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:

  1. Acted in good faith,
  2. With the care that a reasonably prudent person would exercise in a like position, and
  3. In a manner reasonably believed to be in the best interest of the corporation.
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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:

  1. The director disclosed the material facts of the transaction to disinterested members of the board or shareholders, who approved the transaction, or
  2. The transaction was fair to the corporation.
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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:

  1. Received a benefit to which he was not entitled,
  2. Intentionally inflicted harm on the corporation or its shareholders,
  3. Approved unlawful distributions, or
  4. Intentionally committed a crime.
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