Directors are presumed to have acted properly and to have satisfied these three basic duties if the Business Judgment Rule (BJR) applies.  The BJR recognizes that not all decisions of directors will result in benefit to the organization and that directors will be personally liable for loss to the organization only if the elements of the defense are not satisfied.

• Not all decisions may not be beneficial, but can be defended.

To obtain the benefit of this important defense, directors must act in good faith and with a reasonable basis for believing that their conduct is in the lawful and legitimate furthering of the organization's purposes and must exercise their honest business judgment after due consideration of what they reasonably believe to be the relevant factors.  Five elements of the BJR are generally recognized as:

The BJR protects directors against claims for wrongful acts, but not against claims for failure to act. Inaction by directors is protected by the BJR only if it is a result of a conscious decision to refrain from acting.

• Inaction is not a defense, there must be a conscious design not to act

Disinterestedness

The BJR protects directors who are disinterested and independent with respect to the challenged action. For this purpose disinterested directors are those who neither appear on both sides of the transaction nor expect to derive any personal financial benefit from it in the sense of self-dealing, as opposed to a benefit which inures to the corporation or all the stockholders generally.

• Must not appear in disputed transaction at all nor expect to gain an advantage

Due Care

The BJR protects directors if they reached an informed decision after making a reasonable effort to ascertain and consider all relevant information reasonably available to them and after reasonably deliberating the decision.

• Must consider and deliberate all information

Good faith

The BJR protects directors if they acted with a good faith belief that their business decision was in the best interests of the corporation. The protection will not apply if the directors acted solely or primarily to preserve their positions or otherwise to benefit themselves.

• Firmly believe decision was in best interest of the Organization  

No Abuse of Discretion

The BJR protects directors against honest errors of judgment, but does not provide protection for decisions that cannot be supported by some rational basis and are egregious on their face.

• Decisions must be based upon reasonable information

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