Cacho, Bianca Divine M.

II – BSAIS

Revised Corporation Code

Directors, Trustees and Officers Pt.2

SEC. 28.
Vacancies in the Office of Director or Trustee; Emergency Board .
The law now provides for a period when you should fill up a vacancy:
 Removal – same meeting where the director was removed
 Expiration – on or before such expiration there should be a new elected director
 Other cases – like death, resignation or retirement, 45 days is given to elect a new
director.
The law provides a new ground for vacancy in the increase in number of directors,
If the cause of vacancy is increase in number of directors – the stockholders will decide to fill
up regardless if there is a quorum or not in Board of Directors. There is no separate cause of
provision before.

Emergency Board – this concept is entirely new:

- Emergency Board may be constituted whenever the Board of Director is no longer
part of the quorum or vacancy prevents constituting at the quorum.
- There will be an emergency action required that is something that the Board has to
approve or act on to prevent serious, grave and irreparable loss or damage in the
corporation. The vacancy may be filled up temporarily but the filling of the vacancy
will be from the corporate officers only.
- The required role to elect is unanimous as to the remaining directors and trustees.
- The corporation officers actions are limited to the Emergency Board only. They
cannot vote any matter that needs Board approval.
- Their term will expire whenever the emergency action is done or a replacement
director has been elected.
SEC. 29.
Compensation of Directors or Trustee.
A success of a corporation should be compensation enough for the Directors, but in reality
directors have salaries because the law provides for certain exceptions
1. Reasonable per diem
2. If there is compensation fixed in the by laws
3. When there is approval by a majority of the stockholders or outstanding capital stock
for the compensation of the directors.
*All cases are subject to limitation that the compensation provided to the directors must not
exceed 10% of the net income after tax.
4. If the director performs other functions or role other than being a director.
*This is not subject to the same limitation above

In addition to the old corporation code, the directors or trustees shall not participate in the
determination of their own per diems or compensation.
- Corporation vested with public interest shall submit to their shareholders and the
commission, there should be an annual report of the total compensation of each of
their directors or trustees.

SEC. 30.
Liability of Directors, Trustees or Officers.
This is premised on the doctrine that a member of a board is a duty of trust. The board
member should always place the interest of the corporation above his own personal agenda.
The errant member of the bad is liable to the corporation for pecuniary loss it has done. This
is simply in the gross negligence or bad faith by the directors in directing the affairs of the
corporation.
Obligations incurred by the corporation acting through its directors, officers and
employees are its sole liabilities. A director, officer or employee of a corporation is generally
not held personally liable for obligations incurred by the corporation.

SEC. 31.
Dealings of Directors, Trustees or Officers with the Corporation.
A self-dealing director refers to a member of the board of one corporation who transacts,
negotiates or deals with other corporations with whom is had either a substantial interests in
such as in the concept of the owner. This section declares any such contrary as voidable at the
option of the corporation.
Exception:
a. That the presence of such director or trustee in the board 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; and
d. That in case of an officer, the contract has been previously authorized by the board of
directors.
An added condition, in case of corporations vested with public interest, material contracts are
approved by atleast two-thirds of the entire board majority of the independent voting to
approve the material contract.
If the first 3 conditions above are absent, the contract is voidable unless the same is ratifie by
the shareholders representing atleast 2/3 of the outstanding capital stock.

SEC. 32.
Contracts between Corporations with Interlocking Directors.
- Still the same in the Old Corporation Code
Interlocking Director – a director of 2 or more corporations that have transactions with each
other. As a general rule, the transactions is valid because they have the respective boards to
approve the transaction. The only exception provide by the law, as to when it will be treated
as voidable:
1. If there is fraud; or
2. Whenever in 1 corporation, the interest of the director is considered substantial and in
the other corporation, the interest is nominal in character.
*Substantial if it is excess of 20% of outstanding capital stock and nominal if below 20% of
the outstanding capital stock.

SEC. 33.
Disloyalty of a Director.
- Still the same in the Old Corporation Code.
This unders in the 4 different concepts/violations with regards the duty of loyalty of a director
which is:
 - The corporate opportunity doctrine that is covered in this section that whenever a
business opportunity which in all fairness rightfully belongs to the corporation then it
must be given to the corporation.
- If he takes the opportunity for himself, the general rule is that he will be liable to
account for the profits and remit the same to the corporation.
Exception: That if it is ratified of the transaction itself is ratified by 2/3 of the outstanding
capital stock , then it is allowed to retain the profits.

SEC. 34.
Executive, Management and Other Special Committee
- They now allows the corporation to form special committee whether temporary or
permanent in character.
An Executive Committee, more like functions as a sub board of directors. The requirements
that they must be composed of atleast 3 members of the board of directors to be appointed by
the board.
As a general rule, their function are all actions that will require board approval. The concept
works on productivity and efficiency. If they cannot form a quorum, they can form members
of executive committee and any decisions that is done will be a valid decision of the Board
also.
Exceptions:
1. All cases that must be done by the entire Board of Directors will be requiring
stockholders approval.
2. The filling of vacancies in the board must be done by the Board of Directors.
3. Concerned by the laws, adoption amendment or repeal must be done by the Board of
Directors.
4. The amendment or repeal of a prior Board resolution particularly if the resolution
does not allow amendment or repeal.
5. To declare cash dividends
*In all cases, the final decisions will be coming from the Board of Directors not only with the
Executive Committee.