Corporations Flashcards
1
Q
What is the business judgment rule?
A
The business judgment rule is a presumption that a director’s decision may not be challenged if the director:
- Acted in good faith,
- With the care that a reasonably prudent person would exercise in a like position, and
- In a manner reasonably believed to be in the best interest of the corporation.
2
Q
Can a transaction be set aside merely because a director had a personal interest in the transaction?
A
A transaction cannot be set aside merely because a director had a personal interest in the transaction if:
- The director disclosed the material facts of the transaction to disinterested members of the board or shareholders, who approved the transaction, or
- The transaction was fair to the corporation.
3
Q
Can a corporation’s articles of incorporation limit the directors’ personal liability for money damages for actions taken?
A
A corporation’s articles of incorporation may limit or eliminate directors’ personal liability for money damages to the shareholders or corporation for actions taken, except to the extent that the director:
- Received a benefit to which he was not entitled,
- Intentionally inflicted harm on the corporation or its shareholders,
- Approved unlawful distributions, or
- Intentionally committed a crime.