Dissertation
Dissertation > Political, legal > Legal > Chinese law > Economic Law > Corporate law, company law

The Elements and Application of Business Judgement Rule

Author LiuZuo
Tutor ShenGuiMing
School East China University of Political Science
Course Economic Law
Keywords Corporation Law Business Judgement Rule Director’s Duty of Care Judicial Review
CLC D922.291.91
Type Master's thesis
Year 2010
Downloads 125
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The separation of company ownership and management rights is the inevitable trend of development of market economy. The shareholders and directors not just share the common economic interests but resort to the demands of the balance of interests. On the one hand, the powers of the directors were given more and more, in order to prevent their power-misusing, the law must exercise the necessary regulatory. On the other hand, in order to prevent the generalization of the responsibility,we should protect the directors in order not to ascribe uncertain risks to the directors who have carried out their duties. The Business Judgement Rule(BJR) which formed in the United States case law is the procedural rules of the justice and also the complement of the director’s duty of care.The article is divided into four parts:The first part analysised the content and the rationality of BJR,including the histroy and the trend of the code of BJR. BJR is a judicial review rule which used to determine the violation of the directors duty of care. The conception of BJR is loose and open,which determined by characteristics of case law rule. The reasonableness of BJR lies on the unforeseen risk of business, the different decision-making capacity of directors,the lack of business judgement expertise of judges and the internal demand of management discretion .Part two focused on the elements of BJR. Academia and the courts have a different understanding on the elements of BJR. This article summaried six elements : business judgement,good faith,no conflict interests,to be informed and for the best interests of the company,constitute an objective standard of review. Pave the way for further discussion of the application of BJR.The third part discussed how to apply BJR in general and special enviorment. Although BJR is becoming more and more consummate,some special problem still need to settle down,such as derivative and anti-takeover lawsuits. The court applied the rule in different types of cases with different standards, reflects the flexibility characteristics of BJR as a case law rule.The fourth part discussed on how to complete Corporation Law of China by using the successful experience of BJR for reference,and introduced some suggestions about designing appropriate discipline,they include how to improve the applicable conditions and operation programs of BJR, refine the relevant provisions of the directors duty of care,and also discussed how to improve the pre-procedure of shareholder derivative action.

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