Legal Question in Business Law in New York
New York state CERTIFICATE OF INCORPORATION - online filing - http://www.dos.ny.gov/corps/online_filing.html
What is the below OPTIONAL Liability Statement? Is it better to include below liability statement in the Certification of Incorporation?
No Director of this corporation shall be personally liable to the corporation, or its shareholders for damages for any breach of duty in such capacity, provided that this provision shall not limit the liability of any director if a judgment or other final adjudication, adverse to him, establishes that his act or ommissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage, to which he was not legally entitled or that his acts violated Section 719 of the New York Business Corporation Law.
1 Answer from Attorneys
I include this or a similar statement in every COI. It prevents claims against Directors in all but the stated instances. Many people with possible grievances or claims against the business will sue everyone connected with the corporation, and this limits liability to only those Directors who may have been involved and who acted improperly. I also recommend the corporation carry E&O insurance and that the By-Laws have an indemnity provision to protect innocent people, employees, officers, directors and stockholders.
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