Directors and Officers - Duty of Care

Question 1

There is a rebuttable presumption that a business determination made by a corporation’s board of directors is fully ________ and made in ____ faith and in the best _________ of the corporation.

Answer 1

There is a rebuttable presumption that a business determination made by a corporation’s board of directors is fully INFORMED and made in GOOD faith and in the best INTERESTS of the corporation.

Question 2

May directors of a corporation be liable to shareholders under the business-judgment rule for approving a merger without reviewing the agreement and after only considering the transaction at a two-hour meeting?

Answer 2

Yes. Under the business-judgment rule, a business determination made by a corporation’s board of directors is presumed to be fully informed and made in good faith and in the best interests of the corporation. However, this presumption is rebuttable if the plaintiffs can show that the directors were grossly negligent in that they did not inform themselves of “all material information reasonably available to them.”