What is the business judgment rule?

The rule protects the decision, not the director. Where a board was informed, disinterested, acting in good faith and inside its authority, a court will generally decline to substitute its own judgment even if the outcome was poor.

Each condition is doing work. A decision made with no information, or by a director with an undisclosed interest, or outside the powers the documents grant, falls outside the protection and is judged on its merits.

How strongly the rule applies to community associations varies by state, and some states apply a reasonableness standard to certain categories of decision — enforcement and rulemaking in particular — rather than the deferential corporate standard.