Fiduciary Duties of Directors

The Revised Corporation Code (RCC) vests in the board of Directors the exercise of all corporate powers, except as otherwise provided by law. As such, the position of a director in a corporation is highly imbued with trust and confidence. In Prime White Cement versus IAC (GR L-68555, March 19, 1993), the Supreme Court held that, owing to the director’s duty of loyalty to his corporation, in case his interests conflict with those of the corporation, he cannot sacrifice the latter to his own advantage and benefit. This trust relationship "is not a matter of statutory or technical law” as it springs from the fact that directors have the control and guidance of corporate affairs and properties of the corporation.

The Supreme Court, in the case of James Ient versus Tullett Prebon (GR189158, Jan. 11, 2017),citing the commentary of Jose Campos on the Corporation Code, discussed the fiduciary duties of directors: "A director, holding as he does a position of trust, is a fiduciary of the corporation. As such, in case of conflict of his interest with those of the corporation, he cannot sacrifice the latter without incurring liability for his disloyal act. The fiduciary duty has many ramifications, and the possible conflict-of-interest situations are almost limitless, each possibility posing different problems. There will be cases where a breach of trust is clear. Thus, where a director converts for his own use funds or property belonging to the corporation, or accepts material benefits for exercising his powers in favor of someone seeking to do business with the corporation, no court will allow him to keep the profit he derives from his wrongdoing. In many other cases, however, the line of demarcation between the fiduciary relationship and a director's personal right is not easy to define. The code has attempted at least to lay down general rules of conduct and although these serve as guidelines for directors to follow, the determination as to whether in a given case the duty of loyalty has been violated has ultimately to be decided by the court on the case's own merits."