Business Judgment Rule Or Monday Morning Quarterback

This note is the first in our series on "Corporate Governance for Start-ups and Early-Stage Companies."¹ In this installment, we focus on the corporate law concept commonly referred to as the "business judgment rule" ("BJR"). To us, the business judgment rule is one of the most important provisions to be enacted in 2023 under the still relatively new Companies Law (Royal Decree No. (M/132) dated 01/12/1443H).

The objective of this series is to go beyond what a start-up or early-stage company might typically learn in an accelerator or an incubator to discuss instead some of the legal concepts that often take years for founders/entrepreneurs to grasp (or even learn about).

Generally speaking, the nature and subject matter of these concepts fall within the category of things we refer to as "potential traps for the unwary," which makes learning and understanding them all the more important, especially for entrepreneurs.