Corporate malfeasance issues arise in various corporate decision making contexts and can often result in a breach of fiduciary duty. Corporate directors, who have corporate fiduciary duty responsibilities, must make important business decisions on a daily basis and they are generally safeguarded under the law by way of the business judgement rule. The business judgement rule provides corporate directors the presumption that their conduct, or their decisions on the day-to-day business matters, is based on a bona fide regard for the interest of the corporation whose affairs the stockholders have committed solely to the determination of the directors.
Again, the presumption is an important business aspect of what has ultimately come to be known as the business judgement rule. The business judgment rule applies to situations that significantly impact the corporation’s assets as well as to other corporate affairs in general. To further define this rule, the business judgement rule provides “a board of directors enjoys a presumption of sound business judgment, and its decisions will not be disturbed if they can be attributed to any rational business purpose. A court under such circumstances will not substitute its own notions of what is or is not sound business judgement.”
Our Chicago business litigation attorneys often find that shareholders will challenge a corporate directors decisions, especially when these decisions negatively impact the corporation and its profits. In these business situations, the shareholder will have the burden of proving a breach of fiduciary duty under the business judgement rule. However, before any action by a corporation’s board, in the context of enactment of a corporate directors defenses, can fall within the protective scope of the business judgment rule, the corporate directors generally prove the following: