Business Judgment Rule Pennsylvania

The question is frequently asked how does the operation of the so called business judgment rule tie in with the concept of negligence.

Business judgment rule pennsylvania. In linde the superior court revisited pennsylvania s longstanding business judgment rule in the context of a closely held corporation lindeco. There is no conflict between the two. The business judgment rule should insulate officers and directors from judicial intervention in the absence of fraud or self dealing if challenged decisions were within the scope of the directors authority if they exercised reasonable diligence and if they honestly and rationally believed their decisions were in the best interests of the company.

Pennsylvania s business judgment rule protects directors and officers of a corporation from liability for business decisions made in good faith. According to alexander the most commonly used precedent in these court cases is thanasoulis v. Under the business judgment rule the officers and directors of a corporation are immune from liability to the corporation for losses incurred in corporate transactions within their authority so long as the transactions are made in good faith and with reasonable skill and prudence.

First developed by courts over a century ago this common law defense prevents courts from second guessing the quality. The business judgment rule has been part of english and american common law on corporations for more than 250 years. The business judgment rule can be a great protection for condo and hoa boards but only if the board is following the documents.

Like any such protection it must be designed to protect others from abuse of the discretion it provides. The business judgment rule attaches to protect officers and directors and the decisions they make 2 the business judgment rule is the first line of defense and often the best protection a company has in an action brought against a director for breach of fiduciary duties. 3 in reality the rule is not so simple.

Winston towers 200 association 110 n j. The business judgment rule under attack the business judgment rule bjr has served for decades as the single most important protection against personal liability for directors and officers. Directors or officers owe to the corpora.

In this case the association established a rule that charged nonresident unit owners those who rent out their unit and do not live in it themselves more for parking than resident unit owners. The declaration for an hoa stated that the board had the discretion to raise the maximum annual assessment without a vote of the homeowners as long as it was in an amount equal to 150 of the rise if any of the cpi for the preceding month of july. However the business judgment rule does not always offer a remedy for a board member if they were to make a mistake.