---
title: "Duty of Care (Corporate)"
type: Legal Term
source: https://casebriefly.com/legal-terms/duty-of-care-corporate
---

# Duty of Care (Corporate)

The corporate duty of care requires directors to act with the care that a reasonably prudent person would use in similar circumstances and to make informed decisions by considering all material information reasonably available before acting. In Smith v. Van Gorkom, the Delaware Supreme Court held that the Trans Union board breached its duty of care by approving a merger after only two hours of deliberation without reviewing the merger price's fairness or obtaining an independent valuation. A breach of the duty of care subjects the decision to entire fairness review, though many corporations adopt exculpation clauses under statutes like Delaware General Corporation Law Section 102(b)(7) to shield directors from monetary liability for care violations absent bad faith.

## Related Terms

- business-judgment-rule
- duty-of-loyalty
- fiduciary-duty-corporate
- entire-fairness-standard

## Related Cases

- smith-v-van-gorkom
- katz-v-bregman

## Example

When the board approved a $500 million acquisition after a 20-minute presentation with no independent valuation or due diligence, shareholders successfully alleged a breach of the duty of care because the directors failed to inform themselves adequately before making such a consequential decision.

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Source: [Duty of Care (Corporate) — CaseBriefly](https://casebriefly.com/legal-terms/duty-of-care-corporate)