Corporations Flashcards
Business judgment rule
Under BCL, a court will not second guess a business decision made by a director if it was made in good faith, was reasonably informed, and had a rational basis. Directors are not guarantors of success; however, they must act prudently.
Duty of loyalty
Under BCL, a director must act in good faith and with the conscientiousness, fairness, morality, and honesty that the law requires of fiduciaries.
Duty of care
Under BCL, a director must discharge his duties in good faith and with that degree of diligence, care and skill that an ordinary prudent person would exercise under similar circumstances in like position.
Breach of duty of care (nonfeasance)
Under BCL, a director is liable if he breaches his fiduciary duty by failing to discharge the duties he has been assigned and this failure causes a loss to the corporation.
Breach of duty of care (misfeasance)
Under BCL, a director is liable if he breaches his fiduciary duty by failing to discharge the duties he has been assigned in good faith or by failing to utilize sufficient diligence, care, or skill in the discharge of his duties and this failure causes a loss to the corporation.
Corporation
Under BCL, a corporation is a legal entity that is created in accordance with statutes.
Derivative actions
Under BCL, a derivative action is a lawsuit brought by an existing shareholder on behalf of the corporation against the directors, management,or other shareholders of the company. The cause of action is typically grounded on an alleged breach of duty.
