Colorado § 7-108-402 - Standards of liabilities for directors.

§ 7-108-402. Standards of liabilities for directors.

(1) A director is liable, as a director, to the corporation or to its shareholders for money damages or other money payment for any act, omission to act, or decision only if the party asserting liability establishes in a proceeding that the challenged act, omission, or decision:

(a) Was not in good faith;

(b) Was one that the director did not rationally believe to be in the best interests of the corporation;

(c) Was one as to which the director was at least grossly negligent, unless the articles of incorporation change the standard of liability to knowing misconduct, knowing violation of law, or negligence;

(d) Was one as to which the director failed to make or cause to be made appropriate inquiry, when particular facts or circumstances of significant concern came to the attention of the director that would have alerted a reasonably attentive director to the need for inquiry;

(e) Consisted of or resulted from a sustained or systematic failure by the director to exercise oversight of the business and affairs of the corporation;

(f) Subject to section 7-108-501, was a breach of the director's duty of loyalty to the corporation, including by directly or indirectly receiving an improper personal benefit; or

(g) Consisted of or resulted from a vote or assent specified in section 7-108-405.

(2) In addition to the requirements of subsection (1) of this section, the party seeking to hold the director liable has:

(a) With respect to money damages, the burden of establishing that the money damages were:

(I) Suffered by the corporation or its shareholders; and

(II) Caused by the director's challenged conduct;

(b) With respect to other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, whatever persuasion burden may be called for to establish that the money payment sought is appropriate in the circumstances; or

(c) With respect to other money payment under an equitable remedy, such as profit recovery by or disgorgement to the corporation, whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances.

(3) A director liable under this section for money damages or for other money payment may offset against the liability any gain to the corporation that the director establishes arose out of the same transaction, unless the offset is against public policy.

Source: L. 2019: Entire part amended with relocations, (SB 19-086), ch. 166, p. 1931, § 35, effective July 1, 2020.

ANNOTATION

Law reviews. For article, "2019 Colorado Business Law Updates: Revising the Colorado Business Corporation Act and the Colorado Corporations and Associations Act", see 48 Colo. Law. 26 (Nov. 2019). For article, "Holding Closely Held Business Assets in Trust", see 49 Colo. Law. 49 (Mar. 2020). For article, "Owner Association Board Member Duties and Liabilities — Part 1", see 50 Colo. Law. 20 (June 2021). For article, "The Business Judgment Rule and Common Interest Communities", see 53 Colo. Law. 34 (June 2024).