Re: Re "Why aren't they licensing?"..PTSC as no means to generate revenues Biajj
posted on
Mar 12, 2014 08:09PM
You said
this latest licensing agreement arrangement would not pass Fiduciary muster and would run afoul of the Business Judgement Rule;
I agree and perhaps a court would also agree
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p. 34 of 35
Under the business judgment rule, a plaintiff can challenge directors’ good faith by proving the directors’ ability to make an impartial assessment of the corporation’s best interests was compromised by a direct or indirect financial self-interest. In this circumstance, the burden shifts to the directors to establish that the approved transaction was entirely fair to the corporation. If the transaction is fair, the court infers the directors were able to subordinate their self-interest and base their decision on the best interests of the corporation. If the transaction is not fair, the court reaches the opposite inference—the directors were motivated by self-interest rather than the best interests of the corporation.
In the absence of direct or indirect financial self-interest, the directors enjoy the presumption that their decision was made in good faith. But a plaintiff may place their good faith at issue by showing the substance of the decision itself belies the presumption that the directors acted in good faith. This requires the court to examine the probable result to be achieved by the decision. If it is assumed that a person intends to achieve the likely consequences of his actions, it follows that the board’s motive for making a particular decision can be inferred from the probable outcome to be achieved by that decision. Thus, if the likely outcome of a board decision is to increase corporate value, a court can infer that it was motivated by a good-faith belief that it would serve the corporation’s best interests. Conversely, where the probable outcome of a decision, viewed in light of the facts known to the board at the time the decision was made, has no rational relation to the corporation’s best interests, a court could reasonably conclude that the decision was based on a purpose other than the best interests of the corporation. In other words, it was not based on a good-faith belief that it would serve the corporation’s best interests and thus constitutes a violation of the duty of loyalty. Such a decision would be deemed “irrational” under the traditional business judgment rule.
http://epubs.utah.edu/index.php/ulr/article/viewfile/249/221