The Business Judgment Rule - Explained

The video discusses the duties of officers and directors to a corporation, focusing on the duty to act in good faith and the duty of care. It explains the business judgment rule, which protects officers and directors from liability if they act in good faith, even if their actions are negligent. However, if they breach their duty of loyalty, the business judgment rule does not apply, and they may be liable for harm to the corporation.

What is one of the primary duties of officers and directors to the corporation?

• To prioritize shareholder interests over the corporation

• To avoid making any business decisions

• To act in good faith

• To maximize personal profit

Under the business judgment rule, when are officers and directors protected from liability?

• When they prioritize personal gain

• When they act in good faith with the corporation's best interest

• When they ignore the corporation's interests

• When they act with malicious intent

What is required for an officer or director to be liable under the business judgment rule?

• Making a decision that results in profit

• Consulting with shareholders before acting

• Acting with complete disregard for potential harm

• Following the advice of legal counsel

What happens if an officer or director breaches their duty of loyalty?

• They are given a warning but no further action is taken

• They are rewarded for their honesty

• They are automatically protected by the business judgment rule

• They may face liability as the business judgment rule does not apply

Which of the following is NOT a duty of officers and directors?

• Duty of care

• Duty of loyalty

• Duty to act in good faith

• Duty to prioritize personal interests