Green Med: Case Study: Cheap Pharma Inc.

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POCKETING THE GREENS Every incorporator has their own responsibilities towards the company they are serving. Also, every company faces its own problems and the success of the business relies on how the management handle these problems. This case study is about how the directors try to solve the problem of the company. 1. Immediate Issue(s) or Problem(s) The main issue in the case is about the conflict of interest when Mr. De Guzman and the two other directors who processed the transactions convinced Dr. Gonzales to sell the shares to them instead when Cheap Pharma cannot pursue the plan due the problem in one of its factories. With this, it turned out that the directors took advantage of the weakness of the company they are serving. 2. Basic Issue(s) or Associated Issue(s) In every company, it is the responsibility…show more content…
Issue(s) Analysis or Information Summary Cheap Pharma Inc. had been suffering low sales in the past months. To improve its product line, the company decided to buy shares of Green Med to take advantage of patent and new developed products. With the proposal, the Board of Directors of Cheap Pharma ratified a purchase and passed a resolution binding the company to pay ten (10) million as consideration for the shares of Green Med. Before Cheap Pharma could pay the purchase price, one of its factories was burned and because of this, the company can no longer pay the earmarked price for Green Med as it needs the cash for the reconstruction of the plant. Due to the situation that Cheap Pharma is facing, Mr. De Guzman and the two other directors who processed the transaction convinced Dr. Gonzales of Green Med to just sell the shares to them instead and Dr. Gonzales agreed. A month later, the said directors divested their shareholding in Green Med and made huge profits. With this, the shareholders of Cheap Pharma sued Mr. De Guzman and the two other directors demanding to render an accounting and return whatever profits they made from the Green

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