I. Immediate Issue(s) or Problem(s):
The problem arises when Mr. de Guzman, one of the Board of Director of Cheap Pharma along with the two other BOD purchased Green Med shares. Hence, a month later, the shareholders of the Cheap Pharma sued Mr. De Guzman and the other two directors demanding that they render an accounting and return whatever profits they made from the Greeen Med transasaction.
II. Basic Issue(s) or Associated Issue(s):
Under Section 31 of Corporation Code. Liability of directors states that Directors who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence of bad faith in directing the affairs of the corporation or acquire any personal or pecuniary…show more content… They may retain their position in Cheap Pharma and return to the said company all the profits they have gain from Green Med and sell their shares of stock to Cheap Pharma. In the first place, they shouldn’t have done acquiring the Green Med because of conflict of interest and doing so, put them in bad faith.
2. They may resign from their position in Cheap Pharma Inc. and return to the said company all the profits they have gain from Green Med and sell their shares of stock to Cheap Pharma. In this case, they will be relieve as Board of Directors and the lawsuit will not go beyond the long process.
3. They may opt to resign in Cheap Pharma Inc. and remain as shareholder of Green Med but still need to return to Cheap Pharma all the profits they have gain from Green Med during their tenure as Board of Director of the said company. Resigning in Cheap Pharma as Board of Director will abolish their responsibility and role in the company. Given the situation, that they acquired Green Med during their tenure and in bad faith, what is due to Cheap Pharma is already been given and from the time that of the effectivity of their resignation they are no longer liable to the company as Board of Directors therefore, discharging them from conflict of