Business Judgment Rule


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Business Judgment Rule

In American business law, the concept granting members of the board of directors of a corporation the presumption that they intend to work for the company's profitability, provided they act in good faith. That is, courts assume boards of directors think they are doing the right thing even if an act harms the company in retrospect. This protects members from shareholder lawsuits in the event their actions do not go as planned. On the other hand, if a board of directors is found to have squandered the company's resources by, for example, grossly overpaying when buying or receiving far too little when selling assets, it may still be found legally liable.
References in periodicals archive ?
The business judgment rule is a principle of non-review that assumes, pending plaintiff rebuttal, the decisionmakers in question had an acceptable basis for initiating the transaction in question.
for the introduction of a statutory business judgment rule. (43) As was
Part Two of this Article summarizes the corporate process for reaching a decision to consummate a leveraged transaction, emphasizing traditional corporate law standards for directorial approval and focusing on the business judgment rule as the standard of judicial review.
In dismissing the lawsuit, the Court of Appeals squarely held that the business judgment rule, and not entire fairness, is the appropriate standard where a merger has been conditioned on approval by a disinterested special committee of directors and a majority of the minority shareholders and on other shareholder protections.
The business judgment rule is a standard of review imposed by the courts that presumes directors have fulfilled their fiduciary duty, and a plaintiff must first rebut that presumption in order to prove a breach worthy of remuneration.
Generally, the business judgment rule gives directors and officers some latitude to make decisions that promote a social good as long as there is a purported, believed, or actual connection to the value of the corporation.
In determining whether directors have met the standard of conduct set forth under Florida law, the standard adopted for directors' decision making is the "business judgment rule."
The business judgment rule relies on the presumption that directors are acting in the best interest of the corporation.
(4) Under the director-friendly business judgment rule, the Delaware Supreme Court has expressly forbidden this sort of behavior.
the business judgment rule applies and, if so, how the application of
The business judgment rule that courts apply to refrain from inquiring into corporate disputes is an important factor in undermining the statutory remedy available to non-shareholder groups.
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