May A Board Sanction A Director By Withholding Corporate Information?
Thursday, April 7, 2022

A recent Alaska Supreme Court decisions addresses, but does not decide, the question of whether a corporation may punish a director by withholding corporate information.  In Borer v. Eyak Corp., 2022 Alas. LEXIS 37, winning candidate for a seat on the board of directors of an Alaska Native Corporation declined to sign the corporation's confidentiality agreement and code of conduct.  The Code of Conduct included the following provision:

[A] director who breaches the Confidentiality Agreement . . . (demonstrated by a 2/3 vote of the remaining directors) shall not be entitled to review any proprietary or confidential information unless and until the Board determines the breach has been rectified.

The candidate argued that this provision violated his absolute right of inspection as a director pursuant to AS10.06.450(d).  Followers of this blog, will know that California bestows on directors a similar absolute right of inspection in Corporations Code Section 1602.   However, this "absolute" right is not absolute in all cases.  See When Is A Director’s Inspection Right Not Absolute?

The Alaska Supreme Court declined to address the candidate's argument, finding that it was not ripe for decision.  According to the court, the candidate's position was, in effect, that "any person elected to be a director of a corporation may obtain a declaratory judgment that particular corporate governance rules are invalid because they might be abused in specific factual situations that have not occurred yet and may not occur at all".

 

NLR Logo

We collaborate with the world's leading lawyers to deliver news tailored for you. Sign Up to receive our free e-Newsbulletins

 

Sign Up for e-NewsBulletins