The duty of loyalty includes a safe harbor when what conditions are met?

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Multiple Choice

The duty of loyalty includes a safe harbor when what conditions are met?

The key idea is that a director can rely on a safe harbor for a potential self-dealing transaction if all material facts are fully disclosed and the transaction is approved by a majority of disinterested directors. Disclosure ensures the board understands the conflict and can evaluate the deal, while approval by directors who have no stake in the outcome provides independent oversight, making it less likely the deal is tainted by loyalty concerns. Together, those steps protect against liability for loyalty violations. The other options don’t combine both elements (disclosure and independent approval) or aren’t relevant to handling conflicts of interest.

The key idea is that a director can rely on a safe harbor for a potential self-dealing transaction if all material facts are fully disclosed and the transaction is approved by a majority of disinterested directors. Disclosure ensures the board understands the conflict and can evaluate the deal, while approval by directors who have no stake in the outcome provides independent oversight, making it less likely the deal is tainted by loyalty concerns. Together, those steps protect against liability for loyalty violations. The other options don’t combine both elements (disclosure and independent approval) or aren’t relevant to handling conflicts of interest.

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