§ 7.4.3

• Jurisdiction: Arizona

§ 7.4.3 Officers, Directors, and Promoters

Because of their managerial responsibilities and their control of the flow of information to shareholders and potential investors, special common-law duties govern officers and directors.

Directors²¹⁴⁷ and officers²¹⁴⁸ owe fiduciary duties to their corporation and in some circumstances to shareholders.²¹⁴⁹ These duties create affirmative-disclosure obligations in transactions in which officers or directors seek shareholder action.²¹⁵⁰ The insider status of these corporate executives also creates affirmative-disclosure responsibilities when they purchase stock from existing shareholders.²¹⁵¹ Fiduciary duties apply too when corporate promoters solicit investments in corporations.²¹⁵² Apart from fiduciary- disclosure responsibilities, corporate officers and directors, like other participants in business transactions, are required to avoid actively misleading other parties.²¹⁵³ Material facts needed to avoid half-truths and false impressions must be disclosed.²¹⁵⁴

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Notes:

^[2147] See Atkinson v. Marquart, 112 Ariz. 304, 306, 541 P.2d 556, 558 (1975); Hatch v. Emery, 1 Ariz. App. 142, 146, 400 P.2d 349, 353 (1965).

^[2148] See Dooley v. O'Brien, 226 Ariz. 149, 154 ¶¶ 18-19, 244 P.3d 586, 591 (Ct. App. 2010) (recognizing that both officers and directors have fiduciary duties to shareholders); see also Gantler v. Stephens, 965 A.2d 695, 708-09 (Del. 2009) ("[C]orporate officers owe fiduciary duties that are identical to those owed by corporate directors."); Paul Graf, A Realistic Approach to Officer Liability, 66 Bus. Law. 315 (2011) (arguing that officers should not be subject to a higher duty of care than directors); Lyman Johnson & Robert Ricca, Reality Check On Officer Liability, 67 Bus. Law. 75 (2011) (disagreeing with Graf and arguing that officers should be subject to a...