ETHICS OPINION 410-1952

ETHICS OPINION 410

NUMBER 410 JUNE 1952

Question. A owns 25 percent of the issued and outstanding capital stock of a corporation, the certificate of incorporation of which provides for cumulative voting and for four directors who need not be stockholders, B is A’s personal attorney. The corporation encounters financial difficulties, leading to the conclusion that it should be liquidated to avoid further losses to creditors or to the stockholders. As yet, the corporation is solvent. At the last annual election A did not vote his shares and no person designated by him presently sits on the board of directors.

A now receives a notice of a special meeting of the stockholders for the purpose, among other things, of electing a new board of directors of the corporation; considering the financial affairs of the corporation, a determination of the question of whether to continue its corporate existence or to elect to dissolve it. In view of the importance of the meeting and the corporate problems which will probably ensue, A is desirous that B, his attorney, become a member of the board of directors, and therefore, suggests that at the meeting A will nominate B as a director and will vote his shares so that B is elected as a director.

Is it unprofessional for B to accept such a directorship under any of the Canons of Professional Ethics pertaining to attorneys? In undertaking such directorship, may it be said that B is representing conflicting interests which, under any of the Canons, should induce him to refuse to accept such directorship?

Answer. In the opinion of the Committee, B may accept the directorship provided there be, at the time, no conflict of interests between A and the corporation, and provided further, that B’s relationship to A is disclosed to the board. If, at any time while B is A’s attorney, such a conflict should arise, it would become B’s duty immediately to resign as director or terminate his attorney-client relationship with A.