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Rosita Peña was awarded the lots in a foreclosure sale In a suit between the two groups, SEC rendered a
for being the highest bidder. Subsequently, the Board decision in 1986 declaring both groups to be null and
of Directors of PAMBUSCO, 3 out of its 5 directors, void. SEC recommeded that the a new by-laws be
issued a resolution to assign its right of redemption to approved and a new election be conducted upon
Marcelino Enriquez, who redeemed the property. the approval of the by-laws. However, the SEC
Peña now avers that she is the legitimate owner of the recommendation was not heeded.
subject lands for having purchased the same in a
foreclosure proceeding instituted by the DBP against In 1989, the Carpizo group passed a Board Resolution
PAMBUSCO and the deed of assignment executed by authorizing the sale of the land to Iglesia Ni Cristo
PAMBUSCO in favor of Enriquez was void ab initio for ("INC"), and a Deed of Sale was eventually executed.
being an ultra vires act of its board of directors and for Subsequently, the Tamano Group filed a petition
being without any valuable consideration. before the SEC questioning the sale.
It should be noted that the by-laws of PAMBUSCO Meanwhile, INC filed a suit for specific performance
provide that four out of five directors must be present before RTC Branch 81 against the Carpizo group.
in a special meeting of the board to constitute a
quorum, and that the corporation has already ceased Issue: Whether or not the sale between the Carpizo
to operate. In this case, only 3 out of 5 directors issued group and INC is null and void.
a resolution to assign its right of redemption to
Marcelino Enriquez. Ruling: Yes. Since the SEC has declared the Carpizo
group as a void Board of Trustees, the sale it entered
Issue: Whether deed of assignment is void. into with INC is likewise void. Without a valid consent
of a contracting party, there can be no valid
Ruling: Yes. contract.
The by-laws of a corporation are its own private laws In this case, the IDP, never gave its consent, through a
which substantially have the same effect as the laws legitimate Board of Trustees, to the disputed Deed of
of the corporation. They are in effect, written, into the Absolute Sale executed in favor of INC. Therefore, this
charter. In this sense they become part of the is a case not only of vitiated consent, but one where
fundamental law of the corporation with which the consent on the part of one of the supposed
corporation and its directors and officers must comply. contracting parties is totally wanting. Ineluctably, the
subject sale is void and produces no effect
Apparently, only three (3) out of five (5) members of whatsoever.
the board of directors of respondent PAMBUSCO
convened by virtue of a prior notice of a special The subject lot constitutes the only property of IDP.
meeting. There was no quorum to validly transact Hence, its sale to a third-party is a sale or disposition of
business since it is required under its by-laws that at all the corporate property and assets of IDP. For the
least four (4) members must be present to constitute a sale to be valid, the majority vote of the legitimate
quorum in a special meeting of the board of directors. Board of Trustees, concurred in by the vote of at least
2/3 of the bona fide members of the corporation
Further, under the Corporation Law, the sale or should have been obtained. These requirements were
disposition of any and/or substantially all properties of not met in the case at bar.
the corporation requires, in addition to a proper board
resolution, the affirmative votes of the stockholders
holding at least two-thirds (2/3) of the voting power in Caltex (Phils) Inc vs PNOC Shipping and Transport
the corporation in a meeting duly called for that Corp
purpose. This was not complied with in the case at bar.
Facts: Caltex (Phils.), Inc. v. Luzon Stevedoring
Corporation was pending before the then
Islamic Department of the Philippines vs CA Intermediate Appellate Court (IAC) directing
LUSTEVECO to pay Caltex. Meanwhile, PSTC and
Facts: 1971, the ISLAMIC DIRECTORATE OF THE Luzon Stevedoring Corporation entered into an
PHILIPPINES ("IDP") was incorporated with the primary Agreement of Assumption of Obligations. The
purpose of establishing a mosque, school, and other agreement provides that PSCTC shall assume all the
religious infrastructures in Quezon City. obligations of LUSTEVECO with respect to the claims to
Caltex.
When President Marcos declared martial law in 1972,
most of the members of the 1971 Board of Trustees
The RTC ruled in favor or Caltex, issued a writ of H. Power to acquire own shares.
execution. However, the judgment was not satisfied
because of the prior foreclosure of LUSTEVECO’s
properties. Sec. 41. Power to acquire own shares. - Provided, That
the corporation has unrestricted retained earnings in
Caltex subsequently learned of the Agreement its books to cover the shares to be purchased or
between PSTC and LUSTEVECO. Caltex sent acquired, a stock corporation shall have the power to
successive demands to PSTC asking for the satisfaction purchase or acquire its own shares for a legitimate
of the judgment rendered by the CFI. PSTC informed corporate purpose or purposes, including but not
Caltex that it was not a party to the prior case and limited to the following cases:
thus, PSTC would not pay LUSTEVECO’s judgment
debt. PSTC advised Caltex to demand satisfaction of 1. To eliminate fractional shares arising out of stock
the judgment directly from LUSTEVECO. dividends;
Caltex filed a complaint for sum of money against 2. To collect or compromise an indebtedness to the
PSTC. corporation, arising out of unpaid subscription, in a
delinquency sale, and to purchase delinquent shares
Issue: Whether PSTC is bound by the Agreement when sold during said sale; and
it assumed all the obligations of LUSTEVECO.
3. To pay dissenting or withdrawing stockholders
RULING: Yes. PSTC may be held liable for the entitled to payment for their shares under the
obligations of LUSTEVECO to Caltex. provisions of this Code.
Even if PSTC did not expressly assume to pay the Written notice of the proposed investment and the
creditors of LUSTEVECO, PSTC would still be liable to time and place of the meeting shall be addressed to
Caltex up to the value of the assets transferred. The each stockholder or member at his place of residence
transfer of all or substantially all of the unencumbered as shown on the books of the corporation and
assets of LUSTEVECO to PSTC cannot work to defraud deposited to the addressee in the post office with
the creditors of LUSTEVECO. A creditor has a real postage prepaid, or served personally, or sent
interest to go after any person to whom the debtor electronically in accordance with the rules and
fraudulently transferred its assets. regulations of the Commission on the use of electronic
data message, when allowed by the by-laws or done
with the consent of the stockholders. Provided,
however, That where the investment by the
corporation is reasonably necessary to accomplish its
primary purpose as stated in the articles of
incorporation, the approval of the stockholders or (1) When justified by definite corporate expansion
members shall not be necessary. projects or programs approved by the board of
directors; or
Take note of the majority requirement: majority and the (2) when the corporation is prohibited under any
2/3. Revision on this is the fact that notices may be sent loan agreement with any financial institution or
electronically. Sa lahat, actually, pwede na creditor, whether local or foreign, from declaring
electronically. But the SEC has not yet issued an IRR for dividends without its/his consent, and such
this matter. consent has not yet been secured; or
J. Power to declare dividends (3) When it can be clearly shown that such
retention is necessary under special circumstances
obtaining in the corporation, such as when there is
Sec. 43. Power to declare dividends. - The board of need for special reserve for probable
directors of a stock corporation may declare
contingencies.
dividends out of the unrestricted retained earnings
which shall be payable in cash, in property, or in stock Q: What are the exceptions to IAET?
to all stockholders on the basis of outstanding stock
held by them: Provided, That any cash dividends due A: Public held corporations, Insurance companies, banks
on delinquent stock shall first be applied to the unpaid and other non-bank financial intermediaries, etc…
balance on the subscription plus costs and expenses,
while stock dividends shall be withheld from the Q: Do you know what “immediacy test” is?
delinquent stockholder until his unpaid subscription is
fully paid: Provided, further, That no stock dividend A: This is in relation to IAET. If it is in the immediate needs
shall be issued without the approval of stockholders of a company, then yung inaccumulate mo, okay lang
representing not less than two-thirds (2/3) of the yun.
outstanding capital stock at a regular or special
meeting duly called for the purpose. K. Power to enter into management contract
Special meetings of stockholders or members shall be This will be part of the by-laws. It does not have to be
held at any time deemed necessary or as provided in specific. Pwede naman na first Monday of the July. Hindi
the by-laws: Provided, however, That written notice siya kailangan specific but it has to be determined.
shall be sent to all stockholders or members at least (2)
weeks prior to the meeting, unless a longer period is “Provided, that written notice of regular meetings shall be
provided in the by-laws, law or regulation. sent to all stockholders or members of record at least (20)
days prior to the meeting, unless a longer period is
A stockholder or member shall have the right to required by the by-laws, law or regulation.”
propose the holding of a special meeting and items to
be included in the agenda. In the old Corporation Code, the period is 2 weeks. Now,
it’s only 20 days prior to the meeting.
Notice of any meeting may be waived, expressly or
impliedly, by any stockholder or member. Provided “Provided further, that the written notice of regular
further, that attendance at a meeting shall constitute meetings may be sent to all stockholders or members of
a waiver of notice of such meeting, except when the record through electronic mail or such other manner as
person attends meeting for the express purpose of the Commission shall allow under its guidelines”
objecting to the transaction of any business because
the meeting is not lawfully called or convened. This is one of the revisions in this provision, it can now be
sent through electronic mail. Again, before, naka
Whenever, for any cause, there is no person postage, now, pwede na electronic mail.
authorized to call a meeting, Commission, upon
petition of a stockholder or member on a showing of “At each regular meeting of stockholders or members,
good cause therefore, may issue an order to the the board of directors or trustees shall endeavor to
petitioning stockholder or member directing him to present to stockholders or members the following:”
call a meeting of the corporation by giving proper (Items a to k)
notice required by this Code or by the by-laws. The
petitioning stockholder or member shall preside Before, wala tong mga items na ito. Now, it appears that
thereat until at least a majority of the stockholders or the legislature wants to formalize what would be
members present have been chosen one of their presented in the meeting.
number as presiding officer.
Take note that most of the provisions on the meeting are
Unless the by-laws provide for a longer period, the geared towards the protection of the minority
stock and transfer book or membership book shall be stockholder because it is easier to silence the minority
closed at least (20) days before the scheduled date than to silence the majority.
of the meeting.
“xxx c.) A detailed, descriptive, balances and
In case of postponement of stockholders’ or comprehensible assessment of the corporation’s
members’ regular meetings, written notice thereof performance which shall include information on any
and the reason therefor shall be sent to all material change in the corporation’s business, strategy
stockholders or members of record at least two (2) and other affairs;”
weeks prior to the date of the meeting, unless a
different period is required under by-laws, laws or If you have made it on the corporate world, you know
regulation. that every stockholder meeting is like an assessment of
duties of the BOD, the officers, especially if you are
The right to vote may be exercised in person, through paying them hundred thousands per month. Usually pag
a proxy, or when so authorized in the by-laws or by a nag-aaudit ako, tinatanggal yung mga comments. Pag
majority of the members of the board of directors, the nasend siya sa meeting sanitized na sya. Para good job.
stockholders or members may also vote through
Pag ikaw naman ang auditor, di ka din magreklamo.
remote communication or in absentia. The
Pero makikita naman din talaga yang material 2. Through a proxy;
differences. 3. remote communication; or
4. In absentia.
“ d.) A financial report for the preceding year, which
shall include financial statements duly signed and There is still no IRR as to remote communication or in
certified in accordance with this Code and the rules the absentia voting.
Commission may prescribe, a statement on the
adequacy of the corporation’s internal controls or risk B. Place and Time of Meeting
management systems, and a statement of all external
audit and non-audit fees;”
Sec. 51. Place and time of meetings of stockholders
This is important kasi pag prinesent mo sya na mahal or members. - Stockholders' or members' meetings,
whether regular or special, shall be held in the
masyado ang binayad sa audit fees, the stockholders
principal office of the corporation as set forth in the
may have the impression na may collusion with the
articles of incorporation, or if not practicable, in the
management. city or municipality where the principal office of the
corporation is located, Provided, That Metro Manila,
The revisions under this provision is actually an adoption
Metro Cebu, Metro Davao and other metropolitan
from the Code of Good Corporate Governance.
areas shall, for purposes of this section, be considered
“xxx f.)Director or trustee profiles which shall include, a city or municipality.
among others, their qualifications and relevant
Written notice shall be sent through means of
experience, length of service in the corporation, trainings
communication provided in the by-laws, which notice
and continuing education attended, and their board
shall state the time, place and purpose of the
representations in other corporations;” meetings.
That is why in some corporations nire-require na MBAs,
Each notice of meeting shall further be accompanied
mga master’s ceritificate, mga abroad-abroad.
by the following:
Napaka-costly wala namang assessment. Yang mga
short course na yan, ayaw dayon mo ka-impress, a) The agenda for the meeting
daghan lang sila’g kwarta. Parang seminar lang siya. But b) A proxy form which shall be submitted to the
that is a venue for networking. Syempre ang mga corporate secretary within a reasonable time
classmate nila diyan, CEO ng other companies. That’s prior to the meeting;
why nire-require. c) When attendance, participation and voting
are allowed by remote communication or in
“xxx Notice of any meeting may be waived, expressly or absentia, the requirements and procedures
impliedly, by any stockholder or member. “ to be followed when a stockholder or
member elects either option; and
Q: How do you waive? d) When the meeting is for election of directors
or trustee, the requirements and procedure
A: Hindi pwede ang general waiver.
for nomination.
“xxx Provided further, that attendance at a meeting shall
constitute a waiver of notice of such meeting, except All proceedings had and any business transacted at
any meeting of the stockholders or members, if within
when the person attends meeting for the express
the powers or authority of the corporation, shall be
purpose of objecting to the transaction of any business
valid even if the meeting be improperly held or called,
because the meeting is not lawfully called or convened.”
provided all the stockholders or members of the
This is similar to motion to dismiss by reason of lack of corporation are present or duly represented at the
meeting and none of them expressly states at the
jurisdiction. Pag nag-appear ka, it is not a waiver to
beginning of the meeting that the purpose of their
question the lack of jurisdiction. The purpose of
attendance is to object to the transaction of any
appearing is actually to question the jurisdiction. business because the meeting is not lawfully called or
convened.
“xxx The right to vote may be exercised in person,
through a proxy, or when so authorized in the by-laws or
by a majority of the members of the board of directors, Q: Pwede bang mag stockholders meeting abroad?
the stockholders or members may also vote through
remote communication or in absentia.” A: No. It should be within the city or municipality of the
principal place of business.
Q: Paano magvote ang stockholders?
Take note of that because that rule is different in case of
A: There is a revision. May apat na ways na: the board of directors. Also, take note of the items that
should be indicated in the notice.
1. In person;
C. Quorum “xxx every decision reached by at least a majority of the
directors or trustees constituting quorum shall be valid as
a corporate act, except for the election of officers which
Sec. 52. Quorum in meetings. - Unless otherwise shall require the vote of a majority of all the members of
provided for in this Code or in the by-laws, a quorum the board.”
shall consist of the stockholders representing a majority
of the outstanding capital stock or a majority of the Pag may majority of the Board, they can transact.
members in the case of non-stock corporations. Majority of the quorum, that is a valid corporate act. But
for the election of officers, you need the absolute
majority.
Q: Again, are treasury shares included in the outstanding
capital stock? “xxx Meetings of directors or trustees of corporations
may be held anywhere in or outside of the Philippines”
A: No. So you have to deduct the treasury shares in
computing for the outstanding capital stock which the Pwede sila magmeeting sa Paris.
basis of the quorum.
“xxx Directors or trustees cannot attend or vote by proxy
Regular and Special Meeting of the DIRECTORS OR at board meetings. They can participate and vote
TRUSTEES; Quorum through remote communication such as
videoconferencing or other alternative modes of
Sec. 53. Regular and special meetings of directors or communication that allow them reasonable opportunity
trustees. – Unless the articles of incorporation or by- to participate.”
laws provides for a greater majority, a majority of the
Compare this to the meetings by the stockholders.
directors or trustees as stated in the articles of
Directors or trustees cannot attend or vote by proxy. They
incorporation shall constitute a quorum to transact a
corporate business, and every decision reached by at can participate through remote communication,
least a majority of the directors or trustees constituting pwede Skype. Since they are given the chance to vote
quorum shall be valid as a corporate act, except for and participate through videoconferencing or other
the election of officers which shall require the vote of alternative modes of communication, they have no
a majority of all the members of the board. reason to vote by proxy.
A: Pag namatay yung may-ari tapos merong mga mga Sec. 59. Voting trusts. - One or more stockholders of a
stock corporation may create a voting trust for the
tagapagmana. So the heirs are joint. The consent of all
purpose of conferring upon a trustee or trustees the
the co-owners is necessary.
right to vote and other rights pertaining to the shares
Sec. 57. Voting right for treasury shares. - Treasury for a period not exceeding five (5) years at any time:
shares shall have no voting right as long as such shares
remain in the Treasury. 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)
Sino ba magvote nyan? Eh binili na yan ng corporation. years but shall automatically expire upon full payment
of the loan. A voting trust agreement must be in writing
Section 58. Manner of Voting; Proxies- Stockholders and notarized, and shall specify the terms and
and members may vote in person or by proxy in all conditions thereof. A certified copy of such
meetings of stockholders or members. agreement shall be filed with the corporation and with
the Commission; otherwise, said agreement is
When so authorized in the by-laws or by a majority of ineffective and unenforceable.
the BOD, the stockholders or members of the
corporations may also vote through remote The certificate or certificates of stock covered by the
communication or in absentia; Provided that the right voting trust agreement shall be canceled and new
to vote through such modes may be exercised in the ones shall be issued in the name of the trustee or
corporation vested with public interest, trustees stating that they are issued pursuant to said
notwithstanding the absence of a provision in the by- agreement. In the books of the corporation, it shall be
laws of the corporation; Provided, further, that the noted that the transfer in the name of the trustee or
votes are received before the corporation finishes the trustees is made pursuant to said voting trust
tally of votes. agreement.
When a stockholder or member participates through The trustee or trustees shall execute and deliver to the
remote communication or in absentia, he or she shall transferors voting trust certificates, which shall be
be deemed present for purposes of quorum. transferable in the same manner and with the same
effect as certificates of stock.
The corporation shall establish the appropriate
requirements and procedures for voting through The voting trust agreement filed with the corporation
remote communication, and in absentia, taking into shall be subject to examination by any stockholder of
account the company’s scale, number of the corporation in the same manner as any other
shareholders or members, structure and other factors corporate book or record: Provided, That both the
consistent with the basic right corporate suffrage. transferor and the trustee or trustees may exercise the
right of inspection of all corporate books and records
Proxies shall be signed and filed by the stockholder or in accordance with the provisions of this Code.
member, in any form authorized by the by-laws and
received by the corporate secretary within a Any other stockholder may transfer his shares to the
reasonable time before the scheduled meeting. same trustee or trustees upon the terms and
conditions stated in the voting trust agreement, and
Unless otherwise provided in the proxy form, it shall be thereupon shall be bound by all the provisions of said
valid only for the meeting for which it is intended. No agreement.
proxy shall be valid and effective for a period longer
than five (5) years at any one time.
No voting trust agreement shall be entered into for the Competition Commission. Take note that not all anti-
purpose of circumventing the law anti-competitive competitive agreements are prohibited.
agreements, abuse of dominant position, anti-
competitive mergers and acquisitions, violation of Please read Proxy Rules and Regulation and SEC
nationality and capital requirements, or for the memorandum of Teleconferencing.
perpetration of fraud.
In teleconferencing, a roll call shall be made by the
Unless expressly renewed, all rights granted in a voting Secretary. Every director and participant shall state, for
trust agreement shall automatically expire at the end the record, the following:
of the agreed period, and the voting trust certificates
as well as the certificates of stock in the name of the a. Full Name
trustee or trustees shall thereby be deemed canceled b. Location
and new certificates of stock shall be reissued in the c. For those attending through tele/videoconferencing,
name of the transferors. he shall confirm that:
The voting trustee or trustees may vote by proxy unless i. he can completely and clearly hear the others
the agreement provides otherwise. who can clearly hear him at the end of the line
ii. state whether he has received the agenda and
all the materials for the meeting
“xxx may create a voting trust for the purpose of iii. specify type of device used.
conferring upon a trustee or trustees the right to vote and
other rights pertaining to the shares for a period not Read the process because any deviation from the
exceeding five (5) years or at any time” process can be a contention to render the participation
to the meeting through teleconferencing invalid.
Meaning, pwede siya ma-extend.