Business Judgment Rule

Question 1

BJR

Answer 1

Where there are complaints that the directors did not meet their common law or statutory duties, the court will defer to the business judgement of the directors where they have made decisions that were duly diligent and informed in all the circumstances.

• Largely process-based inquiry
• The std is reasonableness, not perfection: if directors acted within range of reasonableness, ct will not substitute its own opinion for that of the BoD [People]
• Reason for deference:
  1) court lacks the expertise to assess all decisions made by d&o
  2) court recognizes that decisions are sometimes made under pressure and may be less than ideal, and do not have the benefit of hindsight [People]
  3) if no deference, SH will sue every time decision turned out sour.

Question 2

UPM-Kymmene Corp v. UPM-Kymmene Miramichi Inc (2004, ONCA)

Answer 2

• Business judgment rule recognizes the autonomy and integrity of a corporation and the expertise of its directors” since they are in the advantageous position of investigating and considering firs-hand the circumstances that come before it and are in a far better position than a court to understand the affairs of the corp
• Decisions are not subject to microscopic examination with hindsight, but are subject to examination