The Business Judgment Rule

question 447

Multiple Choice

The business judgment rule:

• A) is applied when directors of a corporation act negligently
• B) protects directors and managers of a corporation who have made honest mistakes in judgment
• C) is used by courts to impose strict liability on directors and managers when violated
• D) protects directors and managers of a corporation who have made honest mistakes in judgment and is used by courts to impose strict liability on directors and managers when violated
• E) none of the other choices

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Definitions:

Transferable Ownership

The ability to legally transfer the possession or control of something, such as property or shares, from one entity to another.

C Corporation

A legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity.

Laws of Inheritance

The principles that govern the passing of traits from one generation to the next through the transmission of genetic information.

Limited Partnership

A form of partnership where one or more partners have limited liabilities and limited involvement in the day-to-day management, while at least one partner has unlimited liability.