Reference no: EM131628214

Basic Products Corp. has five directors on its board. Basic owned vacant land that it had purchased several years ago as the site for a new factory. Basic no longer planned to build a factory on that land. The directors of Basic asked the corporation President to obtain an appraisal of the property. The president obtained the appraisal from a qualified appraiser, who appraised the property for $50,000. At a board meeting, the directors reviewed the appraisal and voted 5-0 to sell the property. Susan, Basic's vice president of marketing, was present at the meeting and told the directors that she was interested in purchasing the land for the $50,000 appraised value, noting that Basic would not need to pay a commission to a real estate broker, which would net more money for Basic. The board agreed and voted 5-0 to sell the land to Susan.

The sale to Susan was completed and the sale was mentioned in Basic's next shareholder meeting. Brice, a shareholder, believed that the property was worth more than $50,000 and sued the directors for breach of their duty of due care.

Explain how the court would determine if the directors satisfied their duty of due care, including a discussion of how the business judgment rule may apply.