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Divina - Corporation Law
Divina - Corporation Law
Divina - Corporation Law
Divina
The decedent was not the owner of the rented property but
BUSINESS only of the shares of the corporation that owns the property.
because being an artificial person and having existence only At the time an unfair labor practice case was pending
in legal contemplation, it cannot experience physical against the corporation, its officers and stockholders
suffering or such sentiments as wounded feelings, serious organized a run-away corporation, engaged in the same
anxiety, mental anguish or moral shock which are the line of business, producing the same line of products,
causes of moral damages under the Civil Code. However, occupying the same compound, using the same pieces of
it may acquire goodwill or reputation of its own and if the machinery, buildings, laboratory, bodega and sales and
same is besmirched, the corporation may recover moral accounts departments used by the first corporation. It was
damages. held that this is another instance where the fiction of
separate and distinct corporate entities should be
Filipinas Broadcasting Network, Inc. v. AGO Medical and disregarded as the second corporation seeks the protective
Educational Center-Bicol Christian College of Medicine shield of a corporate fiction whose veil in the present case
(AMEC-BCCM) could, and should, be pierced as it was deliberately and
A radio broadcaster uttered libelous remarks against an maliciously designed to evade its financial obligation to its
educational center (calling it the dumping ground for employees.
intellectual misfits). The Supreme Court held that AMEC’s
claim for moral damages falls under item 7 of Article 2219 Times Transportation Company, Inc. v. Santos Sotelo,
of the Civil Code which expressly authorizes the recovery of et.al., G.R. No. 163786 (February 16, 2005)
moral damages in cases of libel, slander, or any other form The sale of the corporation’s franchise, as well as most of
of defamation. Article 2219(7) of the Civil Code does not its bus units, to a company owned by the daughter and
qualify whether the plaintiff is a natural or juridical person. family members of the controlling stockholder of the seller-
Therefore, a juridical person such as a corporation can corporation, right in the middle of a labor dispute, yielded
validly complain for libel or any other form of defamation and the conclusion that the transaction was made to remove
claim for moral damages. the corporation’s remaining assets from the reach of any
judgment that may be rendered in the unfair labor practice
Simex International, Incorporated v. Court of Appeals, G.R. cases filed against it.
No. 88013 (March 19, 1990)
Moral damages may also be awarded in case of tortious act Livesey v. Binswanger Philippines, G.R. No. 177493 (March
against the corporation. A corporation whose checks were 19, 2014)
dishonored by the drawee bank despite the availability of Piercing the veil of corporate fiction is warranted when a
funds and because of the negligence of the bank corporation ceased to exist only in name as it re-emerged
employees can recover moral damages for besmirched in the person of another corporation, for the purpose of
reputation. The standing of the corporation was reduced in evading its unfulfilled financial obligation under a
the business community because of the bank’s negligence. compromise agreement. Thus, if the judgment for money
claim could not be enforced against the employer
DOCTRINE OF PIERCING THE VEIL OF CORPORATE corporation, an alias writ may be obtained against the other
FICTION corporation considering the indubitable link between the
This applies in 3 areas: closure of the first corporation and incorporation of the
1. Defeat of public convenience cases other.
2. Fraud cases
3. Alter ego cases ALTER EGO TEST
Case law lays down a 3-pronged test to determine the
DEFEAT OF PUBLIC CONVENIENCE application of the alter ego theory, which is also known as
Sta. Monica Industrial and Development Corporation v. the the instrumentality theory, namely:
Department of Agrarian Reform Regional Director for a. Control, not mere majority or complete stock
Region III, et. al., G.R. No. 164846 (June 18, 2008) control, but complete domination, not only of
The sale of agricultural land covered by the agrarian reform finances but of policy and business practice in
law by the owner to a corporation owned and controlled by respect to the transaction attacked so that the
the same owner and his family is null and void. The corporate entity as to this transaction had at the
corporate vehicle cannot be used to shield the owner from time no separate mind, will or existence of its own;
the agricultural claims of the tenant-beneficiary. The veil of (3 areas – shares, finances, business practices)
corporate fiction ought to be pierced when it is used to b. Such control must have been used by the
subvert a public policy, in this case, the agrarian reform defendant to commit fraud or wrong, to perpetuate
policy. the violation of a statutory or other positive legal
duty, or dishonest and unjust act in contravention
FRAUD of plaintiff’s legal right; and
A.C. Ransom Labor Union-CCLU v. NLRC et.al., G.R. No. c. The aforesaid control and breach of duty must
L-69494 (May 29, 1987) have proximately caused the injury or unjust loss
complained of.
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MERCANTILE LAW | BUSINESS ORGANIZATIONS | Atty. Nilo T. Divina
as the corporation, whose veil the court wants to pierce, is sustained the levy, ruling that the corporation is an alter ego
given the opportunity to be heard and based on the hearing, of the lessee and the lessee – the natural person is the alter
albeit summary in nature, evidence exists to warrant the ego of the corporation. The lessee falsely represented
application of the doctrine. This is necessary to prevent himself as president of the corporation in the Deed of Sale
multiplicity of suits and save on expenses. Due process, when he bought the property at a time when the
after all, can be afforded to the corporation even without a corporation had not yet existed. Uncontroverted facts also
full-blown hearing. The Supreme Court has in fact ruled in revealed that the lessee and the corporation are one and
other cases that a party whose corporation is vulnerable to the same person: The lessee is the conceptualizer and
piercing its corporate veil cannot argue violations of due implementor of the corporation and the majority contributor
process. of the corporation. I/AME is basically the corporate entity
used by the lessee as his alter ego for the purpose of
Is the doctrine of piercing the corporate veil applicable shielding his assets from the reach of his creditors.
to a non-stock non-profit corporation and natural
persons?
Yes, the fact that the corporation involved is a non-stock 2. CLASSES OF CORPORATIONS
non-profit corporation does not by itself preclude the court a. AS TO THE EXISTENCE OF SHARES OF
from applying the equitable remedy of piercing the STOCK
corporate veil. The equitable character of the remedy i. Stock corporation
permits a court to look to the substance of the organization ii. Non-stock corporation
and its decision is not controlled by the statutory framework
under which the corporation was formed and operated. b. AS TO ORGANIZERS
While it may appear to be impossible for a person to i. Public
exercise ownership control over a non-stock non-profit ii. Private
corporation, a person can be held personally liable under
the alter ego theory if the evidence shows that the person c. AS TO FUNCTION
controlling the corporation did in fact exercise control even i. Public
though there was no stock ownership. ii. Private
In previous cases, the Supreme Court said that the doctrine e. AS TO LEGAL STATUS
of piercing the corporate veil has no application where the i. De Jure
purpose is not to hold the individual stockholders liable for ii. De Facto
the obligation to the corporation but on the contrary, to hold iii. By Estoppel
the corporation liable for the obligations of stockholders. iv. By Prescription
(Francisco Motors v. CA, G.R. No. 100812, Second
Division, June 25, 1999; Umali v. CA, G.R. No. 89561, f. AS TO PLACE OF INCORPORATION
September 13, 1990; Indophil Textile Mill Workers Union v. i. Domestic
Calica, G.R. No. 96490, February 3, 1992). ii. Foreign
It is created, among others, to own, hold and/or administer 1. Valid law under which it is incorporated
military reservations in the country and implement its 2. Bona fide attempt to incorporate
conversion to other productive use. 3. Use of corporate powers
It is NEITHER a stock nor a non-stock corporation but a Missionary Sisters of Our Lady of Fatima v. Alzona, et.al.,
governmental authority vested with corporate powers. G.R. No. 224307 (August 6, 2018)
The filing of articles of incorporation and the issuance of the
While it has an authorized capital of P100 Billion, it is not certificate of incorporation are essential for the existence of
divided into shares of stock. It has no voting shares. There a de facto corporation. In fine, it is the act of registration
is likewise no provision which authorizes the distribution of with the SEC through the issuance of a certificate of
dividends and allotment of surplus profits to BCDA incorporation that marks the beginning of an entity’s
stockholders. Hence, it is not a stock corporation. It does corporate existence.
not qualify as a non-stock organization because it is not
organized for any of the purposes mentioned under Section Are the stockholders of a de facto corporation liable as
87 of the RCC. general partners? Only to the extent of their subscriptions.
applies when a non-existent corporation enters into acquired a prior right to the use of such name, that
contracts or dealings with third persons. In which case, the the name has been declared not distinguishable from
person who has contracted or otherwise dealt with the non- a name already registered or reserved for the use of
existent corporation is estopped to deny the latter’s legal another corporation, or that it is contrary to law,
existence in any action leading out of or involving such public morals, good customs, or public policy.
contract or dealing. While the doctrine is generally applied e. It provides that the corporation shall have perpetual
to protect the sanctity of dealings with the public, nothing existence or a fixed term as may be indicated in the
prevents its application in the reverse, inf act, the very articles of incorporation.
wording of the law which sets forth the doctrine of f. There is no need to state that at least twenty-five
corporation by estoppel permits such interpretation. Such (25%) percent of the authorized capital stock above
that a person who has assumed an obligation in favor of a stated has been subscribed and that at least twenty-
non-existent corporation, having transacted with the latter five (25%) of the total subscription have been paid as
as if it was duly incorporated, is prevented from denying the this double 25% requirement under the OCC has
existence of the latter to avoid the enforcement of the been deleted.
contract. In this case, while the donation was accepted at g. There is a requirement of certification of receipt of the
the time the done was not yet incorporated, the subsequent paid-up portion of subscription by the Corporate
incorporation of the donee-corporation and its affirmation Treasurer.
of the recipient’s authority to accept on its behalf cured h. Since the requirement of Treasurer’s affidavit has
whatever defect that may have attended the acceptance of already been deleted under the RCC, the format for
the donation, applying the doctrine of corporation by the said affidavit is omitted as well.
estoppel under the Corporation Code.
Revisions on the amendment of articles of incorporation
The Supreme Court likewise stated that the donee could a. It appears that unless otherwise provided by the
not be considered a de facto corporation because, at the RCC or the corporation’s bylaws, the articles of
time of the donation, it was not registered with the SEC. incorporation of a non-stock corporation may be
The filing of articles of incorporation and the issuance of the amended by the vote or written assent of both the
certificate of incorporation are essential for the existence of trustees, by majority vote, and the members of the
a de facto corporation. corporation, by at least 2/3s, unlike under the OCC
where the option of written assent is limited to
To summarize then, an ostensible corporation when sued stockholders or members of the corporation.
on any transaction entered by it as a corporation or on any b. While the requirements for amendment of the
tort committed by it as such shall not be allowed to use its articles of incorporation are common for both stock
lack of corporate personality as a defense. and non-stock corporation, the provision on
requirements for a stock corporation was
Similarly, anyone who assumes an obligation to an separated from those of non-stock corporation. As
ostensible corporation as such cannot resist performance a consequence, it may be inferred that the remedy
thereof on the ground that there was in fact no corporation of appraisal right only applies to a stock
(Sec. 20, RCC) corporation.
of the corporation to adopt bylaws after interest who should constitute at least twenty
incorporation. percent (20%) of such Board.
2. On the contents of the bylaws, it included d. RCC enumerated the corporations that are vested
provisions on the mode of notice to the with public interest, to wit:
stockholders or members and the modes by which • Corporations covered by Section 17.2 of R.A.
they may attend meetings; the guidelines for setting No. 8799, otherwise known as “The Securities
the compensation of directors or trustees and Regulation Code,” namely those whose
officers, and the maximum number of other board securities are registered with the SEC,
representations that an independent director or corporations listed with an exchange or with
trustee may have which shall, in no case, be more assets of at least Fifty million pesos
than the number prescribed by the SEC; and other (P50,000,000.00) and having two hundred
matters as may be necessary for the promotion of (200) or more holders of shares, each holding at
good governance and anti-graft and corruption least one hundred (100) shares off a class of its
measures. equity shares;
3. It also allows the inclusion of an arbitration • Banks and quasi-banks, NSSLAs, pawnshops,
agreement in the bylaws. corporations engaged in money service
business, preneed, trust and insurance
By-laws are not binding on third parties. companies, and other financial intermediaries;
By-laws are effective upon approval of the SEC. and
• Other corporations engaged in businesses
Revision under the RCC on amendment of bylaws vested with public interest similar to the above,
It made it clear that the delegation of authority by the as may be determined by the SEC, after taking
stockholders or members to the board of directors or into account relevant factors which are
trustees to amend the bylaws must be embodied in a germane to the objective and purpose of
stockholders’ or members’ resolution. requiring the election of an independent
director, such as the extent of minority
May the bylaws reflect the actual delegation of authority to ownership, type of financial products or
the board of directors to amend the bylaws? No. delegation securities issued or offered to investors, public
is supposed to be temporary. interest involved in the nature of business
operations, and other analogous factors.
Is it permissible for the bylaws to provide quorum of e. It defines an independent director as a person who,
stockholders’ meetings which is less than a majority? Yes. apart from shareholdings and fees received from
the corporation, is independent of management
4. REMEDIAL RIGHTS and free from any business or other relationship
a. Individual suit which could or could reasonably be perceived to
b. Representative suit materially interfere with the exercise of independent
c. Derivative Suit judgment in carrying out the responsibilities as a
director. Independent directors must be elected by
the shareholders present or entitled to vote in
5. BOARD OF DIRECTORS AND absentia during the election of directors.
Independent directors shall be subject to rules and
TRUSTEES regulations governing their qualifications,
a. Repository of corporate powers disqualifications, voting requirements, duration of
b. Tenure, qualifications and disqualifications of term and term limit, the maximum number of board
directors memberships, and other requirements that the
c. Requirement of independent directors SEC will prescribe to strengthen their
d. Elections independence and align with international best
1. Cumulative voting practices.
2. Quorum
DOCTRINE OF CENTRALIZED MANAGEMENT
Revisions on the RCC Corporate power is vested in one body except in those
a. The term of a trustee was modified for a period not cases where approval of stockholders are required.
exceeding three years from its term of one year in
the OCC. Paul Lee Tan v. Paul Sycip, et.al., G.R. No. 153468 (August
b. There is no residence requirement for the members 17, 2006)
of the Board In other words, stockholders or members periodically elect
c. The RCC requires the election of independent the board of directors or trustees, who are charged with the
directors for a corporation vested with public management of the corporation. The board, in turn,
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MERCANTILE LAW | BUSINESS ORGANIZATIONS | Atty. Nilo T. Divina
periodically elects officers to carry out management HOW MANY VOTES ARE STOCKHOLDERS ENTITLED TO
function on a day-to-day basis. As owners though, the CAST? Such number of votes depending on his
stockholders or members have residual powers over shareholdings multiplied by directors to be elected
fundamental and major corporate changes. Acts of (cumulative voting in stock corporation)
management pertain to the board; and those of ownership,
to the stockholders or members. HOW MANY VOTES ARE MEMBERS OF NON-STOCK
CORPORATIONS ENTITLED TO CAST? May casts votes
BUSINESS JUDGMENT RULE for all candidates, but not more than 1 vote for each.
Questions of policy and management are in the discretion
and decision of the actors and officers of the corporation. Do the holders of founders’ shares have the right to be
voted as directors if their shares and votes are not enough
Provident International Resources v. Joaquin Venus, et.al., to be assured of a board seat? Yes.
G.R. No. 167041 (June 17, 2008)
The business judgment rule is not absolute. What are the allowable modes of voting for election of
directors or trustees?
It cannot be relied upon to support a request for a new 1. In person
stock and transfer book on the pretext that the original is 2. By proxy
lost (when in fact it is not) and declare entries in the 3. Remote communication/in absentia
supposed lost stock and transfer book as invalid.
When is #3 allowed?
Can the board of directors or trustees create positions or 1. If allowed by the by-laws of the corporation
committees? Yes. However, it cannot create an executive 2. When authorized by the Board
committee, and a corporate office, because these are 3. In corporations vested with public interest, even
required to be created by the by-laws. though not provided in the by-laws
TERM OF THE BOARD OF DIRECTORS REVISIONS ON THE RCC FOR CORPORATE OFFICERS
1 year. Holdover period is not part of the term, but of the a. The treasurer is required to be a resident.
tenure. Term is fixed by statute. Tenure is the actual b. It requires the appointment of a compliance officer
incumbency which can be shorter or longer than 1 year. for those corporations vested with public interest.
c. The provision on the determination of quorum of
Thus, if a hold-over director resigns, the vacancy is due to directors or trustees for the transaction of
the expiration of term and not resignation. Accordingly, the corporate business was moved from Section 24 to
vacancy can only be filled by the stockholders in a meeting Sec. 52 of the RCC. Likewise, the prohibition on
called for the purpose and not by the board of directors proxies during board meetings was moved to
even though the remaining directors may still constitute a Section 52 of the RCC.
quorum. d. The prohibition that one cannot act as president
and secretary or as president and treasurer at the
ELECTION OF DIRECTORS same time is now subject to an exception – if the
4. The right of each stockholder or member to nominate same is allowed in the RCC.
any director or trustee is subject to the exclusive right May the Board of directors create positions and offices?
reserved for holders of founders’ shares to be voted Yes, if Board is authorized by the by-laws.
as directors. Test: is this position provided for in the by-laws of the
5. When so authorized in the bylaws or by a majority of corporation?
the board of directors, the stockholders or members
may also vote through remote communication or in Wesleyan University-Philippines v. Guillermo T. Maglaya,
absentia: Provided, That the right to vote through such Sr., G.R. No. 212774 (January 23, 2017)
modes may be exercised in corporations vested with In other words, the creation of the position is under the
public interest, notwithstanding the absence of a corporation’s charter or bylaws, and that the election of the
provision in the bylaws of such corporations. officer is by the directors or stockholders must concur in
6. A stockholder or member who participates through order for an individual to be considered a corporate officer,
remote communication or in absentia shall be deemed as against an ordinary employee or officer. It is only when
present for purposes of quorum. the officer claiming to have been illegally dismissed is
7. It added a provision that the directors or trustees classified as such corporate officer that the issue is deemed
elected shall perform their duties as prescribed by law, an intra-corporate dispute which falls within the jurisdiction
rules of good corporate governance, and bylaws of the of the trial courts.
corporation.
When is the act of the officer of the corporation considered 1. The non-holding of elections and the reasons
the act of the corporation and therefore, valid and therefor shall be reported to the SEC within 30 days
enforceable against the corporation? from the date of the scheduled election. The report
1. Authorized by the by-laws shall specify a new date for the election, which shall
2. Authorized by the board of directors not be later than 60 days from the scheduled date
3. If ratified by the corporation (by acquiescence or if 2. If no new date has been designated, or if the
the corporation clothes that the officer is authorized rescheduled election is likewise not held, the SEC
and holds him out to the public as such) may, upon the application of a stockholder,
member, director or trustee, and after verification
DOCTRINE OF APPARENT AUTHORITY of the unjustified non-holding of the election,
A corporation is estopped from denying liability if it permits summarily order that an election to be held. The
its officer or agent to act within its authority and holds him SEC shall have the power to issue such orders as
out to the public as possessing such power to do those may be appropriate, including orders directing the
acts. issuance of a notice stating the time and place of
• Presupposes there is no board resolution the election, designated presiding officer, and the
record date or dates for the determination of
Games and Garment Developers v. Allied Banking stockholders or members entitled to vote.
Corporation, G.R. No. 181426 (July 13, 2015) 3. Should a director, trustee or officer die, resign or in
A bank is liable to the seller who transferred ownership of any manner cease to hold office, the secretary, or
his property in favor of its buyer after the seller relied on the the director, trustee or officer of the corporation,
letter of the bank manager that the buyer had an approved shall, within 7 days from knowledge thereof, report
real estate loan with the bank and guaranteed that in writing such fact to the SEC.
subsequent releases from the loan would be made directly
to the seller, but the manager released the loan instead to EMERGENCY QUORUM
the buyer who, however, failed, to pay the seller. Actual attendance shall constitute the required quorum
notwithstanding the attendance required in the by-laws of
TERP Construction Corp vs. Banco Filipino Savings and the corporation.
Mortgage Bank, G.R. No. 221771 (September 18, 2019)
Banco Filipino purchased a bond from TERP Construction REVISIONS ON THE RCC REGARDING
(“TERP”) and relied on TERP senior vice president’s (“SVP”) DISQUALIFICATIONS OF DIRECTORS, TRUSTEES, OR
apparent authority to promise interest payments over and OFFICERS
above the guaranteed 8.5% considering the SVP’s position Within 5 years prior to election or appointment, person was
in TERP. His apparent authority was further demonstrated convicted by final judgment of an offense punishable by
when TERP paid Banco Filipino what the SVP promised imprisonment of more than 6 years.
during the Bond’s term.
May the bylaws provide as a ground for disqualification
JURISPRUDENCE WHERE DOCTRINE OF APPARENT being a director or stockholder of a competing corporation
AUTHORITY WAS NOT APPLIED or representing an interest in conflict with or adverse to the
corporation? Yes, conflict of interest is a valid ground for
Philippine Race Horse Trainer’s Association, Inc. v. Piedras disqualification.
Negras Construction and Development Corporation, G.R. REVISIONS ON THE RCC REGARDING REMOVAL OF
No. 192658 (December 2, 2015) DIRECTORS OR TRUSTEES
While in the absence of a charter or bylaw provision to the 1. The SEC is given authority, motu proprio, or upon
contrary the president is presumed to have authority, the a verified complaint, and after due notice and
questioned act should still be within the domain of the hearing, to order the removal of a director or
general objectives of the company’s business and within trustee elected despite the disqualification, or
the scope of his or her usual duties. Here, the corporation whose disqualification arose or is discovered
is an association of professional horse trainers in the subsequent to an election.
Philippine horse racing industry organized as a non-stock 2. The removal of a disqualified director shall be
corporation and it is committed to the uplifting of the without prejudice to other sanctions that the SEC
economic condition of the working sector of the racing may impose on the board of directors or trustees
industry. It is not in its ordinary course of business to enter who, with knowledge of the disqualification, failed
into housing projects, especially not in such scale and to remove such director or trustee.
magnitude so massive as to amount to P101,150,000.00.
REVISIONS UNDER THE RCC ON DEALING WITH
REVISIONS ON THE RCC RELATING TO NON-HOLDING VACANCIES IN THE BOARD OF DIRECTORS OR
OF ELECTION AND CESSATION FROM OFFICE TRUSTEES
1. There are now fixed periods within which the not establish probable cause absent showing or personal
corporations must hold their elections to fill participation in any irregularity as regards approval of the
vacancies in the director or trustee positions, viz: loan.
o If the vacancy is due to term expiration, the
election shall be held no later than the day Donnina Halley v. Print well, Inc. G.R. No. 157549 (May 30,
of such expiration. 2011)
o If the vacancy arises as a result of removal It should be noted that the stockholders are not included in
by the stockholders or members, the the enumeration of persons who may be held personally
election may be held on the same day of liable. Stockholders are liable only to the extent of their
the meeting authorizing the removal. subscription unless they also act as directors, officers, or
However, this fact must be so stated in the agents of the corporation.
agenda and notice of the said meeting.
o For all other cases, the election must be REVISIONS UNDER THE RCC ON SELF-DEALING
held no later than 45 days from the time PROVISION
the vacancy arose. 1. It expands the coverage of self-dealing provision to
2. The RCC also introduced the concept of spouses and relatives within the 4th civil degree of
emergency board. consanguinity or affinity of the directors, trustees,
officers.
REVISIONS UNDER THE RCC ON COMPENSATION OF 2. In the case of corporations vested with public
DIRECTORS OR TRUSTEES interest, material contracts are approved by at least
1. Section 29 of the RCC clarified that directors or 2/3 of the entire membership of the board, with at
trustees shall not participate in the determination of least a majority of the independent directors voting
their own per diems or compensation. to approve the material contract.
2. It imposed an annual reportorial requirement in
relation to the total compensation of each of the REVISIONS UNDER THE RCC ON CORPORATE POWERS
directors or trustees for corporations vested with 1. Corporations under the RCC may have perpetual
public interest. existence.
2. Corporations are now expressly allowed to enter
Limit: 10% of the net income of the corporation into a partnership, joint venture, or any other
commercial agreement with natural and juridical
What are the instances when personal liability may persons.
attach to directors, trustees, or officers of the 3. It appears that there is no more prohibition for
corporation? domestic corporations to donate in favor of a
political party or candidate.
Heirs of Fe Tan Uy vs. International Exchange Bank, G.R.
No. 166282 (February 13, 2013) Powers of Board of Outstanding
Before a director or officer of a corporation can be held Corporation Directors Capital
personally liable for corporate obligations, the following Stock (or
requisites must concur: members,
1. The complainant must allege in the complaint that for non-
the director or officer assented to patently unlawful stock
acts of the corporation, or that the officer was guilty corporations
of gross negligence or bad faith; and )
2. The complainant must clearly and convincingly Sec. 15 – At least majority At least 2/3s
prove such unlawful acts, negligence, or bad faith. Amendment of of the board of the
Articles of outstanding
The president of the corporation cannot be held personally Incorporation capital stock
liable for gross negligence or bad faith if the complaint Sec. 23 – Election of At least
merely averred that he signed as a surety to secure the Directors majority of
obligation of the corporation, but which surety turned out to the
be spurious. outstanding
capital stock
Note: the grounds are exclusive. Sec. 24 – At least majority
Appointment of of the board
Presidential Commission on Good Government v. Hon. Ma. Corporate Officers
Merceditas Gutierrez, G.R. No. 189800 (July 29, 2018) Removal of At least majority
Relating to a criminal case, the Supreme Court said that Corporate Officers of the board
approval of a loan during the incumbency as a director does
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MERCANTILE LAW | BUSINESS ORGANIZATIONS | Atty. Nilo T. Divina
delegated by
stockholders
to the board
at least 2/3s
of the
outstanding
capital stock.
Revocation of
the
delegation
made to the
Board – at
least majority
of the
outstanding
capital stock.
Sec. 61 – Fixing the Majority of the Or at least
issued value of no quorum majority of
par value shares (if (pursuant to the
not fixed in the authority outstanding
Articles of conferred by the capital stock
Incorporation) Articles of
Incorporation or
the Bylaws)
Sec. 75 – Merger or At least majority At least 2/3s
consolidation of the board of the
outstanding
capital stock
Sec. 102 - At least majority At least 2/3s
Amendment of of the board of the
articles of outstanding
incorporation of a capital stock
close corporation
Sec. 134 – Voluntary At least majority At least
dissolution where no of the board majority of
creditors are the
affected outstanding
capital stock
Sec. 135 – voluntary At least majority At least 2/3s
dissolution where of the board of the
creditors are outstanding
affected capital stock