CHAPTER 19

SPECIAL PROVISIONS AND PENALTIES

SEC Power and Supervision

Confidential Nature of SEC Examination
Applicability of Code to Special Corporations
Applicability of New Requirements on Existing Corporations
Effect of Dissolution of the Corporation or Amendment or Repeal of the Corporation
Code
Repealing Clause of the Corporation Code
PENAL PROVISIONS OF THE CORPORATION CODE
Criminal Law Principles
Elements of the Criminal Offense under Section 144
Meaning of "Violation" Under Section 144
Section 190-1/7: Historical Background to Section 144
Contrary View
Absence of Malice or Defense of Good Faith

——

SEC POWER AND SUPERVISION

The Corporation Code provides that the SEC shall have the power and
authority to implement its provisions, to promulgate rules and regulations
reasonable necessary to enable it to perform its duties under the Code,
particularly in the prevention of fraud and abuses on the part of the controlling
stockholders, members, directors, trustees or officers.1
Under Section 141 of the Corporation Code, every corporation, domestic
or foreign, lawfully doing business in the Philippines, shall submit to the SEC an
annual report of its operations, together with a financial statement of its assets
and liabilities, certified by any independent certified public accountant in
appropriate cases, covering the preceding fiscal year and such other
requirements as the SEC may require. Such report shall be submitted within
such period as may be prescribed by the SEC.
Under present SEC Rules, the following are the reportorial requirements
of registered corporations:

1
Sec. 143, Corporation Code.
 (a) Registration and stamping of the stock and transfer book or
the membership book, within thirty (30) days from the date of
the issuance of the certificate of incorporation;

(b) Filing of the General Information Sheet within thirty (30) days
from the date of actual meeting of the stockholders or
membership meeting;
(c) The filing of two (2) copies of the financial statements duly
stamped "received" by the Bureau of Internal Revenue
(BIR), within 105 days after the end of the fiscal year as
specified in the by-laws;
(d) The filing of an Affidavit of Non-Operation or Board
Resolution or Affidavit of Cessation of Business Operations,
within one-hundred-five (105) days after the end of the fiscal
year as specified in the by-laws for corporations that have
ceased operations and no longer prepare financial
statements;
(e) Filing of the notice of postponement of annual meeting, at
least ten (10) days before the date of the annual meeting as
specified in the by-laws, in case the meeting cannot be held
as provided; and
(f) Filing of the Affidavit of Non-Holding of Annual Meeting,
together with the General Information Sheet, within thirty
(30) days before the date of the annual meeting as specified
in the by-laws in case of non-holding of the annual meeting.

CONFIDENTIAL NATURE OF SEC EXAMINATION

All interrogatories propounded by the SEC and answers thereto, as well
as the results of any examination made by the SEC or by any other official
authorized by law to make an examination of the operations, books and records
of any corporation, shall be kept strictly confidential, except insofar as the law
may require the same to be made public or where such interrogatories, answers
or results are necessary to be presented as evidence before any court.2

APPLICABILITY OF THE CODE TO SPECIAL CORPORATIONS

Corporations created by special laws or charters shall be governed
primarily by the provisions of the special law or charter creating them or

2
Sec. 142, Corporation Code.
applicable to them, supplemented by the provisions of the Corporation Code,
insofar as they are applicable.3

APPLICABILITY OF NEW REQUIREMENTS ON EXISTING CORPORATIONS

All corporations lawfully existing and doing business in the Philippines on
the date of the effectivity of the Corporation Code and theretofore authorized,
licensed or registered by the SEC, shall be deemed to have been authorized,
licensed or registered under the provisions of the Corporation Code, subject to
the terms and conditions of their license, and shall be governed by the provisions
of the Code.4 Where any such corporation is affected by the new requirements of
the Corporation Code, said corporation shall, unless otherwise provided, be
given a period of not more than two (2) years from the effectivity of the
Corporation Code within which to comply with the same.5

EFFECT OF DISSOLUTION OF THE CORPORATION OR

AMENDMENT OR REPEAL OF THE CORPORATION CODE
Section 145 of the Corporation Code provides for two important aspects:

(a) That established rights in favor of or remedies against the

corporation, its stockholders, members, directors, trustees,
or officers, are not affected by the amendment or repeal of
the Corporation Code; and
(b) Such established rights or remedies are also unaffected by
the dissolution of the corporation.

In spite of such provision, of course, the effects of dissolution as provided

by the Corporation Code and jurisprudence shall always prevail.
In Reburiano v. Court of Appeals,6 the Supreme Court employed the
language of Section 145 to rule that in spite of the lapse of the three (3) period
limitation for the liquidation of a corporation, nevertheless, there would still be
legal basis to pursue remedies for and its behalf since the section provides
clearly that “[n]o right of remedy in favor or against any corporation . . . shall be
removed or impaired either by the subsequent dissolution of said corporation.”

REPEALING CLAUSE OF THE CORPORATION CODE

The repealing clause in Section 146 of the Corporation Code does not
provide for a direct repeal of the old Corporation Law (Act No. 1459), but is rather
an implied repeal thereof, thus: "Except as expressly provided by this Code, all

3
Sec. 147, Corporation Code.
4
Sec. 148, Corporation Code.
5
Ibid.
6
301 SCRA 342, 102 SCAD 285 (1999).
laws or parts thereof inconsistent with any provision of this Code shall be
deemed repealed."
Since the Corporation Code is meant to cover the whole body of law on
Corporate Law, despite the implied repeal provisions of Section 146 thereof, the
old Corporation Law is deemed repealed in toto.
Also, the explanatory note to then Cabinet Bill No. 3 which became the
basis for the Code states that the "bill is intended to supplant the present
Corporation Law, Act No. 1459."
Certain provisions of the old Corporation Law are still quite instructive,
such as the definitional differences between public corporations and private
corporations.

PENAL PROVISIONS OF THE CORPORATION CODE7

Section 144, of the Corporation Code, provides that -

SEC. 144. Violations of the Code.--Violations of any of

the provisions of this Code or its amendments not otherwise
specifically penalized therein shall be punished by a fine of not
less than one thousand (P1,000.00) pesos but not more than
ten thousand (P10,000.00) pesos or by imprisonment for not
less than thirty (30) days but not more than five (5) years, or
both, in the discretion of the court. If the violation is committed
by a corporation, the same may, after notice and hearing, be
dissolved in appropriate proceedings before the Securities and
Exchange Commission; Provided, That such dissolution shall
not preclude the institution of appropriate action against the
director, trustee, or officer of the corporation responsible for
said violation: Provided, further, That nothing in this section
shall be construed to repeal the other causes for dissolution of
a corporation provided in this Code. (190-1/7a).

Under Section 27 of the Code, a person convicted by final judgment of a

violation of the Code committed within five (5) years prior to the date of his
election or appointment, shall not be qualified as a director, trustee or officer of
any corporation.
In-depth discussions on the proper interpretation and coverage of Section
144 of the Corporation Code is essential since it provides for criminal penalties
for violations of "any" of the provisions of the Corporation Code, and therefore
seems to over-criminalize the provisions of the Code. The broad language of
Section 144, unless properly applied, presents a codal land mine that could maim
or harm the actors in the corporate setting, or would tend to put at risk many of

7
This section was first published with the title "The Penal Provision Under Sec. 144 of the
Corporation Code," with THE LAWYERS REVIEW, Vol. X, No. 2, 29 February 1996.
the actuations and decisions of the directors, trustees, and corporate officers, as
to necessarily cramp the exercise of their business judgment.
Lately, practitioners have began to look at the seemingly all-
encompassing provisions of Section 144 to effectively obtain results on their
demands or claims against the corporation, by dangling a threat of criminal suit
against corporate directors and officers.

1. Criminal Law Principles

To effectively render a proper interpretation of the extent and reach of
Section 144, which is essentially a criminal law provision, it is necessary to view
the section in line with prevailing Philippine Criminal Law principles.
Although the Corporation Code was essentially derived from common law
jurisprudence and legislation from the United States, nevertheless, it has been
long held by Philippine Supreme Court that the so-called common law crimes
known in the United States and England as the body of principles, usages and
rules of action, which do not rest for their authority upon any express and positive
declaration of the will of the legislature, are not recognized in the Philippines.8
Unless there be a particular provision in the penal code or special penal law that
defines and punishes the act, even if it be socially or morally wrong, no criminal
liability is incurred by its commission.9
We have therefore in Philippine jurisdiction one of the fundamental rules of
construction in Criminal Law, that penal laws are strictly construed against the
State and liberally in favor of the accused.10 Although it has also been held that
such construction rule may be invoked only where the law is ambiguous and
there is doubt as to its interpretation; where the law is clear and unambiguous,
there is no room for the application of the rule.11
Nevertheless, the Supreme Court has equally held that the rule of strict
construction of criminal law is subordinate to the rule of reasonable, sensible
construction, having in view the legislative purpose and intent, and given effect to
the same; the rule should not be unreasonably applied as to defeat the true intent
and meaning of the enactment found in the language actually used.12 Penal
statutes shall not, by what may be thought their spirit and equity, be extended to
offenses other than those which are specifically and clearly described and
provided for since the law will not allow constructive offenses or arbitrary
punishments.13 This rule does not exclude the application of common sense to
the terms used in the law.14

8
U.S. v. Taylor, 28 Phil. 599, 604 (1914).
9
Ibid.
10
U.S. v. Abad Santos, 36 Phil. 243 (1917); People v. Yu Hai, 99 Phil. 725 (1956); People
v. Terrado, 125 SCRA 648 (1983).
11
People v. Gatchalian, 104 Phil. 664 (1958).
12
People v. Padilla and Von Arend, 71 Phil. 261 (1941).
13
People v. Abuyen, 52 Phil. 722, 726 (1929).
14
Ibid.
 2. Elements of the Criminal Offense Under Section 144
Looking at the language of Section 144, one can see that it seems all-
encompassive in nature as it imposes criminal liability for "Violations of any of the
provisions of this Code or its amendments not otherwise specifically penalized
therein." This is further bolstered by the fact that in addition, Section 144 does
not mean to cover other provisions of the Corporation Code which provides for
specific penalties (as Section 74 on violation of the right of inspection as
discussed hereunder) because is uses the phrase "not otherwise specifically
penalized therein."
It is difficult to construe Section 144 to mean that all non-compliance with
the provisions of the Corporation Code would be criminally punishable. For
example, under Section 26 of the Corporation Code, it is provided that within
thirty (30) days after the election of the directors, trustees and officers of the
corporation, the secretary, or any other officer of the corporation, shall submit to
the SEC, the names, nationalities and residences of the directors, trustees and
officers elected. If a corporate secretary fails to comply with this provision, would
he then be subject to a criminal penalty under Section 144?
Such a construction would seem too harsh, and effectively discourages
competent and well-meaning individuals from accepting positions within the
corporate setting. It would then make the corporation a very unattractive medium
for commerce.

3. Meaning of "Violation" Under Section 144

The proper and reasonable interpretation of Section 144 is to determine
what the term "violations" covers.
"Violation" means "Injury; infringement; breach of right, duty or law;"15 the
action of breaking a law, rule, agreement, promise, or instruction.16
Therefore, the "violations" covered by Section 144 covers only those
provisions in the Corporation Code which are expressly mandatory in nature to
show the true intent of Legislature to impose a penal sanction for non-compliance
therewith.
For example, Section 15 of the Corporation Code provides for the form to
be followed in preparing and filing the articles of incorporation of a corporation.
Certainly, non-compliance therewith would not subject the incorporators to penal
sanction, although certainly that would be a "violation" of the provisions of the
Corporation Code in broad use of the term "violation". Especially so when the
Code itself under Section 17 gives the SEC authority to reject the articles of
incorporation or disapprove the same if it does not comply with the Code. In fact
that same section grants the incorporator a reasonable time "within which to
correct or modify the objectionable portions of the articles."

15
BLACK'S LAW DICTIONARY, 5th Ed.
16
W ORLD BOOK DICTIONARY, 1983 Ed., Doubleday & Company, Inc. Chicago Illinois.
 There are other provisions in the Corporation Code where it would seem
clear that civil sanction for damages is imposed rather than the criminal sanction
under Section 144 thereof. Under Section 31 thereof, a director or trustee who
willfully and knowingly votes for or assents to patently unlawful acts of the
corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict
with their duty as such directors or trustees shall be liable jointly and severally for
all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons. Under Section 32, where a director, by virtue of his
office, acquires for himself a business opportunity which should belong to the
corporation, thereby obtaining profits to the prejudice of such corporation, he
must account to the corporation for all such profits by refunding the same.
Under Section 65, any director or officer of a corporation consenting to the
issuance of stocks for a consideration less than its par or issued value or for a
consideration in any form other than cash, valued in excess of its fair value, or
who, having knowledge thereof, does not forthwith express his objection in
writing and file the same with the corporate secretary, shall be solidarily liable
with the stockholder concerned to the corporation and its creditors for the
difference between the fair value received at the time of issuance of the stock
and the par or issued value of the same.
In all the foregoing instances, it would not be proper to subject erring
directors, trustees, or corporate officers to criminal penalty under Section 144
since the specific provisions themselves provide for the proper remedies in each
case. This is the proper and reasonable interpretation of the phrase in Section
144 "not otherwise specifically penalized therein" to mean that even when the
provisions seems to be mandatory and the violation thereof is a serious breach,
when the particular provision already provides for a specific penalty or sanction,
the penal sanction under Section 144 should not be made to apply.
There is a specific provision of the Corporation Code where the
Legislature has made it clear or apparent that it seeks to impose the penal
sanctions under Section 144 for non-compliance therewith. Under Section 74,
any officer or agent of the corporation who shall refuse to allow any director,
trustee, stockholder or member of the corporation to examine or copy excerpts
from its records and minutes, in accordance with the provisions of this Code
"shall be liable to such director, trustee, stockholder or member for damages, and
in addition, shall be guilty of an offense which shall be punishable under Section
144 of this Code."
Section 74 of the Corporation Code is therefore a clear example of the
intent of Legislature that when it seeks to impose the criminal sanction under
Section 144 for violation of the provision of the Code, then it uses clear words to
so indicate.
At present, only Section 74 of the Corporation Code refers to Section 144,
so that effectively only violation of the right of inspection under Section 74 are
criminally punishable under Section 144.
 In effect, the broad coverage of Section 144 is meaningless since it is
applicable only to Section 74 of the Code. If that is the legal effect, then it could
be argued that Legislature, when it enacted Section 144 of part of the
Corporation Code, had not intended it to be a practically useless provision since
the penal sanctions provided therein could have effectively been stated in
Section 74 if it is indeed the only violation applicable to said provision. However,
such a position fails to consider that indeed Section 144 was meant to be the
over-all penal sanction under the Code, if and when Legislature deems it
appropriate to impose a penal sanction for violation thereof not only based on the
current provisions of the Code, but also "its amendments" in the future.
It should also be noted that although a penal provision like Section 144 is
usual in special laws, nevertheless, the implementation dura lex, sed lex of such
penal provisions under most special laws is without controversy because the
subject thereof is limited and the acts covered therein are clearly defined. Such
position cannot be equated to Section 144, since the Corporation Code, indeed is
a "code" that necessary covers a broad subject and almost innumerable acts.

4. Section 190-1/7: Historical Background to Section 144

As indicated at the end of Section 144, it is an amended version of Section
190-1/7 of the old Corporation Law. A contrary view to the position taken in this
paper does not take into consideration that the present Section 144 of the
Corporation Code, is a carry-over of Section 190-1/7 of the old Corporation Law.
It should be recalled that when the then Corporation Law sought to impose a
criminal penalty on a prohibited act, the Law spelled it our clearly, thus:

(a) Under then Section 15 of the Law, it punished as an offense

by a fine of P20,000 employment of persons in slavery in a
corporation doing business in the Philippines or receiving
any grant, franchise or concession from the Philippine
Government;
(b) Under Section 19 of the Law, any corporation which fails to
report to the SEC any cessation or change of address, if
any, shall be subject to a fine of not less than P100 nor more
than P1,000;
(c) Under then Section 69 of the Law, any officer, or agent of the
corporation or any person transacting business or any
foreign corporation not having the license prescribed by law
shall be punished by imprisonment of not less than six (6)
months nor more than two (2) years or by a fine of not less
than P200 nor more than P1,000, or by both such
imprisonment and fine, in the discretion of the court.
 Subsequently, then Section 190-1/7 became the general sanction under
the then Corporation Law for violations of the above-enumerated offenses.17
Such offenses, considered to be archaic, have not been carried over into the
Corporation Code. Therefore, Section 144 should now be viewed not as a
contemporary enactment of Legislature as a "new" policy towards violation of the
any and all provisions of the Corporation Code, but really a relic or carry-over of
the old Corporation Law provision which therefore should be interpreted in the
same manner as then Section 190-1/7 of the Law, which also carried the phrase
"not otherwise penalized therein."
As originally enacted, the old Corporation Law18 did not contain any
appropriate clause directly penalizing the act of a corporation, or member of a
corporation for violation of certain prohibited acts under that law. The Philippine
Legislature undertook to remedy the situation in section 3 of Act No. 2792,
approved on 18 February 1919, providing for the original version of Section 190.
Government of the Philippine Islands v. El Hogar Filipino,19 held that the
section was not intended to make every casual violation of one of the
Corporation Law provisions ground for involuntary dissolution of the corporation
and that the court was entitled to exercise discretion in such matters. At the time
of El Hogar, the version of then Section 190 on the dissolution of corporate
violator was expressed in mandatory terms, thus:

SEC. 190. (A). Penalties.--The violation of any of the

provisions of this Act and its amendments not otherwise
penalized therein, shall be punished by a fine of nor more than
one thousand pesos, or by imprisonment for not more than
one thousand pesos, or by imprisonment for not more than five
years, or both, in the discretion of the court. If the violation is
committed by a corporation, the same shall, upon such
violation being proved, be dissolved quo warranto proceedings
instituted by the Attorney-General or by any provincial fiscal by
order of said Attorney-General . .

The Court held that although the section uses the word "shall" the
provision on dissolution should be interpreted to mean "may". It held another way
to put the same conclusion is to say that the expression "shall be dissolved by
quo warranto proceedings" means in effect, "may be dissolved by quo warranto
proceedings in the discretion of the court." The Court also held that "[t]he
proposition that the word `shall' may be construed as `may', when addressed by
the Legislature to the courts is well supported in jurisprudence."20
Nevertheless, El Hogar declared the section invalid for lack of adequate
title to the Act. Subsequently, the Philippine Legislature re-enacted substantially

17
SALONGA, PHILIPPINE LAW ON PRIVATE CORPORATIONS, p. 629 (1968 Ed.).
18
Act No. 1459.
19
50 Phil. 399 (1927).
20
Ibid, at p. 414, citing Becker v. Lebanon and M. St. Ry. Co., 188 Pa., 484.
the same penal provision in section 21 of Act No. 3518, under a title sufficiently
broad to comprehend the subject matter.
Harden v. Benguet Consolidated Mining Co,21 held that violation of the
provisions of the old Corporation Law prohibiting one mining corporation from
acquiring interest in another was held not to permit repudiation of the contract for
such interest, though it might subject the corporation to quo warranto or criminal
proceedings. What is important is the ruling in Harden is the pronouncement of
the Court that Section 190 "was adopted by the lawmakers with a sole view to
the public policy that should control in the granting of mining rights. Furthermore,
the penalties imposed in what is now section 190(A) of the Corporation Law for
the violation of the prohibition in question are of such nature that they can be
enforced only by a criminal prosecution or by an action of quo warranto. But
these proceedings can be maintained only by the Attorney-General in
representation of the Government."22
The implication in Harden is that, as dissolution of a corporation is a
matter addressed to the courts, and can be commenced only by the State,
through the Solicitor General, when enforcing a public policy, as distinguished
from answering a private wrong; so also criminal prosecutions under Section
144, as a derivative from the old Section 190 of the Corporation Law, can be
proceeded by the State only for violations of the provisions of the Corporation
Code that go into prohibitory provisions of the Code covering fundamental public
policy, and can only be commenced by the Solicitor General, and now the SEC,
in representation of the Government, and not upon the complaint of any ordinary
citizen.

5. Contrary View
It should be noted, however, that Guevarra, in his treatise on the old
Corporation Law23 took the contrary position that the Law "provides special
penalties for violations of some provisions of the Corporation Law and also a
general penalty for violations not specifically penalized therein."24
We must also take note of the obiter expressed in Home Insurance
Company v. Eastern Shipping Lines.25 In that case, Home Insurance Company, a
foreign corporation, which admittedly had engaged in business in the Philippines,
had issued insurance contracts in the Philippines without obtaining the necessary
license. Subsequently, it obtained the license before filing the cases for collection
under the insurance contracts. The lower court dismissed the complaint and
declared that pursuant to its understanding of the basic public policy reflected in
the Corporation Law, the insurance contracts executed before a license was

21
58 Phil. 141 (1933).
22
Ibid, at p. 149; emphasis supplied.
23
GUEVARRA, CORPORATION LAW (Phil. Jur. Series I), 1978 Ed., U.P. Law Center.
24
Ibid, at p. 250.
25
123 SCRA 424 (1983).
secured must be held null and void, and the subsequent procurement of the
license did not validate the contracts.
The Supreme Court, although it recognized there were conflicting schools
of thought both here and abroad which are divided on whether such contracts are
void or merely voidable, took its cue from the doctrine laid down in Marshall-
Wells Co. v. Elser,26 that the doctrine of then Section 69 of the old Corporation
Law "was to subject the foreign corporation doing business in the Philippines to
the jurisdiction of our courts . . . and not to prevent the foreign corporation from
performing single acts, but to prevents it from acquiring domicile for the purpose
of business without taking the necessary steps to render it amenable to suit in
the local courts."
However, although the issue of criminal sanction was not at issue, Justice
Gutierrez in Home Insurance held that Section 133 of the present Corporation
Code, which unlike its counterpart Section 69 of the Corporation Law provided
specifically for penal sanctions for foreign corporations engaging in business in
the Philippines without obtaining the requisite license, should be deemed to have
a penal sanction by virtue of Section 144 of the Corporation Code, thus:

Significantly, Batas Pambansa Blg. 68, the Corporation

Code of the Philippines has corrected the ambiguity caused by
the wording of Section 69 of the old Corporation Law. . .
The old Section 69 has been reworded in terms of non-
access to courts and administrative agencies in order to
maintain or intervene in any action or proceedings.
The prohibition against doing business without first
securing a license is now given penal sanction which is also
applicable to other violations of the Corporation Code under
the general provisions of Section 144 of the Code.
It is, therefore, not necessary to declare the contract null
and void even as against the erring foreign corporation. The
penal sanction for the violation and the denial of access to our
courts and administrative bodies are sufficient from the
viewpoint of legislative policy.27

Home Insurance in dealing with the scope and reach of Section 144, has
not only expressed an obiter, but more importantly has not looked into the
implications of such broad pronouncements on the basis of Criminal Law
principles, since such principles have not been raised, discussed nor focused
into appropriately in the rendering of the decision. When the appropriate case is
brought to the Supreme Court, and the proper factual basis and principles of
Criminal Law are discussed and detailed before the Court, we believe that the
Court will take a contrary position on ratio decidendi considerations. After all, it

26
46 Phil. 70 (1924).
27
Ibid, at pp. 438-439. Emphasis supplied.
was in Home Insurance where the Court itself expressed the position that "[t]he
Corporation Law must be given a reasonable, not an unduly harsh, interpretation
which does not hamper the development of trade relations."28 Otherwise, Section
144, hangs like a damocles sword ready to chop off the neck of corporate
directors, trustees, and officers.

6. Absence of Malice or Defense of Good Faith

Even if one where to meet head-on the position that Section 144 was
meant by Legislature to encompass every violation of the provisions Corporation
Code, it would be extremely difficult to obtain a conviction under Section 144,
except for the specific violation under Section 74 of the Code. Not only must the
guilt of the accused be proven beyond reasonable doubt, but more so, since
violations of the Corporation Code are not mala prohibita, but constitute mala in
se, then the evil intent or malice of the accused is an essential element for a
crime punishable under Section 144. This is demonstrated by no less than
Section 74 which provides good faith as a defense: "That it shall be a defense to
any action under this section that the person demanding to examine and copy
excerpts from the corporation's records and minutes has improperly used any
information secured through any prior examination or the records or minutes of
such corporation or of any other corporation, or was not acting in good faith or for
a legitimate purpose in making his demand."
In cases, therefore, of prosecutions under Section 144, the director,
trustee or officer accused, could have more than enough legal basis to claim
good faith because of the varied interpretations and applications of the principles
of Corporate Law.
It should be recalled that Corporate Law is essentially a transplant of that
specific body of law coming from the common law jurisdiction of the various
states of the United States. The Corporation Code may have expressed in
statutory form many of the common law principles of Corporate Law, however
there are various interpretations of similar provisions in various codes. In
addition, there are various common law principles in Corporate Law that are
applicable in our jurisdiction that have not even found their way in the
Corporation Code, but which nevertheless are applied by our Supreme Court. A
prime example of this are the principles pertaining to derivative suits, which are
all found in decisions of the Supreme Court which have no direct statutory basis
in the Corporation Code.
Our own Supreme Court every now and then relies on discussions of
Fletcher to resolves issues in Corporate Law. In addition, there are varying, and
sometimes conflicting decisions on the same principle or statutory provision in
Corporate Law among the various courts in the United States. Finally, the often
fast development in our commercial transactions which have by practice allowed
previously outlawed practices to be accepted (such as rights of first refusal
practice, classification of the board seats, etc.) have often been recognized as
28
Ibid, at p. 435.
reasonable and lawful bases to validly animate board decisions or actions of
corporate officers.
There is therefore every leeway for the defense in a criminal suit based on
Section 144 of the Corporation Code, to show that the element of malice does
not pertain to an act or a transaction upon which the criminal imputation is based
upon.

—oOo—

CORP. MANUSCRIPT\19-MISECLLANYCORPMAN.DIR\8-02-2002