Prof. Andrew Keay and Prof. Joan Loughrey

Directors’ Business Judgments: Judicial Deferment, Intervention or Both?

Directors make judgments all of the time. There are some judgments that they make that have been classified by courts as business judgments. In some jurisdictions such as the US and Australia, where business judgment rules apply, directors are not liable for their business judgments. The general view appears to be that while a formal business judgment rule does not apply in the UK, UK courts defer to the business judgments of directors. However, there has been no substantial UK study that has investigated that view. This paper examines whether judges in England and Wales do defer to all of the business judgments of directors and if not in what situations do they intervene and hold directors liable for the loss caused by directors’ judgments.