Disproportional Application of the Commercial Judgment Rule and its Effects on Corporate Governance and Minority Shareholder’s Rights

Articles in Press

Document Type : Research Paper

Authors

1 department of law. AZARBAIJAN SHAHID MADANI UNIVERSITY

2 Master's degree student in private law, Shahid Madani University of Azerbaijan

10.22099/jls.2026.55322.5444

Abstract

The Business Judgment Rule, as one of the fundamental principles of corporate law, plays a significant role in protecting managers during the process of making business decisions. This rule, aimed at reducing unnecessary judicial intervention and creating an environment conducive to managerial risk-taking, has been applied in various legal systems. However, the asymmetric application of this rule in companies with ownership structures comprising controlling and minority shareholders poses serious challenges to the rights of minority shareholders. This situation leads to reduced judicial protection for minorities, increased risks of self-dealing and managerial abuses, and weakens transparency and oversight.

The present study analyzes the historical background, elements, and reasons for the adoption of the Business Judgment Rule, the harms resulting from its asymmetric application, and its impact on minority shareholders’ rights. The findings indicate that to maintain a balance between protecting managers and safeguarding minority rights, it is necessary to strengthen transparency, enforce stricter standards in cases of conflicts of interest, establish independent supervisory bodies, and expand shareholder exit rights. These measures can improve corporate governance and enhance the trust of minority shareholders.

Keywords

Main Subjects

Journal of Legal Studies

Articles in Press, Accepted Manuscript
Available Online from 27 April 2026

Files

Share

How to cite

Statistics