Question

discuss the significance and operation of the business judgement role. ( corporation law)

Answer 1

The business judgement role is a doctrine that aims to protect the board of directors when they have made decisions with due diligence, acted in good faith and in the best interests of the company. The directors are expected to act in an informed manner without breach of their fiduciary duties. The rule does not apply when the directors have acted in a way to gain favors by use of their position, use their position to cause detriment to the company or have indulged in insider trading. The business judgement role provides two types of protection. The first being it protects the directors from being held personally liable for business decisions that gone unprofitable or have been misguided. Second, it does not permit those who disagree with the board's decisions to invoke the power of court to revoke the business decision. Simply put ,the court will not subsitute the decision made the directors if there is enough evidence that it is in the best interest of the company although other stakeholders may not agree. This rule requires courts to respect the business decisions taken by corporate directors.