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Appointed/hired by directors to manage day-to-day decisionsHave broad duties of care & loyalty to directorsEmployeesWorkersBusiness Judgment RuleMakes directors & managers immune from liabilityWhen problems result from honest mistakes in judgmentIf there was a reasonable basis for their decisionsIf they acted in good faithYoung woman working in officeKovacs-Whaley v. Wellness Solutions, Inc.In Lewis on Behalf of Citizens Sav. Bank & Trust Co. v. Boyd, 838 S.W.2d 215 (Tenn. Ct.App. 1992), this court discussed the business judgment rule as follows: Tennessee's courts have consistently followed a noninterventionist policy with regard to internal corporate matters. They have recognized that directors have broad management discretion. Chism v. Mid-South Milling Co., 762 S.W.2d 552, 556 (Tenn.1988) (discretion in employing or discharging corporate officers); Wallace v. Lincoln Sav. Bank, 89 Tenn. 630, 636, 15 S.W. 448, 449-50 (1891). Accordingly, they have declinedto substitute their judgment for that of a corporation's board of directors when the board has acted in good faith and in the exercise of honest judgment in the lawful andlegitimate furtherance of corporate purposes. French v. Appalachian Elec. Coop., 580Page 12S.W.2d 565, 570 (Tenn. Ct. App.1978); Range v. Tennessee Burley Tobacco Growers Ass'n, 41 Tenn. App. 667, 675, 298 S.W.2d 545, 549 (1955), cert. denied, 355U.S. 813, 78 S.Ct. 11, 2 L.Ed.2d 30 (1958).Kovacs-WhaleyThese decisions squarely align Tennessee with the jurisdictions recognizing and following the "business judgment rule." Levine v. Smith, 591 A.2d 194, 197-98 (Del.1991); Auerbach v. Bennett, 47 N.Y.2d 619, 419 N.Y.S.2d 920, 926, 393 N.E.2d 994, 999-1000 (1979); 3A W. Fletcher, Cyclopedia of the Law of Private Corporations §1039 (rev. perm. ed. 1986); Dennis J. Block, Stephen A. Radin & James P. Rosenzweig, The Role of the Business Judgment Rule in Shareholder Litigation at the Turn of the
Decade, 45 Bus.Law. 469, 489-90 (1990) ("Block, Radin & Rosenzweig"). Thus, like other courts following the business judgment rule, we presume that a corporation's directors, when making a business decision, acted on an informed basis, in good faith,and with the honest belief that their decision was in the corporation's best interests. Spiegel v. Buntrock, 571 A.2d 767, 774 (Del.1990); Zapata Corp. v. Maldonado, 430 A.2d 779, 782 (Del.1981).Lewis, 838 S.W.2d at 220-21.Business Judgment RuleNot applicable to breach of Duty of Loyalty claimsWhat does “acting on an informed basis” mean?Board Member X asks internal accountant to prepare a valuation for the board to consider when it votes on a transaction.Problems?Termination of the Corporation(Dissolution)VoluntaryApproval of the shareholders and the Board of DirectorsArticles of Dissolution are filed with the stateInvoluntaryThe state dissolves itSometimes due to fraud in the establishment of corporation or bankruptcy of the corporation“Wind up” business to pay creditors and disburse profits to shareholdersRefer to “Mad at Each Other? . . .” (lawsuit dismissed; disagreement was “nothing more than a business dispute”)Professional Corporations (PCs)