5.02 EXPLANATORY: Business Judgment is a legal doctrine that allows business owners to make business decisions without fear of personal liability. The doctrine protects owners from liability for certain decisions made in good faith, as long as they do not breach their fiduciary duties in the process. Types of Business Judgment include strategic decisions, operational decisions, financial decisions, and personnel decisions.
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The business judgment 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, e.g., if the directors stand to gain a personal benefit.
The New Jersey Offer of Judgment Rule permits any party to make an ?offer to take judgment? either in the party's favor (if a plaintiff) or against the offeror (if a defendant).
The business judgment rule provides a director of a corporation immunity from liability when a plaintiff sues on grounds that the director violated the duty of care to the corporation so long as the director's actions fall within the parameters of the rule.
Business Judgement Rule (BJR) is a presumption that directors, by default, act while (1) sufficiently informed, in (2) good faith, and with (3) an honest belief that they have the best interest of the corporation and stockholders in mind.
The business judgment rule protects companies from frivolous lawsuits by assuming that, unless proved otherwise, management is acting in the interests of the corporation and its stakeholders. The rule assumes that managers will not make optimal decisions all the time.
The business judgment rule protects the directors and officers of a corporation from liability for intra vires decisions within their authority and made in good faith, uninfluenced by any consideration other than an honest belief that the action promotes the corporation's best interest.
Courts refer to the business judgment rule when determining whether or not the actions of a board or board member are permissible under the law and under the governing documents of the cooperative in question. The rule is used regularly in other states, as well as in New Jersey.
The Business Judgment Rule 1 Officers and directors must make decisions that they believe, in good faith, to be in the best interests of their companies and must make decisions after appropriate research and due diligence inquiries. The decisions must be the products of appropriate care and thought.