Abstract
Section 23 of the Corporation Code of the Philippines (hereinafter “Corporation Code’ or “Code”) states:
Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted, and all property of such corporations controlled and held by the board of directors.
But the board’s exercise of corporate powers is not unlimited. Directors and officers should, collectively and individually, have the interest of the corporation they serve paramount in mind. For them. the fundamental question is always: will the transaction serve the best interests of the corporation? Essentially subjective, this question can be a difficult one to resolve. Thus, when directors and officers fail to optimize for their corporation or even honestly err, they remain immune from liability because of the business judgment rule. This rule sustains corporate transactions and immunizes management from liability where the transaction is within the powers of the corporation (intra vires) and the authority of management, and involves the exercise of due care and compliance with applicable fiduciary duties.