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Can Directors Bring Their Personal Advisors To Board Meetings?

A corporate board meeting is fundamentally an opportunity for directors to consider, discuss and make decisions.  Some (most notably Delaware Vice Chancellor J. Travis Laster) have argued that a director's obligations as a fiduciary supports the argument that individual directors generally should be permitted to have their advisors present for board meetings to assist with the discharge of their duties on behalf of the corporation and all of its stockholders.  J. Travis Laster & John Mark Zeberkiewicz, “The Rights and Duties of Blockholder Directors”, 33 Bus. Lawyer at 48 (Vol. 70, Winter 2014/2015).  While this argument might support the advisability of obtaining advice from persons who are not directors, it does not support the notion that an individual director is entitled to have a personal adviser present at a board meeting. 

Decisions by California courts, moreover, support the rule that attendance of persons other than directors is within the discretion of the board (and not individual directors).  See Burt v. The Irvine Company, 224 Cal. App. 2d 50, 36 Cal. Rptr. 270 (1964) (West Virginia corporation); American Center for Education, Inc. v. Cavnar, 80 Cal. App. 3d 476, 145 Cal. Rptr. 736 (1978) (District of Columbia nonprofit corporation); and SB Liberty, LLC v. Isla Verde Assn., Inc., 217 Cal. App. 4th 272, 158 Cal. Rptr. 3d 105 (2013) (nonprofit mutual benefit corporation).

In deciding whether to admit guests into the boardroom, a board might weigh a number of factors, including the number of outsiders (if one director brings his or her attorney, other directors may feel compelled to do so as well); the need to maintain confidentiality of board discussions; a desire to preserve the attorney-client privilege of communications between the board and corporate counsel; and the chilling effect that the presence of outsiders on board discussions.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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