What is the Duty of Candor?

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.

How Does the Duty of Candor Work?

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 managements declaration and accept that information as complete and accurate unless they have direct knowledge of any misconduct.