As I and others have pointed out, Nevada leans heavily on its statutes when it comes to corporate governance. Currently, NRS 78.135 provides:
The fiduciary duties of directors and officers are to exercise their respective powers in good faith and with a view to the interests of the corporation.
The analogous provision of the California General Corporation Law provides:
A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.
Cal. Corp. Code § 309(a). Neither statute specifically requires that a director act on an informed basis. But application of the business judgment rule in California likely requires that directors act on an informed basis. See Palm Springs Villas II Homeowners Ass’n, Inc. v. Parth, 248 Cal. App. 4th 268, 286 (2016) ("Permitting directors to remain ignorant and to rely on their uninformed beliefs to obtain summary judgment would gut the reasonable diligence element of the rule and, quite possibly, incentivize directors to remain ignorant."). It is more debatable that Nevada's "good faith" requires a director to act on an informed basis. After all, even an ignorant person might be considered to act in good faith if he or she has an honesty of intention.
The Nevada Legislature is now considering an amendment to NRS 78.135 to add "on an informed basis" after "in good faith". Delaware Supreme Court Justice Henry Ridgely Horsey (the author of Smith v. Van Gorkum, 488 A.2d 858 (Del. 1985). The bill, AB 239, would make numerous other changes to Nevada's corporate laws and I hope to cover at least some of these in future posts.
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