Corporate officers and directors, as well as managers of limited liability companies (LLC), are generally protected from discretionary business decisions. Inevitably, when a suit is filed by a shareholder of a corporation or member of a LLC , the director, officer or manager will assert the business judgment rule as a defense to the lawsuit.
The business judgment rule protects directors, officers and managers from liability for decisions made within the scope of their authority in good faith, uninfluenced by any consideration other than an honest belief that the action promotes the company’s best interests. Virgil Kirchoff Revocable Trust u/a 6/19/09 v. Moto, Inc., 482 S.W.3d 834, 841 (Mo. Ct. App. 2016). On the other hand, decisions showing fraud,, illegal conduct, an act beyone one’s authority (an “ultra vires” act) or an irrational business judgment are not protected by the business judgment rule. Id. at 842. “Ultra vires” acts are boadly interpreted and includes acts prohibited by the charter, articles of organization/incorporation, bylaws, operating agreement and Missouri law. State ex rel. Supreme Temple of Pythian Sisters v. Cook, 136 S.W.2d 142, 146 (Mo. Ct. App. 1940).
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