Professional Documents
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Bind Themselves: Art. 1767. by The Contract of Partnership Two or
Bind Themselves: Art. 1767. by The Contract of Partnership Two or
If there is no agreement, in proportion to Liable for any amount that he may have
contribution; the industrial partner shall taken from the partnership funds which he
receive such hare as may be just and converted for his own use. (Article 1788)
equitable.
Liable to contribute additional fund in case only the share of each partner in the profits has
of an imminent loss of the business of the been agreed upon, the share of each in the losses
partnership. (Article 1791) shall be in the same proportion.
A new partner is liable for the obligations In the absence of stipulation, the share of
already contracted before his admission but each partner in the profits and losses shall be in
only to the extent of this contribution. proportion to what he may have contributed, but
the industrial partner shall not be liable for the
A new partner is liable to the extent of his
losses. As for the profits, the industrial partner shall
personal property (if general partner) for
receive such share as may be just and equitable
subsequent obligations like an original
under the circumstances. If besides his services he
partner.
has contributed capital, he shall also receive a
Responsible to the partnership for damages share in the profits in proportion to his capital.
suffered by it through his fault. (Article (XPN’s)
1794 )
Industrial Partner, the demand he should
An industrial partner cannot engage in do is to ask the court to share the profits.
business for himself, unless the partnership
ASSOCIATION AND ASSIGNMENT OF
expressly permits him to do so. (Article
PARTNER’S INTEREST
1789)
I. ASSOCIATION OF OTHERS TO PARTNER’S
Partners shall render on demand true and
INTEREST:
full information of all things affecting the
partnership to any partner or the legal Can be done without the consent of other
representative of any deceased partner or partners
of any partner under legal disability. (Article
1806) Associate shall not be admitted to the
Partnership without the consent of ALL the
Every partner must account to the partners
partnership for any benefit, and hold as
trustee for it any profits derived by him What happens when a partner associate
without the consent of the other partners someone with his partnership interest?
from any transaction connected with the What happens when a partner assign or
formation, conduct, or liquidation of the convey his interest to another?
partnership or from any use by him of its
property. (Article 1807) Can a partner be forced to assign his
interest to another person?
The capitalist partners cannot engage for
their own account in any operation which is II. ASSIGNMENT OF PARTNER’S INTEREST :
of the kind of business in which the
Can be done without the consent of the
partnership is engaged, unless there is a
other partners
stipulation to the contrary.
Does not dissolve the partnership, unless
Art. 1797. The losses and profits shall be
there is an agreement.
distributed in conformity with the agreement. If
Does not entitle the assignee to interfere in I. Rights in a Specific Partnership.
the management and administration of the
Partner is considered as a co-owner with
partnership affairs.
his partners of specific partnership
Assignee merely receives his share in profits property
in accordance with what the assigning A partner cannot assign his interest over a
partner would have received. specific partnership property unless all the
partners will assign theirs.
IN CASE OF FRAUD, assignee may ask for
A partner can possess the property for
the dissolution of the partnership through a
partnership purpose.
court decree.
A partner cannot possess the partnership
III. ASSIGNMENT OF INTEREST BY COURT DECREE: property for any other purpose other than
partnership purpose without the consent of
Must be made by a JUDGMENT creditor ALL the partners.
upon due application to a competent Not subject to attachment or execution
court. except on a claim against the partnership.
Court may charge the interest of the
debtor partner with payment of II. Partner’s Interest in the Partnership.
unsatisfied amount of such judgment
Share in Profits and surplus
debt with interest thereon.
Partnership Surplus is equivalent to
Court may appoint a receiver of the
Partnership Assets – Partnership Liabilities.
debtor partner’s share in profit for the
benefit of the judgment creditor Obligations of the Partners with regard to
Third Persons
III. ASSIGNMENT OF INTEREST BY COURT DECREE
(REMEDIES): • All partners, including industrial ones, are
liable equally with all their property and
Interest charged may be redeemed at
after all the partnership assets have been
any time before foreclosure, or in case
exhausted, for the contracts which may be
of a sale being directed by the court:
entered into in the name and for the
o With separate property, by
account of the partnership, under its
any one or more of the
signature and by a person authorized to act
partners; or
for the partnership.
o Court may appoint a receiver
of the debtor partner’s share • The partnership is liable for the acts of a
in profit for the benefit of partner who acts within the scope of his
the judgment creditor authority
PROPERTY RIGHTS OF A PARTNER All partners are liable solidarily with the
partnership for everything chargeable to the
What are the Property Rights of a Partner?
partnership as a result of the following:
a. His rights in specific partnership property;
b. His interest in the partnership; and -Liability incurred due to any wrongful act
c. His right to participate in the management or omission of any partner acting in the
ordinary course of the business of the
partnership or with the authority of his co- 1. Property rights (Art. 1810)
partners
2. To associate with another person in his share
-Liability incurred where one partner acting (Art. 1804)
within the scope of his apparent authority
3. To inspect and copy partnership books (Art.
receives money or property of a third person
1805)
and misapplies it;
4. To demand a formal account (Art. 1809)
- Liability incurred where the partnership in
the course of its business receives money or 5. To ask for a dissolution of the firm at the proper
property of a third person and the money or time (Art. 1830-31)
property so received is misapplied by any
partner while it is in the custody of the MODES OF RETIREMENT AND REQUIREMENTS
partnership.
DISSOLUTION
OBLIGATIONS OF A PARTNER:
is the change in the relation of the partners
1. To give his contribution (Arts. 1786, 1788) caused by any partner ceasing to be
associated in the carrying on of business as
2. Not to convert partnership funds/ property for distinguished from the winding up of the
his own use (Art. 1788) business. (Art. 1828)
3. Not to engage in unfair competition (applicable Art. 1829. On dissolution, the partnership is not
to capitalist partner); not to engage in any other terminated, but continues until the winding up of
industry at all without the consent of the partnership affairs is completed.
partnership (applicable to industrial partner) (Art.
1808) WINDING UP
4. To account for and hold as trustee, unauthorized On the other hand, is the process of settling
personal profits (Art. 1807) business affairs after dissolution.
6. Credit to the firm the payment made by a debtor is the point where all the partnership affairs
who owes both the partnership and the partner have been wound up.
(Art. 1792)
Until when does a partnership exist as a body
7. Share with other partners the share of the corporate?
partnership credit which he has received from an
Until termination, but only for purposes of
insolvent firm debtor (Art. 1743)
winding up the affairs only (General Rule)
After dissolution, a partner can bind the b. Partner who caused the wrongful dissolution
partnership: shall have (GUILTY PARTNER):
a. By any act appropriate for winding up 1. The right to the surplus of the partnership
partnership affairs or completing assets after paying all the partnership
transactions unfinished at dissolution liabilities subject to liability for damages.
2. If the business is continued, is entitled to
b. By any transaction which would bind the
indemnity from the continuing partners.
partnership if dissolution had not taken
place, provided the other party to the Art. 1839. Rules in settling accounts between
transaction had no knowledge or notice of the partners after dissolution:
the dissolution of the partnership
1. The assets of the partnership are:
The partnership is in no case bound by any act of
a partner after dissolution: a. The partnership property,
a. Where the partnership is dissolved because b. The contributions of the partners necessary
it is unlawful to carry on the business, for the payment of all the liabilities
unless the act is appropriate for winding up specified in No. 2.
partnership affairs; or 2. Order of Liability:
b. Where the partner has become insolvent; (a) Those owing to creditors other than partners,
or
(b) Those owing to partners other than for capital
c. Where the partner has no authority to wind and profits,
up partnership affairs
(c) Those owing to partners in respect of capital,
When dissolution is caused in contravention of the
partnership agreement the rights of the partners (d) Those owing to partners in respect of profits.
shall be as follows:
Where a partner has become insolvent or his
a. Partners who have not caused the dissolution estate is insolvent, the claims against his separate
wrongfully shall have (Innocent Partners): property shall rank in the following order:
i. The right to the surplus of the partnership (a) Those owing to separate creditors;
assets after paying all the partnership
(b) Those owing to partnership creditors;
liabilities
(c) Those owing to partners by way of contribution.
ii. The right to damages against the partner
who wrongfully dissolved that partnership
Without the written consent or ratification of the (1) Liable for the difference between his
specific act by all the limited partners, a general contribution as actually made and that stated in
partner or all of the general partners have no the certificate as having been made, and
authority to: (2) Liable for any unpaid contribution which he
agreed in the certificate to make in the future at
(1) Do any act in contravention of the certificate; the time and on the conditions stated in the
certificate.
(2) Do any act which would make it impossible to
(3) Liable to partnership creditors up to the extent
carry on the ordinary business of the partnership;
of his contribution
(3)Confess a judgment against the partnership;
Who is a Substituted Limited Partner?
(4) Possess partnership property, or assign their
Is a person admitted to all the rights of a
rights in specific partnership property, for other
limited partner who has died or has
than a partnership purpose;
assigned his interest in a partnership.
(5)Admit a person as a general partner; An assignee is not always a substituted
limited partner but a substituted limited
(6)Admit a person as a limited partner, unless the partner is always an assignee
right so to do is given in the certificate; Assignee becomes a substituted limited
(7)Continue the business with partnership property partner if all the members consent thereto
on the death, retirement, insanity, civil interdiction or if the assignor, being thereunto
or insolvency of a general partner, unless the right empowered by the certificate, gives the
so to do is given in the certificate. assignee that right .
(1) Those to creditors, in the order of priority as (5) A general partner retires, dies, becomes
provided by law, except those to limited partners insolvent or insane, or is sentenced to civil
on account of their contributions, and to general interdiction and the business is continued under
partners; Article 1860;
(2) Those to limited partners in respect to their (6) There is a change in the character of the
share of the profits and other compensation by business of the partnership;
way of income on their contributions;
(7) There is a false or erroneous statement in the
(3) Those to limited partners in respect to the certificate;
capital of their contributions;
(8) There is a change in the time as stated in the
(4) Those to general partners other than for capital certificate for the dissolution of the partnership or
and profits; for the return of a contribution;
(5) Those to general partners in respect to profits; (9) A time is fixed for the dissolution of the
partnership, or the return of a contribution, no
(6) Those to general partners in respect to capital.
time having been specified in the certificate, or
Who has priority over distribution of assets in a
(10) The members desire to make a change in any
limited partnership?
other statement in the certificate in order that it
Creditors, including limited partners who shall accurately represent the agreement among
have a claim against the partnership. them.
Limited partners’ share in profits.
When should a certificate be cancelled?
Limited partners’ return of capital
contribution Upon Dissolution
General partners who have claims against When ALL limited partners cease to be such
the partnership
When should the certificate be amended?
General partners’ share in profits
General partners’ return of capital In all cases other than those that will cause
contribution the certificate to be cancelled.
Art. 1864. The certificate shall be cancelled when
the partnership is dissolved or all limited partners
cease to be such.
NOTE:
*An Independent director is a person who, apart Note: Some special laws still requires for a
from shareholdings and fees received from the minimum capital stock of a corporation.
corporation, is independent of management free
from any business or other relationship which True or False: Under the Corporation Code, there’s
could, or could reasonably be perceived to a required capital stock? False. That the
materially interfere with the exercise of incorporators must subscribe at least 1 share
independent judgment in carrying out the capital of the corporation. It must have
responsibilities as a director. subscription. So, there is still minimum subscription
required under the law.
*NOTE: New Provision in Corporation Code before
a BOD can only exercise power of a corporation If you are 1 man corporation there is a requirement
with the consent of the other BOD meaning it of at least 1 subscription otherwise if you are an
cannot act on its own or solely. But now we have ordinary corporation you are required to have at
Independent directors it means a corporation or least 2 subscription of your capital stock because if
BOD may solely exercise the power of a it is more than 1 it will Ordinary Corporation but
corporation without the need of approval of other not more than 15 as we discuss before. So it also
BOD. The requirement that they only need to be have.
Independent Director is independent of Q: How does the corporation manifest its consent
management and also free from any business or when entering to a contract? Through its BOD,
other relationship. because the BOD only has the rights to exercise the
He is possible to engage in other business? power of Corporation.
=Yes, as long as that business would not in any way What are the possible consideration if you want to
interfere in the material exercise of its independent buy a shares of stock? What can you pay?
judgment. =Section 61, RCC
*What is Authorized Capital Stock? What is Paid-Up Capital?
It is the amount fixed in the AOI to be subscribed It is that portion of the authorized capital
and paid by the stockholders of the Corporation. It stock which has been subscribed and
is the amount of capital stock that a corporation actually paid.
can issue for subscription
* These are the subscribed that is under
*What is Subscribed Capital Stock? subscription agreement and also paid by
subscriber.
It is that portion of the authorized capital stock
that is covered by subscriptions agreements What is Outstanding Capital Stock?
whether fully paid or not
It is the total shares of stock issued to
NOTE: subscribers or stockholders, whether or not
It is the maximum amount of capital stock that a fully or partially paid except treasury shares
corporation can issue for subscription. so long as there is a binding subscription
agreement.
Q: Are Authorized Capital Stock already paid? NO.
It is only the Capital Stock that will be issued and Total issued stock regardless whether its fully paid
subscribe by the shareholder. So where that is or not. Not total subscribed. Total Issued.
appears? In AOI Subscribe is not the same to issued.
Q: Among these 8? It is possible with the Certificate of stocks is a mere proof but however
combination of this will be your payment for the the fact that a person has a shares of stock of a
issuance of shares of stock? corporation can still be proof by other evidence
=Yes. other than certificate of stocks. So it is different.
Only preferred or redeemable share may, As to the status of the shares of stock after
however, be denied the right to vote. reacquisition
SUBJECT the penultimate paragraph of
RS- after reacquisition forms part of the
section 5.
Outstanding Capital Stock of the
Treasury Shares vs. Redeemable Shares corporation and if that happened may be
reissued once again.
TS - In order to fully acquire there is no TS- forms part of the asset of the
condition or term. The only condition is it corporation which may be disposed for a
must be issued and fully paid. There is no reasonable price
condition as to period, as to when. Meaning the RS if you will redeem it will go
RS- If acquiring RS there is a particular in Capital portion of corporation while TS if
condition or term before you can reacquire you redeem it will go in the asset portion of
it, it may be in the form of a period for corporation.
example if they issue an RS the corporation
their right to redeem it will only appear a As to Voting Right
year after the issuance of RS That is a term
TS - Which remain as Treasury shall have no
of period. Let’s say condition for example
voting rights.
you’re possible to reacquire the RS if the
RS- as a rule if there is no restriction or
shareholder fail to pay the full amount of RS
there is no statement as to prohibition as to
on or before a certain date. That is also a
right to vote the RS has a right to vote from
condition for purposes of reacquisition of a
the time of issuance and before the RS has
RS.
been reacquired by the corporation
In treasury shares there is no term it is just
because if you reacquired it there’s no
needed in TS it must be issued and fully
voting rights because it will be back in
paid.
Authorized Capital Stock of the Corporation
As to subscription and it can be declared.
Founders Share
As to when acquired
There is a certain rights & privilege Has a certificate of registration. Without
Only shares are given usually to founder at that de facto corporation cannot exercised
incorporators. their powers which is a requirement.
There is a exclusive rights in voting. Its existence can only be attacked by the
They can elect their self. There’s a State in a direct proceeding (quo warranto).
limitations that only 5years can use that
benefit. X. Commencement of Corporate Existence
(Section 18, RCC)
Redeemable Shares
The determination as to when a corporation
Shares issued by a corporation subject to commences to exist is reckoned with at the
redemption as may be provided by the time of the issuance of its certificate of
terms of the subscription contract. incorporation or registration. (It is not
Redeemable shares may be reacquired absolute statement) because it has
regardless of the existence of unrestricted exceptions:
of retained earnings. Corporate existence of a corporation
commences from the issuance of its
Treasury Shares
certificate of registration, except:
(Section 9) Must be issued and fully paid 1. Corporations created under a special law.
before acquisition by the corporation 2. Corporation Sole (Sec 108, RCC)
XPNs(110)
Founders Share
XII. Corporation by Estoppel
Gives certain rights and privileges not
enjoyed by the other stockholders. A corporation may exist on the ground of
Limitations: estoppels by virtue of the agreement,
Right to vote and be voted as a BOD it must admission, or conduct of parties, such that
be for limited period not to exceed five (5) they will not be permitted to deny the fact
years. of the existence of the corporation.
Applies to person who misrepresents that
IX. Grounds for Disapproval (See Section 16, there is a corporation.
RCC)
Does the law on Corporation by estoppels
Grounds stated therein are not exclusive. applies to third parties?
(e.g. corporate name is not legally
=yes, but only when he tries to escape liability
permissible)
on a contract from which he has benefited on
XI. De Facto Corporations the irrelevant ground of defective corporation.
XIII. Corporate Organization (Section 21) *So the Delinquent Corporation is given by the law
a chance to operate again and resume business so
Failure of corporation to organize and that it certificate of registration will not be revoke.
commence its business within 5 years
would result in its automatic dissolution Question: Whose electing a corporate officers in
(certificate of registration is deemed corporation?
revoked). After the election of BOD there must be
What are the activities that are considered as formally organize and elect corporate
“organization” activities: officers.
Q: What are the requirements in order for a The stockholder C nominated stockholder A for the
stockholder to be elected or to be voted as a BOD? possession of BOD. Now here comes stockholder D,
he oppose the nomination of stockholder A. He
In Sec 23. A director or trustee must said Stockholder A is not qualify to be a BOD
possess all the qualification and none of the because he already sold his shares of stock to
disqualification provided under the revised Stockholder B.
corporation code. Those are the
requirement in order for a person to be Q: Was stockholder D was correct in saying that
voted or elected as BOD. Stockholder A is not qualify to be a BOD?
2. He must not possess all the disqualification set What’s with A which qualify him to be a BOD?
forth in the RCC
He has legal title because the shares are still Because without a quorum there can be no
named with him in shares of stock in the valid meeting. It applies not only under the
books of corporation. corporation code but in any kind of meeting
when there is a requirement to vote.
So in our scenario Stockholder A possess the legal
If it has a requirement to vote also requires
title of the shares of stock while the beneficial
that there must be a quorum. Meaning the
ownership of the shares of stock belong to
majority of those persons who should be in
stockholder B. B is only beneficial owner. So B only
the meeting must be represented during
pay to get the shares of stock. So He is the
the vote. So it is needed to have a quorum
beneficial owner of the shares of stock previously
usually in a meeting.
owned by A.
Q: under the revised corporation code? What is
When we are talking about qualification of
the required quorum in a meeting?
BOD pertaining to owning a shares of stock
we are talking about ownership which is stockholders representing a majority of the
legal and not beneficial. He need to be a outstanding capital stock or a majority of
legal owner or the legal title must be the members in the case of non stock
possessed by that stockholder and he is corporation. (Sec.51)
qualified to be a BOD.
Q: what are the disqualifications of a BOD?
A is still the legal owner of the shares of
stock. sec. 26
Q: What are the corporate powers that a BOD can One corporate officer can hold 2 position
exercise. concurrently. As long as he cannot be Pres-Sec.and
Pres- Treasurer. So he can be Sec-Treasurer?
1. Implied Powers
Pres-Treasurer. (Sec.122) In one man
2. Incidental Powers
corporation it is allowed by law. The single
3. Express Powers stockholder who is also the president can
also be a treasurer at the same time. That is
Q: When are the instances where a stockholder
the exception.
considered as present during a corporate
The prohibition is absolute. That a president
meeting?
cannot be a secretary at the same time.
It must be with the approval written in the
BOARD OF DIRECTORS /TRUSTEES AND
bylaws or by the majority of the BOD.
OFFICERS
Q: What is quorum?
POWERS OF THE BOARD
It is the required minimum number of
The Revised Corporation Code vests unto
persons in a meeting.
the BOD or BOT the authority to exercise
corporate powers, conduct all business and
control and hold the properties of the
corporation.
Q: Why quorum is important?
Based from the foregoing, the BOD or BOT See Section 26 of the Revised Corporation
is considered as the supreme authority in Code.
matters of management of the business
affairs of the corporation. ELECTION AND VOTING
The equitable principle therefore is that the In order to have a valid election the
stockholders may have all the profits but Quorum required for the said election must
shall turn over the management of the be obtained.
enterprise to the BOD. Quorum is the required minimum number
of persons that should appear to have a
DELEGATION OF POWER OF THE BOD/BOT
valid meeting
Although Corporate Powers are exercised Under Section 51, of the RCC:
by the Board, such powers however, may Quorum in Meetings. – Unless otherwise
be delegated to either an executive provided in this Code or in the bylaws, a
committee or corporate officers of the quorum shall consist of the stockholders
Corporation. representing a majority of the outstanding
The general rule is that a corporation is capital stock or a majority of the members
bound by the acts of its corporate officers if in the case of non stock corporations.
they act within the scope of an apparent
When a person is considered present during a
authority.
meeting for the Election of BOD/BOT?
REQUIREMENTS TO BE A BOD/BOT
1. When he appears personally
In order to be elected and qualified as a
2. When he appears by proxy provided that the
BOD/BOT, a person must possess all the
proxy has a written authority coming from person
Qualification and none of the
whom he represents.
Disqualification provided for under the
Revised Corporation Code. 3. When he appears through remote
communication or in absentia provided it is
QUALIFICATIONS (RCC)
authorized by the bylaws or by a majority of the
1. Must be a holder of at least one (1) BOD of the corporation.
shares of stock of the corporation in their
REQUIRED FORM IN VOTING DURING
own name (meaning it must be recorded in
ELECTION
the books of the corporation)
2. Such other qualification which is provided No required form unless a stockholder or
in the by laws of the corporation provided member requests that the voting be made
that such corporation cannot do away with through ballot
first requirement stated above.
CUMULATIVE VOTING
Total Votes that “A” may cast = 500,000 (100,000 NON ELECTION
shares x 5)
There is Non Election of BOD/BOT when:
1. No election is actually held. remind you the authority to report such
2. The owners of majority of the thing is latch with the corporate secretary
outstanding capital stock or majority of the however the responsibilities can be given to
members entitled to vote are not present in any other corporate officer. So kapag hindi
person, by proxy, or through remote nagreport violation ng RCC and any person
communication or not voting in absentia at who is responsible to report such matter
the meeting, maybe held civilly. Civilly liable ibigsabihin
pede magbayad ng danyos and he may also
What will happen if there is Non Election?
be criminally liable.
=Nangyayari naman yung Non Election Yung violation ng RCC is a criminal act.
minsan walang nangyayaring election of the Pedeng makulong dyan kasi special law yan.
board of directors. So when are those It is shall be reported to the SEC within 30
instances? Na walang nangyayaring election days from the date of the scheduled
election.
1. Kapag walang election na naheld. There is The report shall specify a NEW date for the
no actual election. election which shall not be later than 60
2. Ibigsabihin di nameet yung required days from the scheduled date.
quorum for the meeting. That will result to =yung 60 days is from the time na hindi
non election. natuloy yung election yun yung
Owners of majority of the outstanding computation non same with the 30 days
capital stock. When we are talking about requirement of report it.
voting kapag nagvovote ng BOD. Only those If no new date is assigned, or the
shares of stock which are entitled to vote rescheduled election, the SEC shall take
can vote. Kapag hindi entitled to vote control of the election.
cannot vote. Remember yung statement = ibigsabihin walang nangyaring election
under section 6. Those are the only times despite the rescheduling what will happen
that a shares of stock which is not entitled to that is that the SEC will take over the
to vote can vote those are the only election of BOD. Sila na ang
instances other than that kapag may magpapaelection.
requirement ng vote ang isang stockholder If the Election is controlled by the SEC,
the law presumes or the law states that it Notwithstanding any provision of the
only pertains to those stockholders or articles of incorporation or bylaws to the
shares of stock which are entitled to vote. contrary, the shares of stock or
The fact of Non Election shall be reported to membership represented at such meeting
the SEC within 30 days from the date of the and entitled to vote shall constitute a
scheduled election. quorum for purposes of conducting an
=The fact of Non Election shall be reported election under this section.
to the comission and please take note the =ang mangyayari kapag SEC controlled na
word SHALL kasi ibigsabihin niyan it is a those stockholder or members which are
mandatory requirement. So what will entitled to vote who appears in the meeting
happen kapag hindi nagreport? That will for purposes of electing a BOD will now
constitute a violation of the RCC and to constitute a quorum. The stockholders
representing the majority of the not mandatory. Ibigsabihin pedeng ideligate
outstanding capital stock and the majority sa member ng non stock corporation. As
of members entitled to vote must be long as it is written in the AOI and by laws
present yun ang requirement for quorum. of the corporation.
However kapag SEC controlled na wala ng Exception na hindi BOD yung mag eelect ng
ganong quorum pedeng less than the corporate officers
majority ang mag appear and it will still 1. In a close corporation
constitute as a quorum. For example 2. Yung sinabi kanina about non stock
tatlong stockholders lang sabihin natin ang corpo. (Sec 91, RCC)
nirerepresent lang non is 15%. Regardless The following are the officers to be elected.
magkakaroon na ng quorum at pede na 1. The President who must be a Director
silang mag elect ng BOD. 2. Treasurer who must be a resident
Q: pwede ka bang mag elect ng BOD na 3. Secretary who must be a citizen and
hindi present sa isang meeting? Lets say resident of the Philippines
hindi ka talaga present you didnt attend by 4. Other officers provided in the bylaws.
proxy by through remote. Any two or more position maybe held at the
= pwede kasi walang batas na nagsasabing same time, except President and Secretary,
hindi. The requirement only is that it must and President and Treasurer subject to the
be with the consent of BOD to be elected or provision under One Person Corporation.
to be voted to. Yung pagkanyang Any two or more position maybe held at the
nomination must be with his consent. Kasi same time, except Pres-Secretary as to that
yung nomination of BOD it is a personal its an absolute rule walang instance under
matter kailangan merong consent mo. So the RCC that the position of Pres and Sec
pwede. maybe held at the same time. Also Pres-
CORPORATE OFFICERS Treasurer cannot be held simultaneously
In a stock corporation, the RCC requires the subject to the exception provided under the
BOD to elect the said officers. provision of One man corporation.
Exception: Q: Kapag ba nag eelect ng Corporate Officer
1. In a close corporation other corporate pede bang walang secretary?
officers may be elected directly by the =No. Ito yung minimum requirement of
stockholders. corporate officer Pres, Sec at Treasurer. The
2. In a non-stock corporation, if provided for corporation cannot do a way with this
in the articles of incorporation or the minimum requirement. Hindi pedeng
bylaws the corporate officers may be idisregard otherwise they will be violating
elected by the members (Section 91, RCC) the RCC. Minimum yan pwedeng dagdagan
== In a stock corporation the RCC requires pero di pedeng bawasan.
that it must be the BOD who must elect. It
is a mandatory upon them to elect a
corporate officer. However that only VALIDITY AND BINDING EFFECT OF ACTIONS
pertains to stockcorporation. Sa nonstock OF CORPORATE OFFICERS
corporation although it is a general rule that To have a valid corporate act, the decision
BOT may elect the corporate officers it is of at least a majority of the directors or the
trustees present at a meeting at which present, 4 (majority) votes
there is a quorum is required. Election of corporate officers = if 6 is
= Ang ibigsabihin kelangan para magkaroon present, all shall vote in favor of electing a
ng corporate act ay first is quorum second corporate officer;
there must be a vote of majority of the BOD If 7 is present, only 6, Majority of 10.
present in such meeting where there is a =Base on the stock alone, how many should
quorum. constitute a quorum? =6. The number
Hindi absolute ang rule na toh kasi when divided by 2 plus 1
you are trying to elect corporate officer the Kapag 11 yung majority is 7. Kasi 6 is not
other requirement aside from quorum it is the majority kasi ang required is 6.5 kaya 7.
required that the vote of the majority of all Kapag silent ang AOI at by laws ganon lang
the BOD or BOT. The number divided by 2 plus 1.
=Sec 25,. Dati may isang paragraph dyan Quorum for board meeting= atleast 6 must
which states the required quorum in order be present.
for a BOD to execute or perform a valid Election= all kasi out of 10 the majority is
corporate act. Pero wala na ngayon. Yan always 6 that is the required minimum
yung required quorum na nakalagay sa Old majority.
corporation code. 7 ba ay majority? Yes
So wala na bang required quorum para 8 is a majority? Yes and 9 but 6 is the
magkaroon ng valid corporate acts? minimum majority.
= meron parin pero nasa Sec 52 na ng RCC. What will happen if the required vote and
Dun sa regular meetings and special quorum is not obtained?
meetigs andon na yung required quorums Any corporate acts performed by the BOD
to perform a valid corporate acts. will not bind the Corporation unless the
Except for the election of corporate officers corporate act is subsequently ratified,
which shall require the vote of the majority expressly or impliedly.
of ALL the members of the board. =The corporate act will not bind the
Quorum required during board meeting – Corporation that is the general rule because
Unless the AIO or bylaws provides for a it is subsequently ratified by the
greater majority, a majority of the directors stockholders mababind ang corporation.
or trustees stated in the AIO shall constitute Subject to ratification yan.
a quorum. How do you ratify?
=Ang quorum for board meeting is majority =Either expressly or impliedly.
unless there is a greater majority provided Expressly pedeng verbal or written. Mahirap
under the AOI or by laws. yung is to implied ratification. So it happens
kapag if there is already a knowledge of the
Illustration: invalid corporate act and the stockholders
ABC Corp has 10 Board of Directors: despite knowledge still ignores the invalid
AIO or bylaws is silent as to quorum corporate act. And in fact,they benefited
Quorum for board meeting = at least 6 must from such invalid act. During that instance
be present the corporate act will be or for purposes
To have a valid corporate act = if 6 is
will be considered as invalid or ratified na. 3. The notice is only for the intention not
That is invalid. for the schedule of the meeting. Kailangan
REMOVAL AND FILLING UP OF VACANCIES muna may notice. (SEC27)
The Revised Corporation Code, as well OTHER REQUIREMENTS:
jurisprudence, authorizes the stockholders The meeting must be called by the
or members to remove or oust a corporate Secretary on order of the President or on
director with or without just cause, subject the written demand of the SH representing
only to the limitation that removal without majority of the outstanding capital stock or
cause may not be used to deprive minority majority of the members entitled to vote
stockholders or members of the right of If the secretary refused and there is no
representation. other person authorized to make a call, the
How do you ratify? same may be addressed directly to the SH’s
=Either expressly or impliedly. Expressly or members by any SH or member signing
pedeng verbal or written. Mahirap yung is the demand.
to implied ratification. So it happens kapag NEW PROVISION
if there is already a knowledge of the invalid Gives the SEC the right to remove or oust a
corporate act and the stockholders despite director, Motu proprio (in his own
knowledge still ignores the invalid discretion) or upon verified complaint of a
corporate act. And in fact,they benefited director or trustee who is:
from such invalid act. During that instance 1. Disqualified to be a director or trustee
the corporate act will be or for purposes but was elected; or
will be considered as invalid or ratified na. 2. Discovered to be disqualified subsequent
That is invalid. to election
REQUIREMENT FOR THE REMOVAL OF A VACANCIES IN THE OFFICE DIRECTOR OR
DIRECTOR TRUSTEE
1. The removal should take place at a Vacancies in the board a occurs:
Regular or Special meeting duly called for 1.When there is a removal of Director or
that purpose. Trustee under Section 27
2. The removal must be by the vote of the 2. By expiration of the term
stockholder representing 2/3 of the 3. Increase in the number of Director or
outstanding capital stock or the member Trustee
entitled to vote in case of a non-stock 4. Other ways of removal (death, incapacity,
corporation. etc.)
3. There must be a previous notice to the Pwedeng may iba pang way to remove.
stockholders or members of the intention For example is he will possess the
to propose such removal at the meeting disqualification of proving under the Section
either by publication or on written notice to 26 kapag nag possess siya ng any of
the SH or members disqualification automatic namareremove
=1. Ibigsabihin yung meeting must be for siya.
the removal. Yung purpose ng meeting is 1. WHEN THERE IS REMOVAL OF DIRECTOR
for the removal. UNDER SECTION 27.
2. The voting 2/3 or the majority.
-Vacancy may only be filled by the SH’s or There are times that by-laws will provide for
members in a Regular or Special Meeting a additional qualification appoint of a BOD.
So the power to fill up the vacancies is -Isa lang ang requirement para maging
lodge with the stockholders or members of BOD under RCC and that is He must own
the corporation. It may be held in regular or atleast one share of stock under his name
special meeting in the corporate books
-The meeting maybe held on the same day Sinabinatinna he must be of legal age or
of the meeting authorizing the removal, legal capacity. But the requirement in rcc is
provided that this fact must be stated in the isa lang and that is he must own atleast one
agenda and notice of said meeting share of stocks.
otherwise it maybe held any other day. Pwede bang dagdaganyung qualification
2. BY EXPIRATION OF THE TERM nayun?
- Vacancy may only be filled by the SH’s or The answer is YES.
members in a Regular or Special Meeting In order to fill up the vacancies he must
- The meeting election shall be held no later elected and qualify.
than the day of such expiration at a meeting How long was the term of a BOD “A”?
called for that purpose Nag expired yung term niya.
At the time of the expiration of the term of 1 year or 3 year lang or depende kung
the board of director dapatmakapag elect gaanokatagalyung term
na ng panibagong board of director. niyahindikasamayung term or period in
For example. which the BOD held the position in hold
A is a board of director. Yung expiration ng over capacity.
kanyang term niya ay Oct, 31,2020. So 3. INCREASE IN THE NUMBER OF DIRECTOR
tomorrow nayun. So dapatyungmga OR TRUSTEE
stockholders or members must already - Vacancy may only be filled by the SH’s or
called for a meeting. Either today or much members in a Regular or Special Meeting
more earlier but not later than tomorrow - The meeting maybe held on the same day
kasiayun ang expiration ng kanyang term. of the meeting authorizing the increase,
So anoba ang board of directors in a hold provided that this fact must be stated in the
over capacity? notice of said meeting otherwise it shall be
if the term of such BOD has already expired held not later than 45 days from the time
but there is no other person or no other the vacancy arose
nominee which have been elected or Ang pagkakaibanila ng number 1 ay yungsa
qualified for the position of BOD. 1 walang period. Anytime pwedeniyaifill up
Meaning yung successor in interest of the yung vacancies which has been created by
BOD na nag expire ng term has been removal of board of directors.
elected and qualified 4. OTHER WAYS OF REMOVAL (DEATH,
Note: IT MUST BE ELECTED OR QUALIFIED INCAPACITY, ETC.)
Not only that the stockholder must elect - Maybe filled by the vote of at least
such board of directors kailangan mag majority of the remaining directors or
qualify din siya. trustees , if still constituting a quorum,
otherwise it shall be filled up the SHs or May isang exemption sa rule nayan. Na
members in a regular or special meeting wherein even without getting the required
Ang kailanganniyo lang tandan ay quorum pwede pa ring mag fill up ng
yungtatlokapagnagkaroon ng vacancies and vacancy ang BOD. At itoyun. If there is a
ang cause was not the 3 mention awhile emergency and such emergency will cause
ago ditonapapasoksa pang apat. And ang irreparable loss or damage to a corporation
requirement lang dito ay the remaining the RCC allows the BOD or the remaining
directors must still constitute a quorum, BOD which that's not constitute a quorum
and if that will happen to elect another BOD.
pwedenanilangifillupang vacancies. Ang
kailanganna lang nila ay majority votes of ANG KANYANG REQUIREMENT NIYA LANG
board of Directors. DYAN SA RCC AY THE DIRECTOR MUST
Otherwise stockholders na or members ang COME FROM THE OFFICERS OF THE
mag fifill up ng vacancy nayun. CORPORATION AND ALSO IS THAT IN
-The meeting be held not later than 45 days ORDER TO FILL UP SUCH VACANCY THE
from the time the vacancy arose REMAINING BOD OR MEMBERS MUST
Replacement DIRECTOR/TRUSTEE – is a UNANIMOUS VOTE.
director or trustee elected to fill a vacancy *dapatlahatsila mag aascendna that this
which shall serve only for the unexpired corporate officer shall be elected as a BOD.
term of the predecessor in office. Diba may tatlong instances na ang
*May replace director, may isang director stockholders lang ang pwede mag elect?
na di natapos ang kanyang term. Now, in those instances nag aapplybaItong
Gaanokatagal ang term ng BOD? 1 year emergency board?It applies. Dun
If Non-stock corporation? 3 years satatlonayun.
Pwede bang tagalan? No, it is mandatory. Kasi dito what the law wants to protect is
EMERGENCY BOARD = constituted when the that the corporation shall not suffer losses.
vacancy prevents the remaining directors That during emergency there is a vacancy at
from constituting a quorum and emergency kailangan mag decide ng BOD, kailanganifill
action is required to prevent grave, up ang vacancy in order to perform a valid
substantial, and irreparable loss or damage corporate act. These provision applies to
to the corporation. those 3. The ground for that vacancy is
Vacancy may temporarily filled from among material in this case.
the officers of the corporation by What is material? There is an emergency
unanimous vote of the remaining directors that a certain act needs to be performed
or trustees. and it can only be performed if there are
Diba kanina ang way lang para mag fill up members of BOD who can perform it
ng vacancies ng isang BOD is that it must be validly.
constitute by quorum in order to them to
fill up a certain vacancy. Kapagwalang Kapagtaposnayung emergency what will
quorum yung stockholder ang mag happen?
coconstitute. The emergency of BOD will now cease to be
a BOD. Kasi siya BOD lang siya for that
emergency. Once that emergency is already COMPENSATION OF DIRECTORS (SEC. 29)
gone, or the act pertaining to that Directors are not generally entitled to
emergency has been already performed receive any compensation, except for
he/she will ceased to be a BOD. reasonable per diems unless the by-laws so
Eto lang ba ang instances namatatanggal provide.
ang emergency BOD? The answer is No. = Directors are not generally entitled to
The other instance is wherein during if the receive any compensation, except for
time of emergency the corporation was reasonable per diems unless the by-laws so
able to elect another BOD for such provide.
vacancies. Ang Ang isang BOD is also a stockholders ng
mangyayariyungtinatawagnatinna corporation. And most of the time yanmga
emergency BOD will cease also to be a BOD. BOD nayan are considered as the majority
-MAG EXPIRE YUNG EMERGENCY OR THE stockholders of a corpo. Basically ang
ACT PERTAINING TO THE EMERGENCY HAS minamanage lang nila is yung business nila.
BEEN ALREADY HAPPEN However, the law provides that a director
-OR KAPAG MAY NA-ELECT can received reasonable per diem as
Paanofinifill up ang vacancy? provided for by-laws.
-By cumulative voting. Compensation and per diems
It is a matter of right kapag nag eelect ka ng =Maybe granted to directors by SH
isang director. So yung stockholders representing at least majority of the
kailangannilabumoto para mag elect ng outstanding capital at a regular or special
isang BOD. At kapag nag fifill up ka ng meeting.
vacancy nag eelect ka din ng isang BOD. Maybe granted to directors by SH
Since it is a matter of right it cannot be representing at least majority of the
denied. In stock corporation, thats the only outstanding capital at a regular or special
way to fill up a vacancy ang exception lang meeting.
dyan ay yung number 4 which is the other In the determination of per diems or
ways of removal wherein the BOD or compensation, the Director SHALL NOT
remaining BOD may fill up the vacancy on Participate.
their own as long as they constitute a Note: A DIRECTOR IS ALSO A
quorum. Pero the rest 1,2,3 ang nag fifill up STOCKHOLDERS.
at ang stockholders through votings. Kapag may mga voting na required ng mga
If a stock corporation, by using cumulative vote ng mga stockholder or concurrence ng
voting. And non-stock corporation walang mga stockholders. THEY ALSO VOTE.
cumulative voting but pwede din Wag niyongilalagaysaisipniyona ang isang
nilaiadaptyun. BOD ay ibasaisang stockholder or
The Emergency Director or Trustee shall yungmgarights ng stockholder ay
cease to be a director or trustee within a hindipwedengiexercise ng BOD. KASI THEY
reasonable time from the termination of ARE ALSO CONSIDERED AS STOCKHOLDERS.
the emergency or upon election of the As regards to the compensation to be
replacement director or trustee, whichever given to the BOD such compensation shall
comes earlier. not exceed 10% of the net income before
income tax of the corporation at ang basis Example. If you are a BOD, and you are
is yung net income before income tax in trying to enter into a contract with another
the preceeding year. person or corporation or other entity. It is
When we say reasonable it is subjective so your responsibility to make diligence. And if
what is reasonable for you might not be this BOD enter to a transaction without
reasonable for me. doing the required due diligence before
So, Who will determine if such is entering such transactions eto yung
reasonable? Kapagnagkaroon ng question sinasabing liable for gross negligence.
abt that and one will do with the other the Bad faith- there is an intent to deceived or
stockholders or directors ang mangyayari ay defraud. There was an intention
pupunta din sakorte. At ang korte din ang 3. Liable when he/she acquires any personal
magdedetermine kung what is reasonable or pecuniary interest in conflict with his/her
and what is not. duty as a director
Usually ang ibigsabihin ng per diems is for = For example, si BOD ay isang business
each day. So yung reasonable for diems is man dahil siya ay business man open siyasa
equivalent to the expenses that a director any kind of transaction. Now may isang
incurred by virtue of his position. corporation nasi B corporation. Si
Syemprekapag BOD ka nakikipag deal ka o Pedro/BOD ay director ni A corporation. Si B
nakikipag transact ka saibangkliyente and corporation ay may business opportunity
by doing that you are incurring obligation or para kay BOD.
expenses. So yung per diem nayan should Bawal niya ba tanggapin ang business
cover up for that expenses. Usually opportunity nayun?
reimbursement lang yan nirereimberse lang THE ANSWER IS NO. Walang prohibition so
yan na dapat nirereimberse lang ng per hindi siya bawal. Unless the by-laws will
diem na yan yung mga nagagastos ng mga require you that your services shall be full
BOD like hotels, meals or transportation time and you shall not engage in any other
expenses kasi it is in relation to the work of kind of business. So as a general rule hindi
BOD. However, hindi niya pwede icharge siya bawal.
yung corporation ng kanyang mga private However a thing is si A Corporation is
expenses. competitor of B corporation, Ngayon kapag
LIABILITY OF tinanggap ni Pedro yung job offer or this
DIRECTORS/TRUSTEES/OFFICERS opportunity galing kay B Corporation
1. for willingly and knowingly voting or indirectly kinocompeteniyasi A corporation.
assenting to patently unlawful acts of the And that's what we called conflict with
corporation interest.
= In order for a director to incur liability dito Liability is jointly and severally (solidary) for
sa situation na to kailangan there is a all damages resulting there from.
breach of trust. PROHIBITION AGAINST
2. Liable for gross negligence or bad faith in DIRECTORS/TRUSTEES/OFFICERS
directing the affairs of the corporation Shall not acquire interest adverse to the
=Gross Negligence - Failure to observe corporation in respect of any matter :
required diligence in a certain transaction
1. Which has been reposed to the D/T/O in least a majority of the independent
confidence by the corporation directors voting to approve the material
2. Upon which equity imposes a disability contract; and
upon themselves to deal in their own (e) In case of an officer, the contract has
behalf. been previously authorized by the board of
In case violated, D/T/O shall account for the directors.
profits which otherwise would have accrued Now, kapag lahat yan ay present the
to the corporation contract is absolutely valid. Hindi na siya
SELF-DEALING DIRECTORS (SEC. 31) voidable. Therefore, it cannot be annulled
Contracts of directors, his spouse, relatives anymore.
within the fourth civil degree of If any of the condition’s from (a) to (c) is not
consanguinity or affinity with his own present the contract may be ratified by the
corporation are voidable at the option of vote of the stockholders representing at
the corporation unless the following least 2/3 of the outstanding capital stock or
conditions are present: of at least 2/3 of the members in a meeting
As a rule yung contact na into by the called for the purpose
director and to his relatives which = if any of the conditions from a to c is not
provided in this section is valid. Although it present the contract is voidable. So
is voidable. Tandaan niyo na yung voidable kailangan mo siya iratified to be absolutely
contracts are valid until annul. However, it valid. Kapag kailangan mo siya iratified
can be annul kasi sabi ng batas it is kailangan mo yung vote ng atleast 2/3 of
voidable. the outstanding capital stock.
(a) The presence of such director or trustee Adverse Interest by the director or trustee
in the board meeting in which the contract must be fully disclosed in the meeting.
was approved was not necessary to
constitute a quorum for such meeting; INTER-LOCKING DIRECTORS (SEC. 32)
= But can he vote? Can the director vote? A director in one corporation who deals or
The answer is YES. Provided that na yung transact business with another corporation
kanyang vote is not a swing vote na of which he is also a director.
tinatawag. Yung swing vote na whether an There is no prohibition sa isang director to
act should be done or not be done. Kapag engage to other business. In fact pwede pa
ganon ang boto ng BOD nayun, the contract siyang maging BOD ng isa pang
will remain voidable. corporation. As long as there is no
(b) The vote of such director or trustee was prohibition under the by laws
not necessary for the approval of the As a rule contract is valid unless there is
contract; fraud, or the contract is not fair and
(c) The contract is fair and reasonable under reasonable.
the circumstances; If a director holds substantial interest in one
(d) In case of corporations vested with corporation and nominal interest in the
public interest, material contracts are other corporation/corporations, the
approved by at least two-thirds (2/3) of the requirement under Section 31 of the RCC
entire membership of the board, with at
shall apply insofar as the latter the adoption of new one
corporation/s are concerned. 4. The amendment or repeal of any
SUBSTANTIAL INTEREST resolution of the Board which by its express
Stockholding exceeding 20% of the terms is not so amenable
Outstanding capital stock is considered 5. Distribution of Cash Dividends to the
substantial shareholders
DISLOYALTY OF A DIRECTOR (SEC. 33) NEW PROVISION:
Duty of loyalty is violated in the following The board of directors may create special
instances: committees of temporary or permanent
1. When a director or trustee acquires nature and to determine the members’
personal or pecuniary interest in conflict term, composition, compensation, powers,
with his duty as such director. and responsibilities.
2. When he attempts to acquire or acquires
in violation of his duty, any interest adverse
to the corporation in respect to any matter
which has been reposed in him in
confidence, as to which equity imposes a
disability upon to deal in his own behalf.
3. When he by virtue of his office, acquires
for himself a business opportunity which
should belong to the corporation, thereby
obtaining profit to the prejudice of such
corporation.
Director must account and refund to the
corporation such profits.
EXECUTIVE COMMITTEE (SEC. 34)
How created?
1. By a provision in the by law to be
appointed by the Board.
2.Must consist of at least three (3)
members of the Board.
3. Only board members are allowed to be
appointed
Powers, functions and authority of the
executive committee are those that may be
delegated to it by the BOD or those specific
matters within the competence of the
board except:
1. Approval of any action which
shareholders approval is also required.
2. The filing up of vacancies in the Board
3. The amendment or repeal of by laws or