Name: Calimot, Honey Crisril M.

Section: IV – Teehankee

CORPORATION LAW EXAM

1. In promulgating By Laws, what are the requirements?

The following are the requirements and procedure for adoption of bylaws:
1. It must be consistent with the law;
2. If adopted prior to incorporation:
a. It must be approved and signed by all the incorporators;
b. It must be submitted together with the AOI to the SEC;
3. If adopted subsequent to incorporation it must be:
a) Adopted within 1 month after receipt of official notice of the issuance of its
certificate of incorporation by the SEC;
b) Affirmative vote of stockholders representing at least a majority of the
outstanding capital stock, or at least a majority of the members in case of
non-stock corporations;
c) Signed by stockholders/members voting for them;
d) Kept in the principal office of the corporation, subject to the inspection of
the stockholders/members during office hours; and
e) A copy thereof, duly certified by a majority of the directors/trustees
countersigned with the secretary of the corporation, must be filed with the
SEC which shall be attached to the original articles of incorporation.
4. Certification of the appropriate government agency concerned to the effect
that such bylaws or amendments are in accordance with law; and
5. Issuance by SEC of certification of a certification that the bylaws are not
inconsistent with this Code.

2. Discuss the purpose/ function of Bylaws.

Bylaws are rules and ordinances made by a corporation for its own
government, directions and management. The purpose of the bylaw is to
regulate its internal affairs in the conduct of its business and/ or protect its
legitimate corporate interest.

3. Discuss Quorum
A quorum is the minimum number required in order to have corporate
jurisdiction. It shall consist of the stockholders representing a majority of the
outstanding capital stock. The bylaws or the RCC may provide for a greater
quorum. The basis for determining the presence of quorum in a stock corporation
is the total subscription irrespective of the amount paid by them, while in a non-
stock corporation, the basis is the total number of registered voting members.
A quorum once present cannot be broken by subsequent withdrawal of
a part of the stockholders. If the voting requirement is met, any resolution passed
in the meeting, even if improperly held will be valid if all the
stockholders/members are present of duly represented.
4. What is the effect of a meeting that is inquorate?

A meeting that is inquorate has no jurisdiction to transact business and

cannot even start. Any rules or laws promulgated during a meeting that is
inquorate provides no effect and cannot bind the corporation or its
stockholders or members.

5. Can the Bylaws require for a greater quorum?

Yes. Bylaws may provide a greater quorum for the protection of

minority shareholders/members. It is important for the minority shareholders
to be protected so as there will be no abuse of power and discretion amongst
the majority shareholders.

6. In shareholders’ regular meeting, how do you determine the percentage of a

quorum

The quorum is generally determined as a percentage of the

outstanding capital stock, or based on the prescribed number of members
who are actual, living members with voting rights, as of the date of record.

7. For stockholders, the Bylaws may require for a greater quorum. What is the
exception? (wherein a greater quorum may NOT be legally required.)

In cases when elections are not held without justifiable reasons and
the Commission issues a summary order calling for special election, “the
shares of stock or membership represented at such meeting and entitled to
vote shall constitute a quorum for purposes of conducting an election”. Simply
stated, even if there’s only one shareholder owning one share who attended
the election supervised by the Commission, such shareholder satisfies the
quorum requirement and his vote will validly elect the new directors of the
corporation.

8. Is it legal to create an office (for corporate officers) through Bylaw enabling

provision (e.g. Board Resolution)? Explain.
No. As held in the case of Matling Industrial and Commercial
Corporation vs. Coros (G.R No. 57802), a position must be expressly
mentioned in the bylaws in order to be considered as a corporate office. A
creation of an office through a bylaw enabling provision is not enough to make
a position a corporate office. Hence, if an office is created through a board
resolution, such officers could only be considered as employees or
subordinate officials and not corporate officers.
9. RCC provides for the qualifications and disqualifications of directors, trustees
and officers.
9.1. Can the Bylaws provides for additional qualifications and
disqualifications?
Yes. In the case of Gokongwei, Jr. vs SEC (G. R No. L-459), the Supreme
Court upheld that in the absence of any legal prohibition or overriding public
policy, extensive freedom may be accorded to the corporation in adopting
measures to protect legitimate corporate interest.
9.2. Can the Bylaws reduce the qualifications and disqualifications being
provided by RCC?
No. A corporation cannot reduce any qualification or disqualification other
than those provided under the RCC. Reduction of qualification or disqualification
may be adverse to the corporate interest or may be contrary to law which the
RCC seeks to protect. Besides, a bylaw shall be effective only upon the issuance
by the SEC of a certification that the same is in accordance with the RCC and
other relevant laws.

10. (a) Explain the rule on amendment of Bylaws and (b) how it differs from
amendment of Articles of Incorporation?

On approval, the voting requirement for amendment of bylaws is the

same with amendment of the articles of incorporation. Which are: (a) majority
vote of the members of the Board; and (b) majority of outstanding capital
stock, or majority of members in case of non-stock corporation.
However, power to amend the bylaws may be delegated to the Board
of Directors/ Trustees. By a vote of 2/3 of the outstanding capital stock, or 2/3
of the members in a non-stock corporation, they may delegate to the Board
power to amend or repeal any by laws or adopt new by laws. Such Board
power may be revoked by majority vote of outstanding capital stock or
members. This power to delegate is not available in the amendment of the
articles of incorporation.

11. What are the 5 requirements for a valid meeting for corporate actions?
The five requirements are:
a. It must be held on the date fixed in the bylaws or in accordance with law;
b. Prior notice must be given;
c. It must be held at the proper place;
d. It must be called by the proper party; and
e. Quorum and voting requirements must be met.

12. Can a director vote by proxy at a particular Board meeting? Explain

 No. Section 52 specifically provides that “Directors or trustees who
cannot physically attend or vote at board meetings can participate and vote
through remote communication such as videoconferencing, teleconferencing,
or other alternative modes of communication that allow them reasonable
opportunities to participate. Directors or trustees cannot attend or vote by
proxy at board meetings.” The availability of voting through remote
communication allows them to reasonably vote and participate in a Board
meeting. Hence, physical unavailability cannot be an excuse of the directors
to vote by proxy.

13. State 1st par of Section 52

Section 52. Regular and Special Meetings of Directors or Trustees; Quorum. -
Unless the articles of incorporation or the bylaws 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 corporate business, and every decision
reached by at least a majority of the directors or trustees constituting a quorum,
except for the election of officers which shall require the vote of a majority of all
the members of the board, shall be valid as a corporate act.

14. What is a subscription contract and pre-incorporation contract?

A subscription is the mutual agreement of the subscribers to take and pay for
the stocks. And a subscription contract is any contract for the acquisition of
unissued stock in an existing corporation in an existing corporation or a
corporation still to be formed, notwithstanding the fact that parties refer to it as a
purchase or some other contract.
A pre-incorporation contract, is a contract of the subscription of shares in a
corporation that is yet to exist or be formed. The contract shall be irrevocable for
a period of at least six months from the date of subscription, unless all of the
other subscribers consent to the revocation, or the corporation fails to incorporate
within the same period or period provided in the contract of subscription. No pre-
incorporation subscription may be revoked after the articles of incorporation is
submitted to the Commission.

15. Shares are personal properties of the shareholder. It represents the political
as well as economic rights of the shareholder. Discuss the political rights and
economic rights of the shareholders.
The political rights of shareholders pertains to the rights to: (a) requisition
and/or attend meetings; (b) elect and be elected as directors; (c) approve the
exercise of special corporate powers or those that fundamentally alter the
conditions when they joined the corporation; and (d) access basic corporate
information and inspect corporate records.
 The economic rights of shareholders pertains to: (a) the right to dividends; (b)
the right to transfer shares; and (c) the right to receive residual assets, following
the corporation’s partial or full liquidation.