The law on business judgment rule in Malaysia: A review

Abstract

Directors are responsible for managing and directing the business and affairs of the company and often face difficult situations to decide. Under the business judgment rule (BJR), the officers and directors of a company are immune from liability to the company for losses incurred in corporate transactions within their authority, so long as the transactions are made for proper purpose and in good faith; no material personal interest; is informed about subject matter; and for the best purpose of the company. The objectives of this paper is to examine the law relating to BJR in Malaysia. In achieving the objectives, pure legal research which involved library research has been conducted. Where necessary, special reference has also been made with the law in United States, Canada and Australia on the BJR. The finding shows that the law regarding BJR in Malaysia has been provided in the Companies Act 2016 which is quite similar with the law in Australia. This article concludes that four conditions as stated in section 214 of the Companies Act 2016 must be fulfilled by the directors before BJR can be used to defend their decision making.