CORPORATION:

BOARD OF
DIRECTORS;
CORPORATE
OFFICERS
  The Board of Directors/Trustees is the governing body of the
corporation and directs its affairs.
 However, there are certain acts that would still need the
ratification/approval of the stockholders.

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 Classification of Powers of the Board
Members or Corporate Officers

 The GENERAL RULE is that

a Corporation is bound by the
acts of its corporate officers
who act within the scope of
the classifications or powers
of corporate agents.

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 Classification of Powers of the Board
Members or Corporate Officers

 Those expressly conferred or  Those that are inherent or

those granted by the articles of acts that go with the office
incorporation, corporate bylaws
 Those that are apparent or
or by the official act of the board
of directors those acts which although not
actually granted, the principle
 Those that are incidental or
knowingly allows or permits it
those acts as are naturally or
be done
ordinarily done which are
reasonable and necessary to  Power arising out of
carry out the corporate purpose customs, usage or
or purposes emergency
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QUALIFICATIONS AND
DISQUALIFICATIONS
 Qualifications of a Director or Trustee

 Must own at least one share in their own name (stock

corporation) or a member (non-stock corporation)
 Majority must be resident of the Philippines
 Except in activities exclusively reserved to Filipino citizens
 Those indicated in the by-laws

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 Disqualifications of a
Director or Trustee

 If, within 5 years prior to  Found administratively liable for

election or appointment as any offense involving fraud acts
such, the person was  By a foreign court or equivalent
convicted of final judgment: foreign regulatory authority for
 Of an offence punishable by acts, violations or misconduct
imprisonment for a period similar to the disqualifications
exceeding 6 years under the Code
 Of a violation of the Corporate  Such other disqualifications that
Code may be provided in the by-laws
 Of a violation of the Securities
Regulations Code
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 Disqualifications of a
Director or Trustee
 Can either be PERMANENT
or TEMPORARY
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 A temporary disqualified
director shall, within 60
business days from
disqualification, take the
appropriate action to remedy
or correct the disqualification.
 If he fails or refuses to do so
for unjustified reasons, the
disqualification shall become
permanent.
ELECTION OF MEMBERS OF THE
BOARD OF DIRECTORS/ TRUSTEES
AND VACANCIES
 Doctrine of Management Prerogative
 Means that the decision of the board of directors and matters
of management cannot be changed by the court unless such
management decision is ultra vires or destructive of the
interests of minority stockholders oh

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 Election

 a quorum of at least a majority  There is no minimum

of the outstanding capital stock required number of votes. As
or a majority of the members in such, the candidates
case of a non-stock Corporation receiving the highest number
in the meeting where the
of votes shall be elected as
election will be held
directors.
 Voting via viva voce is
allowable. However, on the
request of any voting
stockholder or member, the
election may be held by ballot.
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 Methods of voting
Straight voting
 A stockholder’s vote is
determined by the number of determined by the number of
shares he owns
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Cumulative voting
 The stockholders vote is
shares he owns and the number
of directors to be elected.
 He may either concentrate all
such votes into one candidate or
he may distribute them among
the candidates as he may see
fit.
 Purpose of Cumulative Voting

Stock Corporations Nonstock Corporation

 to allow the minority to have
a rightful representation in
the board of directors by
combining their cumulative
votes to elect a director
 cumulative voting is generally
NOT allowed, unless it is
authorized by the bylaws

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 Removal and Filling-up Vacancies

 The grounds for removal of a  the Securities and Exchange

director may be provided for Commission is not
in the bylaws empowered to motu proprio
 director representing the and after due notice and
minority interest may not be hearing order the removal of
removed except for those a director or trustee elected
causes despite the disqualification, or
 a director not representing the whose disqualification arouse
minority interest may be or is discovered subsequent
removed even without a cause an election

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 Requirements for a Valid Removal

 the removal should take place  there must be a previous

at a general or special meeting notice to the stockholders or
duly called for that purpose members of the intention to
 the removal must be by the propose such removal at the
vote of the stockholders meeting either by publication
holding or representing 2/3 of or on written notice to the
the outstanding capital stock or stockholders or members
the members entitled to vote in
case of nonstock Corporation

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 Emergency Board
 when the vacancy prevents the remaining directors from
constituting a cold room and emergency action is required to
prevent grave, substantial, and irreplaceable loss or damage
to the Corporation, the vacancy may be temporarily failed
from among the officers of the Corporation by
unanimous vote of the remaining directors or trustees

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DIRECTORS’ DUTY OF LOYALTY
 Corporate Opportunity Doctrine

 A director cannot appropriate  If he does, he shall be liable

himself opportunity which in to account for the profits
fairness should belong to the except if the acquisition of
Corporation the business opportunity is
ratified by the stockholders
owning or representing at
least 2/3 of the outstanding
capital stock

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 Acquiring Adverse Interest on a Matter
Reposed in Him in Confidence

 A director is liable to account

for profits if he attempts to  this is not subject to ratification
acquire or acquires any
interest adverse to the
Corporation in respect to any
matter reposed him in
confidence as to which equity
imposes a disability upon him
to deal in his own behalf

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 Self-dealing Directors

General Rule
 One who deals or transacts  A contract entered into by a
business with his own director with his own
corporation corporation is VOIDABLE at
the latter’s option

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 Self-dealing Directors (exceptions)
 All of the following are present  Ratified by the stockholders
 the presence of such directory trustee representing 2/3 of the
what's necessary to constitute a
quorum outstanding capital stock
 that the vote was not necessary for  Approved by at least 2/3 of
approval
 that the contract is fair and the entire membership the
reasonable board
 if the self-dealing director owns all  prove me at least the majority
or substantially all of the shares of
of the independent directors
the stock the reasonableness of the
transaction shall be determined

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