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Title 4.

BY-LAWS
SEC.46. Adoption of by-laws.
1. Every corporation must, within
one (1) month after receipt of
official notice of the issuance of
its certificate of incorporation by
the SEC, adopt a code of by-laws
for
its
government
not
inconsistent with the Corporation
Code
2. However, by-laws may be
adopted and filed prior to
incorporation, but it shall be
approved and signed by all the
incorporators and submitted to
the SEC together with the AOI.
-for the adoption of by-laws, 1) the
affirmative vote of stockholders
representing at least a majority of the
outstanding capital stock, in a stock
corp. or 2) at least a majority of
members in case of a non-stock corp.
-the by-laws shall be signed by the
stockholders/members voting for them
and shall be kept in the principal office
of the corp., subject to the inspection of
the same during office hours.
-a copy duly certified by a majority of
the directors/trustees and countersigned
by the secretary shall be filed with SEC
which shall be attached with the original
AOI.
BY-LAWS
- rules of action adopted by a
corporation(associated) for its internal

govt. and for the govt. of its


stockholders/members and those having
the direction.mgt and control of its
affairs in their relation to the corp and as
among themselves, including rules for
routine matters such calling meetings
and the like
POWER TO ADOPT BY-LAWS
(Sec.36(5)) & Sec.46:
1. Power is inherent in every
corp as one of its necessary and
inseparable legal incidents. Being
essential to enable the corp to
accomplish the purpose of its creation,
ordinarily conferred in express terms by
the law.
2. Holders of non-voting shares/
non-voting members, are entitled to vote
on the adoption of bylaws.
3. Where statute under w/c a
corp is formed authorizes it to make bylaws upon specifically named subjects,
there is an implied denial of authority to
make by-laws upon subjects not named.
FUNCTION OF BY-LAWS:
1.Supplements the articles of
incorp. Provide the details not important
enough to be stated in the articles
2. Function of by-laws is to define
the rights and duties of corporate officers
and
directors/trustees,
and
stockholders/members
towards
the
corporation and among themselves w/
reference to the mgt of corporate in a
particular way.
3. Source of authority for corporate
officers and agents of the corp.

(Primarily, by-laws look to the future)


NECESSITY OF ADOPTING BYLAWS:
1. A Matter of practical and legal
necessity- upon the issuance of the
certificate
of
incorporation,
the
corporation comes into existence. But
not yet prepared to do business
a. Must have the
means/instrumentalities
for
the
accomplishment of its purposes. Must
have executive officers charged w/ the
task of actual mgt., and rules governing
the mgt of its affairs. Corp is in
existence but not yet organized. Code of
by-laws for the govt. of the corp, its
officers and members must be adopted.
b. By-laws are the rules of its life,
and that until by-laws have been
adopted, the corp may not be able to act
for the purposes of its creation, and that
the first and most important duty of the
members is to adopt them. The adoption
of by-laws is a matter of practical, if not
one of legal, necessity
2. In the case of corporation sole ordinary corp is governed by its by-laws,
a corp sole is governed by Rules,
Regulations and Discipline of its
religious denomination w/c already
contain the provisions embodied in the
by-laws of ordinary corps.
>Sec.111(par.2) expressly allows corps
sole to include in their articles of incorp
any provision other than those required
under said section to regulate the affairs
of corps sole. Hence, corp sole need not
comply w/ Sec.46 provided that the
provisions ordinarily embodied in the

by-laws are already provided for in the


AOI or Rules,Regulations and Discipline
of its religious denomination.
TIME AND PROCEDURE FOR THE
ADOPTION OF BY-LAWS:
1. adopted "w/in 1 month" after
receipt of official notice of the issuance
of its certificate of incorp by the SEC.
for the convenience of the incorporators,
by-laws may be adopted and filed, prior
to incorp, w/ the articles of incorp.(par.2)
>either case, by-laws shall be effective
only upon the issuance by the
Commission of a certification that they
ate not inconsistent w/ the Code. (par.3;
sec.48,last part)
2. Procedure for the adoption of bylaws is set in Sec. 46. W/ respect to
special corps governed by special laws,
the SEC shall not accept their by-laws/
any
amendment
thereto
unless
accompanied by a certificate of the
appropriate govt. agency to the effect
that such by-laws/amendments thereto
are in accordance w/ law. The formal
requisites such as the filing of a certified
copy of the entire by-laws for approval
w/ the SEC is only for record purposes
and in order that said copy be attached to
the orig. articles of incorp.
>Sec.48 provided for the procedure for
the amendment of by-laws/adoption of
new by-law.
EFFECT OF FAILURE TO FILE BYLAWS:
>Non-filing of the by-laws on time will
not result in the automatic dissolution of

the corp. Consequence is not provided in


the Corp. Code.
1. Failure to file a code of by-laws w/in
1month from the date of its incorp w/ the
SEC shall render the corp liable to the
time revocation of its registration.
2. A hearing to determine the existence
of the ground, and assuming such
finding, penalty is not necessarily
revocation but may only be suspension.
3. The failure may be merely w/ the
imposition of an administrative fine.
CONSTRUCTION, APPLICATION,
AND EFFECTIVITY OF BY-LAWS
1. Construed and given effect according
to the general rules governing the
construction of contracts.
2.
Those
providing
for
disenfranchisement of members of a
corp. are penal in character and must be
strictly construed. Under the provision
for in the by-laws that a member on
suspended accounts may not use
facilities/avail of the privileges of a nonstock, non-profit org., such member may
still exercise his right to vote. He doesn't
lose his membership, ipso facto, because
of an act of default w/c is made a cause
for expulsion/forfeiture unless expressly
provided, bit there must a proper action
by the corp expelling him.
3. Made to apply prospectively, not
retroactively
4. Effective only upon the issuance by
the SEC of a certification that they are
not be inconsistent w/ the Code. Only
upon that time that the provisions of said
by-laws should be followed/observed.
a. "Every corporation formed under
this Code," w/c can only refer to corps

incorporated in the Phils, Sec.46,refers


to the effectivity of corporate by-laws,
applies only to domestic corpos and not
to foreign corps.
b. In foreign corps licensed to transact
business in the Phils, matters relating to
their by-laws are governed by the law of
their incorporation.
>Commission will grant a license only
when the foreign corp has complied
w/all the requirements of law, it follows
that when it decides to issue such
license, it is satisfied that the applicants'
by-laws, among the other documents,
meet the legal requirements. In effect, is
an approval of its by-laws although it
may not have been made in express
terms. Thus, foreign corporation's bylaws, though originating from a foreign
jurisdiction, are valid and effective in the
Phils.
VALIDITY OF BY-LAWS
Element of a valid by-laws:
1. Not contrary to existing law and
inconsistent w/ the Code
2. Not contrary to morals and public
policy
3. Not impair obligations of contract
4. Be general and uniform in their
operation and not directed against
particular
individuals,
i.e
not
discriminatory
5. Be consistent w/ the
charter/articles of incorporation
6. Be reasonable
1.

MUST BE CONSISTENT WITH


LAW
-must not be contrary to the general law,
thus a by-law is void if it is repugnant to

the law of the land, whether statutory or


constitutional.
2.

MUST BE CONSISTENT WITH


PUBLIC POLICY
-must be consistent with the public
policy and not in conflict with public
welfare. If they conflict with either, they
are invalid and will not be sustained.
3.
MUST
NOT
IMPAIR
OBLIGATION OF CONTRACTS
- a by-law may not operate
retrospectively if it does thereby disturb
or impair any existing contract or vested
right.
4. MUST BE GENERAL AND NOT
DIRECTED
AGAINST
PARTICULAR INDIVIDUALS
-must be general, it must affect alike,
and operate equally as to all
stockholders/members under the same
circumstances, and not be directed
against particular stockholders or
members.
5. MUST BE CONSISTENT WITH
THE CHARTER OR AOI
-a by-law that is not consistent with the
charter/AOI is void
6. MUST BE REASONABLE
- the validity or reasonableness of a bylaw, whether it is in conflict with the
charter or the law of the land or is in
legal sense unreasonable is therefore
unlawful.
BINDING EFFECT OF BY-LAWS
-until repealed or amended, a by-law is a
continuing ruke for the government of

the corporation and the individuals


composing it.
1. As to corporation and its
officers
- By-laws, when valid, have
the same effect as laws of
the corporation and the
corporation
and
its
directors/trustees/officers
are bound by and must
comply with them unless
and until they are changed,
amended, or repealed.
- But
subordinate
employees without actual
knowledge of the by-laws
are not bound
2. As to stockholders or
members
-as a general ryle, the
stockholders or members of a
corporation are presumed to
know the provisions of the
corporations by-laws. Hence,
they are charged with notice
of the by-laws
- stockholders or members
cannot therefore claim lack of
notice or knowledge
3. As to third persons
-they are not bound by the
by-laws since it operates
merely as internal rules
among the stockholders
WAIVER OF BY-LAWS
1. By the corporation
- By-laws which are not
required by the charter or

statute and which operate in


favor of the corporation are
subject to waiver, both
express and implied, by the
corporation
2. By
the
stockholders
or
members
- By-laws may be waived
when the individual rights
of the stockholders or
members are advanced or
protected by its provisions
- \

Sec. 47 Contents of by-laws


1. The time, place and manner of
calling and conducting regular or
special meetings of the directors
or trustees;
2. The time and manner of calling
and conducting regular or special
meetings of the stockholders or
members;
3. The required quorum in meetings
of stockholders or members and
the manner of the voting therein;
4. The form of proxies for the
stockholders and the members
and the manner of voting them;
5. The qualifications, duties and
compensation
of
directors,
trustees, officers, or employees;
6. The time for holding the annual
election of directors or trustees
and the mode or manner of
giving notice thereof;
7. The manner of election or
appointment and the term of
office of all officers other than

the directors or trustees;


8. The penalties for the violation of
the by-laws;
9. In case of stock corporations, the
manner
of
issuing
stock
certificates; and
10. Such other matters as may be
necessary for the proper or
convenient transaction of its
corporate business and affairs
Sec. 48 Amendments to by-laws
a) the BOD/BOT by a majority vote
b) owners of at least a majority of
the OCS
c) or at least a majority of the
members of a non-stock corp.
- may amend or repeal any
by-laws or adopt new bylaws at a regular or
special meeting duly
called for the purpose
- the owners of 2/3 of the OCS or 2/3 of
members in a non-stock corp may
delegate the BOD/BOT the power to
amend or repeal any by-laws or adopt
new by-laws
-Provided, that the power delegated to
the BOD/BOT may be revoked
whenever stockholders owning or
representing a majority of the OCS or a
majority of members in a non-stock
corp, shall so vote at a regular or special
meeting
-Whenever amendment ot new by-laws
are adopted, they shall be attached to the
original by-laws in the office of the corp
and a copy thereof duly certified under
oath by the secretary and majority of the
BOD/BOT, shall be filed with the SEC

and attached to the original AOI and


original by-laws.
-the amendment or new by-laws shall
only be effective upon the issuance by
the SEC of a certification that the same
are not inconsistent with the Corp Code.
REVOCATION OF DELEGATED
POWER OF THE BOD/BOT
- the law requires the vote of
stockholders representing a majority of
the OCS in a stock corp or a majority of
members in a non-stock corp, while the
vote for the delegation is 2/3

DISTINCTION OF BY-LAWS AND


RESOLUTION

1. Nature and subject matter bylaws are permanent rule of


action of the conduct of
corporate affairs while a
resolution is ordinarily limited in
its operation, applying usually to
a single act or transaction of the
corporation
2. Rule in case of conflict the bylaws are, in effect, its
constitution, and will prevail
over a resolution of the
BOD/BOT
3. Necessity of approval by SEC
while corporate by-laws are
subject to the approval of SEC,
other rules and regulations do
not need its approval, unless they
involve matters where the law

requires such approval

DISTINCTION OF ARTICLES OF
INCORPORATION AND BY-LAWS
1. The former constitutes the
chapter or fundamental law of
the corp while the latter are
merely rules and regulations
adopted by the corp;
2. The former is executed before
the incorporation by the
incorporators, while the latter,
usually after the incorporation
by the stockholders/members;
3. The filing of the former is a
condition precedent to corporate
existence, while the filing of the
latter is a condition subsequent.