The business judgment rule is a //squeelee.com/ legal doctrine that protects corporate directors and officers from liability for decisions made in good faith. The rule states that directors and officers will not be held liable for their decisions unless they can be shown to have acted in bad faith, with a conflict of interest, or with gross negligence.
The business judgment rule is based on the idea that directors and officers are in the best position to make decisions about the business. They have access to information and expertise that shareholders do not. The rule also recognizes that directors and officers are human and will make mistakes.
To be protected by the business judgment rule, directors and officers must act in good faith. This means that they must act honestly and in the best interests of the corporation. They must also have a reasonable basis for their decisions.
Directors and officers are not protected by the business judgment rule if they act with a conflict of interest. This means that they cannot make decisions that benefit themselves or their friends or family at the expense of the corporation.
Directors and officers are also not protected by the ru business judgmentle if they act with gross negligence. This means that they must have acted with reckless disregard for the interests of the corporation.
The business judgment rule is an important doctrine that protects directors and officers from liability. It allows them to make decisions without fear of being sued. However, the rule is not absolute. Directors and officers who act in bad faith, with a conflict of interest, or with gross negligence can still be held liable.
Here are some additional things to keep in mind about the business judgment rule:
- The rule applies to both directors and officers.
- The rule is not absolute. There are some cases where directors and officers can be held liable for their decisions, even if they acted in good faith.
- The rule is a defense to liability. It does not mean that directors and officers cannot be sued.
- The rule is applied by judges on a case-by-case basis. There is no bright-line rule for determining whether the rule applies.
If you are a director or officer of a corporation, it is important to be aware of the business judgment rule. The rule can protect you from liability, but it is not an absolute defense. If you are sued, you should consult with an attorney to discuss your case.