BUSINESS-JUDGMENT RULE

business-judgment rule.Corporations. The presumption that in making business decisions not involving direct self-interest or self-dealing, corporate directors act on an informed basis, in good faith, and in the honest belief that their actions are in the corporation’s best interest. • The rule shields directors and officers from liability for unprofitable or harmful corporate transactions if the transactions were made in good faith, with due care, and within the directors’ or officers’ authority.

[Cases: Corporations  310(1). C.J.S. Corporations §§ 475, 477–484, 487–489.]

“The business judgment rule is a presumption protecting conduct by directors that can be attributed to any rational business purpose. In order to plead and prove a claim, a plaintiff must plead and prove facts overcoming this presumption. Where the presumption is overcome, directors bear the burden of proving the fairness of the challenged conduct. The difference between these two levels of judicial scrutiny — a presumption in favor of directors that protects conduct that is

rational, versus a burden of proving fairness — frequently is outcome determinative.” 1 Dennis J.

Block et al., The Business Judgment Rule 18–19 (5th ed. 1998).[Blacks Law 8th]