Prof. CK Low

Interpreting the business judgement rule: a safe harbour for directors?

As the complexity and sophistication of business activities increase with operations extending beyond borders and across industries, so too does the demand on management – especially on boards of directors of companies – to ensure that appropriate standards of corporate governance are implemented and enforced.  However, one must question whether these standards have become so onerous as to disincentivise otherwise qualified individuals from joining corporate boards?

The Companies Act 2016 has as amongst its objectives the modernization and simplification of numerous aspects of company law in Malaysia, and maintains the statutory Business Judgment Rule which ambit remains to be definitively set although the provision was originally enacted a decade ago in 2007.  Commencing with a concise overview of the duties and responsibilities expected of directors, this article enquires – through a review of the approaches in Australia and the United States of America – whether section 214 will afford directors with adequate protection when they are alleged to have breached their duty of care to the company on which board they serve.