Duty of Candor

5/20/2025 pdw

Would a loyal fiduciary lie to you? Or tell half truths?

The duty of loyalty includes a duty of candor. This applies in two different ways. First, when communicating among each other, directors and officers have an "unremitting obligation to deal candidly" with their fellow fiduciaries. They can't conceal information from each other.

The second situation is when directors and officers are communicating with shareholders. This happens most frequently in the merger context. When asking shareholders to take some action, the directors or officers must disclose all material information. Material in this context means there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.

This section will start with shareholder disclosure cases, then come back to disclosure and candor among officers and directors.

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