Choice for the 10 member board.

So suppose the minority, they

would say that is not allowed. So the election is Defective is the
argument of the minority, correct?

The answer is NO. Under the changes in the revised

corporation code, the election of the members of the board
can be done Through a remote communication through a
zoom communication, for example, and that a stockholders'
meeting can proceed even if the whole holder of that 60 per
cent or the majority of the outstanding capital was not
physically present in the venue.

So now remote communication is expressly provided for

under the law, particularly for publicly listed companies,
particularly for those businesses vested with public interest.
So in that particular regard, the 60% is then present during that
meeting. So for forum purposes, there is a quorum , 60% is
already represented.

Can the corporation conduct business? The answer is yes,

because 60% is already present. Suppose election proceed Can
the 60% be voted on the answer is yes, because that stock holder
is deem present for purposes of the election.
If the election must be by ballot, if requested by any voting
stakeholder or member. No problem. But to be honest with you,
that is not oftenly observed no, especially in publicly listed
company. In a stock corporation, stock holders entitled the vote
shall have the right to vote the number of shares of stock
standing in their own names in the stock book of the corporation
at the same time, fixed in the bylaws or where the bylaws are
silent at the time of the election. Of course, as part of the rights
of the stakeholder to participate in the management of the
corporation, they have the right to vote on the basis of their
interest in the corporation.

Whenon the basis of their interest in the corporation, that is

quantified by the number of shares in their main.
So how many can they vote? As many as the number of shares
that they have in the corporation, per percentage. If they own
70% of the outstanding capital, then they are entitled to vote for
say 70 percent of the number of directors running for that
particular position.

Okay. For a better illustration, there were 10 director or 10 seats

in the board of directors. Okay. Board of directors, 10 seats 10
available seats. Okay. If the stockholder owns 70% of the
outstanding capital, how many director can he both for
obviously she or he can have at least seven board seats available
equivalent to 70% percent of his interest in the corporation.

It is unfortunate if he will vote for those which he does and

agree with.

So obviously that 70% will be used for purposes of nominating

and getting elected the people that they would like to represent
them. Now, at least for the ownership of the percentage, they
have a percentage of ownership they have in the corporation.

The said stockholder may vote. This is the manner of voting

such number of shares as may, as many persons as there are
directors to be elected. So if there are 10 members of the board
nominated, he can allocate all his shares to all these 10
candidates. Now giving them a equivalent number of shares or
accumulate the only shares and give it to only one candidate to
make sure that there will be representation of his share. This is
particularly important in cases where there are several holders
and the number of shares is not really so much in the hands of
certain individual.

For example, one stock holder own 10% of the shares

outstanding or issued by the corporation. So 10 member, board
of directors that 10% represents one board seat. Now the stock
holder may choose to distribute his, a number of voting shares
to all the 10 candidates. Of course, in that case, he will not get a
seat in board. But they may try to come accumulate, all his
voting shares under one candidate for or nominated director for
all we know that is him the stock holder he wants to see it as a
member of the board. So he will nominate things that have been
said, nominated. And put all the number of shares in his name so
he can get elected, get that one board seat and be able to become
a member of the board of directors.

Distribute them in the same principle among as many candidates

at us, it may seem. Of course this would be necessary or this will
be applicable in a case where the stockholder is not, or could not
master a single board. So if he cannot get a single board seat, he
may just want to distribute this among those groups where he is
a part of is in the minority. He can distribute this within the
number of candidates, belonging to the minority.
Or he is in friends with those in the majority. He may just set
his, a number of shares to those already sitting or nominated by
the, those in the majority.

The directors or trustees elected shall perform the duties as

prescribed by law rules and good corporate governance and
bylaws of the corporation.

This may not seem to be easily understandable, no specially

those who are not very conversant with the corporation code, but
there is one very important amendment. Inserted in this
particular provision, under the rules on the election of board of
directors and board the trustees.

Before the board of directors, the board of trustees are supposed

to perform their function in accordance with law, with in
accordance with the bylaws of the corporation.

Now what was inserted, then the one that I escaped, the rules of
corporate governance. So the board of directors and the board of
trustees. Can be made the responsible for the inaction or for the
action. The corporation done not is specifically in violation of
the law. Not specifically in violation of the bylaws of the
corporation, but may be against the rules on good corporate
governance.

For example, there is a rule on sustainability. And there is a for

example, there is no law that prohibits the prohibits the the the
use of certain or that the dumping of certain chemicals. In a
certain place now because in a mining operation it is being done
now I suppose that there is no law that covers that particular act
of dumping this these chemicals in that particular place, near the
area where the people are reside.

There is no law that prohibits that and the bylaws of the

corporation also doesn't prohibit that.

Now the question is this, suppose the act of dumping these

materials, this chemicals in that place would affect the lives of
the people, the communities living near that area. Suppose there
was a leak of this chemical use in mining operation, and it has
affected the communities living beside that particular mining
site. Can the board of directors be liable or can the board of
directors raise the claim that we can not be made liable because
there was no law violated. Then our bylaws did not prevent
did not require us from ensuring that no chemical will be
placed near communities populated by people?

A: Under the revised corporation code, the compliance. Of

the directors with the law, with the, the bylaws is not limited
because the board of directors, the board of trustees must
also ensure compliance with the so-called good rules
Corporate governance. And that is very expansive.

Articles of incorporation is a must prior to incorporation. But

bylaws may come in later. In fact, even if there is no bylaw, The
corporation is not deemed to be defective or meaning It is not a
corporation. The absence of bylaws will not bring about a defect
in the corporation itself is especially when the corporation is an
OPC.
What is the procedure? When the bylaws is to be adopted pre
incorporation before the incorporation, the incorporators will
already come up with a bylaws and then adopt it pre
incorporation.
1. there should be approval and signing by all the incorporators
because there is yet no stock holders only incorporators
okay.
2. Submission of this bylaws with the sec together with the
articles of incorporation, because this is pre incorporation.
So some corporations may want this bylaws to be approved
and submitted to sec ahead of the incorporation. So that is
allowed. So that, that should should be submitted together
with the AOI.
3. Then the issue once by the by the sec of the that the bylaws
are in accordance with law

Enumerate the procedure in in the submission and approval

of bylaws, pre incorporation. So approval by the
incorporators, then submission to the sec, attached to the
AOI and then the approval by the S E C.

How about if the adoption of the bylaws would be post

incorporation?

So there was already a corporation that has been allowed by the

sec, there was already the issuance by the sec of the certificate
of incorporation. Remember earlier, That the issue once by the
sec of the certificate of incorporation will start the corporate
existence of the corporation.
Suppose the corporation is already existing because the sec
already, the issue of the certificate of incorporation. But then
there is, she had no bylaws. So what is the procedure to be
observed?

1. Now, there should be an approval by the stakeholders

representing at least a majority of the outstanding capital, or
if it is an non stock corporation, a majority of the members
of the non-stock corporation.
4. So there is a voting after the vote is obtained, the bylaws
must be signed by the stockholders or the members voting
for them. To indicate that the required numbers have been
achieved. Okay.
5. Next a copy thereof shall certified by the majority of the
directors or trustees And countersign signed the secretary of
the corporation and filed with the sec. This time, the original
copy of the articles of incorporation will still be submitted.
Now what's the purpose. To make sure that the bylaws
would not run counter to what was stated in the articles
of incorporation. Although there'll be honest with it the sec
already copy of the articles of incorporation, but that is the
requirement under the law.
6. The issuance of the issuance by the sec of the certification
that the bylaws are in accordance with law. Always the
process shall be goes with the issue once by the sec of a
certification, if there is no certification issued by the sec,
meaning to say there has yet been no approval of the
bylaws, whether pre incorporation or post incorporation.