Title III: Board of Directors/ Trustees / Officers

3.1 The Board of Directors or Trustees

Doctrine of Centralized Management

-corporate powers of all corporations shall be exercised, controlled and held (business
and property) by the BOD or Trustees

* Tenure (1 year term/annual meeting/election)(Section 23)

* Hold-over (failure of a quorum (majority of stock/member) to have meeting to elect

new BOD, the directorate/current BOD holds over)

-BOD is the governing body of stock corporation

Business Judgement Rule

-Courts cannot undertaken to control the discretion of the BOD about administrative
matters/decisions (unless it is unconscionable/illegal and oppressive to the rights of the
minority)

Exept:

-provided by the Corporation Code

-BOD acted with fraud, negligence and in bad faith

-conflict of interest
Board of Director and Trustees

Beneficial owner – representative/registered name of stock, has the right to run for BOD

Naked owner – owned the stock, don’t have the right to run for election

Voting Trust Agreement (VTA)- passed the ownership of stock as a collateral to

creditor/trustee, trustee can be elected as director

3.4 Disqualification of Directors, Trustees, or Officers

Disqualification (cannot be elected)

1. Has been convicted by final judgement/imprisonment exceeding 6 years Or having

violation of the corporation code, but both must 5 years prior election to qualify

For the election, majority of the capital stock or members are present.

Example: A owns 100 shares, 5 directors must be elected. A is entitled to 500 votes
(100 shares x 5 directors)

Subscribed Shares=100 ; Paid-up shares=25 shares Votes=100

Delinquent stock -no voting rights/with unpaid subscription

3.2 Election of Directors or Trustees

Straight Voting – Number of votes directly proportionate to the number of directors. 500
votes = 100 votes each for 5 directors to be elected

Cumulative voting for One Candidate

Cumulative voting by Distribution – votes distributed

3.3 Corporate Officers, Quorum

Absolute Majority – a majority of all the directors or trustees

- A vote of majority of directors constituting quorum (majority) of who is

present

3.5 Removal of Directors or Trustees

Removal of Directors or Trustees

a. Having a vote of 2/3 of outstanding balance or 2/3 vote of members

b. BOD has no power to remove fellow BOD

3.6 Liability of Directors, Trustees, or Officers

Fiduciary Duties and Liability Rules

-their power are powers in trust

1. Duty of Obedience – BOD must adhere to laws. Ultra vires acts (excessive power)
2. Duty of Diligence

Watered Stocks – selling stock above par value

3.8 Disloyalty of a Director

Duty of Loyalty- you cannot have adverse interest to corporation

3.7 Dealings of Directors, Trustees, or Officers with the Corporation
Inter-locking directors - director of two different corporations
3.9 Executive Committee
IV. Powers of Corporations

Corporate Powers and Capacity Power to Extend or Shorten Corporate Term

Power to Increase or Decrease Capital Stock

Incur, Create, or Increase Bonded Indebtedness

- A loan secured for property

Power to Deny Pre-emptive Right

Sale or other Disposition of Assets Power to Acquire Own Shares

Power to Invest Corporate Funds in another Corporation or \ Business

Power to Declare Dividends

Power to Enter into Management Contract

Ultra Vires Acts of Corporations