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STANDARDS OF CONDUCT

Iowa Code tit. XII, ch. 504, subch. VIII, pt. 3
in effect

Iowa Code § 504.831 General standards for directors.

504.831. General standards for directors. 1. Each member of the board of directors of a corporation, when discharging the duties of a director, shall act in conformity with all of the following: a. In good faith. b. In a manner the director reasonably believes to be in the best interests of the corporation. 2. The members of the board of directors or a committee of the board, when becoming informed in connection with their decision-making functions or when devoting attention to their oversight functions, shall discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances. 2A. In discharging board or committee duties, a director shall disclose, or cause to be disclosed, to the other board or committee members information which the director knows is not already known by them but is known by the director to be material to the discharge of their decision-making or oversight functions, except that disclosure is not required to the extent that the director reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule. 3. In discharging board or committee duties, a director who does not have knowledge that makes reliance unwarranted is entitled to rely on the performance by any of the persons specified in subsection 5, paragraph “a”, to whom the board may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board’s functions that are delegable under applicable law. 4. In discharging board or committee duties, a director who does not have knowledge that makes reliance unwarranted is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by any of the persons specified in subsection 5. 5. A director is entitled to rely, in accordance with subsection 3 or 4, on any of the following: a. One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided by the officer or employee. b. Legal counsel, public accountants, or other persons as to matters involving skills or expertise the director reasonably believes are either of the following: (1) Matters within the particular person’s professional or expert competence. (2) Matters as to which the particular person merits confidence. c. A committee of the board or advisory committee of which the director is not a member, as to matters within the committee’s or advisory committee’s jurisdiction, if the director reasonably believes the committee or advisory committee merits confidence. d. In the case of religious corporations, religious authorities and ministers, priests, rabbis, or other persons whose position or duties in the religious organization the director believes justify reliance and confidence and whom the director believes to be reliable and competent in the matters presented. 6. A director shall not be deemed to be a trustee with respect to the corporation or with respect to any property held or administered by the corporation, including without limit, property that may be subject to restrictions imposed by the donor or transferor of such property. 2004 Acts, ch 1049, §90, 192; 2007 Acts, ch 15, §1; 2012 Acts, ch 1049, §11; 2015 Acts, ch 45, §9

Iowa Code § 504.832 Standards of liability for directors.

504.832. Standards of liability for directors. 1. A director shall not be liable to the corporation or its members for any decision to take or not to take action, or any failure to take any action, as director, unless the party asserting liability in a proceeding establishes both of the following: a. That section 504.202, subsection 2, paragraph “d”, or section 504.901 or the protection afforded by section 504.833 or 504.836, if interposed as a bar to the proceeding by the director, does not preclude liability. b. That the challenged conduct consisted or was the result of one of the following: (1) Action not in good faith. (2) A decision that satisfies one of the following: (a) That the director did not reasonably believe to be in the best interests of the corporation. (b) As to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances. (3) A lack of objectivity due to the director’s familial, financial, or business relationship with, or lack of independence due to the director’s domination or control by, another person having a material interest in the challenged conduct which also meets both of the following criteria: (a) Which relationship or which domination or control could reasonably be expected to have affected the director’s judgment respecting the challenged conduct in a manner adverse to the corporation. (b) After a reasonable expectation to such effect has been established, the director shall not have established that the challenged conduct was reasonably believed by the director to be in the best interests of the corporation. (4) A sustained failure of the director to devote attention to ongoing oversight of the business and affairs of the corporation, or a failure to devote timely attention, by making, or causing to be made, appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need therefor. (5) Receipt of a financial benefit to which the director was not entitled or any other breach of the director’s duties to deal fairly with the corporation and its members that is actionable under applicable law. 2. a. A party seeking to hold a director liable for money damages shall also have the burden of establishing both of the following: (1) That harm to the corporation or its members has been suffered. (2) The harm suffered was proximately caused by the director’s challenged conduct. b. A party seeking to hold a director liable for other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, shall also have whatever burden of persuasion that may be called for to establish that the payment sought is appropriate in the circumstances. c. A party seeking to hold a director liable for other money payment under an equitable remedy, such as profit recovery by or disgorgement to the corporation, shall also have whatever burden of persuasion that may be called for to establish that the equitable remedy sought is appropriate in the circumstances. 3. This section shall not do any of the following: a. In any instance where fairness is at issue, such as consideration of the fairness of a transaction to the corporation under section 504.833, alter the burden of proving the fact or lack of fairness otherwise applicable. b. Alter the fact or lack of liability of a director under another section of this chapter, such as the provisions governing the consequences of a transactional interest under section 504.833 or an unlawful distribution under section 504.835. c. Affect any rights to which the corporation or a member may be entitled under another statute of this state or the United States. 2004 Acts, ch 1049, §91, 192; 2005 Acts, ch 19, §94, 95; 2018 Acts, ch 1136, §6

Iowa Code § 504.833 Director conflict of interest.

504.833. Director conflict of interest. 1. A conflict of interest transaction is a transaction with the corporation in which a director of the corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the corporation on the basis of the director’s interest in the transaction if the transaction was fair at the time it was entered into or is approved as provided in subsection 2. 2. A transaction in which a director of a corporation has a conflict of interest may be approved if either of the following occurs: a. The material facts of the transaction and the director’s interest were disclosed or known to the board of directors or a committee of the board and the board or committee of the board authorized, approved, or ratified the transaction. b. The material facts of the transaction and the director’s interest were disclosed or known to the members and they authorized, approved, or ratified the transaction. 3. For the purposes of this section, a director of the corporation has an indirect interest in a transaction under either of the following circumstances: a. If another entity in which the director has a material interest or in which the director is a general partner is a party to the transaction. b. If another entity of which the director is a director, officer, or trustee is a party to the transaction. 4. For purposes of subsection 2, a conflict of interest transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the directors on the board or on a committee of the board who have no direct or indirect interest in the transaction, but a transaction shall not be authorized, approved, or ratified under this section by a single director. If a majority of the directors on the board who have no direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, a quorum is present for the purpose of taking action under this section. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any action taken under subsection 2, paragraph “a”, if the transaction is otherwise approved as provided in subsection 2. 5. For purposes of subsection 2, paragraph “b”, a conflict of interest transaction is authorized, approved, or ratified by the members if it receives a majority of the votes entitled to be counted under this subsection. Votes cast by or voted under the control of a director who has a direct or indirect interest in the transaction, and votes cast by or voted under the control of an entity described in subsection 3, paragraph “a”, shall not be counted in a vote of members to determine whether to authorize, approve, or ratify a conflict of interest transaction under subsection 2, paragraph “b”. The vote of these members, however, is counted in determining whether the transaction is approved under other sections of this chapter. A majority of the voting power, whether or not present, that is entitled to be counted in a vote on the transaction under this subsection constitutes a quorum for the purpose of taking action under this section. 6. The articles, bylaws, or a resolution of the board may impose additional requirements on conflict of interest transactions. 2004 Acts, ch 1049, §92, 192; 2005 Acts, ch 19, §96, 97

Iowa Code § 504.834 Loans to or guarantees for directors and officers.

504.834. Loans to or guarantees for directors and officers. 1. A corporation shall not lend money to or guarantee the obligation of a director or officer of the corporation. 2. This section does not apply to the situation where the director or officer is a full-time employee of the corporation and involves any of the following: a. An advance to pay reimbursable expenses reasonably expected to be incurred by a director or officer. b. An advance to pay premiums on a policy of life insurance if the advance is secured by the policy’s death benefit proceeds or cash surrender value, or both. c. Advances pursuant to part 5 of this subchapter. d. Loans or advances pursuant to employee benefit plans. e. A loan secured by the principal residence of an officer. f. A loan to pay relocation expenses of an officer. 3. The fact that a loan or guarantee is made in violation of this section does not affect the borrower’s liability on the loan. 2004 Acts, ch 1049, §93, 192; 2015 Acts, ch 45, §10; 2016 Acts, ch 1073, §141

Iowa Code § 504.835 Liability for unlawful distributions.

504.835. Liability for unlawful distributions. 1. Unless a director complies with the applicable standards of conduct described in section 504.831, a director who votes for or assents to a distribution made in violation of this chapter is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating this chapter. 2. A director held liable for an unlawful distribution under subsection 1 is entitled to contribution from both of the following: a. Every other director who voted for or assented to the distribution without complying with the applicable standards of conduct described in section 504.831. b. Each person who received an unlawful distribution for the amount of the distribution whether or not the person receiving the distribution knew it was made in violation of this chapter. 2004 Acts, ch 1049, §94, 192; 2005 Acts, ch 19, §98, 99

Iowa Code § 504.836 Business opportunities.

504.836. Business opportunities. 1. A director’s taking advantage, directly or indirectly, of a business opportunity shall not be the subject of equitable relief, or give rise to an award of damages or other sanctions against the director, in a proceeding by or in the right of a corporation on the ground that such opportunity should have first been offered to the corporation, if before becoming legally obligated respecting the business opportunity, the director brings the opportunity to the attention of the corporation and action is taken by the directors, a committee of the directors, or the members disclaiming the corporation’s interest in the opportunity in compliance with the procedures set forth in section 504.833, as if the decision being made concerned a conflict of interest transaction. 2. In any proceeding seeking equitable relief or other remedy, based upon an alleged improper taking advantage of a business opportunity by a director, the fact that the director did not employ the procedure described in subsection 1 before taking advantage of the opportunity shall not create an inference that the opportunity should have first been presented to the corporation, or alter the burden of proof otherwise applicable to establish that the director breached a duty to the corporation under the circumstances. 2012 Acts, ch 1049, §12
Source: Iowa Legislature (legis.iowa.gov)URL: https://www.legis.iowa.gov/law/iowaCode/sections?codeChapter=504&year=2026Fetched: 10/20/2026

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