TITLE III

SECTION 22 – THE BOARD OF DIRECTORS OR TRUSTEES OF A CORPORATION; QUALIFICATION

AND TERM
 BOD or trustees shall exercise the:
1.) corporate powers
2.) conduct all business
3.) control all properties of the corporation

 DIRECTORS- shall be elected for a term of 1 year from among the holders of stocks registered in
the corporation’s books.
 TRUSTEES- shall be elected for a term not exceeding 3 years from among the members of the
corporation.
 Each director and trustee shall hold office until the successor is elected and qualified.

 A director who ceases to own at least 1 share of stock or a trustee who ceases to be a member
of the corporation shall cease to be such.

 The board of the following CORPORATIONS VESTED WITH PUBLIC INTEREST shall have
INDEPENDENT DIRECTORS constituting at least 20% of such board:

1.) Corporations covered by the SECURITIES REGULATION CODE – namely those whose
securities are:
a.) registered with the Commission
b.) corporations listed with an exchange or with assets of at least P50M and
having 200 or more holders of shares, each holding at least 100 shares of a class of its equity
shares

2.)
a.) banks
b.) quasi- banks
c.) NSSLA’s – non stock savings and loan association
d.) pawnshops
e.) corporations engaged in money service business
f.) pre- need
g.) trust and insurance companies
h.) other FINANCIAL INTERMEDIARIES; and

3.) Other corporations vested with public interest as may be determined by the
Commission which requires the election of an independent director SUCH AS:
a.) extent of minority ownership
 b.) type of financial products
c.) securities issued or offered to investors
d.) public interest involved in the nature of business
e.) other analogous factors

INDEPENDENT DIRECTOR
 apart from shareholdings and fees received from the corporation, is independent of
management
 free from any business or other relationship which could or could reasonably be perceived to
materially interfere with the exercise of independent judgment in carrying out the
responsibilities as a director

 Must be elected by the shareholders present or entitled to vote in absentia during the election
of directors.

 Shall be subject to rules and regulations governing their:

1.) qualifications
2.) disqualifications
3.) voting requirements
4.) duration of term – term limit
5.) maximum number of board memberships
6.) other requireents that the Comission will prescribe TO STRENGTHEN INDEPENDENCE
and ALIGN WITH INTERNATIONAL BEST PRACTICES

SECTION 23 – ELECTION OF DIRECTORS OR TRUSTEES

 GR: Each stockholder or member shall have the right to nominate any director or trustee who
possesses all of the qualifications and none of the disqualifications
 XPN: When the exclusive right is reserved for holders’ or founders’ shares under Section 7

It must be for a limited period not to exceed 5 years from the date of incorporation: Provided, that such
exclusive right shall NOT be allowed if its exercise will violate the Anti- Dummy Law or the Foreign
Investments Act of 1991.

 At all elections of directors or trustees there must be PRESENT the– either in person or through
a representative authorized to act by written proxy
1.) OWNERS OF MAJORITY OF THE OUTSTANDING CAPITAL STOCK
2.) MAJORITY OF THE MEMBERS ENTITLED TO VOTE

 STOCKHOLDERS OR MEMBERS may also vote IN ABSENTIA if:

 authorized in the by laws or by a majority of the BOD – NO NEED FOR AUTHORIZATION
if corporation vested with public interest.

 A stockholder or member who participates through remote communication or in absentia , shall

be DEEMED PRESENT for purposes of QUORUM.

 The election must be by ballot IF REQUESTED by any stockholder or member.

 IN STOCK CORPORATIONS
-Stockholders entitled to vote shall have the right to vote the number of shares of stock
standing in their own names in the stock books of the corporation at the time fixed in the by
laws or if none- at the time of election. SAID STOCKHOLDER MAY:

1) Vote such number of shares for as many persons as there are directors to be elected
2.) Cumulate said shares and give 1 candidate as many votes as the number of directors to be
elected MULTIPLIED by the number of shares owned; or
3.) Distribute them on the same principle among as many candidates as may be seen fit:
PROVIDED;
a.) the total number of votes cast shall NOT EXCEED the number of shares owned by the
stockholders as shown in the books of the corporation multiplied by the whole number of
directors to be elected: PROVIDED that no delinquent stock shall be voted.

 MEMBERS OF NON- STOCK CORPORATIONS

may cast as many votes as there are trustees to be elected but may not cast more than
1 vote for 1 candidate – UNLESS otherwise provided in the articles of incorporation or in the by
laws.

 Nominees for directors or trustees receiving the highest number of votes shall be declared
elected.

1.) If no election is held

2.) Owners of majority of the outstanding capital stock or majority of the members entitled to vote are
NOT present (person or proxy or remote communication or in absentia)

SUCH MEETING MAY BE ADJOURNED and corporation shall proceed – Section 25 – REPORT OF
NON- HOLDING OF ELECTION

The non- holding of elections and the reasons therefor shall be reported to the Commission
within 30 days from the date of the scheduled election.

-Report shall specify a new date for the election, which shall not be later than 60 days from the
scheduled date.

1.) If no new date has been designated

2.) If the rescheduled election is likewise not held, the Commission may, upon the application of a:
 a.) stockholder

b.) member

c.) director or trustee

and AFTER THE VERIFICATION of the unjustified non- holding of the election, SUMMARILY order that
an election be held. The Commission shall have the power to issue appropriate orders regarding:

a.) time and place of election

b.) designated presiding officer

c.) record dates for the determination of stockholder or members entitled to vote .

DIRECTORS OR TRUSTEES ELECTED SHALL PERFORM THEIR DUTIES AS:

1.) Prescribed by law

2.) Rules of GOOD CORPORATE GOVERNANCE

3.) By laws of the Corporation.

^^FIDUCDIARY DUTY OF OBEDIENCE

1.) duty to act intra vires (INSIDE THE POWERS)

2.) to act within authority

SECTION 24 – CORPORATE OFFICERS

Immediately after their election, the directors of a corporation must formally organize and elect:

a.) President- who must be a director

b.) Treasurer- who must be a resident

c.) Secretary- citizen and resident of the PH

d.) Such other officers as may be provided in the BYL LAWS.

e.) COMPLIANCE OFFICER – only if the corporation is vested with PUBLIC INTEREST.

GR: The same person may hold 2 or more positions concurrently.

XPN: (xpn to xpn – unless allowed by this Code)

1.) President – secretary

2.) President – treasurer

  The officers shall manage the corporation and perform such duties as may be provided in the by
laws and/ or as resolved by the BOD.

SECTION 25 – (OTHER PARTS) – REPORT OF ELECTION OF DIRECTORS, TRUSTEEES AND OFFICERS AND
CESSATION FROM OFFICE

REPORT OF ELECTION:

 Within 30 days AFTER the election of the DTO of the corporation, the SECRETARY (or other
officer) shall submit to the Commission the: NNSR
1.) names
2.) nationalities
3.) shareholding
4.) residence address of the ELECTED.

 The shares of stock or membership represented at such meeting and entitled to vote shall
constitute a quorum for purposes of conducting an election.

CESSATION FROM OFFICE

Should a DOT die, resign, or in any manner cease to hold office, the SECRETARY or DOT of the
corporation, shall, within 7 days from knowledge thereof  REPORT IN WRITING SUCH FACT TO
THE COMMISSION.

SECTION 26 – DISQUALIFICATION OF DOT

If within 5 years prior to the election or appointment, the person was:

1.) Convicted by final judgmenet:

a.) of an offense punishable by imprisonment for a period exceeding 6 years;

b.) violating the RCC

c.) for violating the SECURITIES AND REGULATIONS CODE

2.) Found administratively liable for any offense involving FRAUDULENT ACTS; and

3.) By a FOREIGN COURT or EQUIVALENT FOREIGN REGULATORY AUTHORITY for acts, violations or
misconduct similar to those enumerated in paragraphs A and B.

*every corporation has the right to provide for additional qualifications and disqualifications

*WHO MAY DO SO?

1.) Commission

2.) Philippine Competition Commission

SECTION 27 – REMOVAL OF DIRECTORS OR TRUSTEES

1.) STOCK - vote of the stockholders holding or representing at least 2/3 of the outstanding capital
stock

2.) NON STOCK- 2/3 members entitled to vote

PROVIDED THAT:

1.) Such removal shall take place either at a regular meeting of the corporation OR

2.) At a special meeting called for that purpose

Must be called by the SECRETARY or ON ORDER OF THE PRESIDENT or upon WRITTEN DEMAND
of the stockholders representing or holding at least a majority of the outstanding capital stock OR a
majority of the members entitled to vote.

IF NO SECRETARY or REFUSES – the stockholder or member of the corporation SIGNING THE

DEMAND may call for the meeting by directly addressing the stockholders or members.

3.) AFTER PREVIOUS NOTICE to stockholder or members of the intention to propose such removal at the
meeting.

 NOTICE of the time and place of such meeting + INTENTION to propose such removal must be
given by:
1.) publication
2.) or by written notice

 REMOVAL MAY BE WITH OR WITHOUT CAUSE.

If WITHOUT CAUSE- may not be used to deprive minority stockholders or members of
the right or representation to which they are entitled under SECTION 23.

 Commission shall order the REMOVAL of the director or trustee elected despite the
disqualification OR whose disqualification arose or is discovered SUBSEQUENT TO THE ELECTION
1.) motu proprio OR upon verified complaint
2.) after due notice; and
3.) hearing

 The removal shall be without prejudice to other sanctions that the Commission may impose on
the BOD or TRUSTEES who, with knowledge of the disqualification, failed to remove the
director or trustee.
SECTION 28 – VACCANCIES IN THE OFFICE OF DIRECTOR OR TRUSTEE; EMERGENCY BOARD

All elections under Section 28 shall observe the procedures under Section 23 and 25

 Any vacancy other than:

1.) removal
2.) expiration of term
May be filled by the vote of at least a MAJORITY OF THE REMAINING DIRECTORS OR TRUSTESS
--- if still constituting a QUORUM. Otherwise, fill it through a regular or special meeting.

VACANCY IS DUE TO TERM EXPIRATION:

Election shall be held no later than the day of such expiration at a meeting called for that
purpose.

VACANCY IS DUE TO THE REMOVAL BY THE STOCKHOLDERS OR MEMBERS:

Election – same day of the meeting authorizing the removal

-such fact must be stated in the agenda and notice of said meeting

VACANCY IN ALL OTHER CASES:

Election – 45 days from the time the vacancy arose.

 A director or trustee elected to fill a vacancy shall be referred to as a REPLACEMENT DIRECTOR

OR TRUSTEE and shall serve only for the unexpired term of the predecessor in office.

WHEN VACANCY PREVENTS QUORUM AND EMERGENCY ACTION IS REQUIRED TO PREVENT GRAVE
LOSS OR DAMAGE

 The vacancy may be temporarily filled from among the officers of the corporation by unanimous
vote of the remaining directors or trustees.
 Emergency action shall be LIMITED to the emergency action necessary.
 Corporation must NOTIFY THE COMMISSION WITHIN 3 DAYS from the creation of the
emergency board – STATING THE REASON for its creation.

Term shall cease: (WHICHEVER COMES EARLIER)

1.) within a reasonable time from the termination of the emergency ;or

2.) upon election of the replacement director or trustee

TO FILL BY REASON OF AN INCREASE IN THE NUMBER OF DIRECTORS OR TRUSTEES

1.) ONLY by an election at a regular meeting; OR

2.) a special meeting of stockholders or members duly called for the purpose; OR

3.) in the same meeting authorizing the increase of directors or trustees if so stated in the
notice of the meeting

SECTION 29 – COMPENSATION OF DIRECTORS OR TRUSTEES

 May be fixed in their by- laws

 IF NOT, the directors or trustees shall NOT receive any compensation in their capacity as such,
EXCEPT for reasonable PER DIEMS: PROVIDED HOWEVER,
That the stockholders representing at least a majority of the outstanding capital stock or
majority of the members may GRANT directors or trustees with COMPENSATION and approve
the amount at a regular or special meeting.

 In no case shall the total yearly compensation of directors exceed 10% of the net income before
income tax of the corporation during the preceding year.

 Directors or trustees shall NOT participate in the determination of their own per diems or
compensation.

 CORPORATIONS WITH PUBLIC INTEREST shall submit to their shareholders and the Commission,
an ANNUAL REPORT of the total compensation of each of their directors or trustees.

SECTION 30 – LIABILITY OF DIRECTORS, TRUSTEES, OR OFFICERS

1.) wilfully and knowingly vote or assent to patently unlawful acts of the corporation; or

2.) who are guilty of gross negligence or bad faith in directing the affairs of the corporation

3.) acquire personal or pecuniary interest in conflict with their duty

JOINTLY AND SEVERALLY for all damages resulting therefrom suffered by the corporation, its
stockholders, or members and other persons.

 A DOT shall not (attempt to) acquire any interest adverse (which has been reposed in them in
CONFIDENCE) to the corporation – OTHERWSE, DOT shall be liable as a TRUSTEE for the
corporation and must account for the profits which otherwise would have accrued to the
corporation.
SECTION 31 – DEALINGS OF DOT WITH THE CORPORATION

 A contract of the corporation with 1 or more of its DOT or their spouses and relatives within the
4th civil degree of consanguinity or affinity is VOIDABLE, at the option of such corporation –
UNLESS:

1.) The presence of such director or trustee in the board meeting in which the contract was approved
was not necessary to constitute a quorum for such meeting:

2.) The vote of such director or trustee was NOT necessary for the approval of the contract;

3.) The contract is fair and reasonable under their circumstances

4.) CORPORATION WITH PUBLIC INTEREST- material contracts are approved by at least 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

5.) In case of an officer, the contract has been previously authorized by the BOD.

If any of the first 3 conditions^^ is absent, in case of a contract with a DOT, such contract may be
RATIFIED by:

1.) the vote of the stockholders representing at least 2/3 of the outstanding capital stock OR

2.) of at least 2/3 of the members in a meeting called for the purpose

PROVIDED, that full disclosure of the adverse interest of the directors or trustees
involved is made at such meeting AND the contract is fair.

SECTION 32 – CONTRACTS BETWEEN CORPORATIONS WITH INTERLOCKING DIRECTORS

GR: A contract (that is fair and reasonable) between 2 or more corporations having interlocking
directors shall NOT be invalidated on that ground alone – PROVIDED, that if the interest of the
interlocking director in 1 corporation is substantial and the interest in the other corporation or
corporations is merely nominal, the contract shall be subject to the provisions of the preceding section
insofar as the latter corporation/s are concerned.

XPN: fraud

 Stockholdings exceeding 20% of the outstanding capital stock shall be considered substantial for
purposes of interlocking directors.

SECTION 33 – DISLOYALTY OF A DIRECTOR

 Director, by virtue of such office, acquires opportunity which should belong to the corporation,
thereby obtaining profits to the prejudice of such corporation,

GR: The director must ACCOUNT FOR AND REFUND to the corporation ALL SUCH PROFITS
 XPN: Unless the act has been ratified by a vote of the stockholders owing or representing at
least 2/3 of the outstanding capital stock.

 Section 33 is applicable notwithstanding the fact that the director risked one’s own funds in
the venture.

SECTION 34 – EXECUTIVE, MANAGEMENT, AND OTHER SPECIAL COMMITTEES

 If bylaws provide, the board may create an executive committee composed of at least 3
directors – they may act by majority vote of all its members on specific matters as may be
delegated to it in the bylaws OR by majority vote by the board

XPN:

1.) approval of any action for which shareholders’ approval is also required

2.) filling of vacancies in the board

3.) amendment or repeal of bylaws or the adoption o

f new bylaws;

4.) amendment or repeal of any resolution of the board which by its express terms is not amenable or
repealable; and

5.) distribution of cash dividends to the shareholders.

 The BOD may create special committees of temporary or permanent nature and determine the
members’ term, composition, compensation, powers, and responsibilities.
TITLE IV – POWER OF CORPORATIONS

SECTION 35 – CORPORATE POWERS AND CAPACITY

1.) To sue and be sued in its corporate name

2.) To have perpetual existence UNLESS the certificate of incorporation provides otherwise;

3.) To adopt and use a corporate seal;

4.) To amend its articles of incorporation in accordance with the provisions of the Code

5.) To adopt bylaws --- not contrary to law, morals, public policy, and to amend or repeal the same

6.) IN CASE OF STOCK CORPORATIONS

a.) to issue or sell stocks to subscribers and

b.) to sell treasury stocks in accordance with the provisions of this Code

c.) admit members to the corporation IF IT BE A NON STOCK CORPORATION

7.) Purchase, take, sell, lease, pledge, mortgage, deal with such real and personal property – INCLUDING
SECURITIES AND BONDS OF OTHER CORPORATIONS, as the transaction of the lawful business of the
corporation may reasonably and necessarily require

8.) To enter into a PARTNERSHIP, JOINT VENTURE, MERGER, CONSOLIDATION, or ANY OTHER
COMMERCIAL AGREEMENT with natural and juridical persons

9.) To make reasonable donations – including those for the public welfare or for hospital etc.
 PROVIDED, that no foreign corporation shall give donations in aid of any political party or
candidate or for purposes of partisan political activity.

10.) To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers,
and employees; and

11.) To exercise such other powers as may be essential or necessary to carry out its purpose or purposes
as stated in the articles of incorporation

SECTION 36 – POWER TO EXTEND OR SHORTEN CORPORATE TERM

 A private corporation may EXTEND or SHORTEN its term:

-as stated in the articles of incorporation
-when approved by a majority vote of the BOD or trustees
-ratified at a meeting by the stockholders or members representing 2/3 of the
outstanding capital stock or its members

 Written notice of the proposed action + TIME AND PLACE of meeting shall be sent to
stockholders or members at their respective place of residence
 And must either be DEPOSITED to the addressee in the post office with postage prepaid;
 Served personally;
 ELECTRONICALLY

 IN CASE OF EXTENSION OF CORPORATE TERM

A DISSENTING STOCKHOLDER may exercise the right of appraisal under the conditions
provided in this Code. Right of appraisal- to demand appraisal and payment of the fair value of
his stocks from the corporation .

SECTION 37 – POWER TO INCREASE OR DECREASE CAPITAL STOCK; INCURE, CREATE OR INCREASE

BONDED INDEBTEDNESS – Require PRIOR APPROVAL (apply within 6 months from the date of approval
of the BOD and stockholders) OF THE COMMISSION; and PH Competition Commission (if appropriate)

 GR: No corporation shall increase or decrease its capital stock or incure, create or increase any
bonded indebtedness
 XPN: UNLESS approved by a majority vote of the BOD AND by 2/3 of the outstanding capital
stock at a stockholders’ meeting duly called for the purpose.

 Written notice of the TIME and PLACE of the stockholders’ meeting and the PURPOSE for said
meeting must be SENT to the stockholders at their places of residence

 Sent Personally
 ELECTRONIC MEANS – recognized as valid under the Commission’s rules.
A CERTIFICATE MUST:

1.) be signed by a majority of the dierctors of the corporation

2.) countersigned by the chairperson; AND

3.) secretary of the stockholders’ meeting, SETTING FORTH:

1.) That the requirements of this section have been complied with;

2.) The amount of the increase or decrease of the capital stock;

3.) In case of an INCREASE OF CAPITAL STOCK 

a.) the amount of capital stock OR number of shares of no- par stock (no face value) thereof actually
subscribed, the names, nationalities, and addressed of the persons subscribing;

b.) the amount of capital stock or number of no- par stock subscribed by each, and the amount paid by
each on the subscription in cash or property, or

c.) the amount of capital stock or number of shares of no- par stock allotted to each stockholder if
such increase is for the purpose of making effective stock dividend therefor authorized;

4.) Any bonded indebtedness to be incurred, created, or increased;

5.) The amount of stock represented at the meeting; and

6.) The vote authorizing the increase or decrease of the capital stock, or the incurring, creating,
or increasing of any bonded indebtedness.

 Copies of the certificate shall be kept on file in the office of the corporation.
 Filed with the Commission; and
 Attached to the original articles of incorporation.

AFTER APPROVAL BY THE COMMISSION + ISSUANCE OF ITS CERTIFICAT EOF FILING:

 The capital stock shall be deemed increased or decreased and the

 Incurring, creating, or increasing of any bonded indebtedness authorized, as the certificate of
filing may declare:
PROVIDED, that the Commission shall NOT accept for filing any certificate of increase of
capital stock UNLESS accompanied by a sworn statement of the TREASURER of the
corporation,
-showing that at least 25% of the increase in capital stock has been subscribed and that at least
25% of the amount subscribed has been paid in actual cash to the corporation or that property,
the valuation of which is equal to 25% of the subscription, has been transferred to the
corporation: Provided, further, that no decrease in capital stock shall be approved by the
Commission of its effect shall prejudice the rights of corporate creditors.
  Nonstock corporations may incur, create, or increase bonded indebtedness when:
1.) approved by a majority of the board of trustees and
2.) of at least 2/3 of the members in a meeting duly called for the purpose

 Bonds issued by a corporation shall be registered with the Commission, which shall have the
authority to determine the sufficiency of the terms thereof.

SECTION 38 – POWER TO DENY PREEMPTIVE RIGHT

GR: All stockholders of a stock corporation shall enjoy preemptive right to subscribe to all issues or
disposition of shares of any class, in proportion to their respective shareholdings

XPN: unless such right is denied by the articles of incorporation or an amendment thereto

PREEMPTIVE RIGHT SHALL NOT EXTEND TO SHARES:

1.) issued in compliance with laws requiring stock offerings or minimum stock ownership by the
public;

2.) shares issued in good faith with the approval of the stockholders representing 2/3 of the
outstanding capital stock, in exchange for property needed for corporate purposes or in payment of a
previously contracted debt.

*Aimed to maintain the existing ratio of the shareholder’s interest and voting power

*For a specifc period- if not made -> WAIVED

ISSUES OF DISPOSITIONS

Includes issuance of the unsubscribed shares that are part of the original capital stock and he
increase of capital stock. Not available if denied in the AOI or one of the limitations

SECTION 39 – SALE OR DISPOSITION OF ASSETS

 A corporation may, by a MAJORITY VOTE of its BOD or trustees, sell, lease, exchange, mortgage,
pledge, or otherwise dispose of its property and assets, UPON SUCH TERMS AND CONDITIONS
and for such consideration, which may be by:
1.) money
2.) stocks
3.) bonds
4.) other instruments for the payment of money or
5.) other property or consideration, as its board of directors or trustees may deem
expedient
  A sale of ALL or SUBSTANTIALLY ALL of the corporation’s properties and assets, including its
goodwill, MUST BE AUTHORIZED by the vote of the stockholders representing at 2/3 of the
outstanding capital stock, or at least 2/3 of the members – in a meeting duly called for the
purpose.

 NONSTOCK CORPORATIONS WHERE NO MEMBERS WITH VOTING RIGHTS – the vote of at least
a majority of the trustees in office will be sufficient authorization for the corporation to enter
into any transaction.

 The determination of W/N the sale involves all or substantially all of the corporation’s properties
and assets must be computed based on its NET ASSET VALUE – as shown in its LATEST
FINANCIAL STATEMENTS.
A sale or other disposition shall be deemed to cover substantially all the corporate
property and assets if thereby the corporation would be rendered incapable of continuing the
business or accomplishing the purpose for which it was incorporated.

 Written notice of the proposed action and of the TIME and PLACE for the meeting shall be
addressed to stockholders or members at their places of residence
1.) deposited to the addressee in the post office with postage prepaid
2.) served personally
3.) allowed by the bylaws or done with the consent of the stockholder
4.) SENT ELECTRONICALLY

PROVIDED, that any dissenting stockholder may exercise the right of appraisal under the
conditions under this Code.

 After AUTHORIZATION or APPROVAL by the stockholders,

The BOD may, nevertheless, in its discretion, ABANDON SUCH SALE, lease, or other
disposition of property SUBJECT TO THE RIGHTS OF THIRD PARTIES under any contract relating
thereto, without further action or approval by the stockholders or members.

 Nothing in Section 39 is intended to restrict the power of any corporation without authorization
to sell etc if the same is necessary in the usual and regular business; or if the proceeds of the
sale or other disposition of such property and assets shall be appropriated for the conduct of the
remaining business.

SECTION 40 – POWER TO ACQUIRE OWN SHARES

  Provided that the corporaton has unrestricted retained earning in its books to cover the shares
to be purchase or acquired, a stock corporation shall have the power to purchase or acquire its
own shares for a legitimate corporate purpose, including:

1.) to eliminate fractional shares arising out of dividends;

2.) to collect or compromise an indebtedness to the corporation --- arising out of unpaid subscription, in
a delinquency sale, and to purchase delinquent shares sold during said sale; and

3.) to pay dissenting or withdrawing stockholders entitled to payment for their shares

SECTION 41 POWER TO INVEST CORPORATE FUNDS IN ANOTHER CORPRATION OR BUSINESS OR FOR

ANY OTHER PURPOSE

 May do so – other than the primary purpose for which it was organized—WHEN:

1.) Approved by a majority of the BOD or trustees and

2.) ratified by the stockholders representing at least 2/3 of the outstanding capital stock, or

3.) by at least 2/3 of the members in the case of nonstock corporations – at a meeting duly called for
that purose.

 Notice of the proposed investment + TIME and PLACE of the meeting shall be addressed to each
stockholder or member at the place of residence—
1.) deposit in the post office with postage prepaid
2.) served PERSONALLY
3.) sent ELECTRONICALLY- subject to rules of commission + electronic daa message –
when allowed by law or done with the consent of the stockholders.

PROVIDED, that any dissenting stockholder shall have appraisal right as provided in this code.

PROVIDED, HOWEVER, that where the investment by the corporation is reasonably necessary to
accomplish its primary purpose as stated in the articles of incorporation, the approval of the
stockholders or members shall NOT be necessary.

SECTION 42 – POWER TO DECLARE DIVIDENS

 The BOD of a stock corporation may declared dividends out of the unrestricted retained earning
which shall be payable in cash, property, or in stock to all stockholders on the basis of
outstanding stock held by them: PROVIDED
1.) that any cash dividends due on delinquent stock shall first be applied to the unpaid
balance on the subscription plus costs and expenses,
 2.) while stock dividends shall be withheld from the delinquent stockholders until their
unpaid subscription is fully paid:

PROVIDED FURTHER, that no stock dividend shall be issued without the approval of stockholders
representing at least 2/3 of the outstanding capital stock at a regular or special meeting duly
called for the purpose.

 Stock corporations are PROHIBITED from retaining surplus profits in excess of 100% of their
paid- in capital stock, EXCEPT:
1.) when justified by definite corporate expansion projects approved by the BOD
2.) when the corporation is prohibited under any loan agreement with financial
insitutions or creditors – whether local or foreign, from declaring dividends WITHOUT THEIR
CONSENT and such consent has NOT YET BEEN SECURED;
3.) when it can be clearly shown that such retention is necessary under special
circumstances obtaining in the corporation, such as when there is need for special reserve for
probable contingencies

SECTION 43 – POWER TO ENTER INTO MANAGEMENT CONTRACT

 No corporation shall conclude a management contract with another corporation

UNLESS such contract is approved by:
1.) the BOD; AND
2.) by stockholders owning at least at least the majority of the outstanding capital stock, OR
-by at least a majority of the members in the cases of nonstock corporation, of both the
managing and the managed corporation, at a meeting duly called for the purpose:

PROVIDED, that:

1.) Where a stockholder or stockholders representing the same interest of both the managing and the
managed corporations own or control more than 1/3 of the total outstanding capital stock entitled to
vote of the managing corporation; OR

2.) Where a majority of the members of the BOD of the managing corporation also constitute a majority
of the members of the board of directors of the managed corporation, then the management contract
must be approved by the stockholders of the managed corporation owning at least 2/3 of the total
outstanding capital stock entitled to vote, or by at least 2/3 of the members in the case of a nonstock
corporation.

 The shall apply to any contract whereby a corporation undertakes to manage or operate ALL OR
SUBSTANTIALLY ALL of the business of another corporation, whether such contracts are called
service contracts, operating agreements or otherwise:
PROVIDED, HOWEVER, that such service contracts or operating agreements which relate
to the exploration, development, exploitation or utilization of natural resources may be entered
 into for periods as may be entered into for such periods as may be provided by the pertinent
laws or regulations.

 No management contract shall be entered into for a period longer than 5 years for any 1 term.

SECTION 44 – ULTRA VIRES ACTS OF CORPORATIONS

No corporation shall possess or exercise corporate powers other than those conferred by this
Code or by its articles of incorporation and except as necessary or incidental to the exercise of the
powers conferred.

TITLE V – BYLAWS

SECTION 45 – ADOPTION OF BYLAWS

To adopt the bylaws of the corporation:

1.) affirmative vote of the stockholders representing at least a majority of the outstanding capital stock;
OR

2.) at least a majority of the members (non stock) shall be NECESSARY.

 The bylaws shall be signed by the stockholders or members voting for them and shall be kept in
the principal office of the corporation—SUBJECT to inspection of stockholders or members
DURING OFFICE HOURS.
 A certified (by majority of directors and trustees + countersigned by the secretary) copy thereof
shall be filed with the Commission and attached to the original AOI.

 NOTWITHSTANDING THE PROVISIONS FROM THE PRECEDING PARAGRAPH, by laws may be

adopted and filed PRIOR to incorporation. Such bylaws shall be:
1.) approved and
2.) signed by all the incorporators and submitted to the Commission, TOGETHER WITH
THE AOI.

 In all cases, bylaws shall be effective only upon the issuance by the Commission of a certification
that the bylaws are in accordance with this Code.
 Unless accompanied by a certificate of the appropriate government agency to effect that such
bylaws or amendments are in accordance with law, the Commission shall NOT ACCEPT for filing
the bylaws or any amendment thereto of any
1.) bank
2.) banking institution
3.) building and loan association
4.) trust company
 5.) insurance company
6.) public utility
7.) educational institution
8.) or other special corporations governed by special laws

SECTION 46- CONTENTS OF BYLAWS

A private corporation may provide the following in its bylaws:

1.) Time, place, and manner of calling and conducting regular or special meetings of the directors or
trustees;

2.) Time and manner of calling and conducting regular or special meetings and mode of notifying the
stockholders or members thereof;

3.) Required quorum in meetings of stockholders/ members; AND

-manner of voting

4.) Modes by which a stockholder, member, director, or trustee may attend meetings and cast their
votes;

5.) Form for proxies of stockholders and members and the manner of voting them;

6.) Directors’ or trustees’ qualifications, duties, and responsibilities,

-the guidelines for setting the compensation of directors or trustees and officers, and

-the maximum number of other board representations that an independent director or trustee
may have which shall, in no case, be more than the number prescribed by the Commission

7.) Time for holding the annual election of directors or trustees and

-the mode or manner of giving notice thereof;

8.) Manner of election or appointment and

The term of office of all officers other than directors or trustees;

9.) Penalties for violation of the bylaws;

10.) In case of stock corporations- manner of issuing stock certificates; and

11.) Other matters as may be necessary for the proper or convenient transaction of its corporate affairs
for the promotion of:

-good governance; and

-anti- graft and corruption measures

**An arbitration agreement may be provided in the bylaws pursuant to Section 181.

SECTION 47 – AMENDMENT TO BYLAWS

1.) majority of the BOD or trustees; AND

2.) owners of at least a majority of the outstanding capital stock; OR

- at least a majority of the members of a nonstock corporation,

 At a regular or special meeting duly called for the purpose, may AMEND or REPEAL the bylaws,
or ADOPT new bylaws.

The owners of 2/3 of the outstanding capital stock or 2/3 of the members in a nonstock corporation may
delegate to the BOD or trustees the power to amend or repeal the bylaws or adopt new bylaws:
PROVIDED:

Any power delegated to the BOD or trustees to amend or repeal the bylaws or adopt new
bylaws shall be considered as REVOKED whenever stockholders owning or representing a majority of the
outstanding capital stock or majority of the members shall so vote at a regular or special meeting.

WHENEVER THE BYLAWS ARE AMENDED OR NEW BYLAWS ARE ADOPTED, Corporation shall

 FILE with the Commission such amended or new bylaws AND

 IF APPLICABLE – the stockholders’ or members’ resolution authorizing the delegation of the
power to amend and/ or adopt new bylaws, DULY CERTIFIED UNDER OATH by the corporate
secretary and a majority of the directors or trustees.

The amended or new bylaws shall only be effective UPON THE ISSUANCE BY THE COMMISSION OF A
CERTIFICATION that the same is in accordance with this Code and other relevant laws.

TITLE VI – MEETINGS

SECTION 48 – KIND OF MEETINGS

 Directors, trustees, stockholders, or members

1.) regular
2.) special

SECTION 49 – REGULAR AND SPECIAL MEETINGS OF STOCKHOLDERS OR MEMBERS

REGULAR MEETINGS (members/stoclholders)

 Shall be held ANNUALLY

  On a date FIXED in the BYLAWS
 IF NOT FIXED – any date AFTER April 15 of every year as determined by the BOD or trustees
PROVIDED, that WRITTEN NOTICE shall be sent to ALL stockholder or members of record
at least 21 days prior to the meeting UNLESS a different period is required in the bylaws, laws, or
regulation
PROVIDED, FURTHER, that written notice of regular meetings may be sent to all
stockholders or members of record through electronic mail or other manner

AT EACH REGULAR MEETING, THE BOD/T shall present to stockholders/members the following:

1.) Minutes of the meeting

a.) A description of the voting and vote tabulation procedures used in the previous
meeting;

b.) description of the opportunity

*A director, trustee, stockholder, or member may propose any other matter for inclusion in the agenda
at any regular meeting of stockholders or members.

SPECIAL MEETING

 Shall be held at any time deemed necessary or as provided in the bylaws:

 PROVIDED, HOWEVER, that at least 1 week written notice shall be sent to all stockholders or
members, UNLESS a different period is provided in the bylaws, law, or regulation.
 A stockholder or member may propose the holding of a special meeting and items to be
included in the agenda.

 Notice of any meeting may be WAIVED- expressly or impliedly, by any stockholder or member:
PROVIDED, that general waivers of notice in the AOI or the bylaws shall NOT BE
ALLOWED
PROVIDED FURTHER, that attendance at a meeting shall constitute a waiver of notice of
such meeting, EXCEPT when the person attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or convened.

IF THERE IS NO AUTHORIZED PERSON OR AUTHORIZED PERSON REFUSES TO CALL A MEETING

The Commission, upon PETITION OF A STOCKHOLDER or MEMBER on a showing of good cause

therefor, may issue an order directing the petitioning stockholder or member to call a meeting of the
corporation by giving proper notice required by this Code or the bylaws.
 The petitioning stockholder or member shall preside thereat at least a majority of the
stockholders or members present have chosen from among themselves, a presiding officer.

 Unless the bylaws provide for a longer period, the stock and transfer book or membership book
shall be closed at least 20 days for regular meetings and 7 days for special meetings before the
scheduled date of the meeting.