Part 10- Corporations, Chapter 43: Management of Corporations, Doc 3

In corporate governance, the management and legal standards governing directors and officers emphasize protecting the corporation and its shareholders, with distinct approaches for close corporations and nonprofit organizations. Here are the key points from this section: 1. Close Corporation Governance: o Close corporations, often run by few shareholders, may include supermajority voting requirements to protect minority shareholders, requiring more than a majority for significant actions, such as altering dividend policies or changing the business line. o Close corporation statutes allow shareholders to manage the business directly, bypassing traditional board authority and imposing restrictions, like mandatory dividends or employment terms for shareholder-employees, effectively operating the corporation similarly to a partnership. 2. Nonprofit Corporation Governance: o Nonprofit corporations require a board of at least three directors, with directors serving primarily in a fiduciary role, often unpaid, particularly in public service and religious nonprofits. o Nonprofit directors are elected by members (if the organization has them) or appointed. Directors may be removed with or without cause by those who elected them, ensuring accountability. o The board may delegate authority to committees, although individual directors generally lack authority to act unilaterally for the corporation. 3. Duties of Directors and Officers: o Directors and officers owe fiduciary duties to act within corporate authority, with care, and in loyalty to the corporation. This duty includes exercising sound judgment and protecting the corporation’s best interests. o Duty of Care requires directors to act in good faith and with reasonable belief that their actions serve the corporation’s best interests, as outlined in MBCA Section 8.30. Directors may face liability if their lack of diligence results in corporate losses. 4. Meeting and Decision-Making Protocols: o Directors can make decisions in meetings or, if agreed unanimously, without a formal meeting (e.g., via written consent). Nonprofits can hold meetings via conference calls, facilitating participation from all members and aligning with modern business needs. These points illustrate that while corporate governance structures share similar standards of care and accountability, nonprofit and close corporations often adopt governance methods reflecting their unique operational and organizational needs.