Still a sleepy hollow? Directors’ liability and the business judgment rule

LexisNexis Australia
Publication Type:
Journal Article
Australian Journal of Corporate Law, 2017, 31 (3), pp. 319 - 343
Issue Date:
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The statutory business judgment rule was introduced in Australia in 2000 after a lengthy process of consultation and debate. The rule was aimed at alleviating fears that directors may have that their commercial decisions made in good faith and for the benefit of the company would be subject to second guessing by the courts through litigation alleging a breach of the duty of care and diligence. Since 2000 there have been only a few decisions that have discussed the rule, giving credence to the prediction that it would be a sleepy hollow rather than a safe harbour. Fifteen years on, the rule was recently successfully relied upon for the first time in ASIC v Mariner (2015) but in circumstances where a breach of duty of care was not proven. Significantly, the rule remains a hot topic for public debate with the AICD and Dr Robert Austin proposing amended business judgment rules. This article reflects on the past 15 years of the statutory business judgment rule and assesses the case for law reform advanced by the private sector.
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