Legal Updates

In accordance with the Business Discretion Rule, there will be no judicial intervention with regard to wrong decisions that were duly received

September 12, 2018

A company that tried to promote an electric vehicle project and raised huge sums from investors failed after a number of years of operation and the company's liquidators filed a claim against directors and officers.

The Court rejected the claim and ruled that according to the Business Discretion Rule, business decisions received by a company will not be examined on their merits, as long as they are received by the officers in the absence of a conflict of interests, in good faith and in an informed manner. The Business Discretion Rule does not change the norms of conduct applicable to officers, who have been and remain the duty to exercise proper care in managing the Company's affairs (i.e. avoiding negligence). However, the assumption is that in the absence of conflicts of interest, officers are interested in making "correct" business decisions, in light of the incentive system applied to them, including financial incentives paid to them and reputation considerations, and that they have better professional skills than those available to the Court to exercise business judgment. After the Court examined the decision-making process, it dismissed the claim against the officers.