Personal Liability Protections Afforded to Directors of Iowa Corporations

Iowa law enables Iowa corporations to extend important personal liability protections to their directors.  Specifically, Iowa Code Section 490.202(2)(d) permits corporations to protect directors from personal liability for the directors’ actions and/or omission taken in their capacity as board members.  To this end, Iowa Code Section 490.202(2)(d) permits an Iowa corporation’s articles of incorporation (“Articles”) to expressly eliminate or limit the personal liability of a director to the corporation or its shareholders for money damages.  See Iowa Code Section 490.202(2)(d).

As may be suspected, however, these protection are not absolute.  For example, under Iowa law and as of the date of publishing this post, a corporation cannot eliminate or limit liability for at least the following:

(1)    The amount of a financial benefit received by a director to which the director is not entitled;

(2)    An intentional infliction of harm on the corporation or the shareholders;

(3)    Unlawful distributions (violations of Iowa Code Section 490.833); and

(4)    For any act or omission occurring prior to the date when the provision in the Articles becomes effective.  In other words, the Articles may not retroactively limit and/or eliminate liability.

In addition to the protections afforded under Iowa Code Section 490.202, an Iowa corporation may also provide further protection to directors through indemnification provisions and/or advancement of expenses provisions.  For more information on the various liability protections that may be afforded to directors, you should consider contacting a licensed attorney.

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About Matthew McKinney

Attorney focused on civil and commercial litigation.
This entry was posted in Business Owner, Director, Intra-corporate dispute, Litigation and tagged , , , , , , , , , , . Bookmark the permalink.

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