Directors or executives are at high risk of being sued as a result of their responsibilities and obligations. This is why engaging a defense attorney for lawsuits against your company is so important.
Furthermore, being a director or executive of a company, large or small, doesn’t make you immune to legal action, be it civil or criminal.
Take a Proactive Defense when Directors and Executives Face Lawsuit
One of the easiest ways to proactively protect directors and executives from personal liability is to form a corporation or limited liability company. This doesn’t protect you from all allegations but engaging business litigation defense lawyers near me early on will give you an advantage over the plaintiff.
One of the benefits of an early, proactive start is that you can present a case that is so solid the plaintiff will want to settle before the matter gets to court.
For example, you’re accused of sexual harassment and you use the grace period to respond to the allegations to put your case together. When you respond to the allegations, you can prove your innocence and the case is dropped.
In such a case, you ideally want a specialist by your side, for example, defense lawyers for executives facing sexual assault charges.
3 Common Types of Lawsuits Directors and Executives May Face
Directors and executives can be accused of indiscretions and misdeeds that can be either civil or criminal. Allegations can fall under three categories, direct lawsuits, derivative lawsuits, and non-shareholder lawsuits.
1. Direct Lawsuits
These are considered shareholder class actions and are brought by one or more shareholders who allege personal harm. Four direct lawsuit causes are:
- Allegations that shareholders were denied their right to vote.
- Demands for dividends owed.
- Refusing access to records
- Violating ownership rights.
2. Derivative Lawsuits
They are brought against directors by shareholders, acting on behalf of the corporation, who suspect misconduct or failure to uphold fiduciary duties.
Before filing a lawsuit, shareholders must try to resolve the matter directly with the accused. Only when these attempts fail, can they continue with legal action.
3. Non-Shareholder Lawsuits
This type of lawsuit is rare. It occurs when employees or vendors sue directors for breach of contract, discrimination, or sexual harassment. A good business litigation defense lawyer who works with employment law can be invaluable here.
What Constitutes Director or Executive Misconduct?
Allegations of misconduct are serious and the board of directors has the unenviable task of deciding if the allegations are based on intentional or unintentional actions, and how to proceed to protect the corporation from harm.
Should the actions be deemed intentional, the board must decide if the nature of the misconduct requires them to inform the authorities. Some of the more serious allegations are criminal and must be handed over to law enforcement officers.
Serious allegations of misconduct are divided into three categories: criminal offenses, sexual offenses, and financial misconduct.
If a director is accused of criminal offenses but is entirely innocent, they still need to take a step back and relinquish their duties until they’ve been acquitted.
Perhaps the most common form of misconduct relates to fiduciary duties. While the duties, responsibilities, and obligations may be clearly spelled out, a breach of duty is difficult to prove.
For example, in cases where the director failed to thoroughly inspect financial records and financial misconduct is discovered, the director could be guilty of negligence. However, the definition of thorough is subjective and it can be argued that the director is not an accountant and can’t reasonably be expected to identify falsified records.
A board director can breach their duties should any of the following cause harm to the shareholders and corporation.
- Ignorance of federal, state, and district laws
- Ignorance of laws pertaining to non-profit organizations
- Not documenting actions
- Having conflicts of interest
- Travel and reimbursement policies
- Prioritizing personal matters over the corporation’s interests
What are the Consequences Directors and Executives May Face?
If allegations of board directors’ misconduct prove to be valid, the guilty party can face several penalties. Legal or criminal misconduct can result in stiff fines and/or prison sentences.
In serious criminal cases, directors could be looking at anything from five to 30 years of imprisonment. Fines or settlements can run to millions of dollars.
If the transgression wasn’t as serious but still harmed the corporation financially or in terms of public standing, board directors can be suspended or have their employment terminated.
Give yourself the best chance at avoiding all penalties by engaging a business litigation defense attorney without delay.
How Can a Corporate Defense Attorney Near Me Defend My Rights?
Attorneys can base their defense on several factors. For example, a common defense is the Business Judgement Rule. In essence, the rule protects directors from allegations of misconduct if the actions were conducted in good faith to the benefit of the corporation and within their authority.
A corporate defense attorney near me conducts their own investigation into the allegations and uses the evidence to create a compelling argument in your defense. They draft the defense as quickly as possible to present a case to the plaintiff’s attorney well before the plaintiff expects it. Catching them on the wrong foot gives you an advantage that you can carry throughout the proceedings.
If done correctly, however, your defense attorney might be able to keep the allegations out of court, which not only protects your reputation but protects the company’s reputation too.
Hire an Experienced Corporate Defense Attorney Near Me
LibertyBell Law Group boasts an array of specialist business lawyers who can mount an impactful defense no matter the allegations.
The primary aim is to have the allegations dropped through arbitration and mediation. However, if the plaintiff wants their day in the district court, our litigators are multi-skilled and not only settle civil cases to your best advantage, but also represent you in criminal court.
One of the biggest advantages that set us apart from other lawyers is our 24-hour availability. No matter what time of the day or night, if you need help your defense attorney for lawsuits against your company is there for you.
Schedule a free 30-minute consultation and enjoy the said benefits. Complete our onsite contact form or call us at 866-320-4854 at LibertyBell Law Group today!