Question

D. Directors, Trustees, and Officers - Doctrine of Ratification or Estoppel

In a corporation, the board of directors plays a crucial role in decision-making and corporate governance. They are expected to act in the best interest of the company and its shareholders. One of the principles that govern their actions is the doctrine of ratification or estoppel. This doctrine relates to situations where the actions of directors, trustees, or officers are validated or deemed binding by the corporation, despite potential irregularities or breaches of duty.

Consider the following scenarios and answer the question below:

1. ABC Corporation's board of directors recently held a meeting to authorize a major investment in a new technology venture. During the meeting, Director X raised concerns about the potential risks and financial implications of the investment. However, after a lengthy discussion, the majority of the board members voted in favor of the investment. Director X, although initially hesitant, decided not to object further and went along with the decision. The investment ultimately failed, resulting in significant financial losses for the corporation.
2. XYZ Corporation has a strict policy that prohibits officers or directors from entering into contracts with the corporation unless specifically authorized by the board. However, Officer Y, without obtaining prior authorization, entered into a contract on behalf of the corporation with a supplier for the purchase of raw materials. The contract turned out to be highly advantageous for the corporation and saved substantial costs.

Question:

Discuss the applicability of the doctrine of ratification or estoppel in the given scenarios, and explain the potential legal consequences for the actions of Director X in Scenario 1 and Officer Y in Scenario 2. Support your answers with relevant provisions of Philippine corporate laws.