A director may make business decisions in reliance on information provided to him by legal counsel or public accountants without incurring liability for negligence as long as he:
A)notifies the preparer of the information.
B)reasonably believes that the matters are within the person's professional competence.
C)conducts his own independent investigation.
D)is given a sworn affidavit by the preparer.

Question

Quizplus · Accepted Answer

A director can rely on information provided by legal counsel or public accountants if he reasonably believes that the matters are within the person's professional competence. This is known as the "safe harbor" provision under the Business Judgment Rule. However, if the director has reason to doubt the professional’s competence or relies blindly on the opinion without doing any independent investigation, he may still be liable. Therefore, (C) is incorrect as conducting his own independent investigation is not always required. (A) and (D) are also incorrect as notification or a sworn affidavit alone do not provide sufficient protection from liability.

A Director May Make Business Decisions in Reliance on Information