Business Judgment Rule

The business judgment rule mandates a director to perform his/her duties in good faith, in a manner such director believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinarily prudent person in a similar position would in similar circumstances. (Corp. Code § 7231(a)) In following this rule, a director will avoid personal liability for poor decisions. See also Civil Code section 5800.

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