2011 Indiana Code
TITLE 23. BUSINESS AND OTHER ASSOCIATIONS
ARTICLE 1. INDIANA BUSINESS CORPORATION LAW
CHAPTER 35. STANDARDS OF CONDUCT FOR DIRECTORS

IC 23-1-35
Chapter 35. Standards of Conduct for Directors

IC 23-1-35-1
Standards of conduct; liability; reaffirmation of corporate governance rules; presumption
Sec. 1. (a) A director shall, based on facts then known to the director, discharge the duties as a director, including the director's duties as a member of a committee:
(1) in good faith;
(2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(3) in a manner the director reasonably believes to be in the best interests of the corporation.
(b) In discharging the director's duties a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(1) one (1) or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;
(2) legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the person's professional or expert competence; or
(3) a committee of the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.
(c) A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.
(d) A director may, in considering the best interests of a corporation, consider the effects of any action on shareholders, employees, suppliers, and customers of the corporation, and communities in which offices or other facilities of the corporation are located, and any other factors the director considers pertinent.
(e) A director is not liable for any action taken as a director, or any failure to take any action, regardless of the nature of the alleged breach of duty, including alleged breaches of the duty of care, the duty of loyalty, and the duty of good faith, unless:
(1) the director has breached or failed to perform the duties of the director's office in compliance with this section; and
(2) the breach or failure to perform constitutes willful misconduct or recklessness.
(f) In enacting this article, the general assembly established corporate governance rules for Indiana corporations, including in this chapter, the standards of conduct applicable to directors of Indiana corporations, and the corporate constituent groups and interests that a director may take into account in exercising the director's business judgment. The general assembly intends to reaffirm certain of these corporate governance rules to ensure that the directors of Indiana corporations, in exercising their business judgment, are not required

to approve a proposed corporate action if the directors in good faith determine, after considering and weighing as they deem appropriate the effects of such action on the corporation's constituents, that such action is not in the best interests of the corporation. In making such determination, directors are not required to consider the effects of a proposed corporate action on any particular corporate constituent group or interest as a dominant or controlling factor. Without limiting the generality of the foregoing, directors are not required to render inapplicable any of the provisions of IC 23-1-43, to redeem any rights under or to render inapplicable a shareholder rights plan adopted pursuant to IC 23-1-26-5, or to take or decline to take any other action under this article, solely because of the effect such action might have on a proposed acquisition of control of the corporation or the amounts that might be paid to shareholders under such an acquisition. Certain judicial decisions in Delaware and other jurisdictions, which might otherwise be looked to for guidance in interpreting Indiana corporate law, including decisions relating to potential change of control transactions that impose a different or higher degree of scrutiny on actions taken by directors in response to a proposed acquisition of control of the corporation, are inconsistent with the proper application of the business judgment rule under this article. Therefore, the general assembly intends:
(1) to reaffirm that this section allows directors the full discretion to weigh the factors enumerated in subsection (d) as they deem appropriate; and
(2) to protect both directors and the validity of corporate action taken by them in the good faith exercise of their business judgment after reasonable investigation.
(g) In taking or declining to take any action, or in making or declining to make any recommendation to the shareholders of the corporation with respect to any matter, a board of directors may, in its discretion, consider both the short term and long term best interests of the corporation, taking into account, and weighing as the directors deem appropriate, the effects thereof on the corporation's shareholders and the other corporate constituent groups and interests listed or described in subsection (d), as well as any other factors deemed pertinent by the directors under subsection (d). If a determination is made with respect to the foregoing with the approval of a majority of the disinterested directors of the board of directors, that determination shall conclusively be presumed to be valid unless it can be demonstrated that the determination was not made in good faith after reasonable investigation.
(h) For the purposes of subsection (g), a director is disinterested if:
(1) the director does not have a conflict of interest, within the meaning of section 2 of this chapter, in connection with the action or recommendation in question;
(2) in connection with matters described in IC 23-1-32 the director is disinterested (as defined in IC 23-1-32-4(d));
(3) in connection with any matter involving or otherwise

affecting:
(A) a control share acquisition (as defined in IC 23-1-42-2) or any matter related to a control share acquisition under IC 23-1-42 or other provisions of this article;
(B) a business combination (as defined in IC 23-1-43-5) or any matter related to a business combination under IC 23-1-43 (including a person becoming an interested shareholder) or other provisions of this article; or
(C) any transaction that may result in a change of control (as defined in IC 23-1-22-4) of the corporation;
the director is not an employee of the corporation; and
(4) in connection with any matter involving or otherwise affecting:
(A) a control share acquisition (as defined in IC 23-1-42-2) or any matter related to a control share acquisition under IC 23-1-42 or other provisions of this article;
(B) a business combination (as defined in IC 23-1-43-5) or any matter related to a business combination under IC 23-1-43 (including a person becoming an interested shareholder) or other provisions of this article; or
(C) any transaction that may result in a change of control (as defined in IC 23-1-22-4) of the corporation;
the director is not an affiliate or associate of, or was not nominated or designated as a director by, a person proposing any of the transactions described in clause (A), (B), or (C).
(i) A person may be disinterested under this section even though the person is a director or shareholder of the corporation.
As added by P.L.149-1986, SEC.19. Amended by P.L.227-1989, SEC.2; P.L.133-2009, SEC.27.

IC 23-1-35-2
Conflict of interest transaction
Sec. 2. (a) A conflict of interest transaction is a transaction with the corporation in which a director of the corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the corporation solely because of the director's interest in the transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the director's interest were disclosed or known to the board of directors or a committee of the board of directors and the board of directors or committee authorized, approved, or ratified the transaction.
(2) The material facts of the transaction and the director's interest were disclosed or known to the shareholders entitled to vote and they authorized, approved, or ratified the transaction.
(3) The transaction was fair to the corporation.
(b) For purposes of this section, a director of the corporation has an indirect interest in a transaction if:
(1) another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction; or (2) another entity of which the director is a director, officer, or trustee is a party to the transaction and the transaction is, or is required to be, considered by the board of directors of the corporation.
(c) For purposes of subsection (a)(1), a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the directors on the board of directors (or on the committee) who have no direct or indirect interest in the transaction, but a transaction may not be authorized, approved, or ratified under this section by a single director. If a majority of the directors who have no direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, a quorum is present for the purpose of taking action under this section. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any action taken under subsection (a)(1) if the transaction is otherwise authorized, approved, or ratified as provided in that subsection.
(d) For purposes of subsection (a)(2), shares owned by or voted under the control of a director who has a direct or indirect interest in the transaction, and shares owned by or voted under the control of an entity described in subsection (b), may be counted in a vote of shareholders to determine whether to authorize, approve, or ratify a conflict of interest transaction.
As added by P.L.149-1986, SEC.19. Amended by P.L.107-1987, SEC.12.

IC 23-1-35-3
Loan or guarantee to director
Sec. 3. (a) Except as provided by subsection (c), a corporation may not lend money to or guarantee the obligation of a director of the corporation unless:
(1) the particular loan or guarantee is approved by a majority of the votes represented by the outstanding voting shares of all classes, voting as a single voting group, except the votes of shares owned by or voted under the control of the benefited director; or
(2) the corporation's board of directors determines that the loan or guarantee benefits the corporation and either approves the specific loan or guarantee or a general plan authorizing loans and guarantees.
(b) The fact that a loan or guarantee is made in violation of this section does not affect the borrower's liability on the loan.
(c) This section does not apply to loans and guarantees authorized by statute regulating any special class of corporations.
As added by P.L.149-1986, SEC.19.

IC 23-1-35-4
Unlawful distribution; liability; contribution
Sec. 4. (a) Subject to section 1(e) of this chapter, a director who votes for or assents to a distribution made in violation of this article

or the articles of incorporation is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating this article or the articles of incorporation.
(b) A director held liable for an unlawful distribution under subsection (a) is entitled to contribution:
(1) from every other director who voted for or assented to the distribution, subject to section 1(e) of this chapter; and
(2) from each shareholder for the amount the shareholder accepted.
As added by P.L.149-1986, SEC.19. Amended by P.L.107-1987, SEC.13.

IC 23-1-35-5
Directors and business opportunities; conflicts of interest
Sec. 5. (a) A director's taking advantage, directly or indirectly, of a business opportunity may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against the director, in a proceeding by or in the right of the corporation on the ground that the opportunity should have first been offered to the corporation, if one (1) or more of the following applies:
(1) The opportunity and all material facts concerning the opportunity then known to the director were disclosed to or known by the board of directors or a committee of the board of directors before the director became legally obligated regarding the opportunity, and the board of directors or committee of the board of directors disclaimed the corporation's interest in the opportunity.
(2) The opportunity and all material facts concerning the business opportunity then known to the director were disclosed to or known by the shareholders entitled to vote before the director became legally obligated regarding the opportunity, and the shareholders disclaimed the corporation's interest in the opportunity.
(b) For purposes of subsection (a)(1), a business opportunity is disclaimed if approved in the manner provided in section 2(c) of this chapter as if the business opportunity were a conflict of interest transaction.
(c) For purposes of subsection (a)(2), a business opportunity is disclaimed if approved in the manner provided in section 2(d) of this chapter as if the business opportunity were a conflict of interest transaction.
(d) In any proceeding seeking equitable relief or other remedies against a director for the director allegedly improperly taking advantage of a business opportunity, the fact that the director did not employ the procedure described in subsection (a) before taking advantage of the opportunity does not create an inference that the opportunity should have been first presented to the corporation or alter the burden of proof otherwise applicable to establish that the director breached a duty to the corporation under the circumstances. As added by P.L.133-2009, SEC.28. Amended by P.L.1-2010, SEC.92.