f. Disloyalty

Disloyalty: Sec. 30(2) v. Sec. 33

Duty of Diligence (Basis: Sec. 30)

Directors and/or trustees shall not willfully and knowingly vote for or assent to patently unlawful acts of the corporation or act in bad faith or with gross negligence in directing the affairs of the corporation.

Doctrine of Corporate Opportunity

If there is presented to a corporate officer or director a business opportunity, which the corporation has an interest or a reasonable expectancy, the self-interest of the officer or director will be brought into conflict with that of his corporation. The law does not permit him to seize the opportunity even if he will use his own funds in the venture. If he seizes the opportunity thereby obtaining profits at the expense of the corporation, he must account all the profits by refunding the same to the corporation.

Requisites of Doctrine of Corporate Opportunity

• The Corporation is financially able to undertake the business opportunity.
• From the nature of the business opportunity, it is in line with the corporation’s business and is of practical advantage to the corporation.
• The corporation has an interest or a reasonable expectancy, by embracing the opportunity.

Consequence of violation

• Directors must account for all the profits by refunding the same to the corporation
• Directors may be removed from the board.

Exception: The act of the director has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock.

Penal liability under the former Corporation Code: Ient v. Prebon addressed whether violations of Secs. 30⁴ and 33 of the former Corporation Code were penal offenses. Had the Legislature intended to attach penal sanctions to said sections, it could have expressly stated such intent in the same manner it did for Section 74⁶ of the former Corporation Code, the violation of which was considered an offense under Section 144⁷ of that Code. (Ient v. Prebon, G.R. No. 189158, 11 January 2017)⁸ Under RA 11232, Sec. 158⁵ instead authorizes the Commission, after due notice and hearing, to impose administrative sanctions for violations of the Revised Corporation Code, its rules or regulations, or the Commission's orders.

Doctrine of Centralized Management

Unless otherwise provided in this Code, the board of directors or trustees shall exercise the corporate powers, conduct all business, and control all properties of the corporation (Sec. 22)⁹.