Board of Directors  Through resolutions, so the BOD among themselves will have to

enact resolutions in order to bind the corporation with its daily

 Who or what in relation to a corporation?
activities or affairs
 The committee or body politic that is constituted within a
corporation in order to govern the affairs of the corporation
 Assigned cases shows the discharge of the authority of a corporate BOD
 Sec. 22 of CC – the affairs of the corporation, the exercise of
in relation to their acts with respect to third persons and the
corporate powers, conduct of all business and control of all
shareholders, whether it was done as ultra vires or intra vires act were
properties of the corporation shall be under the supervision and
all decided in these cases
control of the BOD
 There is always an obiter that was dictated by the ponente that the
 Explanation:
activities of a corporation and the control of its properties is under the
 Corporation is a juridical personality, it is a person that is
supervision and control of the BOD
recognized by the state, we can deal with that juridical person
 It is the BOD that has the management and control of all the affairs of
(a person for all intents and purposes, it has an identity, it has a
the corporation, whether or not it is correct. Even if there is
charter, it is governed by its articles of incorporation).
mismanagement on the part of the BOD, still it is within their authority
 But how can a corporation act if it is merely a juridical
(Filipinasport v. Go) vis-à-vis Sec. 22, everything that must be done by
personality? The only way by which a corporation which is a
the corporation must be through the BOD and no one else.
juridical person to act is through natural persons, and in order
 Exception when the activities of the corporation may be recognized as
for this to come into a reality, these natural persons should
valid even if it was not done through the BOD:
constitute themselves into a group called the BOD
 Doctrine of apparent authority – when the corporation has
 Do not confuse the BOD with the stockholders, the latter are
clothed somebody with apparent authority, by the principle of
the ones composing the incorporators or corporators, whereas
estoppel, then even if the discharge of the function of the
the former is merely a portion of the incorporators. It is from
corporation is not through its BOD, then it is valid (EGI v. PS
them that the BODs are to be elected.
Bank).
 Thus, NO ELECTION, NO BOD
 The President, without any board resolution or any
 Does the CC provide for the number of persons that constitute
authority from the BOD entered into a compromise
the member of the BOD?
agreement for the settlement of the obligation of the
 Under the old Code, at least three: the president,
corporation with the bank. And when the enforcement
corporate secretary and treasurer
of the agreement was already being executed by the
 Amendment, there can be as few as only one, i.e., one
PSB which was adverse to the corporation, the
person corporation
corporation contended that the compromise
 A one person corporation still must have a agreement cannot be recognized as a corporate act
president and a separate treasurer and since the president was not given an authority or an
secretary, but the secretary and treasurer need imprimatur from the BOD. According to EGI, it is very
not be a member of the BOD nor a shareholder basic that the activities or the contracts that are
entered into by the corporation on behalf of the
 How conduct of affairs of the corporation is done by the BOD? corporation must be through the BOD and no one else.
The Court ruled that while the contention of EGI is
 correct, that the CC specifically provides that all the
activities of the corporation must be through its BOD
however, there is an exception. By the doctrine of
agency or apparent authority, EGI is estopped from
denying the authority of the president to enter into the
compromise agreement because EGI never questioned
it during the 20 year-pendency of the case.
 Why is the power of corporate acts conferred on the BOD? Why not on
the individual persons or the stockholders? – The reason why the
powers of the corporation are concentrated in the BOD even if there is
mismanagement or loss in the corporation (remains to be valid), as long
as there is no bad faith, is for practical consideration. Usually in
corporations, there are numerous stockholders and most of them are
scattered, it is very difficult to gather them into a single entity whereas,
if there are BODs it is easier for the company to manage itself.
(Filipinasport v. Go) However, in the case, the SC declared that if the
acts of the BOD go beyond their authority, if it is done in bad faith or if
it is done with manifest conflict of interest or manifest injustice or
obtains an interest which is prejudicial to the corporation, he may be
held liable for whatever damage that was suffered by the corporation
and the shareholders. (Sec. 30, CC)
 What is the participation of the stockholders or the shareholders if the
act of the BOD goes beyond their authority? – they can file a derivative
suit. A derivative suit is a suit that is filed by a single stockholder or
group of stockholders questioning the activities of a corporation if it
resulted in damage to the corporation and the corporation itself does
not act. (Filipinasport v. Go) Ex: the corporation is suffering losses
because it is being cheated upon and the BOD does not do anything,
then a stockholder may file a derivative suit.
 Requirements for a derivative suit. Before one can file a
derivative suit on behalf of the corporation, the following are
the requirements:
 The person filing must be a stock/shareholder or a
member of the corporation (personality to file the suit);
 It must be shown, to the satisfaction of the court, that
the corporation, despite the patent illegality of
activities being undertaken against it, has not taken any
legal action; and
 It must not be filed for the purposes of personal
interest – because the shareholder filing the derivative
suit is merely a nominal party, the real party-in-interest
is the corporation. (Filipinasport v. Go)
 Can a stockholder file a derivative suit against the
corporation/BOD/fellow shareholder? itself? (Derivative suits are
normally filed against third persons) – Yes, it is called an intra-corporate
dispute – when there is a dispute among the members of the
corporation. There is nothing prohibiting a shareholder from filing a
derivative suit or an intra-corporate dispute against the corporation,
BOD, or fellow shareholder.
 An intra-corporate dispute is merely a suit between the corporation and
the erring members.
 If the corporate powers are concentrated in the BOD, what is the role of
the shareholders? – shareholders can only participate with regards to
the corporate affairs only in certain instances and only in particular
situations because the primary roles of the stockholders are to pay
their contributions and to elect the members of the BOD. (Tan v. Sycip;
and Valle Verde Country Club v. Africa)
 Other roles (past discussions): to participate in the sharing of
profits, those voted upon in the General Assembly, i.e.,
amendment of the articles of incorporation, of the by-laws,
increase in the bad debt indebtedness, merger and
consolidation, etc…
 These are the only roles of the stockholders, but with respect to
the management, do not confuse, it is always through the BOD
unless, a stockholder is to question the propriety of the act by
means of a derivative suit.
 The stockholders elect the members of the BOD, the BOD
governs (Tan v. Sycip)
 When can the BOD replace another member (substitute BOD) of the
BOD? Only if there is a vacancy by reason of resignation,
disqualification/termination or is death however, it can only be done
during the term of office of the members – for stock corporations, one
year (minimum), for non-stock, three years (minimum) – but in this
 case, there is no “term” to speak of because the term has already
lapsed, the members were sitting only in their holdover capacity. (Valle
Verde Country Club v. Africa)
 If the term of office has lapsed, the BOD cannot elect a substitute BOD
because it is the stockholders who has the function of electing the
same. (Valle Verde Country Club v. Africa)
 When may the BOD exercise their discretion to elect a substitute BOD?
– when the vacancy is by reason of resignation,
disqualification/termination or death provided that, there is a quorum
and it is done within the term of office of the members of the outgoing
BOD because the substitute BOD will only serve the unexpired term of
the outgoing BOD. (Valle Verde Country Club v. Africa)
 The relationship between the BOD and the stockholders is that the
latter merely are there in order to regulate the election and the
determination of whether or not the act of the corporate officers is
ultra vires (outside their authority) or intra vires (within their authority).
Again, question through a derivative and/or a criminal suit, a derivative
suit may also serve as a criminal suit because the law does not specify.
Ex. an estafa case/qualified theft against the president on behalf of the
stockholders.
 Tenure vs. Term (Valle Verde Country Club v. Africa)
 Term is one provided for by law
 Is it possible that the term of a member of the BOD be more than one
year? – Yes, the may by-laws provide for a longer term than one year
because the one-year term of office of a member of the BOD provided
for under the CC is merely the minimum. It can be increased BUT cannot
be decreased.
 Qualifications of a member of the BOD:
 He must own at least one stock in HIS NAME.
 “in his name” means must be a legal title, not merely an
equitable title.
 “legal title” means the ownership of the stock must be
registered in the books of the corporation as belonging
to the particular person who is going to be voted upon
since the shares of stocks is a property in a sense that
the person possesses the attributes of ownership upon
it, i.e., to sell the shares.
 Exemptions even if he is not the legal owner of
the shares: 1. In case of a nominee of a
corporate shareholder (corporation that owns
shares of the corporation); 2. Shares of stocks
belonging to a deceased person, in which the
voting rights may be exercised by the
administrator or executor; and 3. In cases of
guardianship (owner is a minor), in which case
the guardian may be a BOD.
 “equitable title” means that a person has a right over
the subject matter but it is not registered or recognized.
(BAR Q)
 HOWEVER, the registration need only be reflected
during the election, not during the nomination.
(Jurisprudence)
 AO-AS case??
 The nominee acquired shares of stock of SMB
which was registered in his name one day
before the election. Hence, the opposition
sought to disqualify him because accordingly,
he only had an equitable title over the shares.
However, the SC declared that it is not
necessary he only has an equitable title during
the nomination, what is important is that he
has a legal title during the election itself
 He must be of legal age since it is impliedly entering into a
contract. However, minors may be elected through their
guardians or through their nominee. Shares of stock may be
acquired by a minor through inheritance. Rule does not apply
when minor is emancipated, a petition for guardianship must be
filed.
 *Citizenship/residency requirement? – generally none, unless it
is a nationalized corporation in which case the officer to be
elected must be that of a Filipino. Foreigners with 40%
ownership may elect a foreign member of the BOD because
 there is generally no citizenship requirement with respect to
the BOD.

 Disqualifications of being a member of the BOD:

 Must not have been convicted five years prior to the election of
an offense that carries with it a penalty of imprisonment of
more than six years – “conviction” is necessary. (BAR Q)
 He was found guilty of violating the Securities Act.
 He has been administratively charged for fraud, which may not
necessarily be connected with his being a member of the
corporation.
 If he had been convicted by a foreign court of any of the
offenses mentioned.
 Qualifications and/or disqualifications provided for under the CC are
merely the minimum requirements for qualification and disqualification.
The corporation through its by-laws may add more requirements for the
qualification or disqualification.
 BOD to be elected cannot be by proxy, but the election of the BOD by
stockholders may be by proxy. Proxy is a special authority granted by
the owner of the shares of stock to a particular individual to exercise
the right to vote on their behalf. It only pertains to the right to vote
NOT to be voted upon. Akin to an SPA.