The business judgment rule is invoked in lawsuits when a director of a corporation takes an action that affects the corporation, and a plaintiff sues, directly or derivatively (i.e., on behalf of the corporation), alleging that the director violated a duty of care to the corporation.
The business judgment rule is a case law-derived doctrine in corporate law that, within certain bounds, courts will defer to the business judgment of corporate executives.
The business judgement rule gives directors protections from honest mistakes if they act with due care and loyalty. It is inapplicable if directors commit oppression or breach their fiduciary duties, or if the directors stand to gain a personal benefit.
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