Virginia
How Cede & Co. v. J. M. B. Realty Corp. applies in Virginia: state-specific rules, key cases, and bar exam notes for Corporate Law.
Virginia law acknowledges the principles established in Cede & Co. v. J. M. B. Realty Corp. regarding the duty of care and fiduciary duties of corporate directors. Virginia courts recognize the business judgment rule, which offers directors latitude in making business decisions as long as they act in good faith and with reasonable care.
In Virginia, directors are expected to exercise their powers in a manner that accords with their fiduciary duties, applying the business judgment rule, which presumes directors act on an informed basis and in good faith.
The court held that directors must demonstrate good faith and a rational basis for their decisions in order to invoke the business judgment rule.
The court emphasized that deference is given to directors' business decisions made in accordance with their fiduciary duties.
The ruling reinforced the idea that shareholders must prove a violation of the fiduciary duty to overcome the business judgment presumption.
Virginia's approach aligns with the Delaware standard of corporate governance, emphasizing directors' discretion under the business judgment rule. While both jurisdictions protect directors from liability for honest mistakes in judgment, Virginia's statutory framework adds specific provisions regarding the resignation and removal processes of directors.
Understanding the fiduciary duties and the business judgment rule as articulated in Cede & Co. is critical for the Virginia bar examination, particularly in questions related to corporate governance.