Governance Insights 2024 Nominee Directors: Fiduciary Obligations and the Limits of Information Sharing
or otherwise influence, deal negotiations. An active and independent committee of the board remains an essential tool in the transactional governance toolkit for managing these conflicts. — Even where information-sharing has been sanctioned by the board, a nominee should be mindful of securities laws that prohibit selective disclosure of material non-public information. In the case of a public company, both the company and the nominee director must ensure disclosure of material non-public information to the nominating shareholder is made in compliance with the rules against selective disclosure, including the requirement that disclosure occur only in the “necessary course of business.” — A nominating shareholder who misuses information improperly shared by a nominee may be liable for breaches by the nominee. In addition to potential insider trading liability for misusing material non-public information, nominating shareholders should be wary of acquiescing in, encouraging or knowingly benefiting from breaches of fiduciary duty by the nominee director. Although not discussed in detail in this article, a nominating shareholder that knowingly misuses confidential information obtained in breach of the nominee’s fiduciary duty may be subject to a number of potential grounds for liability, including knowing assistance in breach of fiduciary duty.
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