Business Judgment Research Articles

The Boundaries of Directors' Duty of Diligence: Responsibility Determination from the Perspective of Corporate Decision-Making Mechanism

Although China's Company Law has established a basic framework for the duty of care of directors, there is still a lack of clear and specific standards for the boundaries and responsibility determination of the duty of care under the decision-making mechanism in the specific implementation process. This involves disputes over the allocation of corporate decision-making power and the choice of judgment criteria. The choice should be made based on the company's objective reality. Examining the composition of the elements of responsibility, subjectively it should be gross negligence and non-bona fide, and objectively, when evaluating whether the director has been diligent, one should not simply judge from the outcome, but should delve into the considerations and efforts in the decision-making process to fairly evaluate whether the director has fulfilled their duty of care. The business judgment rule essentially reduces the requirements of the duty of care for directors and serves to block liability. Therefore, the determination of responsibility should be lenient rather than strict. By constructing a scientific, reasonable, and flexible determination mechanism, the optimization and upgrading of corporate governance are promoted.

Business Courts as Loci of Privilege: The Business Judgment Rule Abroad

Abstract Business courts can function as loci of privilege, both institutional and substantive, expressing a clear privileging of business as a sphere of social action. Using an original case study, we show how the establishment of a new business court privileged businesspersons in two ways: by providing them with expert judicial services and by receiving into law a rule that gives them unique protection from liability—the Delaware Business Judgment Rule. We did not find that this reception reflected court capture by businesspersons. It did reflect a conviction that Delaware law is best, inculcated by US-educated academics, and inter-jurisdictional competitive aspirations. Our case study demonstrates how business courts express the structured power of business and businesspersons.

Director’s Fiduciary Duties and the future Corporate Sustainability Due Diligence Directive in the Wake of English Case Law

Climate litigation is on the rise and may raise legitimate questions. As the same issues apply in France and the United Kingdom, a highly instructive English decision provides an opportunity to present the state of play and possible improvements to French law during this period of European normative effervescence marked by constant changes, particularly for stakeholders. In such a context, a French-style Business Judgment Rule would be welcome, with commendable signals recently emerging from the OECD Guidelines on Responsible Conduct for Multinational Enterprise; in such a context, NGO shareholders can play a valuable role as “Big Sisters” if they act in the interests of society as a whole, for the benefit of all its members.

Implementation of the Business Judgement Rule Doctrine as Legal Protection for Directors in Realizing Good Governance of Regionally-Owned Enterprises

<em>The form of BUMD governance as a regional company as regulated in UUPD and PPBUMD consists of Regional Public Companies (Perumda) and Regional Limited Companies (Perseroda). The establishment of Perumda is in the form of regional regulations based on regional needs and the feasibility of the business field of the Perumda to be formed. Perumda is a BUMD whose entire capital is owned by one region only and is not in the form of shares. One of the important organs in a company is the board of directors. The board of directors who control the company in daily activities has the authority to determine policies in carrying out its powers and obligations in managing the company must have good intentions, be responsible, have integrity, be honest, and be highly dedicated to advancing and developing the company. The board of directors is fully responsible personally for the company's losses if the person concerned is guilty or negligent in carrying out his duties. The board of directors can take or carry out actions to facilitate his duties as long as it is within the scope of his duties and obligations and does not conflict with customs, fairness, and propriety. Implementation of the business judgment rule (BJR) doctrine as a form of protection given to directors in carrying out their duties and responsibilities in running the company. Business decisions or actions taken by directors are intended to manage the company professionally according to their expertise to generate profits for the company, even though there are risks from these decisions and actions that can cause losses for the company</em>

Reforming Corporate Compliance Systems in China Under the New Company Law: Lessons from The United States and Japan

This article investigates the construction of an ideal compliance system under China’s new Company Law through a comparative legal analysis. It begins by identifying the existing challenges in China’s compliance framework, particularly the historical dominance of shareholder primacy and the uneven distribution of responsibilities under the previous Company Law. These issues have hindered the development of an effective compliance system, necessitating a reevaluation of corporate governance principles in China. The comparative analysis examines the compliance systems in the United States and Japan, focusing on the frameworks and key elements such as fiduciary duties and the application of the business judgment rule. The study highlights significant differences in how these jurisdictions handle compliance, providing insights into potential improvements for China’s system. This section underscores the importance of adapting international best practices to local contexts to enhance the effectiveness of corporate compliance in China. Finally, the article proposes a dual-level compliance concept tailored to China’s unique legal and corporate environment, integrating both private and public interests. It outlines specific compliance duties for directors, supervisors, and other compliance personnel, emphasizing the need for robust information transmission, whistleblower protections, and temporary management systems. The conclusion calls for a comprehensive and flexible compliance framework that not only ensures corporate profitability but also promotes broader societal welfare, aligning with the evolving goals of corporate governance in China. Keywords: Compliance System, Corporate Governance, Fiduciary Duties, Business Judgment Rule, New Company Law

Analysis Of The State Financial Losses To Subsidiaries Of State-Owned Enterprises In Terms Of Business Judgment Rules

The recovery of financial losses suffered by subsidiaries should prioritize recovery efforts that have a non-punitive nature or without punishing a certain person who is considered responsible for the management of BUMN subsidiaries unless there is intentional unlawful conduct and there are elements of criminal acts in it. In accordance with the principle of business judgment rule, the directors can be exempted, because the directors are considered to have made business decisions in accordance with good faith. In this research, the author uses a descriptive analytical research method, because the author will describe or provide an overview of the object under study through the data collected. The form of research used in this writing is normative legal research, because this research uses legislation and court decisions and also legal norms that exist in society. Researchers also collect data in the form of decisions from the corruption court on corruption cases that harm state finances. Losses arising in subsidiaries of SOEs whose capital is not sourced from the state budget or is not equity participation of SOEs and does not receive or use state facilities, are not included in the State's losses. the role of the business judgment rule if the person commits acts of criminal acts of corruption not due to encouragement or coercion and/or business decisions that are not based on prudence from the directors, the directors will be free from legal liability.

Business Judgment Rule and Corporate Governance as the Strategic Imperative of Indonesian State-owned Enterprise

The business judgment rule in state-owned enterprises can serve as either a protective shield or a boomerang for those involved within the mechanism of corporate governance. As such, this study aims to explore the relationship between good corporate governance and the business judgment rule principle in the context of the integrity and sustainability of directorial decisions amidst the dynamically changing context of a company’s legal responsibilities. Through a juridical normative method employing a conceptual approach, this study finds that good corporate governance cannot determine the implementation of the business judgment rule principle. This means that even though good corporate governance is significant in creating a conducive work environment for a responsible decision-making process, it cannot directly influence the implementation of the business judgment rule in cases involving state-owned enterprises.

Contributory Fault in International Investment Arbitration

As a general rule, if a state commits a wrongful act, it is under an obligation to make full reparation for the injury caused. Yet, arbitral tribunals have used the doctrine of contributory fault to reduce the amount of damages awarded to the investor for the state’s breach of an investment treaty. This article analyses fifteen arbitration cases in which the respondent argued that the claimant contributed to its injury, either as a result of the investor’s bad business judgment or because the investor’s behaviour provoked the state’s wrongful conduct. The analysis shows that arbitral tribunals supported their decisions to reduce the amount of compensation by as much as 50% with strikingly brief reasoning and instead relied on their wide margin of discretion. The article discusses possible avenues to remedy deficiencies in arbitral practice dealing with contributory fault, both through the reform of investor-state dispute settlement and practical solutions that may be adopted by arbitral tribunals when considering allegations of contributory fault.

Application Of The Business Judgment Rule Doctrine To Business Decisions Of The Directors Of The State-Owned Enterprise Persero As A Legal Entity Whose Capital Comes From Separated State Assets

The juridical basis for the application of the business judgment rule principle is a reflection ofthe independence and discretion of the board of directors, where in every decision they make, noparty should be able to interfere with the challenge of their decision, including the court, even iftheir decision causes the company to suffer losses. This is regulated in Article 97 paragraph (5)and Article 104 paragraph (4) of Law no. 40 of 2007 concerning Limited Liability Companies.This provision also applies to State-Owned Enterprises Persero based on Article 1 point 2,Article 11, Article 91 of Law no. 19 of 2003. Apart from that, the Supreme Court has also issuedSupreme Court Fatwa Number WKMA/Yud/20/VIII/2006 which confirms that state assets thathave been separated into BUMN are not state assets and that all provisions and principles applyto BUMN Persero. the principles of limited liability companies regulated in Law no. 40 of 2007concerning Limited Liability Companies. The principles of business judgment rules are applied tothe directors of State-Owned Enterprises Persero if they make business decisions in accordancewith applicable law, namely; Done in good faith, done with the right aim (prosper purpose), thedecision has a rational basis (rational basis), done with due care as would be done by a personwho is careful enough in a similar position, and carried out in a manner that he reasonablybelieves is in the best interest for the company.

Extending dual-class stock: A proposal

Abstract The increasing use of dual-class voting structures in public companies—and the frequency with which such structures contain sunset provisions—raises the issue of when and how such sunset provisions should be modified, extending the company’s use of the dual-class structure. Recent decisions have applied the entire fairness legal standard to dual-class extensions, but, in the recent Trade Desk case, the Delaware Chancery court concluded that the extension complied with the MFW standard and should therefore receive the protection of the business judgment rule. We question the practicality of applying either entire fairness or MFW to dual-class extensions. Instead, we argue for a contractual approach in which the initial charter specifies the conditions under which a dual-class structure can be extended. The contractual approach increases the information available to shareholders at the IPO stage, thereby improving market efficiency. We argue that extensions that comply with such charter provisions should be insulated from entire fairness review.

THE BUSINESS JUDGEMENT RULES ( BJR ) DOCTRINE AS LEGAL PROTECTION AGAINST BOARD OF DIRECTORS IN BUMN

<p><em>This legal writing discusses the implementation of the Business Judgment Rules (BJR) doctrine, in relation to the legal protection of BUMN directors, where in carrying out management of BUMN, when the BUMN experiences losses the directors are deemed to have harmed state finances. In writing this law, it uses a type of normative legal research, with a statutory approach and a conceptual approach. The legal materials used are primary legal materials, namely Law Number 40 of 2007 concerning Limited Liability Companies and Law Number 19 of 2003 concerning BUMN. The research results show that Law Number 40 of 2007 concerning Limited Liability Companies basically regulates the protection of Directors in BUMN companies in protecting the rights of directors through the concept of the Business Judgment Rule doctrine as regulated in Article 97 Paragraph (5) and Article 104 Paragraph (4) Law Number 40 of 2007 concerning Limited Liability Companies. Through the Business Judgment Rule Doctrine, it has provided legal protection for directors of state-owned companies who cannot be held individually responsible for losses to state-owned companies by proving that the losses were not due to the fault or negligence of the directors of state -owned companies, have made business policies in accordance with good faith and the principle of prudence and the absence of personal conflicts of interest when making business policies by BUMN directors.</em></p>

The Business Judgment Rule as a Protective Armor for Directors’ Responsibilities: A Comparative Study Among Mauritius, United Kingdom, and United States

Abstract The business judgment rule (BJR) is a corporate law doctrine that protects a decision of directors from fairness review by a court of law unless there is sufficient evidence that the director has breached his fiduciary duties or that the decision-making process is tainted. Given that the BJR acts as a protective armor for directors as their personal liability is not engaged for a corporate decision irrespective of its outcomes provided that some requirements are satisfied, the purpose of this paper is to critically assess whether directors of Mauritian companies are sufficiently protected and encouraged in the exercise of their duties. To achieve the research objective, the black letter research method was adopted to collect secondary data and a comparative analysis with some other countries’ rules on business judgment was conducted. A desk-based approach and content analysis were used to collect this information. The countries selected for the comparison are the United Kingdom and United States. Mauritian law does not afford protection to directors for decisions taken based on business judgment whereas this research has demonstrated that the laws of other countries being the United Kingdom and the United States as well as their judicial instances both recognize and apply the BJR.

Judicial Review of the Application of Corporate Legal Veil in Malaysia and Indonesia: A Legal Comparison

This study aims to find a comparison of the Legal Corporate Veil between Malaysia and Indonesia. This research is a normative legal research as a literature review. It is found that in corporate law both in Malaysia and Indonesia there is a principle of limited liability between shareholders and company directors known as Separate Legal Entity. This principle essentially asserts that a person's responsibility in a company is limited to their responsibility within the company and does not extend to personal liability. In Malaysia, this regulation is governed by Section 20 of the Companies Act 2016. Meanwhile, in Indonesia, this principle is scattered in the provisions of the Limited Liability Company Act (UU PT) applicable to shareholders, directors, and commissioners. However, this principle may become inapplicable in certain cases, known as Piercing The Corporate Veil. In Malaysia, this is regulated under the Companies Act 2016 as well as several judicial decisions. In Indonesia, this principle becomes inapplicable if shareholders act in bad faith by using the company for personal gain and are involved in legal actions undertaken by the Company. One form of protection from personal liability for Directors and Commissioners is implemented based on the Business Judgement Rule principle. Personal liability does not apply if Directors and Commissioners can prove that the company's loss is not due to their negligence, they have acted in good faith, have no conflict of interest, and have taken action to prevent losses. In this study, there is also corporate responsibility outside the existing Limited Liability Company Law based on business and economic developments decided by The Constitutional Court.

BUSINESS JUDGMENT RULES AND IMPOSITION OF STATE LOSSES ON STATE-OWNED ENTERPRISES WHICH LOSSES DUE TO OWNERSHIP OF AN ASSET SOURCED FROM ACCUMULATION OF PENSION CONTRIBUTIONS

This article aims to examine and analyze the limitations of implementations of Business Judgment Rule and the imposition of state financial losses on State-Owned Emterprise due to losses in asset which is financed by accumulated pension contributions. The problem is focused on the application of the Business Judgment Rule for accumulated pension contributions losses due to ownership of the JMP stand/kiosk in Surabaya and the imposition of state financial losses on that losses. This research is doctrinal legal research which uses interpretive methods to analyze cases of Director’s decision at BUMN X, the results of which are then developed into descriptive analysis. Based on the theory of Business Judgment Rules, State Finances, and State Losses, it is concluded that the loss in Accumulated Pension Contributions from the ownership of the JMP stand/kiosk is not a state loss and BUMN X Directors cannot be blamed for this loss. This research suggests the Director to do the cut loss immediately by selling the 18 stands/kiosks and continuing to encourage the Minister of Finance to issue implementing regulations of Undang-Undang Nomor 4 Tahun 2004 tentang Pengembangan dan Penguatan Sektor Keuangan as a basis for the cut loss.

Application of Business Judgement Rule Doctrine in Case Settlement (Case Study of Corruption Crime of PT Asuransi Jiwasraya (Persero))

As is known in Corporate Law, corporate law experts divide 2 (two) major groups of business entity forms, one of which is a legal entity. Included in this group is the Limited Liability Company (PT) The thing that distinguishes between the two types of business entities incorporated and unincorporated lies in the responsibility of the company owner. In relation to practice, business people are more interested in establishing a business entity in the form of a legal entity, namely a Limited Liability Company ("PT"). The reasons why business people are more likely to choose a PT, namely the continuity of a business entity in the form of a PT does not depend on the personalities of the owners but on the capital accumulated, the separation of responsibilities between the company owner and the company, and because PT can be used as a means to move towards a more liberal and open business. In carrying out the management of a PT, the Board of Directors performs its duties with reference to the principle of good faith. In this case, it is actually difficult to distinguish which actions are actually carried out in good faith and which actions are reasonable in carrying out their duties. In relation to its duties and authorities, the management of the Company carried out by the Board of Directors includes running business activities, controlling, and making business decisions that have an impact on the Company, even though these decisions can cause profits or losses.

The influence of the Business Judgment Rule on the accountability of the Board of Directors for their errors or negligence based on Eisenberg's theory of Director's Accountability

<table border="0" cellspacing="0" cellpadding="0"><tbody><tr><td valign="top" width="406"><p class="TableParagraph"><em>In the business world, the Business Judgment Rule (BJR) is a legal principle that provides protection to directors when making risky business decisions, as long as those decisions are made in good faith, with sufficient care, and without personal interest. Although BJR is not explicitly regulated in Indonesian law, this principle is reflected in the Limited Liability Company Law and considered in the theory of director liability proposed by Melvin Aron Eisenberg. The purpose of this research is to analyze the application of the Business Judgment Rule principle in Indonesian corporate law to protect directors from liability for their mistakes or negligence, and to evaluate its influence on Eisenberg's theory of director liability. This study uses a normative legal research method that examines legal norms to analyze and interpret legal provisions related to the application of the Business Judgment Rule and director liability in Indonesia, as well as examining the influence of Eisenberg's theory on that doctrine. A conceptual approach is used to study the concept of the Business Judgment Rule and Eisenberg's theory of director liability in depth. The research results show that the Limited Liability Company Law in Indonesia regulates the application of the Business Judgment Rule (BJR), which provides protection to directors from liability for risky business decisions as long as they meet the requirements of good faith, due care, no conflict of interest, and efforts to prevent loss. However, BJR protection is not absolute, and directors can be held accountable if they violate corporate governance principles. Melvin A. Eisenberg's theory of director liability provides clearer boundaries, where directors can lose BJR protection if they violate the duty of care, duty of loyalty, duty of good faith, and duty of candor, making them accountable for their mistakes or negligence in business decision-making.</em><strong></strong></p></td></tr></tbody></table>

Analisis Yuridis Penerapan Business Judgement Rules dalam Tindak Pidana Korupsi Yang Dilakukan Oleh Direksi BUMN PT. Asabri Persero (Studi Putusan Nomor 13/Pid.Sus-Tpk/2022/PT.DKI)

Case from PT. Asabri Persero highlighted the important role of BUMN's direction in maintaining company integrity following the principles of Business Judgment Rules (BJR). In the context of BJR, directives have the authority to make business decisions in good faith and rationally, but the case shows alleged violations of integrity and legal compliance by directives, highlighting weaknesses in the company's internal oversight. This research aims to apply the application of the Business Judgment Rule (BJR) in making decisions regarding the direction of BUMN Persero, especially in the context of corruption cases. Normative research methods are used by analyzing legal norms related to BJR and the principles contained therein. The results of the analysis show that the application of the Business Judgment Rule (BJR) in the context of BUMN Persero is important to ensure the sustainability and sustainability of the business. However, in cases of criminal acts of corruption, the application of the Business Judgment Rule (BJR) requires careful adjustments to the principles of transparency, accountability and public interest. In conclusion, the application of the Business Judgment Rule (BJR) in the direction of BUMN Persero's decision-making must be in line with the values ??of integrity and good governance, taking into account the legal consequences that may arise.

Artificial Intelligence in corporate governance: a few inquiries on the (non-)compliance of directors’ duties from a Portuguese law perspective

Abstract It is widely accepted that directors’ duties encompass the duty to prepare and analyse information concerning the company’s business and affairs and market conditions and the duty to monitor and oversee the company’s actual and prospective economic and financial outlook. While exercising the so-called business judgment rule, directors shall question themselves as to whether the information reasonably available at the time a decision is to be made provides sufficient grounds to support it. They also must have in due regard the underlying business rationality of the decision concerned. The issue merits particular attention in the context of companies undergoing economic or financial distress in the vicinity of insolvency. Directors usually resort to assistance from internal staff and external advisors as well as to technological tools for performing managerial activities. There are a number of options of technologies that employ artificial intelligence (AI) and that have shown a high degree of certainty in predicting scenarios of economic or financial distress. However, directors are not exempted from potential accountability for actions taken in breach of their duties by simply employing AI technology. If, how, and to which extent the use of AI in corporate governance will affect the compliance of a director’s duties are questions yet to be addressed.

SUSTAINABLE CORPORATE GOVERNANCE OF AMERICAN SOCIAL ENTERPRISES UNDER THE PRESSURE OF NEW TRENDS

With minimal federal regulation, state legislation and precedent in the United States, the institutional environment for social enterprises, the development of social responsibility of business and sustainable corporate governance has generally been formed. It is distinguished by active support for social initiatives of business, a minimum of administrative barriers and interference in matters of their internal management, and the presence of special legal regimes. At the same time, the economic effectiveness of sustainable corporate governance is not known; its principles are also not enshrined at the federal level, but are implemented through the charters of corporations and social entrepreneurship organizations. The type and specifics of sustainable management depend on the type of organization. They are fully implemented in the organizational and legal forms of SPC and BC. The main problem in implementing the principles of sustainable management by the owners and management of social corporations remains the search for a balance between profit and social interests, including an objective assessment of the level of achievement of the latter. This balance is achieved not by the application of corporate law, which varies from state to state, but by the application of the business judgment rule, based on precedent, which implies a high degree of discretion and the difficulty or even impossibility of an objective assessment. Sustainable corporate governance is under increasing pressure from multidirectional non-economic trends leading to socialization, greening and politicization of business to the detriment of its traditional goals. The American federal, decentralized model of legal regulation of social entrepreneurship does not correspond to the development trends of the Russian legal system, where the trends of centralization of regulation dominate. The American legal model of sustainable corporate governance is implemented mainly in large international corporations, which no longer exist in Russia, which significantly reduces the relevance of the experience.

Business Judgment Rules Regulations by Directors in Indonesia

Business Judgment Rules Regulations by Directors in Indonesia