2013 Maryland Code
CORPORATIONS AND ASSOCIATIONS
§ 2-405 - Directors holding over
(a) In case of failure to elect directors at the designated time, the directors holding over shall continue to manage the business and affairs of the corporation until their successors are elected and qualify.
(b) A director not elected annually in accordance with § 2-501(b) of this title shall be deemed to be continuing in office and shall not be deemed to be holding over under subsection (a) of this section until after the time at which an annual meeting is required to be held under § 2-501(b) of this title or the charter or bylaws of the corporation.
§ 2-405 - 1. Standard of care required of directors
(a) In general. -- A director shall perform his duties as a director, including his duties as a member of a committee of the board on which he serves:
(1) In good faith;
(2) In a manner he reasonably believes to be in the best interests of the corporation; and
(3) With the care that an ordinarily prudent person in a like position would use under similar circumstances.
(b) Reliance on information from others. --
(1) In performing his duties, a director is entitled to rely on any information, opinion, report, or statement, including any financial statement or other financial data, prepared or presented by:
(i) An officer or employee of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;
(ii) A lawyer, certified public accountant, or other person, as to a matter which the director reasonably believes to be within the person's professional or expert competence; or
(iii) A committee of the board on which the director does not serve, as to a matter within its designated authority, if the director reasonably believes the committee to merit confidence.
(2) A director is not acting in good faith if he has any knowledge concerning the matter in question which would cause such reliance to be unwarranted.
(c) Liability limited. -- A person who performs his duties in accordance with the standard provided in this section shall have the immunity from liability described under § 5-417 of the Courts and Judicial Proceedings Article.
(d) Limitations of duty. -- The duty of the directors of a corporation does not require them to:
(1) Accept, recommend, or respond on behalf of the corporation to any proposal by an acquiring person as defined in § 3-801 of this article;
(2) Authorize the corporation to redeem any rights under, modify, or render inapplicable, a stockholder rights plan;
(3) Elect on behalf of the corporation to be subject to or refrain from electing on behalf of the corporation to be subject to any or all of the provisions of Title 3, Subtitle 8 of this article;
(4) Make a determination under the provisions of Title 3, Subtitle 6 or Subtitle 7 of this article; or
(5) Act or fail to act solely because of:
(i) The effect the act or failure to act may have on an acquisition or potential acquisition of control of the corporation; or
(ii) The amount or type of any consideration that may be offered or paid to stockholders in an acquisition.
(e) Presumption of satisfaction. -- An act of a director of a corporation is presumed to satisfy the standards of subsection (a) of this section.
(f) No higher acquisition duty. -- An act of a director relating to or affecting an acquisition or a potential acquisition of control of a corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director.
(g) Limitation on enforceability. -- Nothing in this section creates a duty of any director of a corporation enforceable otherwise than by the corporation or in the right of the corporation.
§ 2-405 - 2. Corporate limitations on director liability
The charter of the corporation may include any provision expanding or limiting the liability of its directors and officers to the corporation or its stockholders as described under § 5-418 of the Courts and Judicial Proceedings Article.
§ 2-405 - 3. When director of investment company deemed independent and disinterested
(a) Applicability. -- This section applies to a corporation that is an investment company, as defined by the Investment Company Act of 1940.
(b) Director disinterested. -- A director of a corporation who with respect to the corporation is not an interested person, as defined by the Investment Company Act of 1940, shall be deemed to be independent and disinterested when making any determination or taking any action as a director.
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