Business Judgment Rule

April 28, 2015 by FundingSage -

The legal principle that assumes the board of directors is acting in the best interests of the shareholders unless it can be clearly established that it is not. If the board was found to violate the business judgment rule, it would be in violation of its fiduciary duties to the shareholders.³

Related Terms

Board of Directors | Staggered Board | Super Majority

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Definitioner

HR: Human Relations
Board of Directors: A group of people elected by the company's shareholders (often to the terms of the negotiated Shareholders Agreement) that makes decisions on major company issues, including hiring/firing the Chief Executive Officer.⁷
Related Terms Shareholder's Agreement | Operating Agreement | Staggered Board Related Articles Board Observer Rights: What Are They and Why Are They Important to Investors? 14 Types of Information Investors May Request As Part Of Their Due Diligence Checklist For Your Startup
Business Judgment Rule: The legal principle that assumes the board of directors is acting in the best interests of the shareholders unless it can be clearly established that it is not. If the board was found to violate the business judgment rule, it would be in violation of its fiduciary duties to the shareholders.³
Related Terms Board of Directors | Staggered Board | Super Majority Related Articles Board Observer Rights: What Are They and Why Are They Important to Investors? Where Does An Entrepreneur Find Advisory Board Candidates?