2018 BUSORG2 OUTLINE 7

Prof. M.I.P. Romero

XIlI. DUTIES OF DIRECTORS & CONTROLLING STOCKHOLDERS

3-fold duty of directors --- Diligence, Loyalty, Obedience

Sec. 21 of NCC;
PNB v. CA May 18, 1978
Montelibano v. Bacolod Murcia May 18, 1962
Litwin v. Allen, et al 25 N.Y.S. 2d 667 (1940)
Walker v. Man, et al. 253 N.Y.S 458 (1931)
Bates v. Dresser 251 US 524 (1920)

1) Compensation of directors – Sec. 30

Western Institute of Technology v. Salas 278 SCRA 216
2) Duty of diligence/Business Judgment Rule – Secs. 23, 31
Board of Liquidators v. Kalaw 20 SCRA 987
Benguet Electric Coop. v. NLRC 209 SCRA 55
3) Self-dealing directors- Sec. 32
Prime White Cement v. IAC 220 SCRA 103
4) Interlocking directors – Sec. 33
Gokongwei v. SEC et al. 89 SCRA 336
5) Doctrine of Corporate Opportunity – Sec. 34
6) Duty to stockholders - Special Facts Doctrine
Strong v. Repide 41 Phil. 947
7) Duty to creditors – Steinberg v. Velasco 52 Phil. 953
8) Watered Stocks - Sec. 65
9) Duty of shareholders in close corps. – Secs. 97(2); 100 (4),(5)

XlV. DEVICES AFFECTING CONTROL

1) Proxy device – Section 58; SEC Memo Circ. 4 (2004)

SEC v. CA (GR 187702; OCT. 22, 2014)
2) Voting trusts – Sec. 59
Everett v. Asia Banking (49 Phil 512)
NIDC v. Aquino (163 SCRA 153)
Lee v. CA Feb. 4, 1992
3) Pooling & voting agreements – Sec. 100
4) Cumulative voting – Sec. 24
 5) Classification of shares – Sec. 6
6) Control Test vs. Grandfather Rule
7) Restriction on transfer of shares – Sec. 98
8) Prescribing qualifications for directors – Sec. 47 (5)
9) Management contracts – Sec. 44
10) “Super” votes; unusual voting/quorum reqs. – Sec. 97
11) Shares that cannot vote --- Sec. 89 vs. Sec. 6

XV. RIGHT OF INSPECTION ----

Secs. 74 – 75
Rule 7, Rules of Proc. On Intra-corporate Controversies
Pardo v. Hercules Lumber 47 Phil. 965
Philpotts v. Phil. Mfg. Co. 40 Phil. 479
Gonzales v. PNB 122 SCRA 490
Veraguth v. Isabela Sugar Co. 57 Phil. 266
Gokongwei v. SEC L- 45911, April 11, 1979
Lim Po v. DOJ and Tan Feb. 11, 2013

XVI. DERIVATIVE SUIT

Rule 8, Rules of Proc. On Intra-corporate Controversies
Evangelista v. Santos 86 Phil. 387
Republic Bank v. Cuaderno 19 SCRA 671
Pascual v. Orozco 19 Phil 83 (1911)
SMC v. Khan Aug. 11, 1989
Yu v. Yukayguan June 18, 2009
Cua v. Ocampo Tan Dec. 4, 2009
Ching and Wellington v. Subic Bay Golf Sept. 10, 2014

XVII. MERGERS & CONSOLIDATION

Sec. 76 – 80
R.A. 10667 (Phil. Competition Act of 2015) – Title IV
Reyes et al. v. Blouse et al. (1952) 91 Phil 305
Edward Nell Co. v. Pacific Farms, Inc. (1965) 15 SCRA 415
Laguna Trans. Co. Inc. v. SSS (1960) 107 Phil 833
Lozano v. De Los Santos 274 SCRA 452
Global Business v. Surecomp Software Oct.13, 2010
BPI v. BPI Employees Union Aug. 10, 2010
AND Resolution on MR Oct. 19, 2011
BANCOM v. RPN April 21, 2014