Business law
Business organizations
Common law business forms:
Sole proprietorship
Partnership  · Corporation
General partnership
Business trust
Statutory business forms:
Limited partnership
Proprietary limited company
Public limited company
Limited liability partnership
Limited liability company
Civil law corporate forms:
AB  · AG  · GmbH  · K.K.
N.V.  · OY  · S.A.  · A/S
Doctrines
Corporate governance
Limited liability  · Ultra vires
Business judgment rule
De facto corporation and corporation by estoppel
Piercing the corporate veil
Related areas of law
Contract  · Civil procedure

The business judgment rule is a case law-derived concept in Corporations law whereby a court will refuse to review the actions of a corporation's board of directors in managing the corporation unless there is some allegation of conduct that (1) violates (a) the directors' duty of care, (b) duty of loyalty, or (c) duty of good faith; or (2) that the decisions of the directors lacks a rational basis. Courts often analyze the rational basis requirement as part of the director's duty of good faith. Image File history File links Scale_of_justice. ... Commercial law or business law is the body of law which governs business and commerce and is often considered to be a branch of civil law and deals both with issues of private law and public law. ... Business organizations or Business Associations is an area of law that covers the broad array of rules governing the formation and operation of different kinds of entities by which individuals can organize to do business. ... This article concerns the common-law legal system, as contrasted with the civil law legal system; for other meanings of the term, within the field of law, see common law (disambiguation). ... A Sole proprietorship is a business which legally has no separate existence from its owner. ... In the common law, a partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which they have all invested. ... A corporation is a legal person that exists quite separately from the natural persons who work with and for it. ... This article needs to be wikified. ... An income trust is an ownership vehicle for certain assets or businesses. ... Statutory law is written law (as opposed to oral or customary law) set down by a legislature or other governing authority such as the executive branch of government in response to a perceived need to clarify the functioning of government, improve civil order, answer a public need, to codify existing... A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). ... A Proprietary limited company or abbreviated as under Australian law is a business structure that has at least one shareholder with a limited number of shares. ... The initials plc after a UK or Irish company name indicate that it is a public limited company, a type of limited company whose shares may be offered for sale to the public. ... Limited liability partnerships (LLP) are a form of business organization combining elements of partnerships and corporations. ... A limited liability company (denoted by L.L.C. or LLC) is a legal form of company offering limited liability to its owners. ... Civil law is a codified system of law that sets out a comprehensive system of rules that suck are applied and interpreted by judges. ... Aktiebolag is the Swedish term for a corporation, i. ... The German term Aktiengesellschaft (IPA /aktsiəngəzεlʃaft/) (abbreviated AG) means a corporation which is limited by shares, , owned by shareholders. ... Gesellschaft mit beschränkter Haftung (GmbH or GesmbH) is a type of legal entity created in Germany in 1892. ... The kabushiki kaisha (Jp. ... The term Naamloze Vennootschap (usually abbreviated NV) is the Dutch terminology for a public limited liability company. ... Osakeyhtiö, directly translated as share corporation, is the Finnish equivalent of Limited company (Ltd or LLC) or Gesellschaft mit beschränkter Haftung (GmbH). ... S.A. is the abbreviation of Société Anonyme in French, Spółka Akcyjna in Polish, Sociedad Anónima in Spanish, Sociedade Anónima in Portuguese, or Naamloze Venootschap (N.V.) in Dutch, generally designating corporations in various countries. ... An aksjeselskap is the Norwegian term for a stock-based corporation. ... Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. ... Limited liability (LL) is liability that is limited to a partner or investors investment. ... Ultra vires is a Latin phrase that literally means beyond the power. ... De facto corporation and corporation by estoppel are both terms that are used by courts to describe circumstances in which is a business organization that has failed to become a de jure corporation (a corporation by law) will nonetheless be treated as a corporation, thereby shielding shareholders from liability. ... The corporate law concept piercing (Lifting) the corporate veil describes a legal decision where an officer, director, or shareholder of a corporation is held liable for the debts of the corporation despite the general principle that those persons are immune from suits in contract or tort that otherwise would only... A contract is a promise or an agreement that is enforced or recognized by the law. ... Civil procedure is the body of law that sets out the process that courts will follow when hearing cases of a civil nature (a civil action). These rules govern how a lawsuit or case may be commenced, what kind of service of process is required, the types of pleadings or... Case law (precedential law) is the body of judge-made law and legal decisions that interprets prior case law, statutes and other legal authority -- including doctrinal writings by legal scholars such as the Corpus Juris Secundum, Halsburys Laws of England or the doctinal writings found in the Recueil Dalloz... Corporations law or corporate law is the law concerning the creation and regulation of corporations. ... A court is an official, public forum which a sovereign establishes by lawful authority to adjudicate disputes, and to dispense civil, labour, administrative and criminal justice under the law. ... It has been suggested that Board of Trustees be merged into this article or section. ... In law, a duty of care is the legal requirement that a person exercise a reasonable standard of care to prevent injury of others. ... A conflict of interest is a situation in which someone in a position of trust, such as a lawyer, a politician, or an executive or director of a corporation, has competing professional and/or personal interests. ...

In effect, the business judgment rule creates a strong presumption in favor of the Board of Directors of a corporation, freeing its members from possible liability for decisions that result in harm to the corporation. In short, it exists so that a Board will not suffer legal action simply from a bad decision. As the Delaware Supreme Court has said, a court "will not substitute its own notions of what is or is not sound business judgment" (Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984)) if "the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company."(Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971))

The rationale for the rule is the recognition by courts that, in the inherently risky environment of business, Boards of Directors need to be free to take risks without a constant fear of lawsuits affecting their judgment.

The presumption raised by the Business Judgment Rule may be rebutted by the plaintiff. Typically, defensive actions that are: based on threats that are unreasonably perceived, unproportional to the perceived threat, or "cram a management alternative down shareholder's throats will successfully defeat presumption of the business judgment rule.