An Examination of the Relevance of the Codification and Application of the American Business Judgment Rule to Nigerian Corporate Law

Abstract

<jats:title>Abstract</jats:title> <jats:p>The business judgment rule is an ancient doctrine that was developed in the US. It seeks to prevent courts from reviewing directors’ decisions, on the basis that directors have the capacity and expertise to make business decisions. This article examines the desirability of applying the US business judgment rule in Nigeria. Through a comparative analysis, it argues that the peculiarities of Nigeria's corporate law and environment do not justify the application of the rule. More specifically, it contends that differences in the legal regime for derivative suits, standards of duty of care and skill, corporate law culture, and the distinct epoch in which the business judgment rule and the duty of care and skill were recognized in the US, make its application unnecessary in Nigeria. It concludes that the current statutory duty of care and skill should be retained to hold directors accountable for reckless business decisions.</jats:p>

The Business Judgment Rule in Practice: Evaluating Directors' Decision-Making and its Legal Framework in India

“…Elsewhere, the difference in corporate culture argument was used to justify the non-codification of Business Judgment Rule in Nigeria. 89 It has been argued that when applied to a regime where shareholder primacy approach is present, a codified Business Judgment Rule "will make directors lack the gravitas required for the management of corporations and will encourage moral hazards". 90 This conclusion hints at the fact that codification of the business judgment rule can potentially negatively affect corporate risk taking than encourage it.…”