Duty of Care

A fiduciary duty that requires a director of a corporation to be fully and adequately informed and act with care when making decisions and acting for the corporation. The duty of care is governed by state law. Directors must use the amount of care that a “prudent person” would use in similar circumstances. Directors may reasonably rely on the advice of counsel, accountants, investment bankers, and others. The corporation must make sure the process is also well-documented, which shows that board is well-informed.