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With proxy season fast approaching, take a look at your bank’s articles of incorporation and bylaws to find out whether there is a limitation of liability provision protecting you.  If not, and if your state law requires language in your articles, you will need to submit the change to shareholders for approval.  Bylaw changes typically only require approval of the board of directors.

By statute, Florida (and perhaps other states) provides a limitation of liability to directors of all corporations, which makes it unnecessary to adopt specific language in the Articles or Bylaws. This broad limitation of liability can be limited by language in the corporation’s articles.

Most states authorize corporations to adopt language limiting personal liability of directors except for certain behavior such as gross misconduct or gross negligence.   See sample language below, which should be tailored to meet the requirements of your state law.

This language can make a huge difference to your risk in case your bank ever fails.  The FDIC sued directors of failed banks in almost 40% of the failures since 2007.  A limitation of liability provision will make such suits more unlikely or more challenging for the FDIC.

Sample Language:

To the fullest extent permitted by _______ statutory or decisional law as the same exists now or may hereafter be amended or interpreted, no director of the Bank shall be personally liable to the Bank or its shareholders for monetary damages for breach of fiduciary duty as a director. Neither any amendment or repeal of this Article _____, nor the adoption of any provision of these Articles of Incorporation inconsistent with this Article ______, shall eliminate or reduce the effect of this Article _______ in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article ______, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.