TITLE VI - MEETINGS

Section 49. Kinds of meetings. - Meetings of directors, trustees, stockholders, or members

may be regular or special. (n)
Section 50. Regular and special meetings of stockholders or members. - Regular meetings
of stockholders or members shall be held annually on a date fixed in the by-laws, or if not
so fixed, on any date in April of every year as determined by the board of directors or
trustees: Provided, That written notice of regular meetings shall be sent to all stockholders
or members of record at least two (2) weeks prior to the meeting, unless a different period
is required by the by-laws.
Special meetings of stockholders or members shall be held at any time deemed necessary
or as provided in the by-laws: Provided, however, That at least one (1) week written notice
shall be sent to all stockholders or members, unless otherwise provided in the by-laws.
Notice of any meeting may be waived, expressly or impliedly, by any stockholder or
member.
Whenever, for any cause, there is no person authorized to call a meeting, the Securities
and Exchange Commission, upon petition of a stockholder or member on a showing of
good cause therefor, may issue an order to the petitioning stockholder or member
directing him to call a meeting of the corporation by giving proper notice required by this
Code or by the by-laws. The petitioning stockholder or member shall preside thereat until
at least a majority of the stockholders or members present have chosen one of their
number as presiding officer. (24, 26)
The stockholders have no power to act as or for the corporation except at a corporate meeting
called and conducted according to law. This rule arises from the need to protect the stockholder
by providing them with notice of meeting and giving them opportunity to attend the meeting,
discuss the issues and vote (an exception would be an ordinary amendment where “written asset”
is acceptable).
DATE OF REGULAR MEETING: The date so fixed in the by-laws, if not fixed, on any date of April
of very year as the BOD/T may determine. April, because this is the time the Audited Financial
Statements are already available.
DATE OF SPECIAL MEETING: At any time deemed necessary or as provided for in the by-laws.
Section 51. Place and time of meetings of stockholders of members. - Stockholder's or
member's meetings, whether regular or special, shall be held in the city or municipality
where the principal office of the corporation is located, and if practicable in the principal
office of the corporation: Provided, That Metro Manila shall, for purposes of this section,
be considered a city or municipality.
Notice of meetings shall be in writing, and the time and place thereof stated therein.
All proceedings had and any business transacted at any meeting of the stockholders or
members, if within the powers or authority of the corporation, shall be valid even if the
meeting be improperly held or called, provided all the stockholders or members of the
corporation are present or duly represented at the meeting. (24 and 25)
Section 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-
laws, a quorum shall consist of the stockholders representing a majority of the
outstanding capital stock or a majority of the members in the case of non-stock
corporations. (n)
REQUIREMENTS FOR A VALID STOCKHOLDERS’ MEETING: (sec. 50-52)
1. It Must Be Held On The Date Fixed In The By-Laws Or In Accordance With The Law.
The Code requires that the regular meeting of SH or members shall be held annually on a date
fixed in the by-laws. Absent any provision relative thereto, the meeting should be held on any
day of April of each year as may be determined by the BOD. This rule however, admits of an
exception as when the annual meeting cannot be held on the appointed time for some valid and
meritorious reasons such as force majeure or inability to obtain the required quorum. If such is
the case, the same may be postponed to a reasonable future date.
The Code requires that the regular meeting of SH or members shall
2. Prior Notice Must Be Given
Sec 50 and 51 requires that written notice of regular meeting shall be sent at least 2 weeks prior
to the meeting, whereas, 1 week prior notice is required for special meetings.
EXCEPTIONS:
(a) If the by-laws provide for a different period for sending out notice for regular or special
meetings (failure to comply would render the resolutions adopted voidable at the option of the
stockholder who was not notified);
(b) Waiver of the notice of meeting, either express or implied.
The fact that a SH or member attended the meeting is deemed as an implied waiver of the notice
requirement.
The Notice must contain the agenda or business matter/s that may be taken up before the meeting
otherwise it may become voidable at the instance of any objecting stockholder or member.
The notice of meeting must state the agenda or business matter that may be taken up before the
meeting otherwise it may become voidable at the instance of any objecting SH or member.
Among them:
1. Removal of directors or trustees
2. Filing up of vacancies in the office of directors or trustees
3. Ratification of contract of the corporation with any of its directors or trustees
4. Extension or shortening of corporate term
5. Increase or decrease of capital stock or incurring, creating or increasing bonded
indebtedness
6. Sale or other disposition of all or substantially all of the assets of the corporation
7. Investment of corporate funds in another corporation or business or for any other purpose
8. Declaration of stock dividends
9. Entering into a management contract with another corporation
10. Amendment or repeal of the by-laws or adoption of a new one
 11. Fixing the issue price of no-par value shares by the SH
12. Merger or consolidation
13. Dissolution of the corporation
THE BOARD OF DIRECTORS AND ELECTION COMMITTEE OF THE SMB WORKERS
SAVINGS AND LOAN ASSOCIATION, INC., ET AL., petitioners, vs. HON. BIENVENIDO A.
TAN, ETC., ET AL., respondents. (GR No. L - 12282; March 31, 1959)
FACTS: A meeting electing the BOD of herein petitioner was declared null and void by the Court
in a suit filed by John Castillo, et. al.
In compliance with the order, another election was scheduled on March 28 at 5:30. On March 27,
the plaintiff filed an ex-parte motion alleging that the meeting is composed of the same people
that had conducted and supervised the previously nullified meeting; that the election to be
conducted did not comply with the 5 day notice requirement required by the by-laws and the
constitution of the association, since the notice was posted and sent out only on March 26 and
the election was to be held on March 28.
ISSUE: WON the notice requirement is complied with?
HELD: No. Section 3, article III, of the constitution and by-laws the association provides:
“Notice of the time and place of holding of any annual meeting, or any special meeting, the
members, shall be given either by posting the same in a postage prepaid envelope, addressed to
each member on the record at the address left by such member with the Secretary of the
Association, or at his known post-office address or by delivering the same person at least (5) days
before the date set for such meeting. . . . In lieu of addressing or serving personal notices to the
members, notice of the members, notice of a regular annual meeting or of a special meeting of
the members may be given by posting copies of said notice at the different departments and
plants of the San Miguel Brewery Inc., not less than five (5) days prior to the date of the meeting.
(Annex K.)”
Notice of a special meeting of the members should be given at least five days before the date of
the meeting. Therefore, the five days previous notice required would not be complied with.
3. It Must Be Held at the Proper Place
Sec. 51.
Place and time of meetings of stockholders or members. - Stockholders' or members' meetings,
whether regular or special, shall be held in the city or municipality where the principal office of the
corporation is located, and if practicable in the principal office of the corporation: Provided, That
Metro Manila shall, for purposes of this section, be considered a city or municipality.
Notice of meetings shall be in writing, and the time and place thereof stated therein.
All proceedings had and any business transacted at any meeting of the stockholders or members,
if within the powers or authority of the corporation, shall be valid even if the meeting be improperly
held or called, provided all the stockholders or members of the corporation are present or duly
represented at the meeting.
Meeting must, at all times, be held in the city or municipality where the principal office is located,
or if practicable at the principal office of the corporation. For this purpose, Metro Manila is
considered as one city or municipality.
While there is no law allowing a STOCK corporation to hold a meeting outside the city or
municipality where the principal office is located, NON-STOCK corporations are allowed to
provide a provision in its by-laws any place of members’ meeting provided there is proper notice
(Sec. 93)
The second portion of the first paragraph of section 51 may likewise constitute an exception to
the rule: A corporation whose principal office is located at Makati may hold its SH meeting in any
place within Metro Manila since the latter is considered as one city or municipality.
4. It Must Be Called by the Proper Party
Generally Held: That unless the by-law provides, however, the authority rests with the BOD and
the president of the corporation which has been held to have no power to call a meeting of the
SH or members in the absence of a by-law provision or a board resolution making it his duty to
do so. However, under Philippine juris, the president presides at the meeting of directors as well
as those of the SH under Sec 54
The BOD and the president of the corporation
DOMINGO PONCE AND BUHAY L. PONCE, petitioners, vs. DEMETRIO B. ENCARNACION,
Judge of the Court of First Instance of Manila, Branch I, and POTENCIANO GAPOL, respondents
(GR No. L - 5883; Nov. 28, 1953)
FACTS: It was agreed by the stockholders of Daguhoy Enterprises at a stockholder’s meeting
that the said corporation shall be voluntarily dissolved, and was placed under the receivership of
Gapol, the largest stockholder. A petition for voluntary dissolution was drafted and signed by
Ponce, which was to be filed with the appropriate authorities. It was found out that instead of filing
the petition, Gapol filed a complaint in the CFI for the accounting of the funds and assets of the
corporation, and to reimburse it the amounts expended for the purchase of a parcel of land, a
loan extended to the wife of Ponce, and an amount spent by Ponce in a trip to the US. Gapol
contends that such amount, taken from the corporation, was misapplied, misappropriated and
misspent by Ponce to his own use and benefit, thus he prayed for the removal of Ponce as a
member of the board of directors. Such removal was rejected by the court, but Gapol’s petition
for the calling of a stockholders’ meeting, was granted. At said meeting, a new set of board of
directors was elected. Ponce filed a petition in the lower court seeking to set aside its order, but
the same was denied. Thus, they filed for an appeal to the SC.
ISSUE: WON the Court may issue such order directing a stockholder to call a meeting of the
stockholders of a corporation?
HELD: Yes. The corporation law provides that “whenever, from any cause, there is no person
authorized to call a meeting, or when the officer authorized to do so refuses, fails or neglects to
call a meeting, any judge of a CFI on the showing of a good cause therefore, may issue an order
to any stockholder or member of a corporation, directing him to call a meeting of the corporation
by giving the proper notice required”. Thus, on the showing of good cause therefore, the court
may authorize a stockholder to call a meeting and to preside thereat until the majority stockholders
representing a majority of the stock present and permitted to be voted shall have chosen one
among them to preside. This showing of good cause exists when the court is apprised of the fact
that the by-laws of the corporation require the calling of a general meeting of the stockholders to
elect the board of directors but the call of the meeting has not been done. There is no need to
issue a notice of hearing, nor is there any necessity to hold a hearing, upon the board of directors.
The court here found good cause in calling the meeting for the election of a new board, because
the chairman of the board of directors who is so authorized to call such meeting, failed, neglected
or refused to perform his duty. Having the authority to grant such relief, the lower court did not
exceed its jurisdiction nor did it abuse its discretion in granting it.
NOTE: In a case decided by the SEC, it rules that under the present state of law, the Ponce case
will apply ONLY “where there is no person authorized to call the meeting:, thus an ex-parte
proceeding may be allowed as obviously there is no person to summon and no person whose
right to due process will be violated. However, where there is an officer authorized to call the
meeting and that officer refuses , fails or neglects to call a meeting then the Ponce case WILL
NOT APPLY. This is so, because the phrase “or when the officer authorized to do so refuses, or
fails, or neglects to call a meeting” has been deliberately omitted in Sec. 50 of the Corporation
Code.
Likewise, in the same ruling of the SEC, the Ponce case likened the questioned order to a writ of
preliminary injunction which may be issued ex parte, the said PI can no longer be issued without
notice and hearing under Sec. 5 of Rule 58 of the Rules of Court. Mandamus is the proper remedy.
IN SUMMARY: The following are authorized to call a meeting: a. The person or persons
authorized under the by-laws; b. Absent any provision in the by-laws, it may be called by the
President; c. By the secretary on order of the president or on written demand of the stockholders
representing at least a majority of the outstanding capital stock or majority of the members entitled
to vote, or the stockholder or member making the demand if there is no secretary or he refuses
to do so, under Sec. 28; and d. A stockholder as empowered by the proper forum pursuant to
Sec. 50
5. Quorum and Voting Requirement Must Be Met
Sec. 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-laws, a
quorum shall consist of the stockholders representing a majority of the outstanding capital stock
or a majority of the members in the case of non-stock corporations.
A by-law provision may provide for a higher quorum requirement than that prescribed in the Code,
but not less. Otherwise, the by-law provision providing for a lesser quorum requirement have no
force and effect since a by-law provision is subordinate to the statute and could not defeat the
requirements of the law. The same goes for a by-law provision providing for a voting requirement
less than that provided in the Code.
If the voting requirement is met, any resolution passed in the meeting, even if improperly held or
called will be valid if ALL the stockholders or members are present or duly represented thereat,
as provided under the last paragraph of Sec. 51:
All proceedings had and any business transacted at any meeting of the stock holders or members
, if within the powers or authority of the corporation, shall be valid even if the meeting be
improperly held or called, provided all the stockholders or members of the corporation are present
or duly represented at the meeting.
Section 53. Regular and special meetings of directors or trustees. - Regular meetings of
the board of directors or trustees of every corporation shall be held monthly, unless the
by-laws provide otherwise.
Special meetings of the board of directors or trustees may be held at any time upon the
call of the president or as provided in the by-laws.
Meetings of directors or trustees of corporations may be held anywhere in or outside of
the Philippines, unless the by-laws provide otherwise. Notice of regular or special
meetings stating the date, time and place of the meeting must be sent to every director or
trustee at least one (1) day prior to the scheduled meeting, unless otherwise provided by
the by-laws. A director or trustee may waive this requirement, either expressly or impliedly.
(n)
REGULAR MEETINGS: those held monthly or as the by-laws may provide; SPECIAL
MEETINGS: those that are held at any time upon call of the President or the person authorized
to do so as may be provided in the bylaws.
PLACE: Unlike the meeting of stockholders, the meetings of directors/trustees may be held
anywhere, within or even outside the Philippines, except when the by-laws provide otherwise.
NOTICE REQUIREMENT: is necessary for the purpose of determining the legality of and binding
effect of the resolution/s passed, EXCEPT: 1. When subsequently ratified; 2. In close corporations
where a director may bid the corporation even without a meeting; 3. When the right to a notice is
waived.
The SEC has ruled that a special meeting conducted in the absence of some of the directors and
without any notice to them is illegal and the action at such meeting although by a majority of the
directors is invalid, unless ratified.
However, if all the directors are present, their presence at the meeting waives the want of notice.
PRESIDING OFFICER: Unless the by-laws otherwise provide, the president.
Section 54. Who shall preside at meetings. - The president shall preside at all meetings of
the directors or trustee as well as of the stockholders or members, unless the by-laws
provide otherwise. (n)
Sec. 54. Who shall preside at meetings. - The president shall preside at all meetings of the
directors or trustee as well as of the stockholders or members, unless the by-laws provide
otherwise.
QUORUM: Unless the AOI or by-laws provide for a greater majority, a majority of the members
of the BOD/T as fixed in the AOI will constitute a quorum for the transaction of corporate business
and the decision of the majority of those present shall be valid as a corporate act. EXCEPT:
election of corporate officers as provided under Sec. 25 which required the vote of a majority of
all the members of the board.
PROXY VOTING: is not allowed for a director or trustee, since he was supposedly elected
because of his expertise in management or his business acumen such that he is expected to
personally attend and vote on matters brought before the meeting.
C. STOCKHOLDERS’ RIGHT TO VOTE AND MANNER OF VOTING
Being a property right, a stockholder can vote his share the way he pleases except in the following:
1. Non-voting shares are not entitled to vote except in those instances provided in the penultimate
paragraph of Sec. 6 of the Code; 2. Treasury shares have no voting rights while they remain in
the treasury (Sec. 57); 3. Shares of stock declared delinquent are not entitled to vote at any
meeting; and 4. Unregistered transferee of shares of stock.
PROXY VOTING: is allowed or through a voting trust agreement, or by the executor,
administrator, receiver or other legal representative appointed by the court.
PLEDGED OR MORTGAGED SHARES: the pledgor or mortgagor is entitled to vote in the
absence of an agreement to the contrary:
Section 55. Right to vote of pledgors, mortgagors, and administrators. - In case of pledged
or mortgaged shares in stock corporations, the pledgor or mortgagor shall have the right
to attend and vote at meetings of stockholders, unless the pledgee or mortgagee is
expressly given by the pledgor or mortgagor such right in writing which is recorded on the
appropriate corporate books. (n)
Executors, administrators, receivers, and other legal representatives duly appointed by
the court may attend and vote in behalf of the stockholders or members without need of
any written proxy. (27a)
SHARES OWNED BY TWO OR MORE PERSONS JOINTLY:
Section 56. Voting in case of joint ownership of stock. - In case of shares of stock owned
jointly by two or more persons, in order to vote the same, the consent of all the co-owners
shall be necessary, unless there is a written proxy, signed by all the co-owners, authorizing
one or some of them or any other person to vote such share or shares: Provided, That
when the shares are owned in an "and/or" capacity by the holders thereof, any one of the
joint owners can vote said shares or appoint a proxy therefor. (n)
D. PROXY AND OTHER REPRESENTATIVE VOTING
PROXY: is a species of absentee voting by mail by a one way ballot for the slate or proposals
suggested by the management or even perhaps, the solicitor thereof. It is the authority given by
the stockholder or member to another to vote for him at a stockholders’ or members’ meeting.
The term is also used to refer to the instrument or paper which is evidence of the authority of an
agent or the holder thereof to vote for and in behalf of the stockholder or member.
Section 57. Voting right for treasury shares. - Treasury shares shall have no voting right
as long as such shares remain in the Treasury. (n)
Section 58. Proxies. - Stockholders and members may vote in person or by proxy in all
meetings of stockholders or members. Proxies shall in writing, signed by the stockholder
or member and filed before the scheduled meeting with the corporate secretary. Unless
otherwise provided in the proxy, it shall be valid only for the meeting for which it is
intended. No proxy shall be valid and effective for a period longer than five (5) years at any
one time. (n)
PROXY VOTING: is a right granted by law to all stockholders entitled to vote in stock corporations
and cannot, therefore, be denied. EXCEPT: In a non-stock corporation with by-laws providing for
a prohibition on the use of proxies (Sec. 89).
REQUIREMENTS: In the absence of a by-law provision regulating the form and execution of
proxy, Sec. 58 requires: 1. The proxy must be in writing; 2. It is signed by the stockholder or
member or his duly authorized representative; and 3. It is filed on or before the schedule meeting
with the corporate secretary.
It is to be noted, however, that publicly listed companies are required to observe and comply with
SEC Memorandum Circular No. 5 -1996.
TYPES OF PROXIES: 1. General – gives a general discretionary power of attorney to vote for
directors and all ordinary matters that my properly come before a meeting. It is not an authority,
however, to vote for fundamental changes in the corporate charter or for other unusual
transactions, unless so specified; 2. Special – restricts the authority to vote on specified matters
only and may direct the manner in which the vote will be cast.
DURATION: May be fixed by the proxy’s own terms but it cannot exceed 5 years and for not more
than 5 years for each renewal. Otherwise, it expires after the meeting for which it was given.
VOTING TRUST: is one created by an agreement between a group of stockholders of a
corporation and a trustee, or a group of identical agreements between individual stockholders and
a common trustee, whereby it is provided that for a term of years, or for a period contingent upon
a certain event, or until the agreement is terminated, control over the stock owned by such
stockholders, shall be lodged in the trustee, either with or without reservation to the owners or
persons designated by them the power to direct how such control shall be issued.
Section 59. Voting trusts. - One or more stockholders of a stock corporation may create a
voting trust for the purpose of conferring upon a trustee or trustees the right to vote and
other rights pertaining to the shares for a period not exceeding five (5) years at any time:
Provided, That in the case of a voting trust specifically required as a condition in a loan
agreement, said voting trust may be for a period exceeding five (5) years but shall
automatically expire upon full payment of the loan. A voting trust agreement must be in
writing and notarized, and shall specify the terms and conditions thereof. A certified copy
of such agreement shall be filed with the corporation and with the Securities and Exchange
Commission;
otherwise, said agreement is ineffective and unenforceable. The certificate or certificates
of stock covered by the voting trust agreement shall be cancelled and new ones shall be
issued in the name of the trustee or trustees stating that they are issued pursuant to said
agreement. In the books of the corporation, it shall be noted that the transfer in the name
of the trustee or trustees is made pursuant to said voting trust agreement.
The trustee or trustees shall execute and deliver to the transferors voting trust certificates,
which shall be transferable in the same manner and with the same effect as certificates of
stock.
The voting trust agreement filed with the corporation shall be subject to examination by
any stockholder of the corporation in the same manner as any other corporate book or
record: Provided, That both the transferor and the trustee or trustees may exercise the
right of inspection of all corporate books and records in accordance with the provisions
of this Code.
Any other stockholder may transfer his shares to the same trustee or trustees upon the
terms and conditions stated in the voting trust agreement, and thereupon shall be bound
by all the provisions of said agreement.
No voting trust agreement shall be entered into for the purpose of circumventing the law
against monopolies and illegal combinations in restraint of trade or used for purposes of
fraud.
Unless expressly renewed, all rights granted in a voting trust agreement shall
automatically expire at the end of the agreed period, and the voting trust certificates as
well as the certificates of stock in the name of the trustee or trustees shall thereby be
deemed cancelled and new certificates of stock shall be reissued in the name of the
transferors.
The voting trustee or trustees may vote by proxy unless the agreement provides otherwise.
(36a)
VOTING TRUSTS DISTINGUISHED FROM PROXY
VOTING TRUST PROXY The beneficial owner of the shares ceased to be stockholder of record
of the corporation since the shares are transferred to the trustee Legal title to the shares remain
with the beneficial owner Trustee votes as owner of the shares Proxy votes merely as an agent
The beneficial owner is disqualified to be a director The owner of the shares may be elected as
such since legal title thereof remains with him Purpose is to acquire voting control of the
corporation Generally used to secure voting an quorum requirements or merely for the purpose
of representing an absent stockholder Irrevocable Revocable anytime unless coupled with an
interest The trustee can act and vote at any meeting during the duration of the VTA Proxy can
generally act as such only at a particular meeting Trustee may vote in person or by proxy Proxy
holder must vote in person Duration may exceed five years Proxy is of a shorter duration and may
not exceed 5 years VTA to be valid and effective, must be notarized and filed with the SEC Unless
required by the by-laws, proxies need not be notarized nor is it required to be filed with the SEC.
READ AGAIN: LEE VS. CA
NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, EUSEBIO VILLATUYA
MARIO Y. CONSING and ROBERTO S. BENEDICTO, petitioners, vs. HON. BENJAMIN
AQUINO, in his official capacity as Presiding Judge of Branch VIII of the Court of First Instance
of Rizal, BATJAK INC., GRACIANO A. GARCIA and MARCELINO CALINAWAN JR.,
respondents. (G.R. No. L - 34192 June 30, 1988)
PHILIPPINE NATIONAL BANK, petitioner, vs. HON. BENJAMIN H. AQUINO, in his capacity as
Presiding Judge of the Court of First Instance of Rizal, Branch VIII and BATJAK
INCORPORATED, respondents (G.R. No. L - 34213 June 30, 1988)
FACTS: On Oct. 26, 1965, private respondent Batjak, Inc. entered into a Voting Trust Agreement
with petitioner NIDC, in order to assist the former with its financial obligations. The VTA was for a
period of 5 years constituting 60% of the outstanding paid-up and subscribed shares of Batjak. 5
years therafter, or on Aug. 31, 1970, Batjak represented by majority stockholders, through Atty.
Amado Duran, legal counsel, wrote to NIDC inquiring if the atter was still interest in negotiating
the renewal of the VTA, but there was no reply even with the second letter sent on Sept. 22, 1970.
On Sept. 23, 1970, legal counsel of Batjak wrote another letter asking for a complete accounting
of the assets, properties, management and operation of Batjak, preparatory to their turn-over and
transfer to the stockholders of Batjak.
68 Cesar Nickolai F. Soriano Jr. Arellano University School of Law 2011-0303 THE
CORPORATION CODE OF THE PHILIPPINES (Batas Pambansa Bilang 68, as amended) based
on the book of Atty Ruben C. Ladia
NIDC replied that it had no intention to comply with such demand. Batjak filed an action for
mandamus with preliminary injunction which was granted.
ISSUE: WON Batjak has the personality to enforce the voting trust agreement executed by its
stockholders and whether it may compel the trustee to turn over the assets of the corporation?
HELD: No. In support of the third ground of their motion to dismiss, PNB and NIDC contend that
Batjak's complaint for mandamus is based on its claim or right to recovery of possession of the
three (3) oil mills, on the ground of an alleged breach of fiduciary relationship. Noteworthy is the
fact that, in the Voting Trust Agreement, the parties thereto were NIDC and certain stockholders
of Batjak. Batjak itself was not a signatory thereto. Under Sec. 2, Rule 3 of the Rules of Court,
every action must be prosecuted and defended in the name of the real party in interest. Applying
the rule in the present case, the action should have been filed by the stockholders of Batjak, who
executed the Voting Trust Agreement with NIDC, and not by Batjak itself which is not a party to
said agreement, and therefore, not the real party in interest in the suit to enforce the same.
In addition, PNB claims that Batjak has no cause of action and prays that the petition for
mandamus be dismissed. A careful reading of the Voting Trust Agreement shows that PNB was
really not a party thereto. Hence, mandamus will not lie against PNB.
Batjak has no clear right to be entitled to the writ prayed for. What Batjak seeks to recover is title
to, or possession of, real property (the three (3) oil mills which really made up the assets of Batjak)
but which the records show already belong to NIDC. It is not disputed that the mortgages on the
three (3) oil mills were foreclosed by PNB and NIDC and acquired by them as the highest bidder
in the appropriate foreclosure sales. Ownership thereto was subsequently consolidated by PNB
and NIDC, after Batjak failed to exercise its right of redemption. The three (3) oil mills are now
titled in the name of NIDC. From the foregoing, it is evident that Batjak had no clear right to be
entitled to the writ prayed for. In Lamb vs. Philippines (22 Phil. 456) citing the case of Gonzales
V. Salazar vs. T h e B o a r d o f P h a r m a c y , 20 Phil. 367, the Court said that the writ of
mandamus will not issue to give to the applicant anything to which he is not entitled by law.
Batjak premises its right to the possession of the three (3) off mills on the Voting Trust Agreement,
claiming that under said agreement, NIDC was constituted as trustee of the assets, management
and operations of Batjak, that due to the expiration of the Voting Trust Agreement, on 26 October
1970, NIDC should tum over the assets of the three (3) oil mills to Batjak From the foregoing
provisions, it is clear that what was assigned to NIDC was the power to vote the shares of stock
of the stockholders of Batjak, representing 60% of Batjak's outstanding shares, and who are the
signatories to the agreement. The power entrusted to NIDC also included the authority to execute
any agreement or document that may be necessary to express the consent or assent to any
matter, by the stockholders. Nowhere in the said provisions or in any other part of the Voting Trust
Agreement is mention made of any transfer or assignment to NIDC of Batjak's assets, operations,
and management. NIDC was constituted as trustee only of the voting rights of 60% of the paid-
up and outstanding shares of stock in Batjak. This is confirmed by paragraph No. 9 of the Voting
Trust Agreement, thus:
9. TERMINATION — Upon termination of this Agreement as heretofore provided, the certificates
delivered to the TRUSTEE by virtue hereof shall be returned and delivered to the undersigned
stockholders as the absolute owners thereof, upon surrender of their respective voting trust
certificates, and the duties of the TRUSTEE shall cease and terminate.-
Under the aforecited provision, what was to be returned by NIDC as trustee to Batjak's
stockholders, upon the termination of the agreement, are the certificates of shares of stock
belonging to Batjak's stockholders, not the properties or assets of Batjak itself which were never
delivered, in the first place to NIDC, under the terms of said Voting Trust Agreement.
In any event, a voting trust transfers only voting or other rights pertaining to the shares subject of
the agreement or control over the stock. The law on the
matter is Section 59, Paragraph 1 of the Corporation Code (BP 68) which provides:
Sec. 59.
Voting Trusts
— One or more stockholders of a stock corporation may create a voting trust for the purpose of
conferring upon a trustee or trusties the right to vote and other rights pertaining to the shares for
a period not exceeding five (5) years at any one time: ...
The acquisition by PNB-NIDC of the properties in question was not made or effected under the
capacity of a trustee but as a foreclosing creditor for the purpose of recovering on a just and valid
obligation of Batjak.
MEETINGS
 Meetings

- Meetings of stockholders 1. Date fixed in the by-laws or by-law

- Meetings of director or trustees

 Meetings are regular and special

 Meetings of stockholders

 What is regular and what is special?

 When are regular meetings of the stockholders held?

- Fixed date provided by the by-laws

 What if there is no date?

- April

 Why april?
- Point in time the audited financial statement have been prepared

 What if in the date specified in the by-laws or by the law itself the meeting was not
convened, for instance lack of quorum or force majeure?

- It may be postponed on a reasonable date

 Notice requirement?

- Regular- 2 weeks prior notice

- Special- 1 week

 May the notice requirement be lessened?

- By-laws may provide a longer or a shorter duration

 What if the notice requirement is not complied with?

 What happened to any act passed in a meeting when notice requirement was not required
with?

- Voidable, subject to ratification

Board of directors vs. Tan

- Notice requirement is the by-laws is a mandatory requirement

- Improperly served, any action will be invalidated at the objection of any stockholder or
member

 Must be held in the proper place

 Where should it be held?

- Apparent from the foregoing provision is that meetings of stockholders must, at all times,
be held in the city or municipality where the principal office of the corporation is located
and, as far as practicable, in the principal office of the corporation.

 May the by-laws of a corporation provide that meetings be held anywhere in the
Philippines?

- While there is no provision authorizing a stock corporation to hold stockholders’ meetings

outside of the City of Municipality where the principal office is located, the law allows a
non-stock corporation to provide in its by-laws any place of members’ meeting provided
that proper notice is sent to all members indicating the date, time and place of the meeting
which shall be within the Philippines.

 T or F the by-laws of a stock corporation may validly provide that meetings shall be held
anywhere in the Philippines?
- FALSE. Non-stock corporations lang pwede provided nakalagay sa by-laws and provided
proper notice is given

 Corporation can do only such things as the law allows it to do, DOCTRINE OF LIMITED
CAPACITY

 San Miguel office located in Ortigas Center. May stockholders meeting be held in PICC
center?

- YES. Metro Manila, one single city

 Must be called by the proper party

 Who calls?

- President until and unless there is a provision , secretary on order of the president

 What if there is nobody who can call?

- The petitioner, stockholder may petition the court

 What if there is a person who can call, but he fails or neglects to call the meeting? May a
stockholder petition to authorize a meeting?

- Ponce case only applies when there is NO person authorized to call the meeting. If there
is a person, but neglects his duty. Ponce will not apply.

 Writ of injunction may never be issued ex parte

 Is there any exception?

- Section 28 only instance

Section 28. Removal of directors or trustees. - Any director or trustee of a

corporation may be removed from office by a vote of the stockholders holding or
representing at least two-thirds (2/3) of the outstanding capital stock, or if the corporation
be a non-stock corporation, by a vote of at least two-thirds (2/3) of the members entitled
to vote: Provided, That such removal shall take place either at a regular meeting of the
corporation or at a special meeting called for the purpose, and in either case, after previous
notice to stockholders or members of the corporation of the intention to propose such
removal at the meeting. A special meeting of the stockholders or members of a corporation
for the purpose of removal of directors or trustees, or any of them, must be called by the
secretary on order of the president or on the written demand of the stockholders
representing or holding at least a majority of the outstanding capital stock, or, if it be a
non-stock corporation, on the written demand of a majority of the members entitled to vote.
Should the secretary fail or refuse to call the special meeting upon such demand or fail or
refuse to give the notice, or if there is no secretary, the call for the meeting may be
addressed directly to the stockholders or members by any stockholder or member of the
corporation signing the demand. Notice of the time and place of such meeting, as well as
of the intention to propose such removal, must be given by publication or by written notice
 prescribed in this Code. Removal may be with or without cause: Provided, That removal
without cause may not be used to deprive minority stockholders or members of the right
of representation to which they may be entitled under Section 24 of this Code. (n)

 Cases of removal or ouster of a director

 Mandamus would be appropriate remedy if there is a person authorized but refuses

 Quorum and voting requirement

- Majority stockholders or members constitute a quorum

 Is the presence of the majority owners of the outstanding capital stock ABSOLUTE to have
a quorum?

- NO. when the code requires a higher quorum it must also be equivalent to the vote
required

 Do you include non-voting shares in arriving at the voting requirement to have a valid
corporate act?

- It depends.

- Section 6 last par. If it falls within the penultimate par. Of section 6

 Five requisites of a valid meeting

1. It must be held on the date fixed in the by-laws or in accordance with law

2. Prior notice must be given

3. It must be held at he proper place

4. It must be called by the proper party

5. Quorum and voting requirements must be met

 Date not complied with, notice, place, not complied with and the person who called not
authorized, what happens to any resolution called?

- Section 51, any meeting shall be valid provided all the stockholders are present or duly
represented and provided it is within the power of the corporation. 3RD paragraph of 324

- If the voting requirement is met, any resolution passed in the meeting, even if improperly
held or called will be valid if all the stockholders or members are present or duly
represented thereat. The last paragraph of section 51 is clear on the matter when it
provides:

“all proceedings had and any business transacted at any meeting of the
stockholders or members, if within the powers or authority of the corporation, shall
 be valid even if the meeting be improperly held or called, provided all the
stockholders or members of the corporation are present or duly represented at the
meeting.”
 Directors/trustees meeting

 Regular (monthly) and special (anytime)

 May that be restricted (within or outside the Phil)

- YES. unless the by-laws provide otherwise.

 Is there any notice requirement?

- YES. 1 day unless otherwise provided by the by-laws

 What happens if notice is not complied with?

- If the notice requirement is not complied with the meeting is illegal and will not bind the
corporation except when subsequently ratified or in the case of a close corporation where
the act of any one director may bind the corporation even without a meeting under the
special provision of Section 101 of the Code.

 Can notice be waived? <sec.53>

Section 53. Regular and special meetings of directors or trustees. - Regular

meetings of the board of directors or trustees of every corporation shall be held monthly,
unless the by-laws provide otherwise.

Special meetings of the board of directors or trustees may be held at any time upon
the call of the president or as provided in the by-laws.

Meetings of directors or trustees of corporations may be held anywhere in or

outside of the Philippines, unless the by-laws provide otherwise. Notice of regular or
special meetings stating the date, time and place of the meeting must be sent to every
director or trustee at least one (1) day prior to the scheduled meeting, unless otherwise
provided by the by-laws. A director or trustee may waive this requirement, either expressly
or impliedly. (n)

- YES. Expressly and impliedly

- SEC ruling

A special meeting is valid without notice where the directors are all present or
where they consent to the meeting. Presence at the meeting waives the want of
notice. Moreover, it has been ruled that the meeting of the directors without a
formal call first being had, and notice thereof given to the members, did not operate
to invalidate it or to render the proceedings which were taken at it void, for every
member of the board were present, and their joint action had completely bound the
 corporation as if the meeting has been called with due formality, and everyone of
the directors had received proper notice.
 What is the quorum and voting requirement in the directors meeting?

- Majority of the members of the board of directors (entire membership)

 Vote required to pass a valid corporate act?

- Majority of those present at which there is a quorum (3 present, vote of 2 sufficient)

- Exception, majority of all the members of the board in case of election of corporate officers,
unless the articles provide for a greater quorum or voting requirement

 Should the director or trustees be physically present?

- General rule, must sit and act as a body to have a valid corporate act

 Five man member board, a meeting was called today, should the physical presence or
warm bodies requires to constitute a quorum?

- NO. it is not required. Teleconference or video conference is allowed, E- commerce law

 Membership subject to laws

 Stockholder not yet

 May director vote by proxy?

- NO

 If A is a director and a meeting is called for the purpose of electing a new set of BOD can
A vote by proxy?

- YES. Because it is a stockholders meeting

 If directors meeting, cannot vote by proxy

 Stockholder’s right to vote

- Inherent in stock ownership

- However this right is not always inherent, because it may be denied:

1. Redeemable and preferred shares, however if founders shares are issued others may
be denied the right to vote.

2. May be denied by the articles of incorporation or contracts

- When not denied they may do so in person or by proxy

 May the right to vote by proxy be denied?

 May the articles of incorporation deny?

 May the by-laws validly provide that proxy voting is not allowed?

- NO

 Only non-stock may be denied proxy voting (may be broaden, limited or denied)

 Proxy voting is a matter of right granted by law

 Requirements of a valid proxy?

- Section 58

Section 58. Proxies. - Stockholders and members may vote in person or by proxy
in all meetings of stockholders or members. Proxies shall in writing, signed by the
stockholder or member and filed before the scheduled meeting with the corporate
secretary. Unless otherwise provided in the proxy, it shall be valid only for the meeting for
which it is intended. No proxy shall be valid and effective for a period longer than five (5)
years at any one time. (n)
 How long may a proxy exist?

- Maximum of 5 years

- Valid for the meeting in which it is intended

 Is proxy revocable?

- Generally revocable, unless coupled with interest

 Revocation

- A proxy, like agency in general is revocable unless coupled with an interest and revocation
need not be made by formal notice in writing. Revocation may be expressed to the proxy
holder, to the election committee, by a subsequent proxy to another or by sale of the
shares. Thus it may be revoke orally by conduct such that appearing and asserting the
right to vote at a meeting by the registered owner of the shares revokes a proxy previously
given.

 Must be submitted to a validation committee

 By-laws of non-stock corporations may deny proxy voting

 What is voting trust agreement?

- One created by an agreement between a group of stockholders of a corporation and a

trustee, or a group of identical agreements between individual stockholders and a common
trustee, whereby it is provided that for a term o years or for a period contingent upon a
 certain event, or until the agreement is terminated, control over the stock owned by such
stockholders, shall be lodged in the trustee, either with or without reservation to the owners
or persons designated by them the power to direct how such control shall be issued.

- It is a devise of binding stockholders to vote as a unit and thus assuring a desirable stability
and continuity in management in situations where it is needed.

 What is the effect of a voting trust agreement relative to the rights?

- Lee vs. CA must pass these criteria

1. That the voting rights of the stock are separated from the other attributes of ownership;

2. That the voting rights granted are intended to be irrevocable for a definite period of time;
and,

3. That the principal purpose of the grant of voting rights is to acquire voting control of the
corporation.

 During the duration of the trust they are irrevocable unless there is a violation either by
fraud

 Requisites

- Section 59

Section 59. Voting trusts. - One or more stockholders of a stock corporation may
create a voting trust for the purpose of conferring upon a trustee or trustees the right to
vote and other rights pertaining to the shares for a period not exceeding five (5) years at
any time: Provided, That in the case of a voting trust specifically required as a condition in
a loan agreement, said voting trust may be for a period exceeding five (5) years but shall
automatically expire upon full payment of the loan. A voting trust agreement must be in
writing and notarized, and shall specify the terms and conditions thereof. A certified copy
of such agreement shall be filed with the corporation and with the Securities and Exchange
Commission; otherwise, said agreement is ineffective and unenforceable. The certificate
or certificates of stock covered by the voting trust agreement shall be cancelled and new
ones shall be issued in the name of the trustee or trustees stating that they are issued
pursuant to said agreement. In the books of the corporation, it shall be noted that the
transfer in the name of the trustee or trustees is made pursuant to said voting trust
agreement.

The trustee or trustees shall execute and deliver to the transferors voting trust
certificates, which shall be transferable in the same manner and with the same effect as
certificates of stock.

The voting trust agreement filed with the corporation shall be subject to
examination by any stockholder of the corporation in the same manner as any other
corporate book or record: Provided, That both the transferor and the trustee or trustees
may exercise the right of inspection of all corporate books and records in accordance with
the provisions of this Code.
 Any other stockholder may transfer his shares to the same trustee or trustees upon
the terms and conditions stated in the voting trust agreement, and thereupon shall be
bound by all the provisions of said agreement.

No voting trust agreement shall be entered into for the purpose of circumventing
the law against monopolies and illegal combinations in restraint of trade or used for
purposes of fraud.

Unless expressly renewed, all rights granted in a voting trust agreement shall
automatically expire at the end of the agreed period, and the voting trust certificates as
well as the certificates of stock in the name of the trustee or trustees shall thereby be
deemed cancelled and new certificates of stock shall be reissued in the name of the
transferors.

The voting trustee or trustees may vote by proxy unless the agreement provides
otherwise. (36a)

 Does it need to be notarized?

- Yes, otherwise it is ineffective and unenforceable

 Only legal ownership is transferred

 Being still the beneficial owner they may transfer these rights

 Is the right granted to a voting trust agreement absolute? (to inspect)

- NO.

- The voting trust agreement filed with the corporation shall be subject to examination by
any stockholder of the corporation in the same manner as any other corporate book or
record. Provided, that both the transfer and the trustee or trustees may exercise the right
of inspection of all corporate books and records in accordance with the provisions of this
Code.

 Legal title is transferred to the voting trustee

 May the voting trustee vote by proxy?

- Yes, legal owner may vote by proxy

 May the proxy holder vote by proxy?

- NO, (AGENT) an agent can have no other agent unless specifically allowed by the
principal

 Stockholder executing as a proxy, is he qualified to be voted as a director?

 Why is he qualified to act as a director if the stockholder executes as a director?

- The beneficial owner of the shares in a voting trust is disqualified to be a director in a
voting trust whereas in a proxy, the owner of the shares may be elected as such since
legal title thereof remains with him

- YES he remains to be the owner

 Is the stockholder executing in a voting trust agreement, is he qualified to act as a director?

- NO. ceases to be stockholder of record, no longer the legal owner of shares

 May the corporation enforce the voting trust agreements executed by its stockholders?

- NO. NIDC vs. AQUINO

- Not a privy to the contract

- Rights liabilities of a stockholder are there in their individual capacity- corporate entity
theory

 Voting trust agreements

- Normally executed in favor of banking and financial institutions

- So that they can vote a certain set of directors

- They will be more secured

 Voting pull agreement

- Enters into an agreement

- Pull all their shares to cast one vote

- Covered by rules governing contracts

- By pulling their votes they can decline the resolution passed by the board