The Liability of Company Directors for Business Mistakes : Discussions in (Business Judgment Rule)

Almadni, Ammar

doi:10.63677/jqlap.2026.171485.1603

	The Liability of Company Directors for Business Mistakes : Discussions in (Business Judgment Rule)
AL-Qadisiya Journal For Law and Political Sciences
Article 22, Volume 17, Issue: 1 part 2, June 2026, Pages 481-516 PDF (946.69 K)
Document Type: Research Paper
DOI: 10.63677/jqlap.2026.171485.1603
Author
Ammar Almadni^*
كلية القانون - جامعة القادسية
Abstract
Commercial practices have shown that applying normal liability rules to company directors' decisions can restrict a company's functions and diminish its attractiveness to qualified managers, in addition to negatively impacting the separation of ownership and management. This is because the shareholders would have the power to sue and seek compensation for any business decision made by directors if it failed to increase profits or if they held differing views from management. This could trap companies in a vicious cycle of disagreement and conflict, negatively affecting the company's operations and even its very existence. To address this reality and avoid these potential pitfalls, some legal systems have developed the Business Judgment Rule (BJR), which grants directors significant legal immunity from liability for business decisions made within their defined authority and in accordance with the principles of credit and good faith. The primary objective of this principle is to enable company directors to operate within a secure legal environment, thereby encouraging them to leverage their knowledge and skills to serve the company's best interests. Functionally, it serves as a structural complement to the principle of separation of ownership and management, in addition to its significant contribution to enhancing the objective aspects of commercial decision-making. This principle is a distinctive feature of Anglo-Saxon legal systems,
Keywords
Directors' liability; Business decision; Business Judgment Rule (BJR); Legal certainty; Fiduciary duty

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