Directors ‘Liability in Light of Business Judgment Rule, with emphasis on Delaware’s Laws.

Document Type : Research Paper

Authors

1 Assistant Professor, Department of international commercial law, Shahid Beheshti University, Tehran, Iran

2 Ph.D. Candidate in the law of oil and gas, Department of international commercial law, Shahid Beheshti University, Tehran, Iran

Abstract

Business judgment rule refers to the presumption that directors are not responsible for losses that may be suffered as a result of a decision that directors made or authorized in good faith. It protects directors from personal civil liability for the decisions they make on behalf of a corporation, even though the decision proves to be erroneous. This rule is applicable upon an examination of certain preconditions, but prevents courts to second-guess director’s decisions. The basis of this rule lays on the fact that if discretion of management of the company is referred to directors, they must be protected against claims on application of this discretion. Otherwise, management of modern companies is impossible. Therefore, this article examines the standard of liability as business judgment should be regarded as a rule which prevents courts from reviewing directors’ decisions absent grounds breach of fiduciary duties (such as of self-dealing, lack of independence or irrational decisions). This article will discuss emergence and application of business judgment rule in Delaware courts and analyzes the existence of this rule in Iran’s legal system.
 
 

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References

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2-     Paseban, Mohammad Reza, “The law of commercial companies”, Second version, SAMT publications, 2016.
3-     , Sotoudeh Tehran, Hassan, “Commercial law”, volume 2, Dadgostar Publications, 2017.
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Noury Youshanloey, Jafar, Johar, Saeid, “The concept of corporate social responsibility in Germany, France, Britain and Iran with Comparative Approach”
Journal of Legal Studies
Volume 10, Issue 3 - Serial Number 29
November 2018
Pages 131-157

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