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Bylaws, Meetings, Merger & Consolidation

RFBT 2 – BSA 2nd Year_August 10, 2019
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BYLAWS
WHAT: rules of action adopted by the corporation for its internal regulations & for
the government of its officers & of its SH or M.

WHY (function):
• to prescribe the rights & duties of SH or M towards the corporation & among
themselves
• to regulate the transaction of the business in a specific way

WHEN (time of adoption): may be prior or after incorporation

WHERE (custody): principal office of the corporation

HOW (manner of its creation / amendment / repeal):

PRIOR TO INCORPORATION
affirmed and signed submitted with the Articles to
by ALL à the SEC
incorporators

AFTER INCORPORATION
affirmed & signed à certified by à filed with the SEC and attached
by majority vote of majority of the to the Articles
SH/members Board (D/T)
-and- in case of special corporations,
(power may be countersigned by Certification of the concerned
delegated to the Secretary government agency shall be
Board) included in the filing…
business agency
banking BSP
insurance IC
land transport LTFRB
vessel MARINA
airline CAAP
school/college DEPED/CHED

Delegation of SH/M’s power to amend or adopt new bylaws

• effective when voted by 2/3 of the SH/M (through a Resolution)
• revoked when voted by majority of SH/M

Effectivity Date: ISSUE DATE OF SEC CERTIFICATION stating that such bylaws is in
accordance with R.A. No. 11232

Content: matters relating to the…

• qualifications, dq’s, election, duties & compensation of D/T/O
• meetings of SH/M/D/T e.g. time, place, purpose
• quorum and voting in such meetings
• penalties for violation of bylaws
• certificate of stocks
• arbitration of intra-corporate disputes
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An ARBITRATION AGREEMENT is one made between the SH/M and Board whereby
one or more neutral third parties, called arbitrator/s, are appointed to resolve intra-
corporate disputes.

Intra-corporate disputes are those arising from the implementation of the Articles or
bylaws, or from intra-corporate relations.

Examples:
• The Board allegedly violated preference in dividend distribution of a certain class of share
prescribed in the articles.
• An officer claims he has received benefit or compensation for an amount less than that fixed
in the articles or bylaws.
• There appears a strained relationship among the members of the execom.

Disputes involving crimes or rights of a third party are nonarbitrable.

Examples:
• A member assaulted a trustee during a meeting.
• An officer wrote a malicious FB post against a SH.
• A corporation and a third person, such as a creditor, assert ownership over a certain
corporate property

MEETINGS
The chairman of the Board, or in his absence, the President shall preside at ALL meetings
unless the bylaws provide otherwise.

MEETINGS OF STOCKHOLDERS/MEMBERS
Prior
Kinds Date Place Quorum Mode of Voting
Notice*
REGULAR ANNUALLY • principal
• on date office
fixed in indicated
the BL in the • personally
• any date Articles • by proxy
after 21 days • in default
04/15 of (1), in if allowed by the
fixed by the actual bylaws or the
majority
D/T location of majority of the
principal Board
SPECIAL AT ANY office • by remote
TIME when communication
necessary or the bylaws • in absentia
1 week
as provided cannot
in the by- change this
laws provision
*Notice may be subject to WAIVER, express or implied, e.g. a SH/M, who did not receive a
notice, still attended the meeting without making any objection.

Nevertheless, NO GENERAL WAIVER OF NOTICE in the Articles or bylaws is allowed.

General in the sense that it applies to every, each and all meetings to be held.
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In a proxy, the principal is the SH/M and the person authorized to attend and vote in his
behalf is the agent.

THREEFOLD MEANING OF PROXY

1. formal written AUTHORITY given by the stockholder or member to another

person to exercise the voting rights of the former.
2. PERSON authorized by an absent SH/member to vote for the latter at the meeting
3. INSTRUMENT or document evidencing the authority of the agent (proxy)

REPRESENTATIVE VOTING OF STOCKHOLDER/MEMBER

• SECURED CREDITOR
WRITTEN PROXY REQUIRED • JOINT SHAREHOLDERS, unless in an
“and/or” capacity
• E.A.R.L.
NO WRITTEN PROXY REQUIRED (executor/administrator/receiver/legal
representative duly appointed by court)
FORMAL / SOLEMN AGREEMENT • VOTING TRUSTEE
REQUIRED

VOTING TRUST AGREEMENT – a written agreement whereby one or more

stockholders transfer his or their shares to any person for the purpose of granting such
person voting or other rights pertaining to the shares.

LEGAL LIMITS OF VOTING TRUST AGREEMENTS

V.T.A. shall be-
1. For a period NOT EXCEEDING 5 YEARS (except in loan agreements)
2. WRITTEN & NOTARIZED
3. SUBJECT TO EXAMINATION of any stockholder
4. FILED with the corporation & SEC
5. COMPLIANT WITH LAWS…
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…against anti-competition
…prescribing nationality and capital requirements
…punishing fraud

DISTINCTIONS BETWEEN PROXY AND VOTING TRUST

PROXY VOTING TRUSTEE
MEETING COVERED a specific meeting any meeting
ABSENCE OF PRINCIPAL a precondition not required
NOTARIAL REQUIREMENT none required
SEC FILING not required required
DURATION OF AGREEMENT for a short period cannot exceed 5 years
INSPECTION RIGHT none available
REVOCABILITY OF AUTHORITY at any time irrevocable
TITLE TO SHARES none existent

MEETINGS OF DIRECTORS/TRUSTEES
Prior
Kinds Date Place Quorum Mode of Voting
Notice*
REGULAR MONTHLY Majority
SPECIAL AT ANY • ANYWHERE except in • personally
TIME upon IN THE case of • by remote
the call of WORLD election of communication
the unless the officers
2 days
President or bylaws which proxy
as provided provide requires attendance/voting
in the otherwise attendance is not allowed
bylaws of ALL
*Notice may be subject to WAIVER

CORPORATE COMBINATIONS

MERGER & CONSOLIDATION

combination involves two or more corporations called constituent corporations

constituent constituent
result
corporation corporation
• surviving/merging/absorbing
corporation, either ABC or XYZ
ABC, Inc. XYZ, Inc.
• merged or absorbed
corporation, either ABC or XYZ
MERGER • BDO is the surviving/absorbing
BDO Equitable PCI • Equitable PCI is the
merged/absorbed
Rural Bank of
BDO BDO… RBPI…
Pandi
• consolidated corporation, a
ABC, Inc. XYZ, Inc. new single corporation is
CONSOLIDATION
formed e.g. MNO, Inc.
CMI Corp ICCDC Corp Union Corporation
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FLOWCHART: Plan of Merger or Plan of Consolidation / Amendment

(applies to each constituent corporation)
Board meeting
$
plan of merger or a This becomes the agreement of merger or consolidation
plan of consolidation once approved by the stockholders/members.
$
approval by majority
of the Board
$ a Dissenting stockholder/s may exercise appraisal right but
ratification by 2/3 vote such right is extinguished if the Board decided to abandon the
of the plan of merger or plan of consolidation.
stockholders/members
$
articles of merger or
articles of consolidation
$
submission of articles to a For special corporations, the favorable recommendation of
SEC the concerned government agency shall first be obtained before
$ submission
SEC certificate of approval
(effectivity date of the merger
or consolidation)

EFFECTS OF MERGER OR CONSOLIDATION

The constituent corporations…

1. form a SINGLE CORPORATION
2. end their SEPARATE JURIDICAL PERSONALITY, except in merger

The surviving/consolidated corporation shall…

3. POSSESS the POWERS, RIGHTS (includes privileges and immunities) &
OBLIGATIONS of a private corporation organized under Republic Act No. 11232
4. ACQUIRES the RIGHTS (includes property) & OBLIGATIONS of each constituent
corporation.

OTHER FORMS OF CORPORATE COMBINATIONS. In the following, the corporate

existence of each corporation remains.

A. SALE OF ASSETS (Sec. 39)

o Generally, the buyer is not liable for the debts of the seller
o If a corporation dissolves after having sold its assets in exchange of stock of the
buying corporation, it is tantamount to a merger.

B. LEASE OF ASSETS (Sec. 39)

o Renting/leasing corporation only acquires the right to use the property being
leased.

C. SALE OF STOCK – selling/acquisition of stock for purpose of controlling the

affairs of one corporation
c.1. The acquiring/controlling corporation is the parent or holding corporation.
c.2. The selling corporation is the subsidiary corporation.