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BUSINESS JUDGEMENT RULE –
SHAKY FOUNDATIONS?
The Business Judgement Rule was introduced as a defence to
breaches of Section 180(1) of the Corporations Act.
Section 180(1) requires that directors and officers of
corporations exercise their powers and discharge their duties
with the degree of care and diligence that a reasonable person
would exercise if the person was a director or officer who
occupied the same position and had the same responsibilities
as the director.
BUSINESS JUDGEMENT RULE –
SHAKY FOUNDATIONS?
Subsection (2) provides that a director or office is taken to have met the
requirements of care and diligence if they:
• Made a business judgement in good faith and for a proper purpose;
• Did not have a material personal interest in the subject matter of the
judgement;
• Informed themselves about the subject matter of the judgement to the
extent that they reasonably believed to be appropriate; and
• Rationally believed that the judgement was in the best interests of the
corporation.
BUSINESS JUDGEMENT RULE –
SHAKY FOUNDATIONS?
Stated objective to
“encourage and afford broad protection to informed business
judgements in order to stimulate risk taking and innovation and
to give directors the confidence to make commercial decisions
on their true merit.” Senator Hill, second reading of the
Introductory Bill).