
Because these lawsuits are civil torts as opposed to criminal cases, your punishment – if any – will be monetary. The court will decide whether or not your small business is liable for your client's financial losses. If your business is liable, the court’s next decision will be how much money you owe the other party to make them “whole.”
Full Answer
How does the business judgment rule work in corporate lawsuits?
In suits alleging a corporation's director violated their duty of care to the company, courts will evaluate the case based on the business judgment rule.
What is the business judgment rule in Delaware?
The business judgment rule is a judicial doctrine arising from courts’ respect for corporate self-governance, as well as their dislike for second-guessing the business decisions of corporate directors and officers. The business judgment rule has been described in Delaware case law as follows:
Can the presumption raised by the business judgment rule be rebutted?
Rationale. The presumption raised by the Business Judgment Rule may be rebutted by the plaintiff. "The business judgment rule is a presumption that in making a business decision, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.
Can a court substitute its own notions of sound business judgment?
As the Delaware Supreme Court has said, a court "will not substitute its own notions of what is or is not sound business judgment" if "the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company."

What are the three elements of the business Judgement rule?
Under this standard, a court will uphold the decisions of a director as long as they are made (1) in good faith, (2) with the care that a reasonably prudent person would use, and (3) with the reasonable belief that the director is acting in the best interests of the corporation.
Can the business judgment rule be used as a defense to allegations of the breach of the duty of care and the duty of loyalty?
The business judgment rule is a defense to allegations of breach of the duty of care but not the duty of loyalty, which also cannot be waived under Delaware Code Section 102(b)(7). Stone v.
What is the business Judgement rule and why do we have it?
The business judgment rule protects companies from frivolous lawsuits by assuming that, unless proved otherwise, management is acting in the interests of the corporation and its stakeholders. The rule assumes that managers will not make optimal decisions all the time.
What is the business judgment rule South Africa?
The 'business judgment rule' protects directors who make informed decisions in relation to their business, but which decisions do not necessarily result in the best outcome for a company. Directors' duties in South Africa are found in the Act as well as in the common law.
What are the exceptions to the business judgment rule?
The Business Judgment Rule does not apply where there is proof of: Fraud or bad faith. Gross negligence. Conflict of interest.
Which of the following is not covered by the business judgment rule protecting business management like corporate directors and officers?
The business judgment rule accomplishes all of the following EXCEPT: totally protects managers from all liability.
What is an example of business Judgement rule?
An example of the Business Judgement Rule The board of directors acting on the duty of loyalty and the duty of care ultimately decide on ceasing the production of the failing product line and completely discontinuing the failing product line all at once.
How does the business judgment rule operate?
The Business Judgment Rule prescribes the requirements that directors must comply with in arriving at a decision. Once these requirements are met, the court will not inquire into the merits or correctness of the decision and deference is accorded to the decision.
Is the business judgment rule an affirmative defense?
The business judgment rule is not an affirmative defense, therefore it would not be proper to instruct the jury that the defendant would not be liable if his actions were “merely negligent, imprudent, or unwise.” Rather, negating the business judgment rule is part of the plaintiff's case, and the specific basis must be ...
What are the duties of officers and directors with respect to the business Judgement rule?
The Business Judgment Rule [1] Officers and directors must make decisions that they believe, in good faith, to be in the best interests of their companies and must make decisions after appropriate research and due diligence inquiries. The decisions must be the products of appropriate care and thought.
Is it possible to unhinge corporate governance from the law?
Good governance is not something that exists separately from the law and it is entirely inappropriate to unhinge governance from the law. The business judgment rule,2 has found its anchor in the new Companies Act 71 of 2008.
Does business judgment rule apply to duty of loyalty?
3d 719 (7th Cir. 2013) the court stated that if a director breaches the fiduciary duty of loyalty, the business judgment rule affords no protection.
What sort of legal protection is offered to directors and officers by the business judgment rule?
Under the business judgment rule, the officers and directors of a corporation are immune from liability to the corporation for losses incurred in corporate transactions within their authority, so long as the transactions are made in good faith and with reasonable skill and prudence. The rule originated in Otis & Co. v.
What does the business Judgement rule encourage quizlet?
-It protects officers and directors from lawsuits against shareholders, encouraging the directors to take higher risk/higher reward choices in the interest of the company.
Will the directors other than major be protected from liability by the business judgment rule explain?
The directors (other than Major) will not be protected from liability by the business judgment rule because they did not exercise adequate care when they failed to seek and receive sufficient information about the transactions. Directors owe a duty of loyalty and a duty of care.
What is the business judgment rule?
The business judgment rule (Rule), the most prominent and important standard of judicial review under corporate law, protects a decision of a corporate board of directors (Board) from a fairness review (“entire fairness” under Delaware law) unless a well pleaded complaint provides sufficient evidence that the Board has breached its fiduciary duties or that the decision making process is tainted, such as with a lack of independence or interestedness. [1] Yet, anyone who has had the opportunity to teach corporate law understands how difficult it is to provide a compelling explanation of why the Rule is so important.
Why is equity restrained?
This requires equity to be restrained in order to have balance with Board authority as provided by statutory law. The courts do this by applying the Rule as a tool to determine when a Board decision should stand without further review or when an entire fairness review is required and the full force of equity is to be applied.
Can a fiduciary be breached in a fairness review?
An entire fairness review is not allowed unless there is evidence that a fiduciary duty has been breached or taint surrounds the decision making process. If no breach or taint is found, then review is halted and the decision stands, upholding the Board’s statutory authority to manage the corporation. The result is that the Rule serves as ...
What is business judgment rule?
The business judgment rule is a judicial doctrine arising from courts’ respect for corporate self-governance, as well as their dislike for second-guessing the business decisions of corporate directors and officers. The business judgment rule has been described in Delaware case law as follows:
What is the rule of business judgment in Orman v. Cullman?
Parkinson, 727 F.3d 719 (7th Cir.2013) (The business judgment rule establishes a presumption that in making a business decision the directors of a corporation acted on an informed basis, in food faith and in the honest belief that the action taken was in the best interests of the company.).
What is the burden of rebutting a business judgment?
To rebut the rule, a shareholder plaintiff assumes the burden of providing evidence that directors, in reaching their challenged decision, breached any one of the triads of their fiduciary duty – good faith, loyalty or due care. If a shareholder plaintiff fails to meet this evidentiary burden, the business judgment rule attaches to protect corporate officers and directors and the decisions they make, and our courts will not second guess these business judgments. If the rule is rebutted, the burden shifts to the defendant directors, the proponent of the challenged transaction, to prove to the trier of fact the “entire fairness” of the transaction to the shareholder plaintiff.
What is Ravenswood Investment Company v. Estate of Winmill?
Ravenswood Investment Company, L.P. v. Estate of Winmill, 2018 WL 1410860 (Del.Ch.) did not specifically deal with the business judgment rule , but discussed the duty of loyalty. Here, the complaint alleged that the defendants breached their fiduciary duties in two respects. First, they granted overly generous stock options to themselves (as Company officers). Second, they caused the company both to forgo audits of the company’s financials and to stop disseminating information to the company’s stockholders in retaliation for plaintiff’s assertion of its inspection rights pursuant to 8 Del.C § 220.
What is the business judgment rule in Lemington Home for Aged?
In In re Lemington Home For Aged, 659 F.3d 282 (3rd Cir.2011), the court noted that the business judgment rule is based on the assumption that reasonable diligence has been used in reaching the challenged decision. In attacking this assumption, a party might consider the following factors: (i) was the board disinterested; (ii) was the board assisted by counsel; (iii) did the board prepare a written report; (iv) whether the board was independent; (v) whether the board conducted an adequate investigation; and (vi) whether the board rationally believed its decision was in the best interests of the corporation. Id. at 292 (quoting Cuker v. Mikalauskas, 547 Pa. 600, 692 A.2d 1042, 1046 (1997).)
What is grossly negligent decision making?
Such egregiousness must ordinarily be manifested in a grossly negligent decision-making process – usually a failure to include consideration of all material information reasonably available. In other words, the plaintiff must establish that the board’s decision was uninformed. More globally, the court stated, therefore, that the business judgment rule does not apply if the board (i) committed fraud, corporate waste, engaged in self-dealing, made decisions affected by a conflict of interest, acted in bad faith or with corrupt motive, or breached the duty of due care by having reached their decision by a grossly negligent process that includes the failure to consider all material facts reasonably available. Id.
Does the business judgment rule protect self-dealing?
The business-judgment rule, therefore, does not operate to protect self-dealing by directors and officers. Davis v. Dorsey, 495 F.Supp.2d 1162 (M.D.Ala.2007). “In other words, if the defendant has engaged the corporation in a conflicting-interest transaction or has usurped a corporate opportunity, the business judgment rule will not bar a claim based on the duty of care.” Id. at 1176. According to In re Farmland Industries, Inc., 335 B.R. 398, 411 (Bankr.W.D.Mo.2005) the business judgment rule has a circularity – an officer’s or director’s good faith and informed action is presumed unless it is shown that the questioned transaction was not made in good faith or with due care, i.e., in an informed manner. Therefore, to survive a motion to dismiss based on the rule, a plaintiff must allege fraud, the lack of good faith motive or that the business decision cannot be attributed to any rational business purpose. See also Davis v. Dyson, 900 N.E. 2d 698 (Ill.App.1 Dist.2008) where the court noted that it is a prerequisite to the application of the business judgment rule that the directors exercise due care in carrying out their corporate duties. “If the directors fail to exercise due care, then they may not use the business judgment rule as a shield for their conduct.” Id.
What Is the Business Judgement Rule?
Under the business judgement rule, the board of directors of a corporation is given the freedom to conduct business and is protected from the courts digging into their business deals or decisions due to unfair or unwarranted allegations.
What would happen if the business judgement rule wasn't in place?
If the business judgement rule wasn't in place, the desire for equity between the interests of shareholders and the power of the board could cause the company's leadership to make decisions based on fear of legal action from the shareholders rather than on the what's best for business. If directors are always worried about being sued, ...
Why do courts run fairness reviews?
A court could decide to run a full fairness review if they find good reason to set aside the business judgement rule and look into the decisions that were made. In such a case, equity will come into play in full force. There is no place for fairness under the business judgement principle, so fairness reviews are only carried out if it has been shown that the principle does not apply.
What is the difference between equity and business judgement?
This provides a balance between the two sides of a company. Equity is on the side of the shareholders, while the business judgement rule is on the side of the leadership. Each principle working to provide a healthy relationship between the two sides and therefore a healthy company.
What is the principle of business judgement?
As the most important and well-known rule in corporate law, the business judgement principle protects corporate decisions that are made in good faith. If a director or board does act outside of the best interest of the company in a way that breaches the fiduciary duty put upon them, a well-argued case must be brought.
Can a court prosecute a director for his or her decisions?
Under the business judgement rule, a court will not prosecute a director for his or her decisions if it can be shown that they were made: Rationally. In good faith. With the understanding that they were acting in a way that was good for the business.
Is there a place for fairness under the business judgement principle?
There is no place for fairness under the business judgement principle, so fairness reviews are only carried out if it has been shown that the principle does not apply. The business judgement rule does not apply under the following circumstances: Breach of fiduciary duties. Business decisions were tainted or coerced.
What is business judgment rule?
The business judgment rule is a case law -derived doctrine in corporations law that courts defer to the business judgment of corporate executives. It is rooted in the principle that the "directors of a corporation... are clothed with [the] presumption, which the law accords to them, of being [motivated] in their conduct by a bona fide regard for the interests of the corporation whose affairs the stockholders have committed to their charge". The rule exists in some form in most common law countries, including the United States, Canada, England and Wales, and Australia.
What is the presumption of a business judgment?
"The business judgment rule is a presumption that in making a business decision, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. Thus, the party attacking a board decision as uninformed must rebut the presumption that its business judgment was an informed one." Further, rebuttal typically requires a showing that the defendants violated duty of care or loyalty (with courts assuming director's good faith otherwise).
What is the prohibition against self interest transactions?
Consequently, over time, one of the points of review that has entered the business judgment rule was the prohibition against self-interest transactions. Conflicting interest transactions occur when a director, who has a conflicting interest with respect to a transaction, knows that she or a related person is (1) a party to the transaction; (2) has a beneficial financial interest in, or closely linked to, the transaction that the interest would reasonably be expected to influence the director's judgment if she were to vote on the transaction; or (3) is a director, general partner, agent, or employee of another entity with whom the corporation is transacting business and the transaction is of such importance to the corporation that it would in the normal course of business be brought before the board.
Why do boards of directors need to be free to take risks?
The rationale for the rule is the recognition by courts that, in the inherently risky environment of business, Boards of Directors need to be free to take risks without a constant fear of lawsuits affecting their judgment. The presumption raised by the business judgement rule may be rebutted by the plaintiff.
What does the Delaware Supreme Court say about sound business judgment?
As the Delaware Supreme Court has said, a court "will not substitute its own notions of what is or is not sound business judgment" if "the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.".
Where does the rule of law exist?
The rule exists in some form in most common law countries, including the United States, Canada, England and Wales, and Australia.
Do directors have to veto a business judgment?
All directors must have the option of vetoing the decision . Frequently, the winning cases for plaintiffs involving the business judgment rule involve acts constituting corporate waste. Also, note that some Board decisions lie outside the business judgment rule.
What is the tax rule for settlements?
Tax Implications of Settlements and Judgments. The general rule of taxability for amounts received from settlement of lawsuits and other legal remedies is Internal Revenue Code (IRC) Section 61 that states all income is taxable from whatever source derived, unless exempted by another section of the code. IRC Section 104 provides an exclusion ...
What is employment related lawsuit?
Employment-related lawsuits may arise from wrongful discharge or failure to honor contract obligations. Damages received to compensate for economic loss, for example lost wages, business income and benefits, are not excludable form gross income unless a personal physical injury caused such loss.
What is the exception to gross income?
For damages, the two most common exceptions are amounts paid for certain discrimination claims and amounts paid on account of physical injury.
Is a settlement agreement taxable?
In some cases, a tax provision in the settlement agreement characterizing the payment can result in their exclusion from taxable income. The IRS is reluctant to override the intent of the parties. If the settlement agreement is silent as to whether the damages are taxable, the IRS will look to the intent of the payor to characterize the payments and determine the Form 1099 reporting requirements.
Is emotional distress excludable from gross income?
96-65 - Under current Section 104 (a) (2) of the Code, back pay and damages for emotional distress received to satisfy a claim for disparate treatment employment discrimination under Title VII of the 1964 Civil Rights Act are not excludable from gross income . Under former Section 104 (a) (2), back pay received to satisfy such a claim was not excludable from gross income, but damages received for emotional distress are excludable. Rev. Rul. 72-342, 84-92, and 93-88 obsoleted. Notice 95-45 superseded. Rev. Proc. 96-3 modified.
What happens if you fail to include identification and establishment language in your settlement agreement?
If they fail to do so, they may forfeit their ability to claim a deduction for those payments.
What is restitution in the new rule?
The new rule outlines enhanced requirements and greater definitional guidance on what qualifi es as “restitution,” “remediation,” and “coming into compliance with a law ,” particularly when it comes to environmental matters.
What is the first amendment to the EPA?
Historically, settlement agreements entered between private parties and a governmental agency, such as the Environmental Protection Agency (EPA), have included a provision that prohibits the defendant from deducting any fines or penalties paid under the agreement when calculating their federal income taxes. The first amendment to § 162 (f), which was published in 2017 and generally applies to orders and agreements entered between December 22, 2017 and January 18, 2021, opened the door to deductibility but lacked clarity in the details and process for claiming the deductions. The new rule, however, provides important direction as to what expenses are potentially deductible by outlining novel requirements for what a taxpayer must do to qualify for a deduction, including deductions for environmental restitution, remediation and compliance. In publishing the changes to § 162 (f), the IRS simultaneously published an amendment to § 6050X requiring increased governmental reporting obligations related to the deductions.
Is a settlement agreement deductible?
This means that, generally, monies paid pursuant to a court order or settlement agreement with a government entity are not deductible. However, the 2017 Tax Cuts and Jobs Act (TCJA) amended § 162 (f) to allow deductions for payments for restitution, remediation, or those paid to come into compliance with a law.
Is the identification requirement sufficient to meet the establishment requirement?
The rule specifies that meeting the identification requirement is not sufficient to meet the establishment requirement, and vice versa. Rather, each requirement must be independently satisfied. The “identification” requirement requires the taxpayer to provide a court order or agreement that identifies a payment by stating the nature of, ...
Can you deduct a court order?
This means that, generally, monies paid pursuant to a court order or settlement agreement with a government entity are not deductible. However, the 2017 Tax Cuts and Jobs Act (TCJA) amended § 162 (f) to allow deductions for payments for restitution, remediation, or those paid to come into compliance with a law. Yet, in the years following the amendment to § 162 (f), taxpayers were left with several questions about what was and was not deductible.
What was the settlement agreement with Tuscany Hotel and Casino?
On October 10, 2012, the Department of Justice issued a press release announcing a settlement agreement with Tuscany Hotel and Casino resolving a lawsuit alleging the company discriminated against certain non-U.S. citizen s during the employment eligibility verification and reverification processes by requesting those individuals to provide more or different documents or information than required under Form I-9 rules based on their citizenship status. Under the terms of the settlement agreement, Tuscany agreed to pay a civil penalty of $49,000 to the government and full back pay to an economic victim. Tuscany will also receive OSC-sponsored training regarding the anti-discrimination provision of the INA, be subject to reporting and monitoring requirements, and will revise its employment eligibility verification procedures.
What is the settlement agreement with National Systems America?
On January 14, 2021, the Division signed a settlement agreement with National Systems America, LP (NSA) to resolve claims based on its independent investigation into whether the company engaged in discrimination based on citizenship status in the hiring and employment eligibility verification processes in violation of 8 U.S.C. § 1324b (a) (1) (B) and (a) (6). The company recruits employees using a foreign company as its agent, and directly hires them to perform IT work for NSA clients. IER’s investigation concluded that the company (1) engaged in a pattern or practice of recruiting and hiring only U.S. citizens or U.S. citizens and lawful permanent residents for certain positions without legal justification, in violation of 8 U.S.C. § 1324b (a) (1) (B); and (2) on numerous occasions, requested copies of Permanent Resident Cards to confirm the citizenship status and work authorization of candidates who identified themselves as lawful permanent residents during the applicant screening process, in violation of 8 U.S.C. § 1324b (a) (6). Under the settlement agreement, the company will pay a civil penalty of $34,200 to the United States and train its employees on the requirements of the INA’s anti-discrimination provision, and be subject to departmental reporting requirements.
What is the settlement agreement with Adaequare?
(Adaequare) to resolve an independent investigation into whether the company engaged in citizenship or immigration status discrimination in violation of 8 U.S.C. § 1324b (a) (1) (B). IER’s investigation concluded that the company, which recruits workers for other entities, engaged in discrimination in the hiring or recruitment/referral for a fee processes by considering only applicants who were U.S. citizens and lawful permanent residents when filling a job for a client. Under the settlement agreement, the company will pay a civil penalty to the United States, train its employees on anti-discrimination obligations, and be subject to departmental reporting requirements.
What is the settlement agreement with Chancery Staffing?
On February 18, 2020, the Division signed a settlement agreement with Chancery Staffing Solutions LLC, aka TransPerfect Staffing Solutions , a legal staffing company headquartered in New York, NY. The Division had previously filed a lawsuit in May 2019 alleging that from at least April 4, 2017 to at least July 7, 2017, the company (while operating as TransPerfect Staffing), had implemented a client directive restricting its recruitment and hiring of attorneys for a document review project to U.S. citizens only, and later, to U.S. citizens without dual citizenship. Under the settlement agreement, Chancery Staffing will pay a civil penalty of $27,000, provide back pay to victims identified during the term of the settlement agreement, and participate in Division-provided training on the anti-discrimination provision contained in 8 U.S.C. § 1324b. Chancery Staffing will also obtain supporting documentation from clients that request a citizenship status restriction when staffing a project to help ensure that any such restriction is lawful.
What is the Facebook lawsuit?
citizens, U.S. nationals, refugees, asylees, and recent lawful permanent residents) in its recruitment and hiring practices, in violation of 8 U.S.C. § 1324b (a) (1). The lawsuit alleges that Facebook routinely refused to recruit, consider, or hire U.S. workers for positions that it reserved for temporary visa holders in connection with the permanent labor certification process (“PERM”). The complaint alleges that beginning no later than January 1, 2018 and lasting until at least September 18, 2019, Facebook used recruiting methods designed to deter U.S. workers from applying to positions reserved for temporary visa holders, refused to consider U.S. workers who applied to the positions, and hired only temporary visa holders for the positions.
What is the Ikon settlement agreement?
On December 8, 2020, the Division signed a settlement agreement with Ikon Systems , LLC , resolving claims that Ikon routinely discriminated against U.S. workers (U.S. citizens, U.S. nationals, recent lawful permanent residents , asylees, and refugees) by posting job advertisements specifying a preference for applicants with temporary work visas, and that Ikon failed to consider at least one U.S. citizen applicant who applied to a discriminatory advertisement. Specifically, IER’s investigation found that from at least May 8, 2019, to September 21, 2019, Ikon posted at least eight job advertisements for information technology (“IT”) positions that solicited applications from non-U.S. citizens with immigration statuses associated with certain employment-based visas and, in so doing, harmed U.S. workers by unlawfully deterring or failing to fairly consider them for hire, including the Charging Party. Under the agreement, Ikon will pay a civil penalty of $27,000 to the United States, revise its policies and procedures, train relevant employees and agents on the requirements of the INA’s anti-discrimination provision, and be subject to departmental reporting requirements during the agreement’s two-year term. Separately, Ikon will pay the $15,000 to the Charging Party.
What was the Whiz lawsuit?
On May 30, 2012, the Department of Justice settled a lawsuit against Whiz International LLC (Whiz), an information technology staffing company, resolving allegations that the company discriminated against one of its employees when it terminated her in retaliation for expressing opposition to its alleged preference for foreign nationals with temporary work visas. Under the terms of the settlement, Whiz agreed to pay $21,870 in back pay/front pay to the terminated worker, $1,000 in civil penalties to the United States Treasury, and three years of monitoring and reporting requirements. Whiz will also undergo training by the Department of Justice and has agreed not to discriminate against any employee on the basis of national origin or citizenship status.

Overview
- The business judgment rule is invoked in lawsuits when a director of a corporation takes an action that affects the corporation, and a plaintiff sues, alleging that the director violated the duty of careto the corporation. In suits alleging a corporation's director violated his duty of care to the company, courts will evaluate the case based on the...
Defeating The Business Judgment Rule
- There are a number of ways to defeat the business judgment presumption. If the plaintiff can prove that the director acted in gross negligence or bad faith, then the court will not uphold the business judgment presumption. Similarly, if the plaintiff can prove that the director had a conflict of interest, then the court will not uphold the business judgment presumption.
Burden of Proof
- When the corporation pleads the business judgment rule, if the court finds that the presumption applies, the plaintiff then must prove that the business judgment rule does not apply. However, if the court finds that the presumption does not apply, then the board needs to prove that the process and the substance of the transaction was fair.
Further Reading
- For more on the business judgment rule, see this Florida State University Law Review article, this University of Florida Law Review article, and this New York University Law School Journal of Law & Business article.
Overview
The business judgment rule is a case law-derived doctrine in corporations law that courts defer to the business judgment of corporate executives. It is rooted in the principle that the "directors of a corporation... are clothed with [the] presumption, which the law accords to them, of being [motivated] in their conduct by a bona fide regard for the interests of the corporation whose affairs the stockholders have committed to their charge". The rule exists in some form in most commo…
Basis
Given that the directors cannot ensure corporate success, the business judgment rule specifies that the court will not review the business decisions of directors who performed their duties (1) in good faith; (2) with the care that an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) in a manner the directors reasonably believe to be in the best interests of the corporation. As part of their duty of care, directors have a duty not to waste corp…
Duty of care and duty of loyalty
Although a distinct common law concept from duty of care, duty of loyalty is often evaluated by courts in certain cases dealing with violations by the board. While the business judgment rule is historically linked particularly to the duty of care standard of conduct, shareholders who sue the directors often charge both the duty of care and duty of loyalty violations.
This forced the courts to evaluate duty of care (employing the business judgment rule standard …
Standard of review
The following test was constructed in the opinion for Grobow v. Perot, 539 A.2d 180 (Del. 1988), as a guideline for satisfaction of the business judgment rule. Directors in a business should:
• act in good faith;
• act in the best interests of the corporation;
• act on an informed basis;
Rationale
Under the Delaware General Corporation Law, the business judgment rule is the offspring of the fundamental principle, codified in Del. Code Ann. tit. 8, § 141(a), that the business and affairs of a Delaware corporation are managed by or under its board of directors. In carrying out their managerial roles, directors are charged with an unyielding fiduciary duty to the corporation. The rationale for the rule is the recognition by courts that, in the inherently risky environment of busi…
See also
• Company
• Corporate law
• US corporate law
• UK company law
• German company law
Notes
1. ^ Gimbel v. Signal Cos., 316 A.2d 599, 608 (Del. Ch. 1974)
2. ^ BCE Inc v 1976 Debentureholders, 2008 SCC 69 (CanLII), [2008] 3 SCR 560
3. ^ Companies Act 2006 section 172; Re Smith & Fawcett Ltd [1942] Ch 304
External links
• Companies House in the UK