The Business Judgement Defence - Insights from ASIC v. Rich

Abstract

In ASIC v Rich Justice Austin provides the first comprehensive judicial analysis of the statutory business judgment defence in s 180(2). The judgment addresses important, mostly unanswered, questions for directors and officers around the use of the business judgment defence: What is a business judgment? Who bears the onus of proof? What is the relationship between the defence and the primary duty of care and diligence in s 180(1)? What is the role of the common law business judgment rule? What does the business judgment defence require? What is the effect of the requirement for a “rational belief”? This article analyses the judgment and extracts some general guidance about how the defence can be usefully applied by managers taking defensible commercial risks.

This is an updated version of a paper of the same title that appeared in Company and Securities Law Journal (2010) 28 Companies and Securities Law Journal 3.

Keywords: Directors’ duties, corporate law, business judgment rule, corporate governance