Question

Should directors and other officers of a company exercise their duties with ‘due care and diligence’? Does the ‘business judgment rule’ protect them if their decisions are not in favour of the company?

Answer 1

As we know that directors and officers are the main employees, those are employed to protect interests of the shareholders in a company. So it is clear that directors and other officers of a company should exercise their duty with due care and diligence.

We know that ‘Due care’ is concerned with “the thought put in to securing business environment by creating policy and procedure to protect it” wheras Digilence associated with the “The effort you put in to making sure those policies/procedures are enforced and utilized.”

Thus it is clear that both due care and diligence is required for fair & proper functioning of a company because without due care and diligence we can not protect & enhance the interests of the shareholders of a company that is why it is true that directors and officers of a company should exercise their duties with ‘due care and diligence’.

It is also true that ‘Business Judgment Rule’ protect them if their decisions are not in favour of the company. Because as per business jufgement rule, directors and other vital officers of the company are protected from the frivolous allegations raised on the directors & officers of the company. That is why it is true that business judgement rule protects directors and officers if their decisions are not in favour of the company.