Duty of loyalty, conflicts & related-party process
The duty of loyalty requires directors to act in good faith to advance the corporation’s best interests — not their own — and to handle conflicts with process that courts and counterparties can understand.
Prepared doesn't make your decisions. It keeps the record that shows how you made them.
Educational only — not legal advice. Details
Fiduciary duties and process standards vary by entity type, charter, bylaws, and jurisdiction. Consult qualified counsel for your board. Using Prepared Board does not ensure business judgment protection, does not prevent liability, and is not a substitute for legal advice, D&O coverage advice, or a fairness opinion.
Conflicts, recusal, and candor
Loyalty forbids subordinating corporate interests to personal motives: unfair self-dealing, usurping corporate opportunities improperly, misusing confidential information, and failing to disclose conflicts when required.
When a director is conflicted on a matter, the practical board response is disclosure + recusal (and, for larger conflicts, procedural protections such as a disinterested committee). Recusal that lives only in conversation is hard to prove later.
Entire fairness and DGCL §144
When conflicted controllers or boards cannot rely on business-judgment deference, Delaware often requires entire fairness — fair dealing and fair price (Weinberger v. UOP).
DGCL §144 provides statutory safe harbors for interested-director transactions that meet informed disinterested-director approval, informed disinterested-stockholder approval, or fairness to the corporation and stockholders. Process documentation is how you show which path you used.
So what for you as a director
- Maintain annual COI / director questionnaires and a conflict policy people actually use.
- Record RECUSED status on the decision with a short conflict note.
- Tag related-party and reserved-matter decisions; attach preferred/investor consent evidence when that is the board’s process.
- Keep a related-party register the chair can open in diligence.
What a good record looks like
Mapped to live Prepared Board routes. Counts and process records only — not a finding that duties were met.
- Recusal on the decision
How Prepared stores RECUSED conflicts (see Piscataqua Spruce Creek demo).
- Related-party register
Year list with recusals, evidence, preferred-consent gaps.
- Director questionnaires
Annual D&O / director questionnaire tracker (in-app, not eSign).
- Policy acknowledgments
CoC, gift, ABC, insider trading, and related acks.
Verified citations on this page
- Weinberger v. UOP, Inc. — 457 A.2d 701 (Del. 1983). The Delaware Supreme Court articulated entire fairness as fair dealing and fair price — the standard often applied when conflicted controllers or boards cannot rely on business-judgment deference. Source
- DGCL §144 — 8 Del. C. § 144. Interested-director (and related) transactions may be protected from equitable relief and damages if they satisfy statutory safe harbors — including informed disinterested-director approval, informed disinterested-stockholder approval, or fairness to the corporation and stockholders. Source
- In re Walt Disney Co. Derivative Litigation — 906 A.2d 27 (Del. 2006). After trial, the Delaware Supreme Court affirmed that the Disney directors did not breach fiduciary duties or commit waste in connection with Michael Ovitz’s hiring and termination / severance — emphasizing that process evidence matters when good faith and care are challenged. Source
See a live process record
Open a seeded demo board, then Board proof. Or run the public process-record self-check (gaps only — no score).