Question

Scenario:

A corporation is facing a critical business decision that may impact its shareholders and stakeholders. As a director of the corporation, you are tasked with making an informed and reasonable decision on behalf of the company. Consider the following scenario and answer the question that follows:

Scenario: The corporation is contemplating a major strategic expansion by acquiring a smaller competitor. The acquisition would require a substantial investment from the corporation and would significantly increase its market presence. However, there are risks associated with the acquisition, including the potential for financial instability and operational challenges. As a director, you are aware of these risks but believe that the potential benefits outweigh the potential drawbacks.

Question: In this scenario, what is the applicability and significance of the Business Judgment Rule to your decision-making process as a director? Discuss the elements and requirements of the Business Judgment Rule and explain how it would impact the evaluation of the proposed acquisition. Support your answer with relevant provisions of Philippine corporation law.