Cheap Pharma Case Study Solution

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PBE Case No. 2

POCKETING THE GREENS________________________________________
Immediate Issue or Problem:
Cheap Pharma Inc. had been suffering for low sales in the past months because of competition from other generic drug brands. Mr. De Guzman and with two other Directors of Cheap Pharma Inc. propose to buy the shares of stocks of Green Med, to use the patents and develop a new product line. Negotiation was ensued and the Board Director s of Cheap Pharma ratified the purchase and passed the resolution binding the company to pay 10 million as consideration for the share.
However, before Cheap Pharma was able to pay the purchase to Green Med, its second largest factory was razed to the ground, hence, the Board Directors
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De Guzman and the other two 2 Directors of Cheap Pharma Inc. had act bad faith in the corporation due to buying the shares of Green Med and divested it for their personal interest? The Board Member should gather information and make proper legal action or through meeting they will finalize what ground they will give for the involved directors.
Associated Issue:
If Mr. De Guzman and the two Directors found guilty of disloyalty, that they have acquire business opportunities by buying the Green Med shares which should belong the corporation and obtained profits for divested shareholdings of the corporation. The Board Directors of Cheap Pharma will account to the involved parties who found guilty of disloyalty or act bad faith in the corporation by refunding the same profit they obtained.
Otherwise, if they found out the Dr. Gonzales, receiver of Green Med, threatened to sue Cheap Pharma Inc in the event they cannot able to meet its obligation and the 3 directors decided to buy the shares of Green Med to help the corporation, its means they had made a good faith for interest of the corporation.
Issue Analysis or Information Summary:
Under the Corporation Code in the Philippines stated the following fiduciary duties of Directors, listed
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De Guzman and the two directors done a fraudulent or bad faith on their duty as directors of Cheap Pharma Inc. for buying the share of Green Med without filling a new resolution with the approval of Board Directors, because every votes should count in every decision of a corporation. Moreover, the three directors divested the shareholdings of Green Med in their personal interest.
In the Corporation Code provides that a directors is liable for damage for certain acts that constitute a violation of its fiduciary duties, such as voting for or assenting to patently unlawful acts of the corporation or for gross negligence or bad faith in directing the affairs of the corporation or acquiring any personal or pecuniary interest in conflict with their duty as such directors. Any act or omission or a director that constitutes a violation of his fiduciary duties can be ground for removal of cause, and cause of action for damages.
Monitor and Control:
Every Board Members and Corporate Officer should know the fiduciary duties of Directors in Corporation Code and should follow and implement in Corporation

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