Duty of Candor – Definition

Cite this article as:"Duty of Candor – Definition," in The Business Professor, updated November 23, 2018, last accessed October 20, 2020, https://thebusinessprofessor.com/lesson/duty-of-candor-explained/.


Duty of Candor Definition

In the field of corporate law, the duty of candor refers to a fiduciary duty of a company’s management and board members to disclose all the material information required for evaluating the company and its management, to its shareholders.

A Little More on What is the Duty of Candor

It is a legal provision under state corporate law (and under the Model Business Corporations Act). A company’s management needs to provide all the material information, fully and fairly to its shareholders in the first instance. The board needs to monitor the process. The provision allows the board to rely on the management’s declaration and accept that information as complete and accurate unless they have direct knowledge of any misconduct.

References for Duty of Candor

Academic Research on Duty of Candor

Candor¬†Versus Advocacy: Courts’ Use of Sanctions to Enforce the¬†Duty¬†of¬†Candor¬†Toward the Tribunal, Floyd, D. H. (1994). Ga. L. Rev.,¬†29, 1035. This article provides an overview of the duty of candor towards the tribunal. The ethical standards of candor are introduced, followed by a discussion of the legal sanctions that can be enacted if a violation of that duty is found.

Coming: The New Model Rules of Professional Conduct, Kutak, R. J. (1980). ABA J, 66, 46.

Aerial Boundaries: The Duty of Candor as a Limitation on the Duty of Patent Practitioners to Advocate for Maximum Patent Coverage, Hricik, D. (2002). S. Tex. L. Rev., 44, 205. This article discusses the legal concept of the duty of candor as it relates to patent protection. The author offers a look at the regulatory framework of patent protection, then moves on to the legal duty to offer maximum protection. The actual process of patent application is addressed as it relates to the duty of candor.

Civil Rights Plaintiffs and the Proposed Revision of Rule 11, Tobias, C. (1991). 11. Iowa L. Rev., 77, 1775. This article examines the Federal Rule of Civil Procedure 11 as it relates to civil rights plaintiffs. The author suggests that this rule has had a negative effect on civil rights plaintiffs. Rule 11’s history is discussed, and the current status of the rule is also presented. The author offers recommendations regarding a proposed set of rule revisions.

Legal Fiction of the Unpublished Kind: The Surreal Paradox of No-Citation Rules and the Ethical Duty of Candor, Goering, J., & Entrikin, L. (2005). Seton Hall Cir. Rev., 1, 27. This article examines the seemingly contradictory function of no-citation rules and the ethical duty of candor. The article approaches this issue from a legal standpoint, beginning with an explanation of the concepts involved. Case law and legislation regarding no-citation rules and candor are discussed, and recommendations for the future are offered.

Telling the truth in mediation: mediator owed duty of candor, Meyerson, B. E. (1997). Disp. Resol. Mag., 4, 17. This article discusses the duty of candor as it relates to legal professionals when dealing with a mediator. The article establishes the idea of candor as it relates to lawyers dealing with judges, and then addresses the same concept against the backdrop of proceedings overseen not by a judge, but by a mediator. Legal precedents and current codes of conduct are discussed.

The Lawyer’s Obligation to be Trustworthy When Dealing with Opposing Parties, Hazard Jr, G. C. (1981).¬†SCL Rev.,¬†33, 181. This article from the South Carolina Law Review discusses the lawyer‚Äôs responsibility in communications with opposing parties. The concept of candor and legal responsibility are balanced with duties to the client.

Senior Corporate Officers and the Duty of Candor: Do the CEO and the CFO Have a Duty to Inform, Barclift, Z. J. (2006). Val. UL Rev., 41, 269. This article examines the concept of the duty of candor as it relates to corporate officers. The author seeks to determine the boundaries of this sometimes vague element of corporate responsibility.

Absolute and Perfect¬†Candor¬†to Clients, Johnson, V. R. (2002). Mary’s LJ,¬†34, 737. This article takes a look at the idea of candor as it relates to the fiduciary duty owed to clients by attorneys. Through an examination of modern case law, the author discusses the limitations and expectations of this broadly applicable notion.

What They Don’t Know Can Hurt Them: Corporate Officers’¬†Duty¬†of¬†Candor¬†to Directors, German, S. (2009). Del. J. Corp. L.,¬†34, 221. This article looks at a group of legal cases from Delaware to examine how the duty of candor on the part of corporate directors should be expanded. In light of recent financial scandals, the authors suggest that corporate directors owe a duty to disclose greater levels of information that could alert shareholders to questionable activity and prevent future financial crises.

Agency law inside the corporation: Problems of candor and knowledge, Langwoort, D. C. (2002). U. Cin. L. Rev., 71, 1187. This article questions the fitness of current U.S. regulatory law to provide sufficiently robust regulation to prevent another financial crisis. The author examines the existing legislation heading into the crisis, and then offers a critique of the new legislation passed after the financial crisis of the early 2000s. Recommendations for future attitudes toward corporate communication and reporting are offered.

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