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Limitation Of Liability

Limitation Of Liability Print
The Articles of Incorporation may include a provision eliminating or limiting the liability of a director to the corporation or its shareholders for money damages for any action taken or any failure to take any action as a director, except liability for any of the four acts: 1)  financial benefits received by a director to which the director is not entitled, to the extend of such benefits; 2) any intentional infliction of harm on the corporation or its shareholders; 3) violation of Arizona statute creating liability for unlawful distributions of corporate assets; and 4) any intentional violation of criminal law.  ARS 10-202(B)(1).  The purpose of this statute is to protect directors from liability for actions taken in good faith in which the directors do not receive any improper personal benefit.  The following is an example of a provision that can be placed in the Articles of Incorporation:

Limitation of Director’s Liability: To the fullest extent permitted by the Arizona Revised Statutes, as the same exists or may hereafter be amended, a Director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for any action taken or any failure to take any action as a Director.  No repeal, amendment or modification of this article, whether direct or indirect, shall eliminate or reduce its effect with respect to any act or omission of a Director of the Corporation occurring prior to such repeal, amendment or modification.  This Article shall not eliminate or limit the liability of a Director for any act or omission occurring prior to the date on which this Article becomes effective.  The private property of any Director or Officer shall be forever exempt from all corporate debts and obligations of any kind whatever.