Minority right of representation

In a non-stock corporation, on the written demand of a majority of the members entitled to

vote removal without cause may not be used to deprive minority stockholders or members
of the right of representation to which they may be entitled

Abstention vote
• Stockholders and members may vote in person or by proxy in all meetings of
stockholders or members. they may participate through remote communication or in
absentia is if authorized by the by-laws or majority of the Board.
• A vote of abstention is considered to be a vote in itself. Abstentions will not be counted
toward the affirmative and such refusal to vote does not by itself indicate acquiescence in
the action of those who vote.

Quorum
• Majority of the number of directors or trustees as fixed in the articles of incorporation.
Exceptions: 1. Unless the articles of incorporation or the by-laws provide for a greater
majority; or 2. In case of election of officers where a vote of a majority of all the members
of the board is needed.
• A quorum shall consist of the stockholders representing a majority of the outstanding
capital stock or a majority of the members in the case of non-stock corporations. They
must be present, in person or by representative authorized to act by written proxy.
• Any act or transaction made during a meeting without quorum is rendered no force and
effect, thus, not binding on the corporation or parties concerned.

Does the law allow imposition of lower quorum requirements? Why not?
No. A by-law provision may provide for a higher quorum requirement than that prescribed
in the Code, butt not less. Otherwise, the by-law provision providing for a lesser quorum
requirement have no force and effect since a by-law provision is subordinate to the statute
and couldnot defeat the requirements of the law. The same goes for a by-law provision
providing for a voting requirement less than that provided in the Code.

Do abstention votes affect the quorum requirement?

No. A stockholder may participate at meetings through remote communication or in
absentia and such participation shall be deemed present for purposes of quorum when so
provided in the By-laws. The vote through remote communication or in absentia must be
received before the corporation finishes the tally of votes.
 What are the things that the Board cannot do?
· Sec. 22 of the Revised Corporation code provides that unless otherwise provided in
this Code, the board of directors or trustees shall exercise the corporate powers,
conduct all business, and control all properties of the corporation.
· The Theory of General Capacity states that a corporation is said to hold such
powers as are not prohibited or withheld from it by general law.
· A corporation has:
i. Express Powers – such powers as are expressly granted by law and its articles of
incorporation;
ii. Implied Powers – those reasonably necessary to accomplish its purposes, as
stated in its articles of incorporation; and
iii. Incidental Powers – those which may be incident to its existence as a juridical
entity [Pilipinas Loan v. SEC, 356 SCRA 193 (2001)]

General Powers; Theory of General Capacity [Sec. 35]

Every corporation has the power and capacity:
(a)  To sue and be sued in its corporate name;
(b)  To have perpetual existence;
- Unless the certificate of incorporation provides otherwise
(c) To adopt and use a corporate seal;
(d)  To amend its articles of incorporation in accordance with the provisions of
this Code;
(e)  To adopt bylaws, and to amend or repeal the same in accordance with this
Code;
- Must not contrary to law, morals or public policy
(f)  In case of stock corporations: To issue
or sell stocks to subscribers and to sell treasury stocks in accordance with the
provisions of this Code; and
In case of non-stock corporations: To admit members to the corporation;
(g)  To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage,
and otherwise deal with such real and personal property, including securities
and bonds of other corporations;
(h) To enter, with natural and juridical persons, into a: partnership, joint
venture, merger, consolidation, or any other commercial agreement.
 (i) To make reasonable donations, including those for public welfare or for
hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, that no
foreign corporation shall give donations in aid of any political party or candidate or
for purposes of partisan political activity;
(j) To establish pension, retirement, and other plans for the benefit of its
directors, trustees, officers, and employees; and
(k) To exercise such other powers s may be essential or necessary to carry out
its purpose or purposes as stated in the articles of incorporation.

Specific Powers; Theory of Specific Capacity [Secs. 36-43, 15]

The Theory of Specific Capacity states that the corporation cannot exercise powers
except those expressly/impliedly given.
Under the Theory of Specific Capacity, the specific powers of a corporation are as
follows:
(a)  Power to extend or shorten corporate term [Sec. 36]
(b)  Power to increase or decrease capital stock, or incur, create, increase bonded
indebtedness [Sec. 37]
(c)  Power to deny pre-emptive rights [Sec. 38]
(d)  Power to sell or dispose corporate assets [Sec. 39]
(e)  Power to acquire own shares [Sec. 40]
(f)  Power to invest corporate funds in another corporation or business, or for any
other purpose [Sec. 41]
(g)  Power to declare dividends [Sec. 42]
(h)  Power to enter into management contract [Sec. 43]
(i)  Power to amend AOI [Sec. 15]

Perpetual existence of a corporation

General Rule: The Revised Corporation Code provides that a corporation shall have
perpetual existence. The AOIs of existing corporations shall be deemed amended to reflect
their perpetual term.
Exception: The AOIs of corporations created under the effectivity of this Code provide for a
specific period. [Sec 11]
A corporation already existing upon effectivity of the RCC may opt out of the rule on
perpetual existence by:
i. Obtaining the vote of its stockholders representing majority of the Outstanding
Capital Stock, without prejudice to the appraisal right of dissenting stockholders
 ii. Notifying the Commission that it elects to retain its specific corporate term, as
provided in its AOI. [Herbosa, 2019]
It is presumed that shareholders, when they incorporated, assented to the perpetual
character of their contract. Their corporate relations will only end upon agreement
between or among the prescribed number of shareholders or involuntarily upon the court’s
or the SEC’s determination.

Day-to-day operations of the corporation

These are the acts that are usually done in the conduct of the business of the corporation.

Corporate officer v Board of Directors/Trustees

Who are the Corporate Officers
President – must be a director;
Treasurer – may or may not be a director; must be a resident
Secretary – need not be a director unless required by the by-laws; must be a citizen
and resident of the Philippines; and
Other officers as may be provided in the by- laws.
Compliance officer – only for corporations vested with public interest. [Sec. 24]

Board of Directors/Trustees- the Board of Directors is the governing body in a stock

corporation, while the Board of Trustees is the governing body in a non-stock corporation
Compensation of the Board: Reasonable per diems in the absence of a by-law
provision fixing their compensation, granted by majority vote of the
stockholders/members through approval in a regular or special meeting.
NOTE: Directors and trustees shall not participate in the determination of their per
diems or their compensation.

How do you become a stockholder?

A person becomes a shareholder/stockholder the moment he:
(1) Enters in to a subscription contract with an existing corporation (he is a stockholder
upon acceptance of the corporation of his offer to subscribe whether the
consideration is fully paid or not;
(2) Purchase treasury shares from the corporation; or
(3) Acquire shares from existing shareholders by sale or any other contract, or through
other modes of acquiring ownership like succession.
 What is a stock certificate?
It is an an instrument formally issued by the corporation with the intention that the same
constitute the best evidence of the rights and status of a shareholder.
Shares of stock so issued are personal property and may be transferred by delivery of the
certificate or certificates indorsed by the owner, his attorney-in-fact, or any other person
legally authorized to make the transfer. [Sec. 62, RCC]
Theory of Quasi-Negotiability
Although a stock certificate is sometimes regarded as quasi-negotiable, in the sense that it
may be transferred by delivery, it is well- settled that the instrument is NON- NEGOTIABLE,
because — the holder thereof takes it without prejudice to such rights or defenses as the
registered owner or creditor may have under the law Except insofar as such rights or
defenses are subject to the limitations imposed by the principles governing estoppels.
[Republic v. Sandiganbayan, G.R. Nos. 107789 & 147214, April 30, 2003].