There are business situations in which corporate directors may be held liable for breach of fiduciary duty for corporate nonfeasance. Not to be confused with corporate malfeasance, where a corporate fiduciary takes inappropriate or negligent action, with nonfeasance the corporate fiduciary breaches his or her duty by failing to take action. The following example is a situation whereby a corporate director was found to be responsible for corporate nonfeasance. Failing to keep informed about the activities of a business could be considered corporate nonfeasance. For example, a corporate director that was not active in the business and knew virtually nothing of its corporate affairs was held responsible for failing to keep informed about the activities of the corporation when one of the officers of the corporation withdrew money that greatly exceeded corporate profits without proper authorization.
Another example of corporate nonfeasance was when a court held that an outside director was liable for failing to prevent the dissemination of a misleading corporate financial statement issued in connection with a sale of a business. The law of directors’ and officers’ corporate nonfeasance has recently been a hot button issue with Chicago trial lawyers and is being litigated in the courts more often than in the past.
Commercial litigation involving corporate nonfeasance can be much more difficult to prove as compared to those involving affirmative acts of negligence or other wrongdoing. In order for nonfeasance to result in liability, it must be the proximate cause of the injury, loss or damages.
Chicago business owners, executives, LLC members, managers, shareholders and corporate board members are invited to learn more about our Chicago commercial litigation practice by visiting our other business litigation pages. For specific legal inquiries, call 312.789.5676. You may also email one of our Chicago business litigation attorneys directly at our Chicago law office.