romothesavior wrote:bk1 wrote:Above, apl said that BJR does not cover duty of loyalty. In my class we were taught that BJR covers both duty of loyalty and duty of care.
See, I don't see how this is right. The types of Duty of Loyalty breaches we learned were self-dealing, corporate opportunities, and good faith (I guess, if I include it under Loyalty). The BJR doesn't apply to these, except under S 144(a) where the majority of the disinterested directors approve the allegedly self-interested transaction. Very strange.
Or maybe I'm wrong.
You are correct. The duty of loyalty is absolutely not protected by the BJR. It's absolutely not. The BJR says that the court will defer to decisions of the directors, the rationale being that the judge doesn't know anything about business so he can't determine whether a businessman took enough care in making X decision. I can't think of an example, but I would bet that there are a lot of decisions that an experienced CEO would make in about 1 second that would appear to a layman like myself to be really hard decisions that would require more thought.
Anyways, a pre-requisite for BJR protection is that there was no fraud, illegality, or conflict of interest (duty of loyalty breach).
The only time the BJR pops up in the duty of loyalty areas is the situation you mentioned. A director can get the board to ratify an interested director transaction under DE 144. The decision of the board to ratify is protected by the BJR.