Case Study Of Cheap Pharma

Background

Because of the tight competition, Cheap Pharma has been experiencing low sales for the past month, therefore, they decided to shares of stocks from Green Med, a pharmaceutical company that rose to fame because of its innovative use of Lagundi leaves in cough syrups. Mr. De Guzman, the authorized representative of Cheap Pharma successfully made a deal with Mr. Gonzales, who is the receiver of Green Med. They agreed to pay the amount of 10 million pesos in consideration of the sales.

Unfortunately, the second largest factory was put on fire, therefore incurring losses. The earmarked amount was later used to reconstruct the said factory and became unavailable to buy the shares. Because of this, Mr. de Guzman, together with the two

De Guzman didn’t do such thing? Can they raise the earmarked amount to pay Mr. Gutierrez? The answer is yes. Cheap Pharma wasn’t stated as insolvent, so even though the second largest factory was burned, I believe they can still do something about it even if the primary factory was burned instead. They could have liquidated the assets especially their inventory. They can think of other ways to meet the agreement with Mr. Gutierrez. Moreover, the directors are still not justified if Mr. Gutierrez sued the company for not meeting its obligations. According to Justice Douglas, in Pepper v. Litton, emphatically restated the standard of fiduciary obligation of the directors of corporations,

... Their powers are powers in trust. ... He who is in such fiduciary position cannot serve himself first and his cestuis second. ... He cannot manipulate the affairs of his corporation to their detriment and in disregard of the standards of common decency. He cannot by the intervention of a corporate entity violate the ancient precept against serving two masters ... He cannot utilize his inside information and strategic position for his own preferment. He cannot violate rules of fair play by doing indirectly through the corporation what he could not do so directly. He cannot violate rules of fair play by doing indirectly though the corporation what he could not do so directly. He cannot use his power for his personal advantage and to the detriment of the stockholders and creditors no matter how absolute in terms that power may be and no matter how meticulous he is to satisfy technical requirements. For that power is at all times subject to the equitable limitation that it may not be exercised for the aggrandizement, preference or advantage of the fiduciary to the exclusion or detriment of the cestuis.”
Recommendation and Implementation
Given that there is a breach of obligations by the directors, it is just right for them to be sued by the company. Moreover, they should just increase the sales by doing the recommendations above, by recreating their product lines, investing on research and development, having a customer database and partnering with