llcs-corporations-partnerships

Duty of Good Faith

Definition

The duty of good faith stands for the principle that directors and officers of a corporation in making all decisions in their capacities as corporate fiduciaries, must act with a conscious regard for their responsibilites as fiduciaries. A violation of the duty of good faith may include an intentional derelict in the usual duties of an director or officer, intentionally acting for a purpose other than the benefit of the corporation, or intentionally violating the law.

Duty of Loyalty

Definition

The duty of loyalty stands for the principle that directors and officers of a corporation in making all decisions in their capacities as corporate fiduciaries, must act without personal economic conflict. The duty of loyalty can be breached either by making a self-interested transaction or taking a corporate opportunity.

See: Self-dealing.

Participating preferred stock

Definition

Stock that confers the holder a right to be paid first, before common (non-preferred) stockholders in the event of a dividend or liquidation payout, and additionally the right to also participate along with the common stockholders in receiving payment on the remaining payout.

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