Definition Of Business Judgement Rule

A rule of law that provides corporate immunity to directors of corporations protecting them from liability for the consequences of informed decisions made in good faith.

Definition of business judgement rule. That is courts assume boards of directors think they are doing the right thing even if an act harms the company in retrospect. 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. 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. The directors and officers of a corporation are.

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. A legal principle that makes officers directors managers and other agents of a corporation immune from liability to the corporation for loss incurred in corporate transactions that are within their authority and power to make when sufficient evidence demonstrates that the transactions were made in good faith. The business judgment rule protects companies from frivolous lawsuits by assuming that unless proved otherwise management is acting in the interests of shareholders. The presumption raised by the business judgement rule may be rebutted by the plaintiff.

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 care to 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 business judgment rule. A rule that immunizes corporate executives from liability concerning their decisions when those decisions are made in good faith with due care and in the best interests of the corporation.