Business Judgment Rule S180 2

A part of the corporations law the business judgment rule s180 2 was introduced as a safe harbour defence of s180 1.

Business judgment rule s180 2. S180 1 duty s180 1 care and diligence a director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they. The business judgment rule in section 180 2 of the corporations act relates to the director s duties of care and diligence. Business judgment rule s180 2 business judgment rule bjr o the director makes the business judgment in good faith for a proper purpose o has no material interest in the subject matter of the decision avoid conflicts of interest o informed themselves as to the subject matter o rationally believe the business judgement is in the best interests of the company s180 3 defines a.

The business judgment rule is a defence that directors can seek to rely on in the face of claims that they did not act with care and diligence. His analysis in respect of director mr olney fraser is worth noting. The business judgment rule justice beach discussed the conduct of each of the 3 directors.

In 2000 when the clerp act 1999 came into effect part of predecessor legislation to the corporations act. Corporations and the business judgment rule recent lessons for all company directors some recent well publicised cases have resulted in significant adverse consequences for directors. Business judgment rule 2 a director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection 1 and their equivalent duties at common law and in equity in respect of the judgment if they.

The first requirement of the rule is that there must be a business judgment. It is rooted in the principle that the directors of a corporation. The business judgment rule is a case law derived doctrine in corporations law that courts defer to the business judgment of corporate executives.

Under the rule a director can argue that they made a business judgment with sufficient care and diligence if they. A were a director or officer of a corporation in the corporation s circumstances. To be a business judgment there must be a decision to take or not to take action in respect of matters.

Are clothed with the presumption which the law accords to them of being motivated in their conduct by a bona fide regard for the interests of the corporation whose affairs. It outlines the requirements a director or officer must fulfill when they make any judgment related to their business. In this bulletin we draw some conclusions to assist directors in their ability to rely on the business judgment rule.