When Can Corporate Officers and Directors Be Held Personally Liable in Florida?
As a general rule, high ranking corporate officers, directors and other prominent officials are not held personally liable for the acts (or debts) of a corporation. To put a finer point on it, a corporate official is not personally responsible for the wrongdoing of the company simply because of their position at the firm. That being said, in certain cases, corporate officials can be held personally liable. Here, our West Palm Beach business litigation attorneys provide an overview of when a corporate officer or director might lose their legal liability shield.
When Misconduct Can Lead to Personal Liability
Officers and directors can always be held personally liable for any tortious conduct that they have engaged in, even if that conduct is expressly within the scope of their employment. In broad terms, the phrase ‘tortious conduct’ simply refers to a wrongful act. More specifically, corporate officers may be subject to personal liability in three different types of scenarios:
- Fraudulent acts: First and foremost, officers and directors may be held personally liable if they engage in illegal activities. Most often, this occurs in the form of fraud. The corporate liability shield does not provide protection for those who participate in criminal or fraudulent acts. If a corporate official intentionally misleads investors, lies to regulators, embezzles funds or willfully commits any other type of unlawful act, then they may be subject to criminal penalties and/or civil liability.
- Breach of fiduciary duty: In certain cases, corporate officers and directors might also be held personally liable for negligent conduct in their professional capacity. To be clear, personal liability for negligence is subject to a much higher standard than it is for unlawful acts. This is because Florida operates under the Business Judgment Rule (BJR). The BJR provides considerable discretion to corporate officers and directors. If their decision was at all ‘reasonable’, they cannot be held liable for it, even if it was extremely ill-advised. That being said, liability for negligence is still possible. For example, in a Florida case from 2004 (Estate of Canavan v. National Healthcare Corp.), a nursing home home director was held personally liable for the negligent care.
- Misuse of the corporate form: Finally, corporate officials can also potentially be held liable in cases where the court decides to ‘pierce the corporate veil’. Essentially, courts will only do this if they believe that the stakeholders of a company are trying to intentionally take advantage of the corporate form. For example, if a court concludes that a company’s sole purpose is to be a ‘shell’ to protect its stakeholders from creditors or other parties, then the corporate veil may be pierced.
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At Pike & Lustig, LLP, our knowledgeable business law attorneys have extensive experience handling officer and director defense cases. If you are facing potential personal liability for your role in managing a company, please contact our team for immediate legal assistance. From our main office in West Palm Beach and our new office in Miami, we handle cases throughout South Florida.