Business Judgment Rule Designed to Shield Directors from Personal Liability

A recent case out of Florida’s Third District discussed the business judgment rule and ultra vires acts. Of importance, the Third District held that the business judgment rule was not required to be raised as an affirmative defense. Hence, the business judgment rule could be relied on notwithstanding a board/manager/director not raising it as an affirmative defense in a lawsuit asserted against them. The business judgment rule is a critical rule for anyone serving on a board to appreciate because it is designed to benefit them, i.e., to shield them for personal liability for their decisions. Without such a rule, who...

12 December

0 Comments

Sticky

(Extract on) Business Judgment Rule

Posted by David Adelstein

in Trial Perspectives

Directors that serve on a board owe a fiduciary duty to their company and members. Directors are generally protected from personal liability for decisions they make by what is known as the business judgment rule. See Fla. Stat. s. 607.0830 (“(5) A director is not liable for any action taken as a director, or any failure to take any action, if he or she performed the duties of his or her office in compliance with this section.”); see also Florida Statute s. 617.0834 (regarding directors that serve on a nonprofit board). These are very important statutes (607.0830 and 617.0834) for...