Director Duties & Liabilities

Director duties and liabilities are among the most critical and risky areas of corporate law. The new "Law on Entrepreneurs" of Georgia has significantly tightened and specified the obligations of managing persons. Directors are no longer just "signatories"; they bear fiduciary duties — the duty of "care" and "loyalty" to the company. Breach of these duties can lead to the director's personal, financial liability, meaning they may be liable with their own assets for damages caused to the company. This risk is particularly high during financial crises, insolvency, or conflicts of interest. Lawyers represented on the Legal.ge platform help understand and manage these risks so that directors can make bold business decisions within the legal framework without personal peril.

What Does Director Duties & Liabilities Service Cover?

Our service aims to protect and inform directors and board members. It includes:

• Clarifying Fiduciary Duties: Detailed consultation on what "conscientious and prudent manager" implies in specific situations.
• Applying the Business Judgment Rule (BJR): Developing mechanisms to protect the director from liability if their decision, even if unsuccessful, was informed and made in good faith.
• Conflict of Interest Management: Creating policies on how to approve transactions with affiliated persons so the director is not held liable.
• D&O Insurance Consultation: Assisting in understanding the terms of Directors and Officers liability insurance policies that cover personal liability.
• Insolvency Risk Management: Special duties of the director during financial difficulties to avoid personal liability to creditors.

Real-World Scenarios When You Need This Service

Liability issues come to the forefront when:

• Entering a Risky Transaction: A director plans a major investment or asset disposal and wants to ensure they won't be sued by shareholders if the project fails.
• Shareholder Disputes: When shareholders sue the director for damages caused to the company (Derivative Suit).
• Pre-Insolvency Period: The company struggles to pay debts. The director needs to know when they are obligated to file for insolvency to avoid being personally liable for debts.
• Signing a Service Agreement: When being appointed as a director, it is important to include indemnification clauses in the contract.

Georgian Legal Framework and Regulations

Director liability is regulated by the Law of Georgia on Entrepreneurs (especially articles concerning duties of care and loyalty) and the Civil Code. The new law introduces the "Business Judgment Rule," which acts as a shield for the director if they acted informedly and without conflict of interest. Additionally, the Law on Rehabilitation and Collective Satisfaction of Creditors imposes strict liability on directors if they fail to file for insolvency in time. A lawyer's consultation will help navigate this complex legislative maze.

Service Process

Obtaining this service on Legal.ge involves:

1. Risk Analysis: Assessing a specific transaction or situation regarding the director's personal liability.
2. Documentation Preparation: Preparing meeting minutes and justifications confirming the decision was "prudent."
3. Contract Review: Including protective mechanisms in the director's employment/service agreement.
4. Representation in Disputes: Defending the director's interests in court if a lawsuit is filed against them.

Why Choose Legal.ge?

Director liability is not a theoretical threat; it is a real risk that can cost an executive dearly. Specialists on Legal.ge are well-versed in Georgian judicial practice and corporate standards. We help you stay protected so you can focus on business growth rather than litigation.