Notes D - Board of Directors/Trustees/Officers: METHODS OF VOTING - Election of Directors (Sec. 23 RCCP)

NOTES D – BOARD OF DIRECTORS/TRUSTEES/OFFICERS
METHODS OF VOTING – Election of Directors (Sec. 23 RCCP)
Stockholders have the option to adopt any of the following:
1) Straight Voting – every stockholder ‘”may vote such number of shares as many persons as
there are directors” to be elected.
2) Cumulative Voting for One Candidate – a stockholder is allowed to concentrate his votes
and “give one candidate as many votes as the number of directors to be elected multiplied
by the number of his shares shall equal”.
3) Cumulative Voting by Distribution – a stockholder may cumulate his shares by
multiplying also the number of his shares by the number of directors to be elected and
distribute the same among as many candidates as he shall see fit.
Notes:
 Cumulative voting is not available in non-stock corporations.

 When so authorized in the bylaws or by a majority of the board of directors, the
stockholders or members may also vote through remote communication or in absentia:
 That the right to vote through such modes may be exercised in corporations vested with
public interest, notwithstanding the absence of a provision in the bylaws of such
corporations.
REMOVAL AND VACANCIES IN THE BOARD
Rules for Removal (Sec. 27, RCCP)
1) It must take place either at a regular meeting or special meeting of the stockholders
or members called for the purpose;
2) There must be previous notice to the stockholders or members of the intention to
remove;
3) The removal must be by vote of the stockholders representing 2/3 of Outstanding
Capital Stock or 2/3 of members.
4) Removal without cause may not be used to deprive minority stockholders or
members of the right of representation to which they may be entitled under Section
23 of RCCP.
5) The removal of a disqualified director shall be without prejudice to other sanctions
that the Commission may impose on the board of directors or trustees who, with
knowledge of the disqualification, failed to remove such director or trustee.
Filling-Up of vacancies in the Board
1. By stockholders or members - If vacancy results because of: (i) removal; (ii) expiration of term;
(iii) the ground is other than removal or expiration of term (e.g., death, resignation, abandonment)
where the remaining directors do not constitute a quorum; (iv) increase in the number of directors.
2. By the board - if remaining directors constitute a quorum – on cases not reserved to

stockholders or members.
Liability of Directors, Trustees or Officers (Sec. 30 RCCP)
Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts
of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the
corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors
or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.
Dealings of Directors, Trustees or Officers with the Corporation (Sec. 31 RCCP)
A contract of the corporation with (1) one or more of its directors, trustees, officers or their
spouses and relatives within the fourth civil degree of consanguinity or affinity is voidable, at the
option of such corporation, unless all the following conditions are present:
(a) The presence of such director or trustee in the board meeting when the contract was
approved was not necessary to constitute a quorum;
(b) The vote of such director or trustee was not necessary for the approval of the contract;
(c) The contract is fair and reasonable under the circumstances;
(d) In case of corporations vested with public interest, material contracts are approved by at
least two-thirds (2/3) of the entire membership of the board, with at least a majority of the
independent directors voting to approve the material contract; and
(e) In case of an officer, the contract has been previously authorized by the board of
directors.
Interlocking Directors:
Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be
considered substantial for purposes of interlocking directors.
Disloyalty of a Director (Sec. 33 RCCP)
Where a director, by virtue of such office, acquires a business opportunity which should
belong to the corporation, thereby obtaining profits to the prejudice of such corporation:
1. The director must account for and refund to the latter all such profits, unless the act has
been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the
outstanding capital stock.
2. Applicable even when the director risked one’s own funds in the venture.

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NOTES D – BOARD OF DIRECTORS/TRUSTEES/OFFICERS

METHODS OF VOTING – Election of Directors (Sec. 23 RCCP)

Stockholders have the option to adopt any of the following:

 Cumulative voting is not available in non-stock corporations.

REMOVAL AND VACANCIES IN THE BOARD

Rules for Removal (Sec. 27, RCCP)

Filling-Up of vacancies in the Board

2. By the board - if remaining directors constitute a quorum – on cases not reserved to

Dealings of Directors, Trustees or Officers with the Corporation (Sec. 31 RCCP)

Disloyalty of a Director (Sec. 33 RCCP)

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