Business Judgment Rule

The courts have defined the business judgment rule as a presumption that in making a business decision, an officer or a director has acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the corporation. The rule serves to shield an officer or a director from civil liability when sued for a breach or a fiduciary duty, with the highest fiduciary duty owed to shareholders. Such a breach might include self-dealing or a negligent act by an officer or a director. An officer or a director owes a duty of care in making decisions and can be sued for negligence when that duty is breached and causes injury to shareholders. While the ...

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