TITLE V: BY-LAWS

By-Laws

Rules and regulations or private laws enacted by the corporation.

Permanent or continuing rules of action for its own government having the direction, management, and control of its affairs
and activities.
Subordinate to the articles of incorporation and Corporation Code and related statutes
Not essential to corporate birth but required by law for an orderly governance and management.

Purposes:

1. To regulate the conduct of the corporation

2. Define the duties of the members.

Section 45: Adoption of By-Laws

 Approval of the stockholders representing at least majority of the outstanding capital stock through voting or majority of the
members in non-stock corporation
 Signed by the stockholders or members.
 Kept in the principal office of corporation (subject to inspection during office hours)
 A copy shall be filed with the SEC duly certified by the majority of the directors or trustees and countersigned by the
secretary of the corporation.

NOTES:

May be filed or adopted prior to incorporation; shall be approved and signed by all incorporators and submitted to SEC
together with the articles of incorporation.
May be adopted before or after incorporation.
Effective upon the issuance of certification by SEC
SEC shall accept for filing the bylaws or amendments of corporations governed by special laws unless accompanied by a
certificate of appropriate government agency that such bylaws or amendments are in accordance with law:
 Banks
 Building and loan associations
 Trust companies
 Insurance companies
 Public utility
 Education institution
 Other special corporation governed by special law

Articles of Incorporation By-laws

Condition precedent in the acquisition of corporate existence Condition subsequent
It constitutes the charter or fundamental law Rules and regulations
Executed before incorporation Executed before or after incorporation
It is amended by: It may be amended by:
Majority of BOD or BOT Majority vote of BOD
Majority of stockholders representing 2/3 of Majority vote of outstanding capital stock,
outstanding capital stock and/or:
2/3 of non-stock members Majority of members in non-stock corporation

Power to amend or repeal: Power to amend/repeal/adopt:

Cannot be delegated by the shareholders or May be delegated by the 2/3 of OCS or 2/3 of
members to the BOD or BOT non-stock members

Section 46: Contents of Bylaws

 Time, place and manner of calling and conducting regular or special meetings of BOD or BOT
 Time, place and manner of calling and conducting regular or special meetings and mode of notifying the stockholders or
members
 The required quorum in meetings of stockholder or members, and the manner of voting
 Modes of meetings and cast their votes
 The form of proxies of stockholders and members, and manner of voting them
 Directors’ or trustees’ qualifications, duties and responsibilities
  Guidelines for setting the compensation of directors or trustees and officers
 Maximum number of other board representation that an independent director or trustee may have
 Time for holding the annual election of directors or trustees, and mode or manner of giving notice
 Manner of election and term of office of all officers other than directors or trustee
 The penalties for violating the by-laws
 Manner of issuing stock certificates
 Other matters as may be necessary for the proper or convenient transaction of corporate affairs for the promotion of good
governance and anti-graft and corruption

Note: An arbitration agreement may be provided in the bylaws pursuant to Section 181

Section 47: Amendments to Bylaws

General Rule: majority vote of BOD or BOT, and the owners of at least majority of the outstanding capital stock or members
at a regular or special meeting duly called for the purpose, may amend or repeal by laws or adopt new by-laws

Exception:
 Delegation - 2/3 of OCS or 2/3 of member in non-stock corporation
 Revocation – majority of OCS or members may revoke the power previously delegated.

AOI – a document is required to make the corporation exist

By laws – not required to create the corporation or to make the corporation exist/juridical personality

Quorum – majority 50% plus 1

Arbitration agreement – pwedeng mapag usapan muna ng mga involve kesa makarating sa korte. Helps the court to unclog cases
which that can be settled, cases that don’t need to be filed in court kasi pwede naming mapag usapan

- Reconciliation, mediation, or arbitration

 TITLE VI: MEETINGS
Meetings of Stockholder or Members
 Kinds of Meetings
o Regular - held annually on a date fixed in bylaws
or any date after April 15.
o Special - held any time deemed necessary or
provided in the bylaw.
 Place of the Meeting
General Rule - Principal office of corporation.
Exception - Within the city or municipal of
principal office
Metropolitan Areas are considered as a city or
municipality
 Notice
o Regular Meeting - 21 days prior
o Special Meeting - 1 week prior
 Quorum
 Required number that must be presented to carry
on legitimate business and corporate action.
 If not reached the quorum, ADJOURNED
MEETING
 Basis of Quorum: Articles of Incorporation vs.
Stock and transfer book
 Participation through remote communication
I. Internal Procedure
 Embodying the mechanisms for
participation in meetings and voting.
II. Quorum
 Stockholders representing majority of
outstanding capital stock
 Majority of the members in nonstock
corporation
 All are deemed present for purpose of
quorum
III. Notice of the Meeting
 Regular meeting: 21 days prior
 Special Meeting: 1 week prior
 In case of postponement: at least 2 weeks
IV. Voting in the Election of Directors, Trustees and
Officers
 Exercised in person or through proxy
 Exercised through remote communication or
in absentia if authorized by a resolution of the
majority of BOD
 If vested with public interest: may vote
notwithstanding the absence of a provision in
the bylaws.
V. Place of Meeting
 Principal office of the corporation, or in the
city or municipality where the principal
office is located
Internal Procedures may provide the following:
a. Mechanism to verify the identity of the stockholders
or members and who among them have the right to
vote
Meetings of Directors or Trustees
 Kinds of Meetings
o Regular – held monthly unless the bylaws provide
otherwise.
o Special - any time upon the call of the president or
as provided in the bylaws
 Place of the Meeting
 Anywhere in or outside the Philippines, unless the
bylaws provide otherwise
 Notice
Notice stating the date, time and place must be given at
least 2 days prior to the scheduled meeting, unless
longer time provided in bylaws.
May waive the requirement expressly or impliedly.
 Quorum
o General Rule: Majority of the directors or trustee as
fixed in the articles of incorporation, shall constitute a
quorum for the corporate business transaction
o Exception: If articles of incorporation or bylaws provide
for greater majority
 Participation through remote communication
I. Internal Procedures
 Directors or trustees can participate through remote
communication such as videoconferencing,
teleconferencing, or other alternative modes.
 Directors or trustees shall notify in advance the
presiding officer and corporate secretary
II. Quorum
 Majority of the directors or trustee, or greater
majority
III. Notice of the Meeting
 sent 2 days prior through electronic mail,
messaging service, or other manner as may
provide in bylaws.
IV. Voting
 Corporate secretary shall note the vote of each
director or trustee
 The vote shall be sent to the presiding officer and
corporate secretary for notation
V. Place of the Meeting
VI. Roll Call
 Corporate secretary making a roll call at the start
of the meeting.
VII. Other duties of corporate secretary
Notice shall be accompanied by other relevant matters such as:
1. The agenda of the meeting
2. When attendance, participation, and voting by
remote communication or in absentia, are authorized,
 Who Shall Preside at Meetings – The chairman, if absent, the president shall preside at all meetings of the directors or trustees
as well as the stockholders or members

 Right to Vote of Secured Creditors and Administrators

o General Rule: Shareholder-grantor has a right to attend and vote
o Exceptions:
1. Secured creditor may also have a right to attend the meeting unless it is expressly given by the shareholder-
grantor, and it is recorded in corporate books.
2. If appointed by the court, no need for written proxy

 Voting in case of Joint Ownership of Stock

o General Rule: The consent of all co-owners is necessary if the shares of stock is owned jointly.
o Exceptions:
1. Written proxy is signed by all co-owners of shares, authorizing one or some of them, or other person to vote.
(Joint ownership)
2. Shares owned in an “and/or” capacity by the holders, any of the joint owners can vote or appoint proxy.
Example: 50,000 stocks owned by Mr. X , Mr. Y, and Mr. Z = either of them can vote or appoint one as a
proxy

 Voting right for Treasury Shares – no voting right as long the shares remain in the treasury.

 Manner of Voting; Proxies

o General Rule: Stockholders and members may vote in person or by proxy in all meeting.
o Exceptions:
1. Shareholders or members may vote through remote communication or in absentia if authorized in the bylaws
or majority of board of directors.
o Quorum – deemed present for the purpose of quorum if presented through remote communication or in absentia.
o Note: Board of directors or trustees are not allowed to attend or vote by proxy.

Requirements Purpose Instances to vote Revocation

1. In writing in any form 1. For convenience 1. Election of BOD or BOT 1. Formal notice
authorized in the bylaws. 2. Assures the 2. Voting in case of joint 2. Verbal
2. Signed by the presence of a ownership of stock communication
stockholders or member. quorum, 3. Voting by trustee under 3. Conduct
3. Filed with the corporation 3. Enables those who voting trust agreement
secretary before the do not wish to 4. Voting by member in
scheduled meeting. attend the meeting nonstock
4. Valid only for the meeting to protect their 5. In case of pledge or
which it is intended. interest. mortgage of shares
5. Not valid and effective 4. Secures voting 6. In all meeting of
for longer than 5 years at control. stockholders or members
any one time. 7. In all other matters as
provided in the bylaws.

 Voting Trusts
o Trust created by an agreement between a group of the stockholders of a corporation and the trustees or by a group of
identical agreements between individual stockholders and a common trustee, whereby it is provided that for a term of
years or period contingent upon a certain event, or until the agreement is terminated, control over the stock owned by
such stockholders, either for certain purposes or all purposes, is to be lodged in the trustee, either with or without
reservation to the owners, or person designated by them, of the power to direct how such control shall be used.

 Voting Trust Agreement

Three Tests of Voting Trust Agreement

a. The voting rights of the stock are separated from the other attributes of ownership.
b. The voting rights are intended to be irrevocable for a definite period of time.
c. The principal purpose of the grant of voting rights is to acquire voting control.

Requirements and Limitations

  The agreement must be in writing and notarized and specify the terms and condition.
 A certified copy of agreement shall be filed with the corporation and SEC; otherwise, ineffective and
unenforceable.
 The certificate or certificates of stock covered by the voting trust agreement shall be cancelled and new ones shall
be issued in the name of the trustee or trustees stating that they are issued pursuant to the said agreement.
 The books of the corporation shall state that the transfer in the name of trustee is made pursuant to said voting
trust agreement.
 The trustee or trustees shall execute and deliver to the transferors voting trust certificates, which shall be
transferable in the same manner and effect as certificated of stock.
 A voting trust agreement shall be entered into for a period not exceeding 5 years at any time. However, in the case
of voting trust specifically required as a condition in a loan agreement, said voting trust may be for a period
exceeding 5 years but shall automatically expire upon full payment of the loan.
 No voting trust agreement shall be entered into for purpose of circumventing the law against anti-competitive
agreements, abuse of dominant position, anti-competitive mergers and acquisitions, violation of nationality and
capital requirements, or for the perpetuation of fraud.

Meetings are necessary to make incorporate act valid and effective; essential to deliberate and decide upon corporate acts

Why monthly meetings – bc bod or trustee are the governing body of corporation.
Shall endeavor to present to stockholders or members:
o The minutes of recent meeting which shall include, among others;
1. Description of voting and vote tabulation procedures used
2. Description of the opportunity given to stockholders or members
3. The matters discussed and resolutions reached
4. A record of the voting results of each agenda item
5. List of attendees
6. Other items that the Commission may require in the interest of good governance and
protection of minority of stockholders
o Members’ list for nonstock corporations and stock corporation, material information on the
current stockholders and voting rights
o Detailed, descriptive, balanced, and comprehensible assessment of corporation’s
performance including information on any material change in the corporation’s business,
strategy, and other affairs
o Financial report for the preceding year including financial statements duly signed and
certified in accordance with this Code and rules the Commission may prescribe, a
statement on the adequacy of the corporation’s internal controls or risk management
systems, and statement of all external audit and non-audit fees
o Explanation of the dividend policy and the fact of payment of dividends or the reason for
nonpayment thereof;
o Profiles of director or trustees including their qualifications and relevant experience, length
of service in the corporation, trainings and continuing education attended, and their board
representations in other corporation
o A director or trustee attendance report, indicating the attendance of each director or trustees
at each meetings of the boars and committees
o Appraisals and performance reports for the board, and criteria and procedure for
assessment
o Compensation report
o Director disclosures on self dealings and related party transactions
o The profile of directors nominated or seeking election or reelection