All ▸ Bar 2024 ▸ COMMERCIAL AND TAXATION LAWS ▸ I. CORPORATION LAW (R.A. No. 11232, Revised Corporation Code) ▸ D. Directors, Trustees, and Officers ▸ 10. Business Judgment Rule 2

Question

Subject: Directors, Trustees, and Officers Topic: Business Judgment Rule

Scenario:

XYZ Corporation is facing financial difficulties due to the impact of the COVID-19 pandemic. The board of directors needs to make crucial decisions to navigate through these challenging times. As a director of the company, you are tasked with making informed judgments in the best interest of the corporation and its stakeholders.

Based on the concept of the Business Judgment Rule, please answer the following question:

Explain the Business Judgment Rule and its significance in corporate decision-making.
Discuss the criteria that will be considered in determining whether the Business Judgment Rule will apply in a particular situation.
Assuming that the board of directors of XYZ Corporation made a decision that appeared to negatively impact the company's financial position, resulting in losses for shareholders, explain the defenses that the directors can raise under the Business Judgment Rule.
Under what circumstances can a court interfere with the decisions of directors under the Business Judgment Rule?

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