Disinterested director approval is a significant factor in the determination of the level of judicial review given to corporate transactions under Delaware law. Thus, decisions of disinterested directors, in the first instance, are protected under the business judgment rule, an evidentiary presumption that “in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company [and its stockholders].”[1]�
A stockholder challenging director action can rebut this presumption by showing that the directors breached any one of the “triad” of fiduciary duties: care (the failure to act on an informed basis), loyalty (where a majority of the directors have a material financial interest in the transaction not shared by all stockholders) or good faith. In that event, the burden shifts to the directors to prove that the transaction was entirely fair.
