The duty of loyalty requires that the interests of the company and stockholders be placed before personal interests. The duty of loyalty can be violated by actions that divert corporate assets, opportunities, or information for personal gain. In addition, the duty of loyalty can be violated if a director usurps a corporate opportunity by taking advantage of information that could be valuable to the company and instead profits from it personally.

To avoid violations of this duty, directors should disclose personal conflicts they may have with decisions before the board so that a disinterested vote can be taken without them and they should be prepared to present opportunities that are relevant to the corporation to the board before trying to benefit from them personally.

Synonyms:
Fiduciary Duty of Loyalty