Protecting Corporate Directors from Duty of Loyalty Breaches
Like many states, Tennessee allows corporations to include provisions in the corporate charter which limit the personal liability of directors when faced with a shareholder derivative action. [see T.C.A. 48-12-102(b)(3)]. However, this protection only extends to "duty of care" breaches. By statute, corporations cannot insulate directors from liability for "duty of loyalty" breaches, unlawful distributions, or any other act that evidences either bad faith or an intentional or knowing violation of the law. Id.