Practice question
A lawful expansion project approved in good faith within the board's authority loses money because demand unexpectedly falls. The stipulated evidence establishes no bad faith, gross negligence, unlawful conduct or other liability ground. Does the loss alone justify replacing the board's choice with a court's preferred strategy?
- No; the unfavorable result alone does not establish the stated exception to business-judgment deference.
- Yes; any loss conclusively proves bad faith.
- Yes; directors guarantee every projection.
- Yes; courts must select all future business plans.
- No; because directors are immune even from proven fraud.
Legal references
- Montelibano v. Bacolod-Murcia Milling Co., G.R. No. L-15092, 18 May 1962, https://www.lawphil.net/judjuris/juri1962/may1962/gr_l-15092_1962.html
- Teng v. Teng, G.R. No. 277015, 17 February 2025, main decision, https://lawphil.net/judjuris/juri2025/feb2025/gr_277015_2025.html
- Revised Corporation Code, RA 11232, sections 22, 30 and 39, https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/2/86463
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