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February 22, 2019 I Part 2 of 2 Nothing in this section is intended to restrict the power

Vallente, Michie Mae of any corporation, without the authorization by the


stockholders or members, to sell, lease, exchange,
G. Power to Sell, Dispose, Lease or Encumber Assets mortgage, pledge or otherwise dispose of any of its
property and assets if the same is necessary in the
usual and regular course of business of said
Sec. 40. Sale or other disposition of assets. - Subject to corporation or if the proceeds of the sale or other
the provisions of RA 10667 or the Philippine disposition of such property and assets be
Competition Act and other related laws, a appropriated for the conduct of its remaining
corporation may, by a majority vote of its board of business.
directors or trustees, sell, lease, exchange, mortgage,
pledge or otherwise dispose of its property and assets,
upon such terms and conditions and for such “Subject to the provisions of RA 10667 or the Philippine
consideration, which may be money, stocks, bonds or Competition Act”
other instruments for the payment of money or other
property or consideration, as its board of directors or Bakit nilagay yan? Do not think of Philippine Competition
trustees may deem expedient. Act as limited only to mergers. Meron ding acquisitions.
So if a company has a joint venture or saklaw ng
A sale of all or substantially all of the corporation’s Competition act, if there is an acquisition, term nila is SLC
properties and assets, including goodwill must or Substantially Lessening Competition, then you will
authorized by the vote of the stockholders need to report to the Philippine Competition. What are
representing at least two-thirds (2/3) of the those instances na magkakaroon ng Substantially
outstanding capital stock, or at least to two-thirds (2/3) Lessening Competition?
of the members, in a stockholder's or member's
meeting duly called for the purpose. Let’s say may isang satellite lang sa buong Pilipinas. Then
inacquire ko siya. I did not enter into any joint venture or
In a non-stock corporations where there are no merger but I acquired it. It is still under the coverage of
members with voting rights, the vote of at least a
the Philippine Competition Act because that would
majority of the trustees in the office will be sufficient
have the effect of substantially lessening the
authorization for the corporation to enter into any
transaction authorized by this section. competition.

“xxx The determination of whether or not the sale


The determination of whether or not the sale involves
involves all or substantially all of the corporation’s
all or substantially all of the corporation’s properties
properties and assets must be computed based on its net
and assets must be computed based on its net asset
value, as shown in its latest financial statements. A sale asset value, as shown in its latest financial statements.”
or other disposition shall be deemed to cover
Q: What is substantially all?
substantially all the corporate property and assets if
thereby the corporation would be rendered A: If the value of that is only 1/10 of the total assets but
incapable of continuing the business or without that property hindi ka na mag-fufunction,
accomplishing the purpose for which it was substantially all yan.
incorporated.
Let’s say logistics ka, tapos may property ka near the
Written notice of the proposed action and of the time wharf. Hindi siya ganun ka mahal pero pag wala yun, di
and place of the meeting shall be addressed to each ka makaka-operate. That is still considered “substantially
stockholder or member at his place of residence as
all”
shown on the books of the corporation and deposited
to the addressee in the post office with postage Please take note that in selling or disposing assets, you
prepaid, or served personally or when allowed by the have to comply with the Bulk Sales Law.
by-laws or done with the consent of the stockholder,
sent electronically; Provided, That any dissenting I. Bulk Sales Law
stockholder may exercise his appraisal right under the
conditions provided in this Code.
This is a very old law but still effective.
After such authorization or approval by the
stockholders or members, the board of directors or Q: What is the purpose of the Bulk Sales Law?
trustees may, nevertheless, in its discretion, abandon
such sale, lease, exchange, mortgage, pledge or A: The purpose is to protect the creditor. If may assets si
other disposition of property and assets, subject to the vendor, yung hindi naman nya talaga binibenta, tapos
rights of third parties under any contract relating ibebenta nya yun, he has to inform the creditor because
thereto, without further action or approval by the the creditor may not have anything to go after.
stockholders or members.
Peña vs CA
Facts: PAMPANGA BUS CO., INC. (PAMBUSCO) is the ("Tamano Group")flew to the Middle East to escape
owner of the three lots in dispute which were political persecution. Thereafter, two contending
mortgaged to Development Bank of the Philippines groups claiming to be the IDP Board of Trustees
(DBP), which were later on foreclosed. sprung: the Carpizo group and Abbas group.

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.

LUSTEVECO transferred, conveyed and assigned to


PSTC all of LUSTEVECO’s business, properties and assets
pertaining to its tanker and bulk business "together Q: Is this redemption?
with all the obligations relating to the said business,
A: No. This is treasury shares.
properties and assets." When PSTC assumed all the
properties, business and assets of LUSTEVECO Q: Can you re-issue?
pertaining to LUSTEVECO’s tanker and bulk business,
PSTC also assumed all of LUSTEVECO’s obligations A: Yes.
pertaining to such business.
Connected lang tong mga provisions. Isang malaking
While the Corporation Code allows the transfer of all story na ang twist nasa dulo.
or substantially all the properties and assets of a
corporation, the transfer should not prejudice the I. Power to invest corporate funds
creditors of the assignor. The only way the transfer can
proceed without prejudice to the creditors is to hold
the assignee liable for the obligations of the assignor. Sec. 42. Power to invest corporate funds in another
The acquisition by the assignee of all or substantially all corporation or business or for any other purpose. -
of the assets of the assignor necessarily includes the Subject to the provisions of this Code, a private
assumption of the assignor’s liabilities, unless the corporation may invest its funds in any other
creditors who did not consent to the transfer choose corporation or business or for any purpose other than
to rescind the transfer on the ground of fraud. To allow the primary purpose for which it was organized when
an assignor to transfer all its business, properties and approved by a majority of the board of directors or
assets without the consent of its creditors and without trustees and ratified by the stockholders representing
requiring the assignee to assume the assignor’s at least two-thirds (2/3) of the outstanding capital
obligations will defraud the creditors. The assignment stock, or by at least two thirds (2/3) of the members in
will place the assignor’s assets beyond the reach of its the case of non-stock corporations, at a stockholder's
creditors. or member's meeting duly called for the purpose.

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

Stock corporations are prohibited from retaining


surplus profits in excess of one hundred (100%) percent Sec. 44. Power to enter into management contract. -
of their paid-in capital stock, except: (1) when justified No corporation shall conclude a management
by definite corporate expansion projects or programs contract with another corporation unless such
approved by the board of directors; or (2) when the contract shall have been approved by the board of
corporation is prohibited under any loan agreement directors and by stockholders owning at least the
with any financial institution or creditor, whether local majority of the outstanding capital stock, or by at least
or foreign, from declaring dividends without its/his a majority of the members in the case of a non-stock
consent, and such consent has not yet been secured; corporation, of both the managing and the managed
or (3) when it can be clearly shown that such retention corporation, at a meeting duly called for the purpose:
is necessary under special circumstances obtaining in
the corporation, such as when there is need for Provided, That (1) where a stockholder or stockholders
special reserve for probable contingencies. representing the same interest of both the managing
and the managed corporations own or control more
than one-third (1/3) of the total outstanding capital
“xxx That no stock dividend shall be issued without the stock entitled to vote of the managing corporation; or
approval of stockholders representing not less than two- (2) where a majority of the members of the board of
thirds (2/3) of the outstanding capital stock at a regular directors of the managing corporation also constitute
a majority of the members of the board of directors of
or special meeting duly called for the purpose”
the managed corporation, then the management
In other words, if you declared dividends in cash or contract must be approved by the stockholders of the
property, you don’t need the 2/3 votes. Only to stock managed corporation owning at least two-thirds (2/3)
dividend lang. of the total outstanding capital stock entitled to vote,
or by at least two-thirds (2/3) of the members in the
case of a non-stock corporation. No management
“xxx Stock corporations are prohibited from retaining contract shall be entered into for a period longer than
surplus profits in excess of one hundred (100%) percent five years for any one term.
of their paid-in capital stock…”
The provisions of the next preceding paragraph shall
This is also in relation to IAET (Improperly Accumulated apply to any contract whereby a corporation
Earnings Tax). What are the exceptions na pwede ka undertakes to manage or operate all or substantially
mag retain more than in excess of one hundred (100%) all of the business of another corporation, whether
percent of paid-in capital stock? such contracts are called service contracts, operating
agreements or otherwise: Provided, however, That
such service contracts or operating agreements
which relate to the exploration, development, ultra vires and beyond the powers of the corporate
exploitation or utilization of natural resources may be directors to adopt.
entered into for such periods as may be provided by
the pertinent laws or regulations. ISSUE: Was the act of the BOD ultra vires?

HELD: NO. The Bacolod-Murcia Milling Co., Inc. is


This is very important. Some corporations manage other ordered to pay appellants the increase of
corporations. Kunwari ito si Holding, mina-manage nya si participation in the milled sugar in accordance with
subsidiary. Tapos meron silang management contract. paragraph 9 of the Resolution of August 20, 1936.
Please take note of the voting requirements.
It is a well-known rule of law that questions of policy or
“xxx the management contract must be approved by of management are left solely to the honest decision
the stockholders of the managed corporation owning at of officers and directors of a corporation, and the
least two-thirds (2/3) of the total outstanding capital court is without authority to substitute its judgment of
stock entitled to vote“ the board of directors; the board is the business
manager of the corporation, and so long as it acts in
Take note na ang kailangan lang ng approval ng good faith its orders are not reviewable by the courts.
stockholder is that of the managed corporation, hindi na
kailangan si managing. There can be no doubt that the directors of the
Bacolod-Murcia had authority to modify the proposed
This is because there is a tendency that the unfavorable terms of the Amended Milling Contract for the
bargaining power is nandun sa managed. Kasi kino- purpose of making its terms more acceptable to the
control sya ni managing. Para hindi vitiated ang consent. other contracting parties. The rule is that —

L. Ultra vires acts It is a question, therefore, in each case of the


logical relation of the act to the corporate
purpose expressed in the charter. If that act is
Sec. 45. Ultra vires acts of corporations. - No one which is lawful in itself, and not otherwise
corporation under this Code shall possess or exercise prohibited, is done for the purpose of serving
any corporate powers except those conferred by this corporate ends, and is reasonably tributary to
Code or by its articles of incorporation and except the promotion of those ends, in a substantial,
such as are necessary or incidental to the exercise of and not in a remote and fanciful sense, it may
the powers so conferred. fairly be considered within charter powers.
The test to be applied is whether the act in
question is in direct and immediate
If a power is not within the expressed or implied furtherance of the corporation's business, fairly
necessary powers of a corporation, then that power is incident to the express powers and
called ultra vires. It is considered as not binding. reasonably necessary to their exercise. If so,
the corporation has the power to do it;
Montelibano vs Bacolod-Murcia Milling Co Inc otherwise, not. (Fletcher Cyc. Corp., Vol. 6,
Rev. Ed. 1950, pp. 266-268)
Facts: Montelibano et al. are sugar planters adhered
to the Bacolod-Murcia Milling Co., Inc’s sugar central As the resolution in question was passed in good faith
mill under identical milling contracts originally by the board of directors, it is valid and binding, and
executed in 1919. In 1936, it was proposed to execute whether or not it will cause losses or decrease the
amended milling contracts, increasing the planters’ profits of the central, the court has no authority to
share of the manufactured sugar, besides other review them.
concessions. To this effect, a printed Amended Milling
Contract form was drawn up.
So kahit hindi siya expressly nakalagay sa AOI, but if it is
The Board of Directors of Bacolod-Murcia Milling Co., reasonably necessary for the furtherance of the business
Inc. adopted a resolution granting further concessions of the corporation, then that is considered as part of the
to the planters over and above those contained in the
powers of the corporation and not ultra vires.
printed Amended Milling Contract on August 10, 1936.
In 1953, the Montelibanos initiated an action, ZOMER Development Corporation vs International
contending that 3 Negros sugar centrals had already Exchange Bank
granted increased participation to their planters, and
that under paragraph 9 of the resolution of August 20, Facts: Zomer Development issued a resolution to
1936, the Bacolod-Murica had become obligated to guarantee by executing REM the loans of Prime
grant similar concessions to the appellants herein. Aggregates in International Exchange Bank.
Eventually Prime Aggregates defaulted in payment
The Bacolod-Murcia Milling Co., inc., resisted the and the REM over the properties of Zomer
claim, urging that the resolution in question was null Development were foreclosed and consolidated in
and void ab initio, being in effect a donation that was
favor of International Exchange Bank. Zomer now manner as the Commission shall allow under its
comes to Court to declare the REM void for being guidelines.
ULTRA VIRES as it was not empowered by its by-laws to
mortgage its property in favor of third party – Prime At each regular meeting of stockholders or members,
Aggregates. the board of directors or trustees shall endeavor to
present to stockholders or members the following:
Issue: Can Zomer raise ULTRA VIRES as a defense?
a) The minutes of the most recent regular
Ruling: NO. The transactions between the Petitioner meeting which shall include, among others:
and the Private Respondent over its properties are i. A description of the voting and vote
neither malum in se or malum prohibitum. Hence, the tabulation procedures used in the
Petitioner cannot hide behind the cloak of ultra vires current meeting;
for a defense. ii. A description of the opportunity
given to stockholders or members to
xxxx ask questions and a record of the
questions asked and answers given;
The plea of ultra vires will not be allowed to prevail, iii. The matters discussed and resolutions
whether interposed for or against a corporation, when reached;
it will not advance justice but, on the contrary, will iv. A record of the voting results for each
accomplish a legal wrong to the prejudice of another agenda item
who acted in good faith. v. A list of the directors, or trustees,
officers, and stockholders or
Ultra vires here was used to invalidate the mortgage. The members who attended the
Court said it cannot be used to justify a wrong. Take note meeting; and
that in this particular case the Court ruled whether or not vi. Such other items that the Commission
it will side with the legal wrong to the prejudice of may require in the interest of good
corporate governance and the
another who acted in good faith. Ang nangyari,
protection of minority stockholders.
minortgage tapos na forclose. Ngayon, ultra vires na ang
defense to invalidate the mortgage. b) A members’ list for non-stock corporations
and, for stock corporations, material
MEETINGS
information on the current stockholders and
their voting rights;
Kinds of Meetings c) A detailed, descriptive, balances and
comprehensible assessment of the
corporation’s performance which shall
Sec. 49. Kinds of meetings. - Meetings of directors, include information on any material change
trustees, stockholders, or members may be regular or in the corporation’s business, strategy and
special. other affairs;
d) A financial report for the preceding year,
which shall include financial statements duly
I. Regular and special meetings of STOCKHOLDERS signed and certified in accordance with this
OR MEMBERS Code and the rules the Commission may
prescribe, a statement on the adequacy of
the corporation’s internal controls or risk
Take note, iba ang rules sa meetings ng directors and management systems, and a statement of all
trustees sa meeting ng stockholders or members. external audit and non-audit fees;
e) An explanation of the dividend policy and the
Sec. 50. Regular and special meetings of stockholders fact of payment of dividends or the reasons
or members. - Regular meetings of stockholders or for non-payment thereof;
members shall be held annually on a date fixed in the f) Director or trustee profiles which shall include,
by-laws, or if not so fixed, on any date after April 15 of among others, their qualifications and
every year as determined by the board of directors or relevant experience, length of service in the
trustees: corporation, trainings and continuing
education attended, and their board
Provided, That written notice of regular meetings shall representations in other corporations;
be sent to all stockholders or members of record at g) A director or trustee attendance report,
least (20) days prior to the meeting, unless a longer indicating the attendance of each director or
period is required by the by-laws, law or regulation. trustee at each of the meetings of the board
Provided further, that the written notice of regular and its committees and in regular or special
meetings may be sent to all stockholders or members stockholder meetings;
of record through electronic mail or such other
h) Appraisals and performance reports for the Commission shall issue the rules and regulations
board and the criteria and procedure for governing participation and voting through remote
assessment; communication or in absentia taking into account the
i) A director or trustee compensation report company’s scale number of shareholders or
prepared in accordance with this code and members, structure, and other factors consistent with
the rules the Commission may prescribe; the protection and promotion of the shareholder’s or
j) Director disclosures on self-dealings and members’ meetings.
related party transactions and/or;
k) The profiles of directors nominated or seeking
election or re-election. “Regular meetings of stockholders or members shall be
A director, trustee, stockholder or member may held annually on a date fixed in the by-laws, or if not so
propose any other natter for inclusion in the agenda fixed, on any date after April 15 of every year as
at any regular meeting of stockholders or members. determined by the board of directors or trustees”

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.

Regular meetings of the board of directors or trustees WHO SHALL PRESIDE


of every corporation shall be held monthly, unless the
by-laws provide otherwise.
Sec. 54. Who shall preside at meetings. - The president
Special meetings of the board of directors or trustees shall preside at all meetings of the directors or trustee
may be held at any time upon the call of the president as well as of the stockholders or members, unless the
or as provided in the by-laws. by-laws provide otherwise.

Meetings of directors or trustees of corporations may


Can you pledge your Certificate of Stock? Pwede ban a
be held anywhere in or outside of the Philippines,
unless the by-laws provide otherwise. Notice of regular i-prenda or i-mortgage?
or special meetings stating the date, time and place
A: Yes. In fact in Section 55, the plegor, moprtgagor and
of the meeting must be sent to every director or
administrator have the right to attend the meetings of
trustee at least (2) days prior to the scheduled
the stockholder.
meeting, unless a longer time is provided by the by-
laws. A director or trustee may waive this requirement,
Sec. 55. Right to vote of pledgors, mortgagors, and
either expressly or impliedly.
administrators. - In case of pledged or mortgaged
shares in stock corporations, the pledgor or mortgagor
Directors or trustees cannot attend or vote by proxy at
shall have the right to attend and vote at meetings of
board meetings. They can participate and vote
stockholders, unless the pledgee or mortgagee is
through remote communication such as
expressly given by the pledgor or mortgagor such right
videoconferencing or other alternative modes of
in writing which is recorded on the appropriate
communication that allow them reasonable
corporate books.
opportunity to participate.
Executors, administrators, receivers, and other legal
A director or trustee who has a potential interest in any
representatives duly appointed by the court may
related party transaction must recuse himself or herself
attend and vote in behalf of the stockholders or
from voting on the approval of the related party
members without need of any written proxy.
transaction without prejudice to compliance with the
requirements of Section 32 of this Code.
Some use this to circumvent the rules. In paper, si Pilipino, Ang proxy can be a written document or a person. Ang
yun pala nakaprenda. Pwede naman sa paper na the process, shall be signed and filed by the stockholder or
right to vote is given to the foreigner. member, in any form authorized by the by-laws and
received by the corporate secretary within a reasonable
Sec. 56. Voting in case of joint ownership of stock. - time before the scheduled meeting.
The consent of all the co-owners shall be necessary in
voting shares of stock owned jointly by two or more “xxx Unless otherwise provided in the proxy form, it shall
persons, unless there is a written proxy, signed by all be valid only for the meeting for which it is intended. No
the co-owners, authorizing one or some of them or any proxy shall be valid and effective for a period longer than
other person to vote such share or shares: Provided, five (5) years at any one time“
That when the shares are owned in an "and/or"
capacity by the holders thereof, any one of the joint Walang perpetual na proxy. Please note the difference
owners can vote said shares or appoint a proxy in proxy and voting trust. In contrast to proxy, the voting
therefor. trust agreement could give perpetual rights. Again, some
use this to circumvent the rules. In paper, si Pilipino pero
Q: In what instance you can be joint owners of stock? the right to vote is given to the foreigner.

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.

“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.”

This is the negative covenants of a bank.


Magpapautang nga ako sayo but you should make a
voting trust agreement. Why? Kasi naninigurado ang
bangko na meron parin siyang say sa decision.

“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 Commission; otherwise,
said agreement is ineffective and unenforceable. “

Sa proxy, signed and filed lang pero sa Voting trust


Agreement (VTA), must be in writing and notarized. And
ang proxy fini-file lang siya sa corporate secretary, while
ang VTA sa corporation and SEC.

“No voting trust agreement shall be entered into for the


purpose of circumventing the law anti-competitive
agreements, abuse of dominant position, anti-
competitive mergers and acquisitions, violation of
nationality and capital requirements, or for the
perpetration of fraud.”

The anti-competitive agreement abuse of dominant


position, anti-competitive mergers and acquisitions are
all violations under the Philippine Competition Act.
Again, hindi lang mergers ang under ng PCA. It could
also be anti-competitive agreements. Let’s say nag-
collude lahat ng BPO industries sa Pilipinas. Sa PCA kasi,
if there is a transaction that will substantially lessen the
competition, you have to pre-notify the Philippine

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