Author Question: What is the definition of the business judgment rule?[br][br][b][color=#FA1639]Question ... (Read 126 times)

TVarnum · **on:** Jun 24, 2018

What is the definition of the business judgment rule?

Question 2

What are some of the advantages for a business to incorporate in Delaware?

mcomstock09 · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

The business judgment rule states that managers are not liable for decisions they make in good faith if (1 ) it is done without a conflict of interest; (2 ) it is done with the care that an ordinary prudent person would take in a similar situation; and (3 ) it is done in a manner they reasonably believe to be in the best interests of the corporation.

Answer to Question 2

Delaware offers corporations several advantages:
Flexible laws that favor management. For example, a Delaware court recently upheld the enforceability of bylaws requiring shareholders who want to sue a Delaware company to do so in Delaware. For a company, defending a lawsuit on its home turf is much more convenient and predictable, not to mention cheaper, than being sued in another state.
An efficient court system. Delaware has a special court called a Chancery Court that hears nothing but business cases and has judges who are experts in corporate law.
A neutral arena. Because very few businesses are actually based in Delaware, it is viewed as being a neutral place in which to try cases. None of the parties has a home court advantage.