REVISED CORPORA-

TION CODE

Republic Act No. 11232

BOARD OF DIRECTORS/TRUSTEES
BOD/BOT

 is the supreme authority in matter of management of the regular and ordi-

nary business affairs of the corporation.

 However, this authority does not extend to the fundamental changes in the
corporate charter such as amendments or substantial changes thereof,
which belong to the stockholders as a whole.
QUALIFICATIONS OF BOD/BOT
1. Must own at least 1 share in their own names or a member (in the case
of trustees)
2. Must possess all the other qualifications as stated under the by-laws
DISQUALIFICATIONS OF BOD/BOT
1. Conviction by final judgment:

a. Of an offense punishable by imprisonment for a period exceeding six (6)

years;
b. For violating the Revised Corporation Code; and
c. For violating Republic Act No. 8799, otherwise known as "The Securities
Regulation Code";

2. Found administratively liable for any offense involving fraudulent acts;

and

3. By a foreign court or equivalent foreign regulatory authority for acts, vio-

lations or misconduct similar to those enumerated in paragraphs (1) and (2)
above

(Conviction or findings must be within 5 years prior to the election or ap-

pointment as Director or Trustee)
OTHER MATTERS

 Directors shall be elected for a term of one (1) year from among the hold-
ers of stocks registered

 Trustees shall be elected for a term not exceeding three (3) years from
among the members of the corporation.

 Each director and trustee shall hold office until the successor is elected and
qualified.
OTHER MATTERS
INDEPENDENT DIRECTOR

 Director is a person who, apart from shareholdings and fees received

from the corporation, is independent of management and free
from any business or other relationship which could, or could rea-
sonably be perceived to materially interfere with the exercise of in-
dependent judgment in carrying out the responsibilities as a direc-
tor.
CORPORATIONS REQUIRED TO HAVE
20% INDEPENDENT DIRECTORS
1. Corporations covered by Section 17.2 of Republic Act No. 8799, other-
wise known as “The Securities Regulation Code”.

2. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in

money service business, pre-need, trust and insurance companies, and
other financial intermediaries; and

3. Other corporations engaged in business vested with public interest simi-

lar to the above, as may be determined by the Commission.
CLASSIFICATION OF POWERS OF CORPORATE AGENTS
/OFFICERS

• Unless the law so provides, corporate powers may be delegated to indi-

vidual directors or other officers or agents.

• The general rule is that a corporation is bound by the acts of its

corporate officers who act within the scope of the 5 classification
of powers of corporate agents,
5 CLASSIFICATION OF POWERS
1. Those expressly conferred or those granted by the articles of incorpora-
tion, corporate by-laws or by the official act of the board of directors;
2. Those that are incidental or those acts as are naturally and ordinar-
ily done which are reasonable and necessary to carry ou the corporate
purpose or purposes;
3. Those that are inherent or acts that go with the office;
4. Those that are apparent or those acts which although not actually
granted, the principal knowingly allows or permits it to be done; and
5. Powers arising out of customs, usage or emergency.
 ELECTION AND VOTING OF
DIRECTORS/TRUSTEES
1. Each stockholder or member shall have the right to nominate any director
or trustee who possesses all of the qualifications and none of the disquali-
fications.

2. There must be present, either in person or through a representative autho-

rized to act by written proxy, the owners of majority of the outstanding
capital stock, or if there be no capital stock, a majority of the members en-
titled to vote.

3. The election must be by ballot if requested by any voting stockholder or

member
4. That no delinquent stock shall be voted.
5. Nominees for directors or trustees receiving the highest number of votes
shall be declared elected.
ATTENDANCE OF SH DURING ELEC-
TIONS
1. SH or members may also vote through remote communication or in ab-
sentia if so authorized in the bylaws or by a majority of the board of di-
rectors.

2. SH or members may also vote through remote communication or in ab-

sentia even if not authorized in the bylaws or by a majority of the board
of directors, provided that the corporation is vested with public interests.

3. A stockholder or member who participates through remote communica-

tion or in absentia, shall be deemed present for purposes of quorum.
 CUMULATIVE
VOTING
1. Cumulative voting gives the stockholder entitled to vote the right to give a
candidate as many votes as the number of directors to be elected multi-
plied by the number of his shares shall equal or he may distribute them
among the candidates as he may see fit.
2. This is granted by law to each stockholder with voting rights. However, in
non-stock corporations, cumulative voting is generally not allowed, UN-
LESS allowed by the AOI or by-laws.
3. Under this method, if there are 10 directors to be elected, a holder of
1,000 shares will have 10,000 votes which he may cast in favor of one
candidate or may apportion to any number o candidate he may wish;
4. To allow the minority to have a rightful representation in the board of di-
rectors.
CORPORATE OFFICERS/QUORUM

 Except in a close corporation where the corporate officers may be elected

directly by the stockholders, the Code requires the BOD to elect the said
officers;

 The officers that may be elected are the:

a. President – who must be a director;
b. Treasurer – who must be a resident;
c. Secretary – who should be a resident and citizen of the Philippines;
d. Such other officers as may be provided for in the by-laws.

 As a general rule, any two or more positions may be held concurrently by

the same person, except:
a. The president and the secretary;
b. The president and the treasurer.

(Exception is One Person Corporation who can be a President and Treasurer at the same
REMOVAL OF DIRECTORS/TRUSTEES

 The removal should take place at a general or special meeting duly call
for that purpose;

 The removal must be by the vote of the stockholders holding or members

representing 2/3 of the outstanding capital stock or the members entitled
to vote in cases of non-stock corporations; and

 There must be a previous notice to the stockholders or members of the

intention to propose such removal at the meeting either by publication or
on written notice to the stockholders or members.
REMOVAL OF DIRECTORS/TRUSTEES

 Other rules:

1. By-laws may provide for causes or grounds for removal of a director;

2. A director representing the minority may not be removed except for a
cause;
3. A director NOT representing the minority may be removed even without a
cause.
 VACANCIES IN THE OFFICE
OF DIRECTOR OR TRUSTEE
1. If a vacancy occurs by virtue of REMOVAL, Sec. 28 authorizes the filling of
the vacancy by the election of a replacement at the same meeting;

2. If it occurs NOT by removal, 1ST paragraph of Section 28 applies.

 VACANCIES IN THE OFFICE
OF DIRECTOR OR TRUSTEE
RULES:
 If the VACANCY is resulting from other than (1) by expiration of term; or (2) by
removal, the BOARD OF DIRECTORS, if still constituting a quorum, may fill the
vacancy. Otherwise, said vacancies must be filled by the stockholders or
members in a regular or special meeting called for that purpose.

 When the vacancy is due to term expiration, the election shall be held no later
than the day of such expiration at a meeting called for that purpose.

 When the vacancy arises as a result of removal by the stockholders or mem-

bers, the election may be held on the same day of the meeting authorizing the
removal and this fact must be so stated in the agenda and notice of said
meeting.

 In all other cases, the election must be held no later than forty-five (45) days
 VACANCIES IN THE OFFICE
OF DIRECTOR OR TRUSTEE
RULES:
 A director or trustee elected to fill a vacancy shall be referred to as replace-
ment director or trustee and shall serve only for the unexpired term of the
predecessor in office.

 Any directorship or trusteeship to be filled by reason of an increase in the

number of directors or trustees shall be filled only by an election at a
regular or at a special meeting of stockholders or members duly
called for the purpose, or in the same meeting authorizing the in-
crease of directors or trustees if so stated in the notice of the meeting.
 EMERGENCY BOARD
 when the vacancy prevents the remaining directors from constituting a quo-
rum and emergency action is required to prevent grave, substantial, and
irreparable loss or damage to the corporation, the vacancy may be
temporarily filled from among the officers of the corporation by unan-
imous vote of the remaining directors or trustees
COMPENSATIN OF BOD/BOT
GENERALLY: Directors are not entitled to receive any compensation, EXCEPT:
1. Reasonable per diems;

2. As provided in the by-laws or upon a majority vote of the stockholders;

and

3. If they are performing functions other than that of a director.

NOTE: In no case shall the total yearly compensation of directors ex-

ceed ten (10%) percent of the net income before income tax of the
corporation during the preceding year.

Directors or trustees shall not participate in the determination of

their own per diems or compensation.
LIABILITIES OF CORPORATE OFFI-
CERS
 The general rule is that unless the law specifically provides a corporate
officer or agent is not civilly or criminally liable for acts done by
him as such officer or agent, or when absent bad faith or malice.

 Personal liability of a corporate director, trustee or officer along (although

not necessarily) with the corporation may so validly attach, as a rule, only
when —
1. He assents (a) to a patently unlawful act of the corporation, or (b) for
bad faith, or gross negligence in directing its affairs, or (c) for conflict of
interest, resulting in damages to the corporation, its stockholders or
other persons;
2. He consents to the issuance of watered stocks or who, having
knowledge thereof, does not forthwith file with the corporate secretary
his written objection thereto;
3. He agrees to hold himself personally and solidarily liable with
the corporation;
4. He is made, by a specific provision of law, to personally answer for
his corporate action.
 OTHER MATTERS BOD/BOT
 Self Dealing Directors - is one who deals or transacts business with his own
corporation.

 INTERLOCKING DIRECTORS - An interlocking director is a director in one corpo-

ration who deals or transacts with another corporation of which he is also a di-
rector. In such case, there may effectively be a dual agency, a divided alle-
giance where allegiance in one corporation may subordinated to the other.
 OTHER MATTERS BOD/BOT
 In case of a wrongful or fraudulent act of a director, officer or agent, stock-
holders have the following options:
1. Individual or Personal Action – for direct injury to his rights, such as denial
of his right to inspect corporate books and records or pre-emptive rights;
2. Representative or Class Suit – in which one or more members of a class
sue for themselves as a class or for all to whom the right was denied, either as
an individual action or a derivative suit; and a
3. Derivative Suit – an action based on injury to the corporation – to enforce a
corporate right – wherein the corporation itself is joined as a necessary party,
and recovery is in favor of and for the corporation. It is a suit granted to any
stockholder to institute a case to remedy a wrong done directly to the corpora-
tion and indirectly to stockholders.
CORPORATE POWERS AND AUTHOR-
ITY
1. POWER TO SUE AND BE SUED
2. POWER OF SUCCESSION
3. POWER TO ADOPT AND USE A COMMON SEAL
4. POWER TO AMEND ITS ARTICLES OF INCORPORATION
5. POWER TO ADOPT BY-LAWS
6. POWER TO ISSUE OR SELL STOCKS AND TO ADMIT MEMBERS
7. POWER TO ACQUIRE OR ALIENATE REAL OR PERSONAL PROPERTY
8. POWER TO ENTER INTO A PARTNERSHIP, JOINT VENTURE, MERGER OR CONSOLIDA-
TION
9. POWER TO MAKE REASONABLE DONATIONS
10. POWER TO ESTABLISH PENSION, RETIREMENT AND OTHER PLANS
11. POWER TO EXERCISE SUCH OTHER POWERS ESSENTIAL OR NECESSARY TO CARRY
OUT ITS PURPOSES
12. POWER TO EXTEND OR SHORTEN CORPORATE TERM
13. POWER TO INCREASE OR DECREASE CAPITAL STOCK; INCUR, CREATE OR INCREASE
BONDED INDEBTEDNESS
14. POWER TO DENY PRE-EMPTIVE RIGHT
15. POWER TO SELL OR DISPOSE OF ASSETS
16. POWER TO ACQUIRE OWN SHARES
CORPORATE POWERS AND AUTHOR-
ITY
17. POWER TO INVEST FUNDS
18. POWER TO DECLARE DIVIDENDS
19. POWER TO ENTER INTO MANAGEMENT CONTRACT
 POWER TO ACQUIRE OR ALIENATE
REAL OR PERSONAL
PROPERTY
 The limitation that “as the transaction of the lawful business of the corpora-
tion may reasonably and necessarily require”. sets the limit of the corporate
authority to acquire, own, hold or alienate property.

 As it has been said the purpose clause in the AOI grants as well as limits the
powers which a corporation may exercise. Verily, whether or not the acquisi-
tion of such property is within the corporate powers or authority may reason-
ably be determined from the purpose or purposes indicated in the AOI.
 IMPLIED POWERS:
POWER TO EXERCISE SUCH OTHER POWERS ESSENTIAL OR
NECESSARY TO CARRY OUT ITS PURPOSES
 Determine the logical relation of the act to the corporate purpose expressed in
the charter.

 If the act is one which is lawful in itself and not otherwise prohibited, and is
done for the purpose of serving corporate ends, and reasonably contributes to
the promotion of those ends in a substantial and not in a remote and fanciful
sense, it may be fairly considered within the corporation’s charter powers.
POWER TO EXTEND OR SHORTEN CORPO-
RATE TERM
Requirements:
1. Approval by the majority vote of the BOD/T;
2. Ratification by the stockholders representing at least 2/3 of the outstand-
ing capital stock (including non-voting shares) or 2/3 of the members in
case of non-stock corporations;
3. The ratification must be made at a meeting duly called for that purpose;
4. Prior written notice of the proposal to extend or shorten the corporate
term must be made stating the time and place of meeting addressed to
each stockholder or member at his place of residence, either by mail or
personal service;
5. In case of extension, the same cannot be made earlier than 3 years
prior to the original or subsequent expiry date unless there are justifiable
reasons for an earlier extension;
6. In case of extension, the same must be made during the lifetime of the
corporation;
7. Any dissenting stockholder may exercise his appraisal right;
8. Submission of the amended articles with the SEC; and
9. Approval thereof by the SEC
 POWER TO INCREASE OR DECREASE CAPITAL STOCK;
INCUR, CREATE OR INCREASE BONDED INDEBTEDNESS

 The following requirements or procedure should be complied with:

1. Approval by the majority vote of the BOD/T;
2. Ratification by the stockholders representing at least 2/3 of the outstanding capital stock
(including non-voting shares) or 2/3 of the members in case of non-stock corporations at
a meeting duly called for that purpose;
3. Prior written notice of the proposal to extend or shorten the corporate term must be
made stating the time and place of meeting addressed to each stockholder or member
at his place of residence, either by mail or personal service;
4. A certificate in duplicate must be signed by a majority of the directors of the corporation,
countersigned by the chairman and the secretary of the stockholders meeting, setting
forth the matters contained in subsection 1 to 7 of Sec. 38;
5. In case of increase in capital stock, 25% of such increased capital must be subscribed
and that at least 25% of the amount subscribed must be paid either in cash or property;
6. In case of decrease of capital stock, the same must not prejudice the right of the credi-
tors;
7. Filing of the certificate of increase and amended AOI with the SEC; and
8. Approval thereof by the SEC.
 TRUST FUND DOCTRINE

 The subscriptions to capital stock of the corporation constitute a fund which the creditors
have a right to look up for the satisfaction of their claims. Accordingly, if the decrease
would affect the rights of creditors, the same would not be approved by the SEC.
POWER TO DENY PRE-EMPTIVE RIGHT
• PRE-EMPTIVE RIGHT is a right granted by law to all existing stockhold-
ers of a stock corporation to subscribe to all issues or disposition of
shares of any class, in proportion to their respective holdings, subject
only to the limitation imposed under Sec. 38.

• The grant of this right is for the preservation, unimpaired and undiluted,
of the old stockholders’ relative and proportionate voting strength and
control, that is, the existing ratio of their property interest and voting
power in the corporation.
POWER TO DENY PRE-EMPTIVE RIGHT
EXCEPTIONS (Under Sec. 38):
1. When shares to be issued is in compliance with laws requiring stock of-
ferings or minimum stock ownership by the public; or

2. Shares to be issued in good faith with the approval of the stockholders

representing 2/3 of the outstanding capital stock either:
a. In exchange for property needed for corporate purpose; or
b. In payment of a previously contracted debt.

 The exceptions will not apply to stockholders of close corporation whose

pre-emptive right, is broader if not absolute. See Sec. 102.

 The right may likewise be lost by waiver, express or implied or inability or

failure to exercise it having been notified of the proposed disposition of
shares.
POWER TO SELL OR DISPOSE OF ASSETS
 The conditions for the valid exercise of this power are thus as follows:

1. Resolution by a majority of the BOD/T;

2. Authorization from the stockholders representing at least 2/3 of the out-
standing capital stock or 2/3 of the members;
3. The ratification of the stockholders or member must be made at a meet-
ing duly called for that purpose;
4. Prior written notice of the proposed action and of the time and place of
meeting must be made addressed to all stockholders of record, either by
mail or personal service;
5. The sale of the assets shall be subject to the provisions of existing laws
on illegal combinations and monopolies; and
6. Any dissenting stockholder shall have the option to exercise his appraisal
right.
POWER TO INVEST FUNDS
 REQUIREMENTS FOR A VALID INVESTMENT OF CORPORATE
FUNDS:

1. Resolution by a majority of the BOD/T;

2. Ratification by the stockholders representing 2/3 of the outstanding capi-
tal stock (or 2/3 of members);
3. The ratification must be made at a meeting duly called for that purpose;
4. Prior written notice of the proposed investment and the time and place
of the meeting shall be made, addressed to each stockholder or member
by mail or by personal service; and
5. Any dissenting stockholder shall have the option to exercise his Appraisal
right.
POWER TO DECLARE DIVIDENDS
WHO CAN DECLARE DIVIDENDS? - The BOD.
 They cannot be compelled to declare dividends, except: when the unre-
stricted retained earnings is in excess of 100% of the paid-up capital;

 The judgment of the BOD is conclusive, EXCEPT:

(1) when they act in bad faith;
(2) for a dishonest purpose;
(3) they act fraudulently, oppressively, unreasonably or unjustly; or
(4) abuse of discretion can be shown as to impair the rights of the complain-
ing shareholders.

 The TEST of bad faith is to determine if the policy of the directors is dic-
tated by their personal interest rather than the corporate welfare.
ULTRA-VIRES ACTS
 are those which cannot be executed or performed by a corporation be-
cause they are not within its express, inherent, or implied powers as de-
fined by its charter or AOI.

 Accordingly, it may be subject to a collateral attack questioning the au-

thority of the corporation to engage in such particular endeavor.
ULTRA-VIRES ACTS
 CONSEQUENCES:
1. On the Corporation itself: The proper forum may suspend or revoke,
after proper notice and hearing, the franchise or certificate of registra-
tion of the corporation for serious misrepresentation as to what the cor-
poration can do or is doing to the great damage or prejudice of the gen-
eral public.

2. On the rights of the Stockholders: A stockholder may bring either

an individual or derivative suit to enjoin a threatened ultra-vires
act or contract. If already performed, a derivative suit against the di-
rectors may be filed, but their liability will depend on whether they acted
in good faith and with reasonable diligence in entering into the contract.
 BY-LAWS

 are rules and ordinances made by a corporation for its own government; to regulate the
conduct and define the duties of the stockholders or members towards the corporation
and among themselves.

 They are the rules and regulations or private laws enacted by the corporation to regu-
late, govern and control its own actions, affairs and concerns and tis stockholder or
members and directors and officers with relation thereto and among themselves in their
relation to it.
 CONTENTS OF BY-LAWS

 The time, place and manner of calling and conducting regular or special meetings of the
directors or trustees;
 The time and manner of calling and conducting regular or special meetings and mode of
notifying the stockholders or members thereof;
 The required quorum in meetings of stockholders or members and the manner of voting
therein;
 The modes by which a stockholder, member, director, or trustee may attend meetings
and cast their votes;
 The form for proxies of stockholders and members and the manner of voting them;
 The directors’ or trustees’ qualifications, duties and responsibilities, the guidelines for
setting the compensation of directors or trustees and officers, and the maximum number
of other board representations that an independent director or trustee may have which
shall, in no case, be more than the number prescribed by the Commission;
 The time for holding the annual election of directors or trustees and the mode or manner
of giving notice thereof;
 The manner of election or appointment and the term of office of all officers other than di-
rectors or trustees;
 CONTENTS OF BY-LAWS

 The penalties for violation of the bylaws;

 In the case of stock corporations, the manner of issuing stock certificates; and
 Such other matters as may be necessary for the proper or convenient transaction of its
corporate affairs for the promotion of good governance and anti-graft and corruption
measures.