g. Business Judgment Rule

Coverage of the Rule: Two Branches

• Courts generally do not substitute their judgment for resolutions and transactions entered into by the Board of Directors within the powers of the corporation and in good faith, but may intervene where fraud, bad faith, gross negligence, or a conflict of interest is shown (Revised Corporation Code, Secs. 30–31); and
• Directors and officers are not personally liable merely because a good-faith business decision has adverse consequences. They may be personally liable on grounds provided by law, including gross negligence, bad faith, or a conflict of interest in the performance of their duties (Revised Corporation Code, Sec. 30).

Doctrine of Apparent Authority

If a corporation knowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the public possessing the power to do those acts; and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority. (Francisco v. GSIS, G.R. No. L-18287, 30 March 1963)¹