The Spanish and the European Codification of the Business Judgment Rule

Different Model Acts and national approaches to the Business Judgment Rule, some by means of its codification, others through the requirements to be considered when delimiting the directors’ responsibilities, have tried to give a better orientation to the positions assumed by directors when they have to deal with business affairs on behalf of the company. Even in cases where there is not a specific section in internal law, the Business Judgment Rule is a common reference in many jurisdictions when the circumstances and elements of directors’ decision-making are considered. In Spain, Law 31/2014, of December 3, to improve corporate governance, has codified the “protección de la discrecionalidad empresarial” in Article 226 of Ley de Sociedades de Capital, assuming the developments of the Business Judgment Rule in other jurisdictions. However, international principles and Model Acts, and other European jurisdictions, such as Germany, do not face codification of the Rule in the same way, and even consider differently requirements for its application. This paper discusses, through the approaches in Comparative law, particularly in other areas where the Business Judgment Rule has a greater tradition, the impact that the codification of the “protección de la discrecionalidad empresarial” may have in Spanish corporate governance. To this end, the paper focuses on the scope of this singular protection on directors’ discretion, as well as on the requirements for its application, which shall serve at last to provide judges with a useful tool to decide on business matters where directors’ responsibility is involved. Comparison with Common Law and more recently with other European approaches is a starting point to critically check whether Spanish systematization avails of the dynamics of the Rule in order to improve and properly coordinate the whole system of corporate governance.