Using Your Best Judgment: Does The Business-Judgment Rule Protect Me From A Shareholder Oppression Claim?

Those in charge of running a business have countless decisions to make every day. Those decisions are generally protected under Michigan law by the so-called "business-judgment rule." But as numerous recent decisions make clear, the business-judgment rule is not an absolute defense to claims of oppression by minority shareholders, and the business decisions of the majority shareholders and those in control of the corporation remain subject to scrutiny.

In general, courts will not substitute their judgment for that of officers and directors. The reason is obvious: courts are not in the business of interfering in the affairs of corporations and recognize that those in control must have latitude to make decisions they believe are in the corporation's best interest. As a result, under the business-judgment rule, courts refrain from interfering in matters of business judgment and discretion, unless the directors or officers are guilty of willful abuse of their