CORPORATION LAW 2ND EXAM REVIEWER
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Section 10. Number and qualifications of incorporators -
Any person, partnership, association or corporation, singly or
jointly with other but not more than fifteen (15) in number,
may organize a corporation for any lawful purpose or
purposes;
Provided, That natural persons who are licensed to practice a
profession, and partnerships or associations organized for
the purpose of practicing a profession, shall not be
allowed to organize as a corporation unless otherwise
provided under special laws. Incorporators who are natural
persons must be of legal age.
Each incorporator of a stock corporation must own or be
a subscriber to at least one (1) share of the capital stock.
A corporation with a single stockholder is considered a One
Person Corporation as described in Title XIII, Chapter III of
this Code.
Section 11. Corporate term. –
GR: A corporation shall have perpetual existence unless its
articles of incorporation provides otherwise.
EXP: A corporate term for a specified period may be extended
or shortened by:
1. amending the articles of incorporation
2. no extension may be made earlier than three (3)
years prior to the original or subsequent expiry
date/s unless there are justifiable reasons for an
earlier extension as may be determined by the
Commission
3. such extension of the corporate term shall take
effect only on the day following the original or
subsequent expiry dates.
Corporations with certificates of incorporation issued prior to
the effectivity of this Code, and which continue to exist, shall
have perpetual existence, unless the corporation, upon a vote
of its stockholders representing a majority of its outstanding
capital stock, notifies the Commission that it elects to retain its
specific corporate term pursuant to its articles of
incorporation: Provided, That any change in the corporate
term under this section is without prejudice to the appraisal
right of dissenting stockholders in accordance with the
provisions of this Code.
A corporation whose term has expired:
1. may apply for a revival of its corporate existence,
together with all the rights and privileges under its
certificate of incorporation and subject to all of its
duties, debts and liabilities existing prior to its
revival.
2. Upon approval by the Commission, the corporation
shall be deemed revived and
3. a certificate of revival of corporate existence shall
be issued, giving it perpetual existence, unless its
application for revival provides otherwise.
No application for revival of certificate of incorporation of
banks, banking and quasi- banking institutions, preneed
insurance and trust companies, on-stock savings and loan
associations, pawnshops, corporations engaged in money
service business, and other financial intermediaries shall be
approved by the Commission unless accompanied by a
favorable recommendation of the appropriate government
agency.
Section 18. Registration, Incorporation and Commencement
of Corporate Existence. – A person or group of persons
desiring to incorporate shall:
1. Submit the intended corporate name to the
Commission for verification.
2. The name shall be reserved in favor of the
incorporators if the Commission finds that the
name:
i. is distinguishable from a name already
reserved or registered for the use of
another corporation,
ii. not protected by law and is not contrary
to law, rules and regulations
3. The incorporators shall then submit their articles of
incorporation and bylaws to the Commission.
4. The Commission shall issue the certificate of
incorporation:
i. if the Commission finds that the
submitted documents and information
are fully compliant with the requirements
of this Code, other relevant laws, rules
and regulations
A private corporation organized under this Code commence
its corporate existence and juridical personality:
1. from the date the Commission issues the certificate
of incorporation under its official and
2. thereupon the incorporators,
stockholders/members and their successors shall
constitute a body corporate under the name stated
in the articles of incorporation for the period of time
mentioned therein,
i. unless said period is extended or
ii. the corporation is sooner dissolved in
accordance with law.
Section 12. Minimum Capital Stock Not Required of Stock
Corporations – Stock corporation shall not be required to
have a minimum capital stock except as otherwise
specifically provided by special law.
Section 13. Amount of capital stock to be subscribed and paid
for the purposes of incorporation. - At least twenty-five
percent (25%) of the authorized capital stock as stated in
the articles of incorporation must be subscribed at the time
of incorporation, and at least twenty-five (25%) per cent
of the total subscription must be paid upon subscription,
the balance to be payable on a date or dates fixed in the
contract of subscription without need of call, or in the absence
of a fixed date or dates, upon call for payment by the board of
directors: Provided, however, That in no case shall the paid-
up capital be less than five Thousand (P5,000.00) pesos.
Section 13. Contents of the articles of incorporation. – All
corporations shall file with the Commission articles of
incorporation in any of the official languages, duly signed and
acknowledged or authenticated, in such form and manner as
may be allowed by the Commission, containing substantially
the following matters, except as otherwise prescribed by this
Code or by special law:
a. The name of the corporation;
b. The specific purpose or purposes for which the
corporation is being formed. Where a corporation has more
than one stated purpose, the articles of incorporation shall
state which is the primary purpose and which is/are the
secondary purpose or purposes: Provided, That a non-stock
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corporation may not include a purpose which would change
or contradict its nature as such;
c. The place where the principal office of the corporation is
to be located, which must be within the Philippines;
d. The term for which the corporation is to exist, if the
corporation has not elected perpetual existence;
e. The names, nationalities and residences of the
incorporators;
f. The number of directors or trustees, which shall not be
more than fifteen or the number of trustees which may be
more than fifteen;
g. The names, nationalities and residences of persons who
shall act as directors or trustees until the first regular directors
or trustees are duly elected and qualified in accordance with
this Code;
h. If it be a stock corporation, the amount of its authorized
capital stock, number of shares into which it is divided, the par
value of each, the names, nationalities and residences of the
original subscribers, amount subscribed an
i. If it be a non-stock corporation, the amount of its capital,
the names, nationalities and residence addresses of the
contributors and the amount contributed by each; and
j. Such other matters consistent with law and which the
incorporators may deem necessary and convenient.
An arbitration agreement may be provided in the articles of
incorporation pursuant to Section 181 of this Code.
The articles of incorporation and applications for amendments
thereto may be filed with the Commission in the form of an
electronic document, in accordance with the Commission‘s
rules and regulations on electronic filing.
Section 17. Corporate Name. – No corporate name shall be
allowed by the Commission if:
1. it is not distinguishable from that already reserved
or registered for the use of another corporation,
2. or if such name is already protected by law,
3. or when its use is contrary to existing law, rules and
regulations.
A name is not distinguishable even of it contains one or
more of the following:
1. The word ―corporationǁ, ―companyǁ,
―incorporatedǁ, ―limitedǁ, ―limited liabilityǁ, or an
abbreviation of one of such words; and
2. Punctuations, articles, conjunctions, contractions,
prepositions, abbreviations, different tenses,
spacing, or number of the same word or phrase.
The Commission, upon determination that the corporate
name is:
1. not distinguishable from a name already reserved
or registered for the use of another corporation; 

2. already protected by law; or 

3. contrary to law, rules and regulations, may
summarily order the corporation to register a new
one. The Commission shall also cause the removal
of all visible signages, marks, advertisements,
labels, prints and other effects bearing such
corporate name. Upon the approval of the new
corporate name, the Commission shall issue a
certificate of incorporation under the amended
name.
If the corporation fails to comply with the Commission‘s order,
the Commission may hold the corporation and its responsible
directors or officers in contempt and/or hold them
administratively, civilly and/or criminally liable under this Code
and other applicable and/or revoke the registration of the
corporation.
• INDUSTRIAL REFRACTORIES VS CA
It is the SECs duty to prevent confusion in the use of corporate
names not only for the protection of the corporations involved
but more so for the protection of the public, and it has authority
to de-register at all times and under all circumstances
corporate names which in its estimation are likely to generate
confusion. Clearly therefore, the present case falls within the
ambit of the SECs regulatory powers.
To fall within the prohibition of the law, two requisites 
must
be proven, to wit:
1. that the complainant corporation acquired a prior
right over the use of such corporate name; and 

2. the proposed name is either:
i. identical, or 

ii. deceptively or confusingly similar to that of

any existing corporation or to any other
name 
already protected by law; or 

iii. patently deceptive, confusing or contrary to

existing law. 

CONSOLIDATE GUIDELINES AND PROCEDURES ON
THE USE OF CORPORATE AND PARTNERSHIP NAMES
(Salient Provisions)
o Term that describes the business of a corporation
in its name should refer to its primary purpose. If
there are two such terms, the first should refer to
the primary purpose and the second to the
secondary purpose.
o The name of an internationally known foreign
corporation, or something similar to it, cannot be
used by a domestic corporation unless it is its
subsidiary and the parent corporation has
consented to such use; 

o The name of a local geographical unit, site or
location cannot be used as corporate or partnership
name unless it is accompanied by a descriptive
word or phrase. e.g. Pasay Food Store, Inc. 

o The name of a corporation or partnership that has
been dissolved or whose registration has been
revoked shall not be used by another corporation
except in meritorious cases as determined by the
Commission En Banc. 
Only expired corporate may
apply for re-registration using the same corporate
name. 

o The reservation or notice of availability of a name
shall not constitute an approval of the use of such
name or an application for a change of name 

o No erasures, changes, modifications or alterations
on a name reservation form shall be allowed, and 

• SEC OPINION NO. 08-24
it is only in the business/es, for which it was lawfully organized
and which is stated in the AOI, that a corporation should
engage in. But if the business is necessary for the
accomplishment of the purpose of the corporation or incident
to it, the corporation may also engage in such business.
Many times the purpose clause can be reasonably 'stretched'
as to impliedly cover these new and unexpected situations.
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But in those cases where it cannot, a proper amendment
thereof would be necessary.
PRINCIPAL PLACE OF BUSINESS
Section 1. All corporations and partnerships applying for
registration with the SEC should state in their Articles of
Incorporation or Articles of Partnership the following:
[i] specific address of their principal office, which shall
include, if feasible, the street number, street name,
barangay, city or municipality, and if applicable, the
name of the building, number of the building, and
name or number of the room or unit; and 

[ii] specific residence address of each incorporator,
stockholder, director, trustee or partner. 
 Amendment May be Disapproved. – The Commission may
• NAUTICA V YUMUL
Nauticas Articles of Incorporation and By-laws, as well as the
General Information Sheet filed with the SEC indicated that
Yumul was an incorporator and subscriber of one share.
Even granting that there was an agreement between Yumul
and Dee whereby the former is holding the share in trust for
Dee, the same is binding only as between them. From the
corporations vantage point, Yumul is its stockholder with one
share, considering that there is no showing that Yumul
transferred his subscription to Dee, the alleged real owner of
the share, after Nauticas incorporation.
Section 15. Amendment of Articles of Incorporation. –
Unless otherwise prescribed by this Code or by special law
and fro legitimate purposes Any provision or matter stated in
the articles of incorporation may be amended:
i. by a majority vote of the board of directors or
trustees and
ii. the vote or written assent of the stockholders
representing at least 2/3 of the outstanding capital
stock,
iii. without prejudice to the appraisal right of dissenting
stockholders in accordance with the provision of
this Code.
The articles of incorporation of a non-stock corporation may
be amended:
i. by the vote or written assent of majority of the
trustee and
ii. at least 2/3 of the members.
The original and amended articles together shall contain all
provisions required by law to be set out in the articles of
incorporation. Amendments to the articles shall be indicated
by underscoring the change or changes made, and a copy
thereof duly certified under oath by the corporate secretary
and a majority of the directors or trustees, with a statement
that the amendments have been duly approved by the
required vote of the stockholders or members, shall be
submitted to the Commission.
The amendments shall take effect:
i. upon their approval by the Commission
ii. or from the date of filing with the said Commission
if not acted upon within 6 months from the date of
filing for a cause no attributable to the corporation.
Note: the following provision in the AOI which refer to acts
exisiting as of the date of incorporation, and hence, are
beyond the power of the stockholders or members to alter or
chane, because they are accomplished facts (“fait accompli”):
1. names of the incorporators;
2. names of incorporating directors/trustees;
3. names of the original subscribers to the capital
stock of the corporation and their subscribed and
paid-up capital;
4. the treasurer-in-trust elected by the original
subscribers;
5. members who contributed to the initial capital of a
non-stock corporation;
6. witnesses and the acknowledgement thereof.
Section 16. Grounds When Articles of Incorporation or
disapprove the articles of incorporation or any amendment
thereof: if the same is not compliant with the requirements of
this Code: Provided, That the Commission shall give the
incorporators, directors, trustees, or officers a reasonable
time from receipt of the disapproval within which to modify he
objectionable portions of the articles of incorporation or
amendment. The following are grounds for such disapproval:
a) The articles of incorporation or any amendment thereto is
not substantially in accordance with the form prescribed
herein; 

b) The purposes or purposes of the corporation are patently
unconstitutional, illegal, immoral or contrary to the
government rules and regulations; 

(c) The certification concerning the amount of capital stock
subscribed and/or paid is false; and
d) The required percentage of Filipino ownership of the
capital stock under existing laws or the Constitution has not
been complied with.
No articles of incorporation or amendment to articles of
incorporation of banks, banking and quasi-banking
institutions, preneed, insurance and trust companies,
NSSLAs, pawnshops, and other financial intermediaries shall
be approved by the Commission unless accompanied by a
favorable recommendation of the appropriate government
agency to the effects that such articles or amendment is in
accordance with law.
Section 21. Effects of Non-Use of Corporate Charter and
Continuous Inoperation. – If a corporation does not
formally organize and commence its business within 5
years from the date of its incorporation, its certificate of
incorporation shall be deemed revoked as of the day
following the end of the five-year period.
However, if a corporation has commenced its business
but subsequently becomes inoperative for a period of at
least 5 consecutive years, the Commission may, after due
notice and hearing, place the corporation under delinquent
status.
A delinquent corporation shall have a period of 2 years to
resume operations and comply with all the requirements
that the Commission shall prescribe. Upon compliance by
the corporation, the Commission shall issue an order lifting
the delinquent status. Failure to
BY LAWS
Sec. 46. Adoption of by-laws. - Every corporation formed
under this Code must:
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1. within one (1) month after receipt of official notice of
the issuance of its certificate of incorporation by the
Securities and Exchange Commission,
2. adopt a code of by-laws for its government not
inconsistent with this Code.
Notwithstanding the provisions of the preceding paragraph:
1. by-laws may be adopted and filed prior to
incorporation;
2. such by-laws shall be approved and signed by all
the incorporators and
3. submitted to the Securities and Exchange
Commission, together with the articles of
incorporation.
In all cases, by-laws shall be effective only upon the issuance
by the Securities and Exchange Commission of a certification
that the by-laws are not inconsistent with this Code.
For the adoption of by- laws by the corporation:
1. the affirmative vote of the stockholders
representing at least a majority of the outstanding
capital stock, or
2. of at least a majority of the members in case of non-
stock corporations, shall be necessary.
3. The by-laws shall be signed by the stockholders or
members voting for them and shall be kept in the
principal office of the corporation, subject to the
inspection of the stockholders or members during
office hours.
4. A copy thereof, duly certified to by a majority of the
directors or trustees countersigned by the secretary
of the corporation, shall be filed with the Securities
and Exchange Commission which shall be attached
to the original articles of incorporation.
The Securities and Exchange Commission shall not accept for
filing the by-laws or any amendment thereto of:
1. any bank, banking institution, building and loan
association, trust company, insurance company,
public utility, educational institution or other special
corporations governed by special laws,
2. unless accompanied by a certificate of the
appropriate government agency to the effect that
such by-laws or amendments are in accordance
with law.
• GOKONGWEI V CA
Every corporation has the inherent power to adopt by-laws 'for
its internal government, and to regulate the conduct and
prescribe the rights and duties of its members towards itself
and among themselves in reference to the management of its
affairs.
A corporation may make by-laws for the qualifications of
directors.
• SAN MIGUEL CORP VS MANDAUE PACKING
PRODUCTS PLANTS UNION-FFW
respondent never submitted a separate by-laws, nor does it
appear that respondent ever intended to prepare a set
thereof.
By-laws has traditionally been defined as regulations,
ordinances, rules or laws adopted by an association or
corporation or the like for its internal governance, including
rules for routine matters such as calling meetings and the like.
Without such provisions governing the internal governance of
the organization, such as rules on meetings and quorum
requirements, there would be no apparent basis on how the
union could operate.
However, if key by-law provisions on matters such as quorum
requirements, meetings, or on the internal governance of the
local/chapter are themselves already provided for in the
constitution, then it would be feasible to overlook the
requirement for by-laws. Indeed in such an event, to insist on
the submission of a separate document denominated as By-
Laws would be an undue technicality, as well as a
redundancy.
• BERNAS VS CINCO
The by- laws of a corporation are its own private laws which
substantially have the same effect as the laws of the
corporation. The general rule is that a corporation, through its
board of directors, should act in the manner and within the
formalities, if any, prescribed in its charter or by the general
law. The rules set in the by-laws are mandatory for every
member of the corporation to respect. They are the
fundamental law of the corporation with which the corporation
and its officers and members must comply.
• CHINA BANKING CORPORATION VS. CA
In order to be bound, the third party must have acquired
knowledge of the pertinent by-laws at the time the transaction
or agreement between said third party and the shareholder
was entered into. It is the generally accepted rule that third
persons are not bound by by-laws, except when they have
knowledge of the provisions either actually or constructively.
• LOYALA V CA
By-laws may be necessary for the government of the
corporation but these are subordinate to the articles of
incorporation as well as to the Corporation Code and related
statutes.
The mere fact, however, of the existence of power in the
corporation to adopt by-laws does not ordinarily and of
necessity make the exercise of such power essential to its
corporate life, or to the validity of any of its acts
Although the Corporation Code requires the filing of by-laws,
it does not expressly provide for the consequences of the non-
filing of the same within the period provided for in Section 46.
There can be no automatic corporate dissolution simply
because the incorporators failed to abide by the required filing
of by-laws embodied in Section 46 of the Corporation Code.
• SAWADJAAN VS. CA
A corporation which has failed to file its by- laws within the
prescribed period does notipso factolose its powers as such.
At the very least, by its failure to submit its by-laws on time,
the AIIBP may be considered a de facto corporation
Section 48. Amendments to by-laws. – Requisites to
amend, repeal or adopt new by laws:
1. The board of directors or trustees, by a majority
vote thereof, and
2. the owners of at least a majority of the outstanding
capital stock, or at least a majority of the members
of a non- stock corporation,
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3. at a regular or special meeting duly called for the
purpose,
Delegated powers to BOD/BOT:
1. The owners of two-thirds (2/3) of the outstanding
capital stock or two-thirds (2/3) of the members in a
non-stock corporation
2. may delegate to the board of directors or trustees
the power to amend or repeal any by-laws or adopt
new by-laws
Any power delegated to the board of directors or trustees to
amend or repeal any by-laws or adopt new by-laws shall be
considered as revoked:
1. whenever stockholders owning or representing a
majority of the outstanding capital stock or a
majority of the members in non-stock corporations,
2. shall so vote at a regular or special meeting.
Whenever any amendment or new by-laws are adopted:
1. such amendment or new by-laws shall be attached
to the original by-laws in the office of the
corporation,
2. and a copy thereof, duly certified under oath by the
corporate secretary and a majority of the directors
or trustees,
3. shall be filed with the Securities and Exchange
Commission
4. the same to be attached to the original articles of
incorporation and original by- laws.
The amended or new by-laws shall only be effective upon
the issuance by the Securities and Exchange
Commission of a certification that the same are not
inconsistent with this Code.
BOARD OF DIRECTORS
Sec 22. The Board of Directors or Trustees of a
Coporation; qualification and term. – Unless otherwise
provided in this Code, the board of directors or trustees shall:
1. exercise the coporate powers,
2. conduct all business and
3. control all properties of the corporation.
Directors shall be elected for a term of - one year from among
the holders of stocks registered in the corporation‘s books,
Trustees shall be elected for a term - not exceeding three
years from among the members of the corporation.
Each director and trustee shall hold office until the successor
is elected and qualified.
Cessation of duties:
1. A director who ceases to own at least one share of
stock or a
2. trustee who ceases to be a member of the
corporation shall cease to be such.
The board of the following corporations vested with public
interest shall have independent directors constituting at least
20% of such board:
1. Corporations covered by Section 17.2 of RA 8799,
otherwise known as the Securities Regulation,
namely those who are registered with the
Commission, corporations listed with an exchange
or with assets of at least Fifty Million Pesos
(P50,000,000.00), and having Two hundred (200)
or more holders each holding at least One hundred
(100) shares of a class of its equity securities; 

2. Banks and quasi-banks, non-stock savings and
loan associations, pawnshops, corporations
engaged in money service business, pre-need,
trust and insurance companies and other financial
intermediaries; and 

3. Other corporations veste with public interest as may
be determined by the Commission. 

An Independent director is a person who:
1. apart from his fees and shareholdings received
from the corporation,
2. is independent of management and
3. free from any business or other relationship which
could, or could reasonably be perceived to,
materially interfere with his exercise of independent
judgment in carrying out his responsibilities as a
director.
Independent directors must be:
1. elected by a majority of the shareholders present or
entitled to vote in absentia during the election of
directors
2. subject to rules and regulations governing their
qualifications, disqualifications, voting
requirements, duration of term and term limit,
maximum number of board memberships and other
requirements that the Commission will prescribe to
strengthen their independence and align with
international best practices.
DOCTRINE OF CENTRALIZED MANAGEMENT
• HORNILLA vs. SALUNAT
Where corporate directors have committed a breach of trust
either by their frauds, ultra vires acts, or negligence, and the
corporation is unable or unwilling to institute suit to remedy
the wrong, a stockholder may sue on behalf of himself and
other stockholders and for the benefit of the corporation, to
bring about a redress of the wrong done directly to the
corporation and indirectly to the stockholders.[11] This is what
is known as a derivative suit, and settled is the doctrine that
in a derivative suit, the corporation is the real party in interest
while the stockholder filing suit for the corporations behalf is
only nominal party.
INDEPENDENT DIRECTOR
Corporations required to have independent directors:
1. Issuers of registered securities to the public
whether or not listed in the Philippine Stock
Exchange (PSE); 

2. Public companies or those with assets of at least
Fifty Million Pesos (P50,000,000.00) or such other
amount as the Commission shall prescribe, and
having Two hundred (200) or more holders each
holding at least One hundred (100) shares of a
class of its equity securities; 


3. Finance companies; 

4. Investment houses; 

5. Brokers and dealers of securities; 

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6. Investment companies; 
 4. Such other disqualifications which the company's

7. Pre-need companies; 
 Manual on Corporate Governance provides.
8. [Subsidiaries or branches of foreign corporations
Number of independent directors:
which operate in the Philippines and are listed in the
PSE; 
 1. issuers of registered securities and public
9. Stock and other securities exchange/s. 
 companies are required to have at least two (2)
independent directors or at least 20% of its board
An independent director is not: size, whichever is the lesser.
1. Is not a director or officer or substantial stockholder 2. The Exchange/s are required to have at least three
of the corporation or of its related companies or any (3) independent directors and an independent
of its substantial shareholders (other than as an director-President
independent director of any of the foregoing); 

2. Is not a relative of any director, officer or substantial Tenure:
shareholder of the corporation, any of its related
companies or any of its substantial shareholders. 1. A company‘s independent director shall serve for a
For this purpose, relatives includes spouse, parent, maximum cumulative term of nine years; 

child, brother, sister, and the spouse of such child,
2. After which, the independent director shall be
brother or sister; 

perpetually barred from re-election as such in the
3. Is not acting as a nominee or representative of a
same company, but may continue to qualify as non-
substantial shareholder of the corporation, any of its
independent director; 

related companies or any of its substantial
shareholders; 
 3. In the instance that a company wants to retain an
4. Has not been employed in any executive capacity independent director who has served for nine
by that public company, any of its related years, the Board should provide meritorious
companies or by any of its substantial shareholders justifications and seek shareholder‘s approval
within the last five (5) years; 
 during the annual shareholder‘s meeting. 

5. Is not retained as professional adviser by that public
company, any of its related companies or any of its DOCTRINE OF ESTOPPEL OR RATIFICATION
substantial shareholders within the last five (5)
years, either personally of through his firm; 
 • LIPAT V. PACIFIC BANKING
6. Has not engaged and does not engage in any
transaction with the corporation or with any of its The principle of estoppel precludes petitioners from denying
related companies or with any of its substantial the validity of the transactions entered into by Teresita Lipat
shareholders, whether by himself or with other with Pacific Bank, who in good faith, relied on the authority of
persons or through a firm of which he is a partner the former as manager to act on behalf of petitioner Estelita
or a company of which he is a director or substantial Lipat and both BET and BEC.
shareholder, other than transactions which 
are
Teresita Lipat had dealt with Pacific Bank on the mortgage
conducted at arms length and are immaterial or
contract by virtue of a special power of attorney executed by
insignificant.
Estelita Lipat. Pacific Bank cannot be faulted for relying on the
Qualifications: same authority granted to Teresita Lipat by Estelita Lipat by
virtue of a special power of attorney. It is a familiar doctrine
1. He shall have at least one (1) share of stock of the that if a corporation knowingly permits one of its officers or
corporation; 
 any other agent to act within the scope of an apparent
2. He shall be at least a college graduate or he shall authority, it holds him out to the public as possessing the
have been engaged or exposed to the business of power to do those acts; thus, the corporation will, as against
the corporation for at least five (5) years; 
 anyone who has in good faith dealt with it through such agent,
3. He shall possess integrity/probity; and 
 be estopped from denying the agents authority.
4. He shall be assiduous. 
 • KWOK V. PHIL. CARPET MANUFACTURING
May be disqualified during his tenure when: Contracts entered into by a corporate officer or obligations or
prestations assumed by such officer for and in behalf of such
1. He becomes an officer or employee of the
corporation are binding on the said corporation only if:
corporation where he is such member of the board
of directors/trustees, or becomes any of the 1. such officer acted within the scope of his authority;
persons enumerated under letter (A) or 

2. His beneficial security ownership exceeds 10% of 2. if such officer exceeded the limits of his authority,
the outstanding capital stock of the company where the corporation has ratified such contracts or
he is such director; 
 obligations. 


3. Fails, without any justifiable cause, to attend at • YASUMA V HEIRS OF DE VILLA

least 50% of the total number of Board meetings
during his incumbency unless such absences are
due to grave illness or death of an immediate family.


The corporation may ratify the unauthorized act of its
corporate officer. Ratification means that the principal
voluntarily adopts, confirms and gives sanction to some
unauthorized act of its agent on its behalf.

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Ratification can be made either expressly or impliedly. Implied
ratification may take various forms — like silence or
acquiescence, acts showing approval or adoption of the act,
or acceptance and retention of benefits flowing therefrom.
The fact that the corporation admitted receiving the proceeds
of the loan did not amount to ratification of the loan. It
accepted the amount from de Villa, its president at that time,
in good faith. Respondent corporation could not have ratified
the act of de Villa because there was no proof that it knew that
he took out a loan on its behalf. Ratification is a voluntary
choice that is knowingly made. The corporation could not
have ratified an act it had no knowledge of.
DOCTRINE OF APPARENT AUTHORITY
• UM V BSP
Acts of an officer that are not authorized by the board of
directors/trustees do not bind the corporation unless the
corporation ratifies the acts or holds the officer out as a
person with authority to transact on its behalf.
The doctrine of apparent authority does not go into the
question of the corporation's competence or power to do a
particular act. It involves the question of whether the officer
has the power or is clothed with the appearance of having the
power to act for the corporation.
A corporation is estopped by its silence and acts of
recognition.
• WOODCHILD V ROXAS
For the principle of apparent authority to apply, the petitioner
was burdened to prove the following:
[a] the acts of the respondent justifying belief in the agency
by the petitioner; 
 consequences of such act.
[b] knowledge thereof by the respondent which is sought to
be held; and
[c] reliance thereon by the petitioner consistent with ordinary
care and prudence. 

• INTERASIA INVESTMENT V CA
A corporate officer or agent may represent and bind the
corporation in transactions with third persons to the
extent that [the] authority to do so has been conferred
upon him, and this includes powers as, in the usual
course of the particular business, are incidental to, or
may be implied from, the powers intentionally conferred,
powers added by custom and usage, as usually pertaining
to the particular officer or agent, and such apparent powers
as the corporation has caused person dealing with the officer
or agent to believe that it has conferred.
Hence, an officer of a corporation who is authorized to
purchase the stock of another corporation has the implied
power to perform all other obligations arising therefrom, such
as payment of the shares of stock.
Note:
1. If officers have authority (ordinary course of
business), there is no need for authorization.
2. If they have no authority or if they exceed their
authority but the act is subsequently ratified by the
BOD, the corporation is bound. 
 rather than of a majority of a quorum, shall be required.
3. Even if no authority and was not subsequently
ratified but there is an apparent authority, the
corporation will be bound by virtue of the doctrine
of apparent authority. 
 Interim Rules of Procedure Governing Intra-Corporate
BUSINESS JUDGEMENT RULE
This is based on the presumption that in making business
decisions, not all transactions shall yield interest. 

This rule creates a strong presumption in favor of the board of
directors of a corporation freeing its member from possible
liability for decisions that would result in harm to the
corporation. it insists that the board will not suffer from a legal
action simply from a bad decision. 

Defense of the director if there is a liability? BUSINESS
JUDGMENT.
Conditions for the Business Judgment Rule to Prosper
The board of directors must:
1. act in good faith; 

2. on an informed basis; and 

3. in a disinterested manner. 

Presumption of business judgement
To rebut: only when the transaction involves a conflict of
interest or breach of fiduciary trust that the burden shifts
The business judgment rule provides for 2 levels of
protection to the board of directors, namely:
[1] Resolutions and transactions entered into by the
BOD within the powers of the corporation cannot be
reversed by the courts, not even at the behest of the
stockholders of the corporation; and 

[2] Directors and officers acting within such business
judgment rule cannot be held personally liable for the


• MONTELIBANO V. BACOLOD-MURCIA
MILLING
As the resolution in question was passed in good faith by the
board of directors, it is valid and binding, and whether or not
it will cause losses or decrease the profits of the central, the
court has no authority to review them.
Questions of policy or of management are left solely to the
honest decision of officers and directors of a corporation, and
the court is without authority to substitute its judgment of the
board of directors; the board is the business manager of
the corporation, and so long as it acts in good faith its
orders are not reviewable by the courts.
ELECTION OF DIRECTORS OR TRUSTEES
• SEC OGC Opinion No. 14-09, June 2, 2014
The Board can only transact business if it reaches a quorum,
which is at least a majority of the number of trustees fixed in
the articles of incorporation or by-laws. For the decisions of
the Board to be valid as a corporate act, at least a majority of
such a majority or quorum has to concur.
For the election of officers, the vote of a majority of all the
members of the Board as fixed in the articles of incorporation,
ELECTION CONTEST
Controversies under R.A. No. 8799, A.M. No. 01-2-04-SC
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SEC. 2. Definition. – An election contest refers to:
1. any controversy or dispute involving title or claim
2. to any elective office in a stock or non-stock
corporation,
3. the validation of proxies,
4. the manner and validity of elections,
5. and the qualifications of candidates, including the
proclamation of winners, to the office of director,
trustee or other officer directly elected by the
stockholders in a close corporation or by members
of a non-stock corporation where the articles of
incorporation or by-laws so provide.
HOLD OVER PRINCIPLE
Section 23. The board of directors or trustees. – Unless
otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations
controlled and held by the board of directors or trustees who
shall hold office for one (1) year until their successors are
elected and qualified.
• SEC OGC Opinion No. 18-06
It has to be emphasized however that a hold-over situation
arises only when no successors are elected due to valid and
justifiable reasons. The Commission considered the
resolution of an election protest or political upheavals which
barred the holding of an election as valid and justifiable
reasons for the hold-over term of the incumbent directors.
• VALLE VERDE COUNTRY CLUB VS. AFRICA,
The holdover period is not part of the term of office of a
member of the board of directors.
When an incumbent member of the board of directors
continues to serve in a holdover capacity, it implies that the
office has a fixed term, which has already expired, and the
incumbent is holding the succeeding term.
CORPORATE OFFICERS
Section 25. Corporate officers, quorum. - Immediately after
their election the directors of a corporation must formally
organize by the election of a:
1. president OR CHIEF EXECUTIVE OFFICER, who
shall be a director,
2. a treasurer OR CHIEF FINANCIAL OFFICER, who
may or may not be a director,
3. a secretary who shall be a resident and citizen of
the Philippines,
4. A COMPLIANCE OFFICER WHO SHALL REPORT
DIRECTLY TO THE CHAIRMAN OF THE BOARD,
5. and such other officers as may be provided for in
the by-laws.
Any two (2) or more positions OTHER THAN THAT OF THE
COMPLIANCE OFFICER may be held concurrently by the
same person, except that no one shall act as president and
secretary or as president and treasurer at the same time.
• SAN JUAN STRUCTURAL AND STEEL
FABRICATORS VS. CA
A corporate officer or agent may represent and bind the
corporation in transactions with 3rd persons to the extent that
the authority to do so has been conferred upon him, and this
includes powers which have been intentionally conferred, and
also such powers as, in the usual course of the particular
business, are incidental to, or may be implied from, the
powers intentionally conferred, powers added by custom and
usage, as usually pertaining to the particular officer or agent,
and such apparent powers as the corporation has caused
persons dealing with the officer or agent to believe that it has
conferred.
Unless duly authorized, a treasurer, whose powers are
limited, cannot bind the corporation in a sale of its assets.
• OKOL VS. SLIMMERS WORLD
INTERNATIONAL,
An office is created by the charter of the corporation and the
officer is elected by the directors and stockholders. On the
other hand, an employee usually occupies no office and
generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such
employee.
• MATLING INDUSTRIAL AND COMMERCIAL
CORP. VS. COROS,
Whoever are the corporate officers enumerated in the by-laws
are the exclusive Officers of the corporation and the Board
has no power to create other Offices without amending first
the corporate By- laws.
However, the Board may create appointive positions other
than the positions of corporate Officers, but the persons
occupying such positions are not considered as corporate
officers within the meaning of Section 25 of the Corporation
Code and are not empowered to exercise the functions of the
corporate Officers, except those functions lawfully delegated
to them.
The Board of Directors of Matling could not validly delegate
the power to create a corporate office to the President, in light
of Section 25 of the Corporation Code requiring the Board of
Directors itself to elect the corporate officers.
The criteria for distinguishing between corporate officers who
may be ousted from office at will, on one hand, and ordinary
corporate employees who may only be terminated for just
cause, on the other hand, do not depend on the nature of the
services performed, but on the manner of creation of the
office.
• PEOPLE’S AIRCARGO AND WAREHOUSING
CO. VS. CA,
A party dealing with the president of a corporation is entitled
to assume that he has the authority to enter, on behalf of the
corporation, into contracts that are within the scope of the
powers of said corporation and that do not violate any statute
or rule on public policy.
CORPORATE SECRETARY
A corporate secretary shall be a Filipino citizen and a resident
of the Philippines. He has the ff duties:
1. Be responsible for the safekeeping and
preservation of the integrity of the minutes of the
meetings of the Board and its committees, as well
as the other official records of the corporation; 

2. Inform the members of the Board, in accordance
with the bylaws, of the agenda of their meetings and
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ensure that the members have before them
accurate information that will enable them to arrive
at intelligent decisions on matters that require their
approval; 
 authority for acts, violations or misconduct similar to
3. Attend all Board meetings, except when justifiable
causes, such as, illness, death in the immediate
family and serious accidents, prevent him from
doing so; 
 disqualifications, which the Commission, the primary
4. IIf he is also the Compliance Officer, perform all the
duties and responsibilities of the said officer as
provided for in this Code. 
 as a sanction in its administrative proceedings.
COROPORATE TREASURER
A corporate treasurer‘s function have generally been
described as ―to receive and keep funds of the corporation,
and to disburse them in accordance with the authority given
him by the board or the properly authorized officers (San Juan
v CA)
Section 25. Report of election of directors, trustees and
officers, NON- HOLDING OF ELECTION AND CESSATION
FROM OFFICE. – Within thirty (30) days after the election
of the directors, trustees and officers of the corporation,
the secretary, or any other officer of the corporation, shall
submit to the Securities and Exchange Commission, the
names, nationalities, SHAREHOLDINGS and residences of
the directors, trustees, and officers elected.
The non-holding of any election and the reasons therefor,
shall be reported to the commission within thirty (30) days
from the date of the scheduled election; the report shall
specify a new date for the election, which shall not be later
than sixty (60) days from the scheduled date.
If no new date has been designated, or if the newly-
scheduled election be likewise not held, the commission
may, upon the application of any stockholder, member,
director or trustee and after verification of the unjustified non-
holding of election, summarily order that an election be
held. The commission shall have the power to issue such
orders as may be appropriate, including orders directing the
issuance of a notice stating the time and place of the election,
designated presiding officer, and the record date or dates for
the determination of stockholders or members entitled to vote.
Notwithstanding any provision of the articles of incorporation
or by-laws to the contrary, the shares of stock or
membership represented at such meeting and entitled to
vote shall constitute a quorum for purposes of
conducting an election under this section.
Should a director, trustee or officer die, resign or in any
manner cease to hold office, the secretary, or the director,
trustee or officer of the corporation, or in case of death, the
officer‘s heirs shall, within 7 days from knowledge thereof,
report in writing such fact to the Commission.
Sec. 27. Disqualification of directors, trustees or officers
– A person shall be disqualified from being a director, trustee
or officer of any corporation if, within five (5) years prior to the
election or appointment as such, he or she was convicted by
a final judgement:
[1] Of an offense punishable by imprisonment for a
period exceeding six (6) years; 

[2] For violating this Code; 
 one of its members as director or trustee. Since the law
[3] For violating Republic Act No. 8799, or otherwise
known as Securities Regulation Code; 
 the board cannot indirectly usurp or disregard the same.”
[4] Found administratively liable for any offense
involving fraud, theft, estafa, counterfeiting,
misappropriation, forgery, bribery, false oath, perjury
and other fraudulent acts; 

[5] By a foreign court or equivalent foreign regulatory
those enumerated in paragraphs 1, 2 and 3 above. 

The foregoing is without prejudice to qualifications or other
regulatory agency, or Philippine Competition Commission
may impose in its promotion of good corporate governance or
Sec. 28. Removal of directors or trustees. – Any director or
trustee of a corporation may be removed from office by:
1. a vote of the stockholders holding or representing
at least two-thirds (2/3) of the outstanding capital
stock, or in a non-stock corporation, by a vote of at
least two-thirds (2/3) of the members entitled to
vote
2. at a regular meeting of the corporation or at a
special meeting called for the purpose
3. after previous notice to stockholders or members of
the corporation of the intention to propose such
removal at the meeting.
The meeting must be called by the secretary:
1. on order of the president,
2. or upon written demand of the stockholders
representing or holding at least a majority of the
outstanding capital stock,
3. or a majority of the members entitled to vote.
If there is no secretary, or if the secretary, despite demand,
fails or refuses to call the special meeting or to give notice
thereof:
the stockholder or member of the corporation signing the
demand may call for the meeting by directly addressing the
stockholders or members.
Notice of the time and place of such meeting, as well as of the
intention to propose such removal:
1. must be given by publication or
2. 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 23 of this Code.
The Commission shall order the removal of a director or
trustee elected despite the disqualification, or whose
disqualification arose or is discovered subsequent to an
election:
1. motu proprio or upon verified complaint, and
2. after due notice and hearing,
The removal of a disqualified director shall be without
prejudice to other sanctions that the Commission may impose
on the board of directors or trustees who, with knowledge of
the disqualification, failed to remove such director or trustee.
• SEC OGC Opinion No. 6-9
The board of directors or trustees has no power to remove
expressly confers the authority to stockholders or members,
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Sec. 29. Vacancies in the office of director or trustee;
EMERGENCY BOARD. - Any vacancy occurring in the board
of directors or trustees other than by removal by the
stockholders or members or by expiration of term, may be
filled:
a. if still constituting a quorum, by the vote of at
least a majority of the remaining directors or
trustees
b. Otherwise, said vacancies must be filled by the
stockholders in a regular or special meeting called
for that purpose.
When the vacancy is due to term expiration:
1. The election shall be held no later than the day of
such expiration
2. At a meeting called for that purpose.
When the vacancy arises as a result of removal by the
stockholders or members:
1. The election may be held on the same day of the
meeting authorizing the removal
2. And this fact must be so stated in the agenda and
notice of said meeting.
In all other cases:
The election must be held no later than forty-five (45) days
from the time vacancy arose (sir: the vacancy that we are
referring to is the vacancy arising from the fact of removing
the director).
A director or trustee [so] elected to fill a vacancy
1. Shall be referred to as replacement director or
trustee
2. And shall only for the unexpired term of his or her
predecessor in office.
However, when the vacancy prevents the remaining directors
from constituting a quorum and emergency action is required
to prevent grave, substantial, and irreparable loss or damage
to the corporation:
1. the vacancy may be temporarily filled from among
the officers of the corporation by unanimous vote of
the remaining directors or trustees.
2. The action by the designated director or trustee
shall be limited to the emergency action necessary,
3. and his or her term shall cease within a reasonable
time from the termination of the emergency or upon
election of the replacement director or trustee,
whichever comes earlier.
4. The corporation must notify the commission within
three (3) days from the creation of the emergency
board, stating therein the reason for its creation.
Any directorship or trusteeship to be filled by reason of an
increase in the number of directors or trustees:
1. shall be filled only by an election at a regular or at a
special meeting of stockholders or members duly
called for the purpose,
2. or in the same meeting authorizing the increase of
directors or trustees if so stated in the notice of the
meeting.
IN ALL ELECTIONS TO FILL VACANCIES UNDER THIS
SECTION, THE PROCEDURE SET FORTH IN SECTIONS
24 AND 26 SHALL APPLY.
• TAN V. SYCIP
 deal in his own behalf.
Under the By-Laws of GCHS, membership in the corporation
shall, among others, be terminated by the death of the
member. Section 91 of the Corporation Code further provides
that termination extinguishes all the rights of a member of the
corporation, unless otherwise provided in the articles of
incorporation or the bylaws.
Applying Section 91 to the present case, we hold that dead
members who are dropped from the membership roster in the
manner and for the cause provided for in the By-Laws of
GCHS are not to be counted in determining the requisite vote
in corporate matters or the requisite quorum for the annual
members meeting. With 11 remaining members, the quorum
in the present case should be 6. Therefore, there being a
quorum, the annual members meeting, conducted with six
members present, was valid.
Sec. 30. Compensation of directors OR TRUSTEES. - In
the absence of any provision in the by-laws fixing their
compensation
GR: the directors OR TRUSTEES shall not receive any
compensation IN THEIR CAPACITY AS SUCH, except for
reasonable per diems:
EXP: the stockholders representing at least a majority of the
outstanding capital stock or majority of the members may
grant directors or trustees with compensation and approve the
amount thereof at a regular or special meeting.
No director or trustee shall participate in the determination of
his or her own per diems or compensation.
Corporations vested with public interest shall submit an
annual report of the total compensation of each of its directors
or trustees to the sec and its shareholders.
• WESTERN INSTITUTE OF TECHNOLOGY V.
SALAS
Two ways by which members of the board can be granted
compensation apart from reasonable per diems:
(1) when there is a provision in the by-laws fixing their
compensation;
(2) and when the stockholders representing a majority
of the outstanding capital stock at a regular or special
stockholders‘ meeting agree to give it to them.
Sec. 31. Liability of directors, trustees or officers.-
Directors or trustees shall be liable jointly and severally for all
damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons when they:
1. willfully and knowingly vote for or assent to patently
unlawful acts of the corporation
2. or are guilty of gross negligence or bad faith in
directing the affairs of the corporation
3. or acquire any personal or pecuniary interest in
conflict with their duty as such directors or trustees
A director, trustee or officer shall be liable as a trustee for the
corporation and must account for the profits which otherwise
would have accrued to the corporation when he:
1. attempts to acquire or acquires, in violation of his
duty,
2. any interest adverse to the corporation in respect of
any matter which has been reposed in him in
confidence,
3. as to which equity imposes a disability upon him to
• PALAY INC. V. CLAVE
No sufficient proof exists on record that the President used
the corporation to defraud private respondent. He cannot,
therefore, be made personally liable just because he "appears
to be the controlling stockholder". Mere ownership by a single
stockholder or by another corporation of all or nearly all of the
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capital stock of a corporation is not of itself sufficient ground
for disregarding the separate corporate personality.
• TRAMAT MERCANTILE INC. V. CA
Ong acted, not in his personal capacity, but as an officer of a
corporation, TRAMAT. It should only be the corporation, not
the person acting for and on its behalf, that properly could be
made liable thereon.
Personal liability of a corporate director, trustee or officer
along (although not necessarily) with the corporation may so
validly attach, as a rule, only when –
[1]
He assents (a) to a patently unlawful act of the
corporation, or (b) for bad faith, or (c) for conflict of
interest, resulting in damages to the corporation, its
stockholders or other persons;
[2] He consents to the issuance of watered stocks or
who, having knowledge thereof, does not forthwith file
with the corporate secretary his written objection
thereto; 
 authorized by the board of directors.
[3] He agrees to hold himself personally and solidarily
liable with the corporation; or 
 When may contract be ratified:
[4] He is made, by a specific provision of law, to
personally answer for his corporate action. 
 in the preceding paragraph is absent,
• SEAOIL PETROLEUM CORP. V. AUTOCORP
GROUP
The bad faith or wrongdoing of the director must be
established clearly and convincingly. Bad faith is never
presumed.
The burden of proving bad faith or wrongdoing on the part of
Rodriguez was, on petitioner, a burden which it failed to
discharge.
DOCTRINE OF CORPORATE OPPORTUNITY
• GOKONGWEI V SEC
Although in the strict and technical sense, directors of a
private corporation are not regarded as trustees, there cannot
be any doubt that their character is that of a fiduciary insofar
as the corporation and the stockholders as a body are
concerned. As agents entrusted with the management of the
corporation for the collective benefit of the stockholders, "they
occupy a fiduciary relation.”
Corporations have the power to make by-laws declaring a
person employed in the service of a rival company to be
ineligible for the corporation's Board of Directors.
This is based upon the principle that where the director is so
employed in the service of a rival company, he cannot serve
both, but must betray one or the other.
The doctrine of "corporate opportunity" is precisely a
recognition by the courts that the fiduciary standards could not
be upheld where the fiduciary was acting for two entities with
competing interests. This doctrine rests fundamentally on the
unfairness, in particular circumstances, of an officer or
director taking advantage of an opportunity for his own
personal profit when the interest of the corporation justly calls
for protection.
Section. 32. Dealings of Directors, Trustees or Officers
with the Corporation.—
GR: A contract of the corporation with one (1) or more of its
directors, trustees,
officers or
their spouses and relatives
within the fourth civil degree of consanguinity or affinity
is
voidable, at the option of such corporation,
EXP: Unless all the following conditions are present:
(a) The presence of such director or trustee in the board
meeting in which the contract was approved was not
necessary to constitute a quorum for such meeting;
(b) The vote of such director or trustee was not necessary for
the approval of the contract;
(c) The contract is fair and reasonable under the
circumstances;
(d) In case of corporations vested with public interest, material
contracts are approved by at least two-thirds (2/3) of the entire
membership of the board, with at least a majority of the
independent directors voting to approve the material contract;
and
(e) In case of an officer, the contract has been previously
1. Where any of the first three (3) conditions set forth
2. in the case of a contract with a director or trustee,
3. such contract may be ratified by the vote of the
stockholders representing at least two-thirds (2/3)
of the outstanding capital stock or of at least two-
thirds (2/3) of the members in a meeting called for
the purpose
4. Full disclosure of the adverse interest of the
directors or trustees involved is made at such
meeting and the contract is fair and reasonable
under the circumstances.
• PRIME WHITE CEMENT CORP. V. IAC
HE was not an ordinary stockholder; he was a member of the
Board of Directors and Auditor of the corporation as well. He
was what is often referred to as a "self-dealing" director.
A director of a corporation holds a position of trust and as
such, he owes a duty of loyalty to his corporation. In case his
interests conflict with those of the corporation, he cannot
sacrifice the latter to his own advantage and benefit.
Section 33. Contracts between corporations with
interlocking directors.–
GR: A contract between two or more corporations having
interlocking directors shall not be invalidated on that ground
alone provided the contract is fair and reasonable under the
circumstances,
EXP: cases of fraud
He shall be subject to the provisions of the preceding section
insofar as the latter corporation or corporations are
concerned:
1. if the interest of the interlocking director in one
corporation is substantial
2. and his interest in the other corporation or
corporations is merely nominal
Stockholdings exceeding twenty (20%) percent of the
outstanding capital stock shall be considered substantial for
purposes of interlocking directors. (n)
Section 34. Disloyalty of a director. – Where a director, by
virtue of his office, acquires for himself a business
opportunity which should belong to the corporation,
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thereby obtaining profits to the prejudice of such corporation,
he must account to the latter for all such profits by
refunding the same, unless his act has been ratified by a
vote of the stockholders owning or representing at least
two-thirds (2/3) of the outstanding capital stock. This
provision shall be applicable, notwithstanding the fact that the
director risked his own funds in the venture. (n)
Section 35. Executive committee. – The by-laws of a
corporation may
create an executive committee:
1. composed of not less than three members of the
board,
2. to be appointed by the board.
Said committee may act, by majority vote of all its members,
on such specific matters within the competence of the board,
as may be delegated to it in the by-laws or on a majority vote
of the board, except with respect to:
(1) approval of any action for which shareholders‘ approval is
also required;
(2) the filing of vacancies in the board;
(3) the amendment or repeal of by-laws or the adoption of new
by-laws;
(4) the amendment or repeal of any resolution of the board
which by its express terms is not so amendable or repealable;
and
(5) a distribution of cash dividends to the shareholders.
CORPORATE POWER
SECTION 36. Corporate and capacity. –Every corporation
incorporated under this Code has the power and capacity:
[1] To sue and be sued in its corporate name; 
 corporation shall have the right to dissent and demand
[2] To perpetual existence unless the certificate of
incorporation provides otherwise
[3] To adopt and use a corporate seal; 

[4] To amend its articles of incorporation in accordance with
the provisions of this Code; 
 the effect of changing or restricting the rights of any
[5] To adopt by-laws, not contrary to law, morals, or public
policy, and to amend or repeal the same in accordance with
this Code;
[6] In case of stock corporations,
issue or sell stocks to
subscribers and to sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this Code;
and to admit members to the corporation if it be a non-stock
corporation;
[7] To purchase, receive, take or grant, hold, convey,sell,
lease, pledge, mortgage and otherwise deal with such real
and personal property, including securities and bonds of other
corporations, as the transaction of the lawful business of the
may and require, subject to the limitations corporation
reasonably necessarily prescribed by law and the
Constitution;
[8] to enter into a partnership, joint venture, merger or
consolidation or any other commercial agreement with natural
or juridical persons
[9] To make reasonable donations, including those for the
public welfare or for hospital, charitable, cultural, scientific,
civic, or similar purposes: Provided, That no foreign
corporation shall give donations in aid of any political party or
candidate or for purposes of partisan political activity;
[10] To establish pension, retirement, and other plans for the
benefit of its directors, trustees, officers and employees; and
[11] To exercise such other powers as may be essential or
necessary to carry out its purpose or purposes as stated in
the articles of incorporation.
Section 37. Power to extend or Shorten Corporate Term.
– A private corporation may extend or shorten its term:
1. as stated in the articles of incorporation
2. when approved by a majority vote of the board of
directors or trustees,
3. and ratified at a meeting by the stockholders or
members representing (2/3) of the outstanding
capital stock or of its members.
4. Written notice of the proposed action and the time
and place of the meeting shall be sent to each
stockholder or member at his or her place of
residence as shown in the books of corporation,
and
i. must either be deposited to the addressee in
the post office with postage prepaid, served
personally,
ii. or when allowed in the by-laws or done with
the consent of the stockholder, sent
electronically in accordance with the rules
and regulations of the Commission on the use
of electronic data messages.
In case of extension of corporate term, a dissenting
stockholder may exercise his or her appraisal right under the
conditions provided in this Code.
RIGHT OF APPRAISAL
The right of appraisal is the stockholder‘s right to dissent and
demand payment of the fair value of the shares.
Sec. 81. Instances of appraisal right.- Any stockholder of a
payment of the fair value of his shares in the following
instances:
[1] In case any amendment to the articles of incorporation has
stockholder or class of shares, or of authorizing preferences
in any respect superior to those of outstanding shares of any
class, or of extending or shortening the term of corporate
existence; 

[2] In case of sale, lease, exchange, transfer, mortgage,
pledge or other disposition of all or substantially all of the
corporate property and assets as provided in the Code; and 

[3]In case of merger or consolidation
Sec. 82. How right is exercised. – The dissenting
stockholder who votes against a proposed corporate action
may exercise his or her appraisal right by:
i. making a written demand on the corporation for the
payment of the fair value of his or her shares within
thirty (30) days from the date on which the vote was
taken
ii. failure to make the demand within such period shall
be deemed a waiver of the appraisal right.
If the proposed corporate action is implemented or affected:
i. the corporation shall pay to such stockholder,
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ii. upon surrender of the certificate or certificates of 4. or disapproved by the Securities and Exchange
stock representing his shares, Commission where such approval is necessary,
iii. the fair value thereof as of the day prior to the date 5. or if the Securities and Exchange Commission
on which the vote was taken, determines that such stockholder is not entitled to
a. excluding any appreciation or the appraisal right
depreciation in anticipation of such
corporate action. Sec. 85. Who bears costs of appraisal. –

If within a period of sixty (60) days from the date the corporate GR: The costs and expenses of appraisal shall be borne by
action was approved by the stockholders the withdrawing the corporation,
stockholder and the corporation cannot agree on the fair value
of the shares:
EXP: the fair value ascertained by the appraisers is
approximately the same as the price which the corporation
i. it shall be determined and appraised by three (3) may have offered to pay the stockholder, in which case they
disinterested persons, shall be borne by the latter.
a. one of whom shall be named by the
stockholder, another by the corporation,
and the third by the two thus chosen. In the case of an action to recover such fair value:
ii. The findings of the majority of the appraisers shall
be final, GR: all costs and expenses shall be assessed against the
iii. and their award shall be paid by the corporation corporation,
within thirty (30) days after such award is made:
a. no payment shall be made to any EXP: the refusal of the stockholder to receive payment was
dissenting stockholder unless the unjustified.
corporation has unrestricted retained
earnings in its books to cover such
Sec. 86. Notation on certificates; rights of transferee. –
payment: and
Duty of stockholder for notation:
b. upon payment by the corporation of the
agreed or awarded price, the stockholder
shall forthwith transfer his shares to the 1. Within ten days after demanding payment for his
corporation. shares
2. a dissenting stockholder shall submit the
certificates of stock representing his shares to the
Sec. 83. Effect of demand and termination of right. - From
corporation for notation thereon that such shares
the time of demand for payment of the fair value of a
are dissenting shares.
stockholder's shares until:

His or her failure to do so shall at the option of the

i. either the abandonment of the corporate action
corporation, terminate his rights under this Title.
involved or
ii. the purchase of the said shares by the corporation,
If shares represented by the certificates bearing such notation
are transferred, and the certificates consequently canceled:
Effect:

1. the rights of the transferor as a dissenting

1. All rights accruing to such shares, including voting
stockholder under this Title shall cease
and dividend rights, shall be suspended
2. and the transferee shall have all the rights of a
2. Except the right of such stockholder to receive
regular stockholder;
payment of the fair value thereof
3. and all dividend distributions which would have
a. if the dissenting stockholder is not paid
accrued on such shares shall be paid to the
the value of his shares within 30 days
transferee.
after the award, his voting and dividend
rights shall immediately be restored.
POWER TO TEMPORARY CEASE CORPORATE
OPERATION
Sec. 84. When right to payment ceases. –

GR: No demand for payment under this Title may be
withdrawn unless the corporation consents thereto.
EXP: the right of said stockholder to be paid the fair value of
his shares shall cease, his status as a stockholder shall
thereupon be restored, and all dividend distributions which
would have accrued on his shares shall be paid to him or her
if:
1. such demand for payment is withdrawn with the
consent of the corporation,
2. or if the proposed corporate action is abandoned
3. or rescinded by the corporation
• SEC OPINION NO. 43-04
The corporate powers conferred upon the BOD usually
involves the ordinary business transaction of the corporation
and do not extend beyond the management of ordinary
corporate affairs.
The issue of stoppage of business operation cannot be
classified as an ordinary business transaction, such as to limit
the approval to the BOD. Cessation of the business, though
temporary, is a fundamental concern which should be decided
not only by the board, but also by the stockholders

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themselves, who would stand to be primarily affected by such
changes.
The 2/3 vote of the outstanding capital stock is required either
prior to the voting or subsequent ratification.
Sec. 38. Power to increase or decrease capital stock;
incur, create or increase bonded indebtedness. - No
corporation shall increase or decrease its capital stock or
incur, create or increase any bonded indebtedness unless:
1. approved by a majority vote of the board of directors
2. and by two-thirds (2/3) of the outstanding capital
stock
3. at a stockholder's meeting duly called for the
purpose.
4. Written notice of the time and place of the
stockholder's meeting must be sent to each
stockholder at his or her place of residence as
shown on the books of the corporation and served
on the stockholder personally, or through electronic
means recognized in the corporation‘s by- laws
and/or Commission‘s rules as a valid mode for
service of notices.
5. A certificate in duplicate must be signed by a
majority of the directors of the corporation and
countersigned by the chairman and the secretary of
the stockholders' meeting, setting forth:
[1] That the requirements of this section have
been complied with; 

[2] The amount of the increase or diminution of
the capital stock; 
 trustees
[3] If an increase of the capital stock, the amount
of capital stock or number of shares of no-par
stock thereof actually subscribed, the names,
nationalities and residences of the persons
subscribing, the amount of capital stock or
number of no- par stock subscribed by each, and
the amount paid by each on his subscription in
cash or property, or the amount of capital stock or
number of shares of no-par stock allotted to each
stock-holder if such increase is for the purpose of
making effective stock dividend therefor
authorized; 
 emptive right to subscribe to all issues or disposition of shares
[4] Any bonded indebtedness to be incurred,
created or increased; 

[5] The amount of stock represented at the
meeting; and 
 amendment thereto
[6] The vote authorizing the increase or
diminution of the capital stock, or the incurring,
creating or increasing of any bonded
indebtedness. 
 1.
Any increase or decrease in the capital stock or the incurring,
creating or increasing of any bonded indebtedness shall
require:
1. prior approval of the Securities and Exchange
Commission.
2. The application with the Commission shall be made
within (6) months from the date of approval of the
board of directors and stockholders, which period
may be extended for justifiable reasons.
One of the duplicate certificates shall be kept on file in the
office of the corporation and the other shall be filed with the
Securities and Exchange Commission and attached to the
original articles of incorporation. From and after approval by
the Securities and Exchange Commission and the issuance
by the Commission of its certificate of filing, the capital stock
shall stand increased or decreased and the incurring, creating
or increasing of any bonded indebtedness authorized, as the
certificate of filing may declare:
The Securities and Exchange Commission shall not accept for
filing any certificate of increase of capital stock unless:
1. accompanied by the sworn statement of the
treasurer of the corporation lawfully holding office at
the time of the filing of the certificate
a. showing that at least twenty- five (25%)
percent of such increased capital stock
has been subscribed
b. and that at least twenty-five (25%)
percent of the amount subscribed has
been paid either in actual cash to the
corporation or that there has been
transferred to the corporation property
the valuation of which is equal to twenty-
five (25%) percent of the subscription:
2. no decrease of the capital stock shall be approved
by the Commission if its effect shall prejudice the
rights of corporate creditors.
Non-stock corporations may incur or create bonded
indebtedness, or increase the same
1. with the approval by a majority vote of the board of
2. and of at least two-thirds (2/3) of the members
3. in a meeting duly called for the purpose.
Bonds issued by a corporation shall be registered with the
Securities and Exchange Commission, which shall have the
authority to determine the sufficiency of the terms thereof.
Sec. 39. Power to deny pre-emptive right. –
GR: All stockholders of a stock corporation shall enjoy pre-
of any class, in proportion to their respective shareholdings,
EXP: such right is denied by the articles of incorporation or an
Such pre-emptive right shall not extend to:
shares to be issued in compliance with laws
requiring stock offerings or minimum stock
ownership by the public;
2. or to shares to be issued in good faith with the
approval of the stockholders representing two-
thirds (2/3) of the outstanding capital stock, in
exchange for property needed for corporate
purposes or in payment of a previously contracted
debt.
Sec. 40. Sale or other disposition of assets. - Subject to
the provisions of RA 10667 or the Philippine Competition Act
and other related laws, a corporation may, by a majority vote
of its board of directors or trustees, sell, lease, exchange,
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mortgage, pledge or otherwise dispose of its property and
assets, upon such terms and conditions and for such
consideration, which may be money, stocks, bonds or other
instruments for the payment of money or other property or
consideration, as its board of directors or trustees may deem
expedient.
A sale of all or substantially all of the corporation‘s properties
and assets, including goodwill must be authorized by:
1. the vote of the stockholders representing at least
two-thirds (2/3) of the outstanding capital stock, or at least to
two-thirds (2/3) of the members,
2. in a stockholder's or member's meeting duly called
for the purpose.
In a non-stock corporations where there are no members
with voting rights the vote of at least a majority of the
trustees in the office will be sufficient authorization for the
corporation to enter into any transaction authorized by this
section.
The determination of whether or not the sale involves all or
substantially all of the corporation‘s properties and assets
must be computed based on its net asset value, as shown
in its latest financial statements. A sale or other disposition
shall be deemed to cover substantially all the corporate
property and assets if thereby the corporation would be
rendered incapable of continuing the business or
accomplishing the purpose for which it was incorporated.
Written notice of the proposed action and of the time and
place of the meeting shall be addressed to each stockholder
or member at his place of residence as shown on the books
of the corporation and deposited to the addressee in the post
office with postage prepaid, or served personally or when
allowed by the by-laws or done with the consent of the
stockholder, sent electronically; Provided, That any dissenting
stockholder may exercise his appraisal right under the
conditions provided in this Code.
After such authorization or approval by the stockholders
or members, the board of directors or trustees may,
nevertheless, in its discretion, abandon such sale, lease,
exchange, mortgage, pledge or other disposition of property
and assets, subject to the rights of third parties under any
contract relating thereto, without further action or approval by
the stockholders or members.
Nothing in this section is intended to restrict the power of any
corporation, without the authorization by the stockholders or
members, to sell, lease, exchange, 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 corporation or if the proceeds of the sale or other
disposition of such property and assets be appropriated for
the conduct of its remaining business.
• CALTEX (PHILS) INC VS PNOC SHIPPING AND
TRANSPORT CORP
While the Corporation Code allows the transfer of all or
substantially all the properties and assets of a corporation, the
transfer should not prejudice the 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. The acquisition by the assignee of all or
substantially all of the assets of the assignor necessarily
includes the assumption of the assignor‘s liabilities, unless the
creditors who did not consent to the transfer choose to rescind
the transfer on the ground of fraud.
Sec. 41. Power to acquire own shares. - Provided, That the
corporation has unrestricted retained earnings in its
books to cover the shares to be purchased or acquired, a
stock corporation shall have the power to purchase or acquire
its own shares for a legitimate corporate purpose or purposes,
including but not limited to the following cases:
[1] To eliminate fractional shares arising out of stock
dividends;
[2] To collect or compromise an indebtedness to the
corporation, arising out of unpaid subscription, in a
delinquency sale, and to purchase delinquent shares sold
during said sale; and 

[3] To pay dissenting or withdrawing stockholders entitled to
payment for their shares under the provisions of this Code. 

Sec. 42. Power to invest corporate funds in another
corporation or business or for any other purpose. -
Subject to the provisions of this Code, a private corporation
may invest its funds:
1. in any other corporation or business or for any
purpose other than the primary purpose for which it
was organized
2. when approved by a majority of the board of
directors or trustees and ratified by the stockholders
representing at least two-thirds (2/3) of the
outstanding capital stock, or by at least two thirds
(2/3) of the members in the case of non-stock
corporations,
3. at a stockholder's or member's meeting duly called
for the purpose.
4. Written notice of the proposed investment and the
time and place of the meeting shall be addressed
to each stockholder or member at his place of
residence as shown on the books of the corporation
and deposited to the addressee in the post office
with postage prepaid, or served personally, or sent
electronically in accordance with the rules and
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.
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 members shall not be
necessary.
Sec. 43. Power to declare dividends. - The board of
directors of a stock corporation may declare dividends out
of the unrestricted retained earnings which shall be
payable in cash, in property, or in stock to all stockholders
on the basis of outstanding stock held by them:
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Any cash dividends due on delinquent stock shall first be
applied to the unpaid balance on the subscription plus costs
and expenses,
Stock dividends shall be withheld from the delinquent
stockholder until his unpaid subscription is fully paid
No stock dividend shall be issued without the approval of
stockholders representing not less than two-thirds (2/3)
of the outstanding capital stock at a regular or special
meeting duly called for the purpose.
Stock corporations are prohibited from retaining surplus
profits in excess of one hundred (100%) percent of their paid-
in capital stock, except:
(1) when justified by definite corporate expansion projects or
programs approved by the board of directors; or
(2) when the corporation is prohibited under any loan
agreement with any financial institution or creditor, whether
local or foreign, from declaring dividends without its/his
consent, and such consent has not yet been secured; or
(3) when it can be clearly shown that such retention is
necessary under special circumstances obtaining in the
corporation, such as when there is need for special reserve
for probable contingencies.
Sec. 44. Power to enter into management contract. - No
corporation shall conclude a management contract with
another corporation unless such contract shall have been:
1. approved by the board of directors
2. and by stockholders owning at least the majority of
the outstanding capital stock, or by at least a
majority of the members in the case of a non- stock
corporation,
3. of both the managing and the managed
corporation,
4. at a meeting duly called for the purpose
No management contract shall be entered into for a period
longer than five years for any one term:
1. where a stockholder or stockholders 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 stock
entitled to vote of the managing corporation; or 

2. where a majority of the members of the board of
directors of the managing corporation also
constitute a majority of the members of the board of
directors of the managed corporation, then the
management contract must be approved by the
stockholders of the managed corporation owning at
least two- thirds (2/3) 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.
The provisions of the next preceding paragraph shall apply to
any contract:
1. whereby a corporation undertakes to manage or
operate all or substantially all of the business of
another corporation,
2. whether such contracts are called service
contracts, operating agreements or otherwise:
3. such service contracts or operating agreements
which relate to the exploration, development,
exploitation or utilization of natural resources may
be entered into for such periods as may be provided
by the pertinent laws or regulations.
Sec. 45. Ultra vires acts of corporations. - No corporation
under this Code shall possess or exercise any corporate
powers except those conferred by this Code or by its articles
of incorporation and except such as are necessary or
incidental to the exercise of the powers so conferred.
• MONTELIBANO VS BACOLOD-MURCIA
MILLING CO INC
If that act is one which is lawful in itself, and not otherwise
prohibited, is done for the purpose of serving corporate ends,
and is reasonably tributary to the promotion of those ends, in
a substantial, and not in a remote and fanciful sense, it may
fairly be considered within charter powers. The test to be
applied is whether the act in question is in direct and
immediate furtherance of the corporation's business, fairly
incident to the express powers and reasonably necessary to
their exercise. If so, the corporation has the power to do it;
otherwise, not.
The plea of ultra vires will not be allowed to prevail,
whether interposed for or against a corporation, when it
will not advance justice but, on the contrary, will
accomplish a legal wrong to the prejudice of another who
acted in good faith.
MEETINGS
Sec. 50. Regular and special meetings of stockholders or
members. - Regular meetings of stockholders or members
shall be held:
1. annually on a date fixed in the by-laws,
2. or if not so fixed, on any date after April 15 of every
year as determined by the board of directors or
trustees
Requirments:
1. Written notice of regular meetings shall be sent to
all stockholders or members of record at least (20)
days prior to the meeting,
a. unless a longer period is required by the
by-laws, law or regulation
2. the written notice of regular meetings may be sent
to all stockholders or members of record through
electronic mail or such other manner as the
Commission shall allow under its guidelines.
At each regular meeting of stockholders or members, the
board of directors or trustees shall endeavor to present to
stockholders or members the following:
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[a] The minutes of the most recent regular meeting 1. at least (2) weeks prior to the meeting, unless a
which shall include, among others: longer period is provided in the by-laws, law or
[i] A description of the voting and vote regulation
tabulation procedures used in the current a. Notice of any meeting may be waived,
meeting; 
 expressly or impliedly, by any
[ii] A description of the opportunity given to stockholder or member.
stockholders or members to ask questions and b. attendance at a meeting shall constitute
a record of the questions asked and answers a waiver of notice of such meeting,
given; 
 i. except when the person
[iii] The matters discussed and resolutions attends meeting for the
reached; 
 express purpose of objecting
[iv] A record of the voting results for each to the transaction of any
business because the meeting
agenda item 

is not lawfully called or
[v] A list of the directors, or trustees, officers,
convened.
and stockholders or members who attended the
meeting; and [vi] Such other items that the
Commission may require in the interest of good A stockholder or member shall have the right to propose the
corporate governance and the protection of holding of a special meeting and items to be included in the
agenda.
minority stockholders. 

Whenever, for any cause, there is no person authorized to call
[b] A members‘ list for non-stock corporations and,
a meeting, the Commission:
for stock corporations, material information on the
1. upon petition of a stockholder or member on a
current stockholders and their voting rights; 

showing of good cause therefore,
[c] A detailed, descriptive, balances and
2. may issue an order to the petitioning stockholder or
comprehensible assessment of the corporation‘s
member directing him to call a meeting of the
performance which shall include information on any
corporation
material change in the corporation‘s business,
3. by giving proper notice required by this Code or by
strategy and other affairs; 

the by-laws.
[d] A financial report for the preceding year, which 4. The petitioning stockholder or member shall
shall include financial statements duly signed and preside thereat until at least a majority of the
certified in accordance with this Code and the rules stockholders or members present have been
the Commission may prescribe, a statement on the chosen one of their number as presiding officer.
adequacy of the corporation‘s internal controls or risk Unless the by-laws provide for a longer period, the stock and
management systems, and a statement of all external
transfer book or membership book shall be closed at least (20)
audit and non-audit fees; 
 days before the scheduled date of the meeting.
[e] An explanation of the dividend policy and the fact
of payment of dividends or the reasons for non- In case of postponement of stockholders‘ or members‘ regular
payment thereof; 
 meetings:
[f] Director or trustee profiles which shall include, 1. written notice thereof and the reason therefor shall
among others, their qualifications and relevant be sent to all stockholders or members of record
experience,
corporation,
education
representations 2. at least two (2) weeks prior to the date of the
in other corporations; length of service in the trainings meeting, unless a different period is required under
and continuing attended, and their board by-laws, laws or regulation.
[g] A director or trustee attendance report, indicating The right to vote may be exercised:
the attendance of each director or trustee at each of 1. in person,
the meetings of the board and its committees and in 2. through a proxy,
regular or special stockholder meetings; 
 3. or when so authorized in the by-laws or by a
[h] Appraisals and performance reports for the board majority of the members of the board of directors,
and the criteria and procedure for assessment; 
 4. the stockholders or members may also vote
[i] A director or trustee compensation report prepared through remote communication
in accordance with this code and the rules the 5. or in absentia.
Commission may prescribe; 

[j] Director disclosures on self-dealings and related The Commission shall issue the rules and regulations
party transactions and/or; 
 governing participation and voting through remote
[k] The profiles of directors nominated or seeking communication or in absentia taking into account the
election or re-election. 
 company‘s scale number of shareholders or members,
A director, trustee, stockholder or member may propose any structure, and other factors consistent with the protection and
other natter for inclusion in the agenda at any regular meeting promotion of the shareholder‘s or members‘ meetings.
of stockholders or members.
Sec. 51. Place and time of meetings of stockholders or
Special meetings of stockholders or members shall be held: members. - Stockholders' or members' meetings, whether
regular or special, shall be held:
1. at any time deemed necessary or as provided in the
by-laws 1. in the principal office of the corporation as set forth
in the articles of incorporation,
2. or if not practicable, in the city or municipality where
Written notice shall be sent to all stockholders or members:
the principal office of the corporation is located,

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3. Metro Manila, Metro Cebu, Metro Davao and other
metropolitan areas shall, for purposes of this
section, be considered a city or municipality.
Written notice shall be sent through means of communication
provided in the by-laws, which notice shall state the time,
place and purpose of the meetings.
Each notice of meeting shall further be accompanied by the
following:
[a] The agenda for the meeting 

[b] A proxy form which shall be submitted to the corporate
secretary within a reasonable time prior to the meeting; 
 party transaction must:
[c] When attendance, participation and voting are allowed by
remote communication or in absentia, the requirements and
procedures to be followed when a stockholder or member
elects either option; and 

[d] When the meeting is for election of directors or trustee, the
requirements and procedure for nomination.
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:
1. provided all the stockholders or members of the
corporation are present or duly represented at the
meeting
2. and none of them expressly states at the beginning
of the meeting that the purpose of their attendance
is to object to the transaction of any business
because the meeting is not lawfully called or
convened.
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.
Sec. 53. Regular and special meetings of directors or
trustees. – Unless the articles of incorporation or by- laws
provides for a greater majority, a majority of the directors or
trustees as stated in the articles of incorporation shall
constitute a quorum to transact a corporate business,
and 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
shall require the vote of a majority of all the members of the
board.
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:
1. anywhere in or outside of the Philippines,
2. unless the by-laws provide otherwise.
Notice of regular or special meetings must:
1. state the date, time and place of the meeting
2. sent to every director or trustee at least (2) days
prior to the scheduled meeting, unless a longer time
is provided by the by-laws.
a. A director or trustee may waive this
requirement, either expressly or
impliedly.
Voting:
1. Directors or trustees cannot attend or vote by proxy
at board meetings.
2. They can participate and vote through remote
communication such as videoconferencing or other
alternative modes of communication that allow
them reasonable opportunity to participate.
A director or trustee who has a potential interest in any related
1. recuse himself or herself from voting
2. on the approval of the related party transaction
without prejudice to compliance with the
requirements of Section 32 of this Code.
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.
Sec. 55. Right to vote of pledgors, mortgagors, and
administrators. - In case of pledged or mortgaged shares in
stock corporations:
GR: the pledgor or mortgagor shall have the right to attend
and vote at meetings of stockholders,
EXP: the pledgee or mortgagee is expressly given by the
pledgor or mortgagor such right:
1. in writing
2. and is recorded on the appropriate
corporate books.
The following may attend and vote in behalf of the
stockholders or members without need of any written proxy:
1. Executors, administrators,
2. receivers,
3. and other legal representatives duly appointed by
the court
Sec. 56. Voting in case of joint ownership of stock. – In
voting shares of stock owned jointly by two or more persons:
GR: The consent of all the co-owners shall be necessary,
EXP: 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:
Note: 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.
Sec. 57.Voting right for treasury shares.- Treasury shares
shall have no voting right as long as such shares remain in
the Treasury.
Section 58. Manner of Voting; Proxies- Stockholders and
members may vote in all meetings of stockholders or
members:
1. in person or
2. by proxy
The stockholders or members of the corporations may also
vote through remote communication or in absentia:
1. When so authorized in the by-laws or by a majority
of the BOD
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2. The right to vote through such modes may be
exercised in the corporation vested with public
interest, notwithstanding the absence of a provision
in the by- laws of the corporation;
3. the votes are received before the corporation
finishes the tally of votes.
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.

When a stockholder or member participates through remote
communication or in absentia, he or she shall be deemed
present for purposes of quorum.
The corporation shall establish the appropriate requirements
and procedures for voting through remote communication,
and in absentia, taking into account the company‘s scale,
number of shareholders or members, structure and other
factors consistent with the basic right corporate suffrage.
Rule on proxies:
1. Proxies shall signed and filed by the stockholder or
member,
2. in any form authorized by the by-laws and
3. received by the corporate secretary within a
reasonable time before the scheduled meeting.
4. Unless otherwise provided in the proxy form, it shall
be valid only for the meeting for which it is intended.
5. No 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:
1. 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,
2. or for the perpetration of fraud.
Unless expressly renewed all rights granted in a voting trust
agreement:
1. shall automatically expire at the end of the agreed
period,
2. and the voting trust certificates as well as the
certificates of stock in the name of the trustee or
trustees shall thereby be deemed canceled
3. 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.

Sec. 59. Voting trusts. - One or more stockholders of a stock

corporation may create a voting trust:
1. for the purpose of conferring upon a trustee or
trustees the right to vote
2. and other rights pertaining to the shares
3. for a period not exceeding five (5) years at any time

In the case of a voting trust specifically required as a condition

in a loan agreement:
1. voting trust may be for a period exceeding five (5)
years
2. but shall automatically expire upon full payment of
the loan.

A voting trust agreement must be:

1. in writing and notarized,
2. and shall specify the terms and conditions thereof.
3. A certified copy of such agreement shall be filed
with the corporation and with the Commission;
otherwise, said agreement is ineffective and
unenforceable.

The certificate or certificates of stock covered by the voting

trust agreement:
1. shall be canceled
2. and new ones shall be issued in the name of the
trustee or trustees stating that they are issued
pursuant to said agreement.
3. 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.
4. 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

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