Business Judgment Rule

Question 1

What are the board’s duties of care?

Answer 1

1. act honestly, in good faith, and in an informed manner
2. reasonable
3. directors should reasonably believe that they are acting in the best interest of the corporation

Question 2

What do the board’s duties of loyalty include?

Answer 2

1. avoid self dealing

2. avoid conflicts of interest

Question 3

BJR definition

Answer 3

rebuttable presumption insulating directors’ decisions from judicial scrutiny if they acted in an honest, well-meaning, informed and rational manner

Question 4

To overcome the BJR, shareholder must show

Answer 4

fraud, illegality, or conflict of interest on behalf of the board

Question 5

What does an exculpation clause do?

Answer 5

directors not held personally accountable for just a duty of care