Written by Ivana Palacios
UCalgary Law | JD Candidate 2024 There are many duties to which the directors and officers of a company are subject. It is unlikely that the average businessperson is aware of all of them. While this may be of initial concern for a new director or officer, there is good news. There are factors working in favour of directors and officers in Canada. Significantly, one of them is the defense of the Business Judgement Rule.[1] The Duty of Care is one of the fiduciary duties that are owe by directors and officers, the Business Judgement Rule (BJR) provides a defense when this Duty is called into question. In 2004, in what has become known as the People’s case[2], the Supreme Court of Canada officially adopted the BJR. This meant that the courts should give deference to business decisions due to the risk of hindsight bias when considering a decision made in the past. The BJR has three key elements:
The standard by which a board, director, or officer’s decision will be examined is whether it was made prudently and on a reasonably informed basis.[5] The BJR helps directors and officers’ defended decisions made when they are call in to question in hindsight. There are many duties that directors and officers owe and this is only one of the factors working in favour of Directors and Officers in Canada. [1] Bryce Tingle, Start-Up and Growth Companies in Canada, 3rd ed (Canada: LexisNexis, 2018) at 192. [2] Peoples Department Stores Inc. (Trustee of) v Wise, [2004] SCR 461, 2004 SCC 68. [3] Ibid., at para 67. [4] Supra note 1 at 193. [5] Supra note 4.
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