Studies On Business Judgment Rule

The Business Judgment Rule is derived from the legal system of American case law. In accordance with the Business Judgment Rule, a business decision is recognized as a normal one as long as the directors are reasonably informed in making the business decision and make the decision with good faith and for the best interest of the corporation. When such a business decision is subject to challenge, the court will dismiss the claim without assessing the intrinsic value the challenged decision to the corporation. Drawing its attention impartially to the normal risks in commercial activities, the Business Judgment Rule knows well the normal risks from the loss made by the directors fail to perform their obligations, hence, it can tackle the problem related to liability rises out of the decision-making. Therefore, the Business Judgment Rule can not only encourage the directors to make decision boldly for the interests of the company but also keep the directors from doing harm to the company's interests by abusing their power. So the Business Judgment Rule is a very important legal system in the field of American corporate law. In addition, because the Business Judgment Rule has a close relationship with the duty of care, so we can borrow ideas from it and perfect the Chinese corporate law. This is why I selected the"Business Judgment Rule"as the topic of my LL.M thesis and I hope that I can expose its real essence and provide suggestions for the improvement of China's corporate legal system.Besides the preface and the conclusion, the thesis consists of four parts.The first part gives the general survey and the basic rationale of the Business Judgment Rule. Firstly, the author traced the history of evolution of this rule briefly, and introduced the codified sources of the rule in America, such as the mode of the Principles of Corporate Governance: Analysis and Recommendations and the mode of the Model Business Corporation Act. Secondly, the rational basis of the Business Judgment Rule was discussed. In the author's view, the Business Judgment Rule has many merits not only in theory but also in the true life. The second part discussed the relationship between the Business Judgment Rule and Duty of Care. Two contradictory theories hold by both the American scholars and the Chinese scholars were analyzed and criticized. Based on the conclusion, the author put forward the essence of the Business Judgment Rule. The author considered that the Business Judgment Rule is essentially a standard of judicial review on the basis of an assumption, in order to protect the decision making of directors.In the third part, the author summed up the functions and the requirements for application of the Business Judgment Rule. The rule's functions include precluding the judicial review of the substantive merits of the board's decision, balancing the authority and accountability of directors, making the plaintiff shareholder has the strict burden of proof and as a conservator of judicial resources. As for the requirement, the author analyzed it from the aspects of American law, Australian law and Japanese law. In the end of this part, an entirely different perspective on the requirements of the Business Judgment Rule was introduced.In the last part, the author focused on the Revised Corporate Law of China and analyzed the theoretical and the practical significance for China to transplant the Business Judgment Rule, followed by presenting some suggestions to build the Business Judgment Rule in China's codified law and to improve the legislation of China's corporate legal system.The main contributions of this thesis are in three aspects. Firstly, under the discussion of the relationship between the Business Judgment Rule and Duty of Care, the author put forward the essence of the Business Judgment Rule. Secondly, based on the analysis of the requirements in three typical countries, the author indicated an entirely different perspective on the requirements of the Business Judgment Rule. Thirdly, focused on the amendment of the Revised Corporate Law of China, the author suggested to build the Business Judgment Rule in China's codified law by judicial interpretation and corporate charter.