shareholder has presented claims of breach of fiduciary duty, fraud, self-dealing, securities violations or similar claims based on allegations other than inadequacy of stock price alone. IRA for Benefit of Oppenheimer v. Brenner Companies, Inc., 1992, 419 S.E.2d 354, 107 N.C.App. 16, review denied 424 S.E.2d 401, 332 N.C. 666. Corporations And Business Organizations 1526(7)

27. Punitive damages

Under North Carolina law, punitive damages are available, without further proof of aggravation, when corporate directors breach their fiduciary duty to their corporation. In re Silverman, 1993, 155 B.R. 362. Corporations And Business Organizations 1912

Under North Carolina law, punitive damages are not available for claims for simple breach of contract, quantum meruit, or unfair and deceptive trade practices. In re Silverman, 1993, 155 B.R. 362. Antitrust And Trade Regulation 392; Damages 89(2)

Directors' conversions of money belonging to corporation to their own use constituted breach of fiduciary duty to corporation and its shareholders and supported award of punitive damages. Stone v. Martin, 1987, 355 S.E.2d 255, 85 N.C.App. 410, appeal dismissed , review denied 360 S.E.2d 105, 320 N.C. 638. Corporations And Business Organizations 1863; Corporations And Business Organizations 1912

Award of $150,000 in punitive damages against each of corporate directors that had breached fiduciary duty to corporation and its shareholders through wrongful conversion of corporate funds was not abuse of jury's discretion, notwithstanding that it significantly exceeded compensatory damage awards of $11,000 and $19,000 against those directors. Stone v. Martin, 1987, 355 S.E.2d 255, 85 N.C.App. 410, appeal dismissed , review denied 360 S.E.2d 105, 320 N.C. 638. Corporations And Business Organizations 1912

Statutory penalty of $500 was properly assessed against each of corporate directors who had refused shareholders' repeated demands to see corporate books and records. Stone v. Martin, 1987, 355 S.E.2d 255, 85 N.C.App. 410, appeal dismissed , review denied 360 S.E.2d 105, 320 N.C. 638. Corporations And Business Organizations 1940(1)

28. Persons liable

Nonofficers and nondirectors may, under North Carolina law, be held to answer for substantially assisting or encouraging another's breach of fiduciary duty. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Torts 441

Shareholders' complaint, alleging violation of settlement agreement on interference with contract theory, was required to be dismissed as to shareholders, who were not parties to the suit or the settlement it produced. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Torts 242

Shareholders' complaint, alleging that market manipulative scheme of former officers and directors of company induced them not to accept company's offer to purchase their shares pursuant to settlement agreement, which required company to offer to purchase same, did not state a cause of action on theory of interference with contract, where there was no allegation that company failed to perform its obligation under the settlement agreement. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Torts 242

Where corporation engaged in business of commission merchant misapplies proceeds of goods sold, officers who knowingly participated may be sued jointly or severally. Cone v. United Fruit Growers' Ass'n, 1916, 88 S.E. 860, 171 N.C. 530. Corporations And Business Organizations 1986

29. Jurisdiction and venue

North Carolina choice of law applied to claim alleging that minority shareholder's rights and interests had been impaired, even though South Carolina was state of incorporation, and residence of two of five shareholders, given that minority shareholder was employed by corporations in North Carolina, and events which allegedly precipitated termination of minority shareholder occurred in North Carolina. Restatement of (Second) Conflicts of Laws §§ 306, 309. Clark v. B.H. Holland Co., Inc., 1994, 852 F.Supp. 1268. Corporations And Business Organizations 1526(3); Corporations And Business Organizations 1532

Former officer and director of company, residing in Washington, D. C., and trustee of company's employee profit-sharing plan, located in Pennsylvania, were subject to suit in North Carolina, with respect to claims of violation of federal securities laws and also with respect to pendent state law claims; requisite fairness of subjecting such nonresident former officer and director and trustee to suit in North Carolina was established by viewing forum as United States rather than Tennessee; moreover, other factors, recognized as proper elements of fairness, supported exercise of jurisdiction. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Federal Courts 76.20

Availability of punitive damages under state law claims was not a basis for declining pendent jurisdiction in action alleging violation of federal securities laws. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Federal Courts 17

30. Pleadings

Minority shareholder's complaint alleging that merger information misrepresented market price of the stock and statutory rights of dissenting shareholders, omitted material facts concerning corporate financial condition and officers and directors involvement in assisting majority shareholder to achieve that status stated cause of action for common-law fraud under North Carolina law. Umstead v. Durham Hosiery Mills, Inc., 1984, 578 F.Supp. 342. Fraud 44

Minority shareholders' allegation that majority shareholder and directors and officers intended to freeze out the minority via merger stated breach of fiduciary claim under North Carolina law. Umstead v. Durham Hosiery Mills, Inc., 1984, 578 F.Supp. 342. Corporations And Business Organizations 1589; Corporations And Business Organizations 1935

Count of shareholders' complaint, alleging that nonofficers and nondirectors aided and abetted several of company's officers to breach their fiduciary duty to shareholders, stated a cause of action against such nonofficers and nondirectors under statute requiring officers and directors to discharge the duties of their respective positions in good faith. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Corporations And Business Organizations 1937(2)

Reorganization trustee's amended complaint, alleging corporate mismanagement or waste on the part of former company officers and directors, would not be dismissed on ground that the allegations were vague and conclusory, inasmuch as trustee's claims and notice to which former officers and directors were entitled could be fleshed out by discovery and other pretrial procedures. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Corporations And Business Organizations 1909

Count of reorganization trustee's amended complaint, alleging that company improperly indemnified former officers and directors as to their legal expenses incurred in connection with certain litigation, stated a cause of action against such former officers and directors for breach of fiduciary duty and against other defendants for aiding and abetting; however, the count could not embrace misconduct subsequent to the litigation and settlement. Gilbert v. Bagley, 1980, 492 F.Supp. 714. Corporations And Business Organizations 1909

Statutory appraisal was dissenting shareholders' exclusive remedy to contest their right to receive fair value of shares in connection with “freeze-out” merger; their primary complaint dealt with stock price and they did not allege sufficient facts to make out claims for unfairness of merger, breach of fiduciary duty, or fraud separate and apart from their concerns over price. IRA for Benefit of Oppenheimer v. Brenner Companies, Inc., 1992, 419 S.E.2d 354, 107 N.C.App. 16, review denied 424 S.E.2d 401, 332 N.C. 666. Corporations And Business Organizations 2671(2)

Allegations by holder of revolving fund certificate that agricultural cooperative owed holder fiduciary duty which was breached by refusal to redeem certificate, that refusal was not reasonable, that cooperative manipulated its income to benefit others, that actions were inequitable, arbitrary and in bad faith, an abuse of discretion and a violation of corporate bylaws, were sufficient to allege constructive fraud and thus to allege a claim of unfair or deceptive trade practice. HAJMM Co. v. House of Raeford Farms, Inc., 1989, 379 S.E.2d 868, 94 N.C.App. 1, review allowed 382 S.E.2d 439, 325 N.C. 271, affirmed in part as modified , reversed in part 403 S.E.2d 483, 328 N.C. 578. Antitrust And Trade Regulation 358

31. Review

In action in which minority shareholder sought involuntary dissolution or a buy-out of his interest in family corporations, trial court erred in using standards of oppression, overreaching, gross abuse, unfair advantage, and the like with respect to majority shareholder's actions rather than in focusing on “rights or interests” minority shareholder had in corporations and whether those “rights or interests” were in need of protection, warranting remand for evidentiary hearing to resolve such issue. Meiselman v. Meiselman, 1983, 307 S.E.2d 551, 309 N.C. 279. Corporations And Business Organizations 3058(1); Corporations And Business Organizations 3070

Where identity of shareholders who owned successor corporation to previous management companies which performed management services for closely held family corporations might be crucial in determining if majority shareholder of family corporations had usurped a corporate opportunity with purchase for himself of all of stock in successor corporation, but trial court failed to focus on such issue, matter would be remanded for determination of whether opportunity to purchase stock in successor corporation rightfully belonged to the family corporations, rather than to majority shareholder personally. Meiselman v. Meiselman, 1983, 307 S.E.2d 551, 309 N.C. 279. Appeal And Error 1178(1)

N.C.G.S.A. § 55-8-30, NC ST § 55-8-30

Current through Chapter 18.

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