CORPORATION LAW (BP 68 as amended by RA 11232)

A. General Principles
1. Definition
A corporation is an artificial being created by operation of law, having the right of succession and the
powers, attributes, and properties expressly authorized by law or incident to its existence.
2. Attributes of a Corporation
a. An Artificial Being
b. Created by Operation of Law
c. Has the right of succession;
d. Has the powers, attributes and properties expressly authorized by law or incident to its existence
3. Nationality of Corporations
- Serves as a legal basis for subjecting an enterprise or its activities to the laws, the economic
and fiscal powers, and the various social and financial policies of the State to which it is
supposed to belong. (SEC OGC Opinion No. 22-07)

a. Place of Incorporation Test

A corporation is a national of the country under whose laws it is organized or incorporated.

b. Control Test
The nationality of the private corporation is determined by the citizenship of the controlling
stockholders.

Control Test is applied in the following:

 Exploitation of natural resources
 Public Utilities
 Mass Media
 Advertising industry
 Any industry or activity where foreign ownership is prohibited or restricted under the
Foreign Investment Negative List.

c. Grandfather Rule
Method of determining the nationality of a corporation, which is owned in part by another
corporation, by breaking down the equity structure of the shareholder corporation.

Applied if doubt exists as to the locus of the “beneficial ownership” and “control” of a
corporation, even if the 60-40 Filipino to foreign equity ratio is apparently met by the subject or
investee corporation.

It involves a computation of Filipino ownership of a corporation in which another corporation, of

partly-Filipino and partly-foreign equity, owns capital stock. The percentage of shares held by
the second corporation in the first is multiplied by the latter’s own Filipino equity, and the
product of these percentages is determined to be the ultimate Filipino ownership of the
subsidiary corporation.

The following are the indicators of doubt:

a. That the foreign investors provide practically all the funds for the joint investment
undertaken by these Filipino businessmen and their foreign partner;
b. That the foreign investors undertake to provide practically all the technological support for
the joint venture;
 c. That the foreign investors, while being minority stockholders, manage the company and
prepare all economic viability studies.
It is only when there is doubt, based on the Control Test, that the Grandfather Rule is applied:
a. If the subject corporation’s Filipino equity falls below the threshold 60% the corporation is
immediately considered foreign-owned, in which case, the need to resort to the Grandfather
Rule disappears.
b. If a corporation that complies with the 69-40 Filipino to foreign equity requirement, it can be
considered a Filipino corporation, and if there is no doubt as to who has the “beneficial
ownership” and “control” of the corporation, there is no need for the application of the
Grandfather Rule.
c. However, if there is doubt as to who has the “beneficial ownership” and “control” of the
corporation, the application of the grandfather rule is necessary.
Example:
The Filipino owned corporation subscribed to 60% of the capital and the foreign corporation
subscribed to 40% but the subscription of the former is nominally paid-up and such corporation
entered into a financial assistance agreement with the foreign-owned corporation.

4. Corporate Juridical Personality

Corporate existence and juridical personality commence from the date the SEC issues a certificate
of incorporation under its official seal. (Sec. 18)

5. Doctrine of Separate Juridical Personality

GR: Due to the corporation’s separate juridical personality, a stockholder may NOT be made to
answer for acts or liabilities of said corporation, and vice versa.

XPN: The corporation’s separate juridical personality cannot be invoked to escape liability when:
1. This legal fiction is used for ends subversive to the policy and purpose behind its creation or
which could not have been intended by law to which it owes its being.
2. The corporate entity is a mere alter ego, adjunct, or business conduit for the sole benefit of the
stockholders or of another corporate entity. The corporation is merely a farce, as it so conducted,
as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

6. Doctrine of Piercing the Corporate Veil

A corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to
the contrary appears but when the notion of legal entity is used to defeat public convenience, justify
wrong, protect fraud or defend crime, the law will regard the corporation as an association of
persons.

Grounds for Application of the Doctrine

The veil of separate corporate personality may be lifted/pierced:

1. When such personality is used to defeat public convenience, justify wrong, protect fraud or
defend crime, or as a shield to confuse legitimate issues;
2. When the corporation is merely an adjunct, a business conduit or an alter ego of another
corporation;
3. Where the corporation is so organized and controlled and its affairs are so conducted as to make
it merely an instrumentality agency, conduit or adjunct corporation.
4. When the corporation is used as a cloak or cover for fraud or illegality, or to work injustice, or
B. Stock vs. Non-Stock Corporations

Stock Non-Stock
Have capital stock divided into shares (Sec. 3) No part of income is distributable as dividends to
its members or trustees (Sec. 86)
Are authorized to distribute to the holders of such Any profit may obtain as an incident to its
shares, dividends or allotments of surplus profits operations shall, when necessary or proper, be
on the basis of the shares held (Sec. 3) used for the furtherance of its purpose or
purposes (Sec. 86)
Composed of stockholders Composed of members
It is for profit It is not for profit
Cumulative voting in elections of directors is Cumulative voting in election of trustees is only
provided by law (Sec. 23) available if provided in AOI or BL (Sec. 23)
Maximum of 15 directors except in merger or May be more than 15 (Sec. 91)
consolidation of banks (Sec. 13)
Term of director is 1 year (Sec. 22) Maximum term of a trustee is 3 years (Sec. 91)
Stockholders’ meetings must be in the principal May be anywhere within Philippine territory as
office as set forth in the AOI or if not practicable, in provided by BL (Sec. 92)
the city or municipality where the principal office is
located (Sec. 50 )
One class of shares must always have complete Right to vote of members of any class may be
voting rights (Sec. 6) denied in the AOI or BL (Sec. 88)
There is free transfer of shares. Membership is not Transfer of membership cannot be made without
personal to the stockholder. consent of the corporation. (Sec. 89) Membership
is personal.
May always vote by proxy (Sec. 57) Vote by proxy can be denied in the AOI or BL
(Sec. 88)
Upon transfer of share, seller is no longer part of Membership may be terminated according to
corporation. Transfer may only be subject to causes provided in the BL (Sec. 90)
restrictions noted down in AOI, BL and stock
certificate, and must not more onerous than the
right of first refusal. (Sec. 97)
Residual assets are to be distributed to the Generally, members are not allowed to participate
stockholders upon dissolution, after payment of in distribution of assets. Assets are to be
creditors. Dissolution is effected through the distributed to such persons, societies,
methods provided in the Code. (Sec. 133) organizations or corporations as may be specified
in a plan of distribution. (Sec. 93)

C. De Facto Corporations and Corporations by estoppel

De facto corporation – a corporation where there exists a flaw in its corporation

GR: The defect in the juridical personality of a corporation cannot be inquired into by private individuals,
much less used as a defense to avoid claims.

XPN: In quo warranto proceedings brought on behalf of the State where the main action is to question
the validity or existence of such juridical personality.

Requisites:
1. There is apparently valid statute under which the corporation may be formed;
2. There has been colorable compliance with the legal requirements in good faith; and
3. There has been user of corporate powers.
 Corporation by Estoppel
- Where a group of persons misrepresent themselves as a corporation, they are subsequently
estopped from claiming lack of corporate life in order to avoid liability.
- Also a third party who had dealt with an unincorporated association as a corporation is
precluded from denying its corporate existence on a suit brought by the alleged corporation on
the contract.
Effects
As to liability
All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable
as general partners for all debts, liabilities and damages incurred or arising as a result thereof. (Sec. 20)
As to the defense of lack of corporate personality
When such ostensible corporation is sued, it shall not be allowed to use its lack of corporate personality
as a defense. (Sec. 20)
As to third party
Anyone who assumes an obligation to an ostensible corporation as such cannot resist performance
thereof on the ground that there was in fact no corporation. (Sec. 20)
D. One Man Corporation
It is a corporation with a single stockholder. Only a natural person, trust, or an estate may form a One
Person Corporation (OPC).

Banks, quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and non-chartered
government-owned and controlled corporations may not incorporate as One Person Corporation.

E. Incorporation and Organization

1. Promoter
- Persons who, acting along with others, take initiative in founding and organizing the business
or enterprise of the issuer and receives consideration therefor. (Sec. 3, 10, RA 8799, The
Securities Regulation Code).
Promoter’s Contracts

- are those types of contracts entered into in behalf of a corporation which is in process of
organization and incorporation, and such fact is acknowledged as an essential ingredient in the
process of perfection

a. Liability of Promoter
GR: The promoter binds himself personally and assumes the responsibility of looking to the
proposed corporation for reimbursement.
XPN:
1. Express or implied agreement to the contrary
2. Novation, not merely adoption or ratification, of the contract.

b. Liability of Corporation for Promoter’s Contracts

GR: A corporation is NOT bound by the contract. A corporation, until organized, has no life or
legal existence. It could not have had an agent who could legally bind it.

XPN: A corporation may be bound by the contract if it makes the contract its own by:
  Adoption or ratification of the entire contract after incorporation
 Acceptance of benefits under the contract with knowledge of the terms thereof
 Performance of its obligation under the contract

2. Number and Qualifications of Incorporators

Number: Not more than 15 (Sec. 10)
Qualifications:
1. Any person, natural or juridical, may organize a corporation (Sec. 10)
- Juridical entities (partnership, association or corporation, singly or jointly with others) are now
permitted to be incorporators, and not merely initial subscribers under the Old Code.
- The following are NOT allowed to organize as a corporation, except as provided under special
laws:
a) Natural persons who are licensed to practice a profession
b) Partnerships or associations organized for the purpose of practicing a profession
2. Natural persons must be of legal age
3. Each incorporator must subscribe to at least one share of the capital stock.
3. Corporate Name – Limitations on the Use of Corporate Name
SEC Memorandum Circular No. 13, s. 2019
a) The corporate name shall contain the word “Corporation” or “Incorporated,” or the
abbreviations “Corp.” or “Inc.” respectively;
b) In the case of a One Person Corporation, the corporate name shall contain the word
“OPC” either below or at the end of its corporate name;
c) The partnership name shall bear the word “Company” or “Co.” and if it is a limited
partnership, the word “Limited” or “Ltd”.
d) A professional partnership name may bear the word “Company”, “Associates,” or
“Partners” or other similar descriptions.
e) The corporate name of a foundation shall use the word “Foundation”;
f) The corporate name of all non-stock, non-profit corporation, including non-foundations,
engaging in micro finance activities shall use the word “Microfinance” or “Microfinancing”
- Provided that said corporations shall state in the purpose clause of their AOI that they shall
conduct microfinance operations pursuant to RA 8425 or the Social Reform and Poverty
Alleviation Act.

Criteria for Allowable Corporate Names

Under the present law, no corporate name shall be allowed by the Commission if it is:
a. Not distinguishable from that already reserved or registered for the use of another
corporation, or
b. Already protected by law, or
c. Used contrary to existing law, rules and regulations. (Sec. 17)

A name is not distinguishable even if it contains one or more of the following:

1. The word “corporation”, “company”, “incorporated”, “limited”, “limited liability” or an
abbreviation of one of such word; and
2. Punctuations, articles, conjunctions, contractions, prepositions, abbreviations, different
tenses, spacing or number of the same word or phrase. (Sec. 17)

Change of Corporate Name

- Requires the amendment of the AOI which must be approved by:
1. Majority vote of the board; and
2. The voted or written assent of stockholders holding 2/3 of the OCS. (Sec. 16)
 Use of Corporate Names of Dissolved Corporations
The name of a corporation or partnership that has been dissolved or whose registration has
been revoked shall not be used by another corporation or partnership:
a. Within five years from the approval of the dissolution; or
b. Within five years from the date of revocation, unless its use has been allowed at the time of
the dissolution or revocation by the stockholders, members, or partners who represent a
majority of the OCS or membership of the dissolved corporation or partnership, as the case
may be. (SEC Memorandum Circular No. 13, s. 2019)

4. Corporate Term
Perpetual Existence
GR: The RCC provides that a corporation shall have perpetual existence. The AOIs of existing
corporations shall be deemed amended to reflect perpetual term.
XPN: The AOIs of corporations created under the effectivity of this Code provide for a specific
period. (Sec. 11)

A corporation already existing upon effectivity of the RCC may opt out of the rule on perpetual
existence by:
1. Obtaining the vote of its stockholders representing majority of the OCS, without prejudice
to the appraisal right of dissenting stockholders
2. Notifying the Commission that it elects to retain its specific corporate term as provided in
its AOI.
Extending or shortening the corporate term
GR: If a corporation wishes to extend its corporate term, it may amend its AOI at least 3 years prior
to the expiration of its term. (Sec. 11)
XPN: When there exist justifiable reasons for an earlier extension, to be determined by the SEC.
Requisites: A private corporation may extend or shorten its term as stated in the articles of
incorporation when –
1. Approved by a majority vote of the board of directors or trustees, and
2. Ratified at a meeting by the stockholders or members representing at least 2/3 of the OCS or of
its members
Summary of changes

For newly established corporations GR: Automatic perpetual term

XPN: AOI provides a specific corporate term
For existing corporations GR: AOI shall be deemed amended to reflect perpetual term
XPN: The corporation opts out and elects to retain their
existing term; requires majority vote of
shareholders/members
For corporations with expired terms GR: May apply with the SEC for the revival of the
corporation. Upon approval, they will have a perpetual term
XPN: Their application indicates a fixed term
For corporations with a limited term GR: May file an application for extension of such term 3
years prior to the expiration of the term
XPN: There are justifiable reasons for an earlier extension
5. Minimum Capital Stock and Subscription Requirements
No minimum capital requirement
Under the Old Corporation Code, at least 25% of the authorized capital stock as stated in the AOI
must be subscribed at the time of the incorporation, and at least 25% of the total subscription must
be paid upon subscription. (Sec. 13)

Section 13 has been removed in the RCC, thus removing such minimum capital requirements (Sec.
12). However, the increase in capital remains subject to the 25% subscription and 25% payment of
subscription rule (Sec. 37).

Subscription Agreements
Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to
be formed shall be deemed a subscription contract. (Sec. 59)

Nature of Subscription Contracts

A subscription contract is indivisible. Consequently, where stocks were subscribed and part of the
subscription contract price was not paid, the whole subscription shall be considered delinquent, and
not only the shares which correspond to the amount not paid.

Holders of subscribed shares not fully paid, which are not delinquent, shall have all the rights of a
stockholder. (Sec. 71)
 SEC has opined that the entire subscription, although not yet fully paid, may be
transferred to as single transferee, who as a result of the transfer must assume the unpaid
balance. (SEC Opinion, 9 Oct. 1995)
 It is necessary to secure the consent of the corporation bc such transfer contemplates a
novation which under Art. 1293 (NCC) cannot be made without the consent of the creditor.
Characteristics
There can be a subscription only with reference to unissued shares of the ACS, in the ff. cases:
1. The original issuance of the ACS at the time of incorporation
2. The opening, during the life of the corporation, of the portion of the original ACS previously
unissued; or
3. The increase in ACS achieved through a formal amendment of the Articles and
registration thereof with the SEC.
Status as Shareholder
One may become a stockholder in a corporation in either two ways:
1. By SUBSCRIPTION to shares before or after incorporation
2. By acquisition of already issued shares
Types of Subscription Contracts
1. Pre-incorporation subscription – it is a subscription for shares of stock of a corporation still to
be formed.
2. Post-incorporation subscription – entered into after incorporation.
Rules on Pre-incorporation Subscription
GR: A pre-incorporation subscription is IRREVOCABLE:

 For a period of at least 6 months from the date of subscription.

 XPN:
1. All of the other subscribers consent to the revocation;
2. The incorporation fails to materialize within 6 months or within a longer period as may
stipulated in the contract of subscription.
 After the submission of the Articles of Incorporation to the SEC (Sec. 60)
Interest on Unpaid Subscription
GR: A stockholder is NOT liable to pay interest on his unpaid subscription. He is not considered a
corporate debtor for the unpaid amount of his subscription.
XPN: If expressly stipulated in the subscription contract. (Sec. 65)
6. Articles of Incorporation
7.
a. Nature and Function of Articles
The AOI is a basic contract document, defining the charter of the corporation, and serves as
the basis by which to judge whether it exists for legal purposes.

The charter of the corporation is a contract between 3 parties:

a. between the State and the corporation
b. between the stockholders and the State;
c. between the corporation and its stockholders;
d. among the stockholders.

b. Contents
The Articles of Incorporation must contain:
1) Corporate Name;
2) Purpose Clause;
3) Principal Office;
4) Corporate Term if the corporation has not elected perpetual existence;
5) Incorporators;
6) Trustees/Directors;
7) For stock corporations:
 The authorized capital stock
 Number of shares into which it is divided
 The par value of each share
 Names, nationalities, and residence addresses of the original subscribers
 Amount subscribed and paid by each on the subscription, and
 A statement that some or all of the shares are without par value, if applicable
8) For non-stock corporations:
 Amount of its capital
 The names, nationalities and
 Residence addresses of the contributors and
 Amount contributed by each
9) Other matters (including arbitration pursuant to Sec. 181) [Sec. 13]

c. Amendment

The following items are amendable under Sec. 15:

1) Change of name of the Corporation; adding business name
 2) Adding to or changing the purpose/s
3) Change the principal office
4) Change in the number of directors or trustees
5) Increase or decrease in authorized capital stock ; re-classifying shares in the
authorized capital stock;
6) Adding or revising transfer restrictions

Requirements for Making Amendments to AOI:

1) By a majority vote of the BOD or trustees; and
2) The vote or written assent of
 2/3 of the OCS without prejudice to the appraisal right of the dissenting
stockholders in accordance with the provisions of this Code;
 2/3 of the members if it be a non-stock corporation. (Sec. 15) unless the AOI
provides for higher voting requirements.

d. Non-Amendable Items

The following items state accomplished facts therefore cannot be amended:

1) The names, nationalities and residences of the incorporators
2) Treasurer-in-trust
3) First set of directors or trustees
4) Original stock subscriptions and paid-in capital
5) Place and date of execution
6) Witnesses

8. Registration and Issuance of Certificate of Incorporation

Documents to be filed with SEC:
a) Articles of Incorporation and By-Laws (if crafted prior to incorporation)
b) Certification concerning the amount of capital stock subscribed and/or paid
c) Undertaking to change the corporate name in case there is another person or entity with
same or similar name that was previously registered
d) Favorable recommendation from the appropriate government agency that the AOI or
amendments thereto of banks, banking and quasi-banking institutions preneed, insurance
and trust companies, NSSLAS, pawnshops, and other financial intermediaries, is in
accordance with law.
Issuance of Certificate of Incorporation by SEC
Effect: Commencement of corporate existence and juridical personality. (Sec. 18)
Grounds for Disapproving the AOI:
a) Does not substantially comply with form prescribed
b) Purpose is patently unconstitutional, illegal, immoral, contrary to government rules and
regulations
c) The certification concerning the amount of capital stock subscribed and/or paid is false
d) Required percentage of ownership of Filipino citizens has not been complied with when
required by existing laws or the Constitution. (Sec. 16)
SEC shall give the incorporators reasonable time to correct or modify objectionable portions of the
articles or amendment. (Sec. 16)
1. Adoption of By-Laws
a. Nature and Function of By-Laws
Nature: It is a product of agreement of stockholders or members.
Functions: It establishes the rules for internal government of the corporation. It also regulates
the affairs and relationship between and among stockholders, BOD and corporation.
Note: OPCs are not required to have by-laws.
b. Requisites of Valid By-Laws
Approval requirement: Must be approved by the affirmative vote of the stockholders
representing at least a MAJORITY of the OCS, or majority of members. (Sec. 45)

If filed pre-incorporation: Must be approved and signed by all incorporators.

Record-Keeping: Must be kept in the principal office of the corporation, subject to inspection by
any director, trustee, stockholder or member representative at reasonable hours on business
days. (Sec. 45)

Filing with SEC: A copy of the by-laws duly certified by a majority of the directors or trustees
and countersigned by the secretary of the corporation, shall be filed with the Commission and
attached to the original AOI. (Sec. 45)

c. Binding Effects

When Binding: ONLY from date of issuance of SEC of a certification that the by-laws are not
inconsistent with the Code (Sec. 45) Pending such approval, they cannot bind stockholders or
corporation.

Effect on third parties: Mere internal rules among stockholders cannot affect or prejudice 3rd
persons who deal with the corporation unless they have knowledge of the same.

d. Amendment or Revision

Effected by: majority vote of the members of the board and majority vote of owners of the OCS
or members, in a meeting duly called for the purpose. (Sec. 47) Unless a higher requirement is
provided in the by-laws.

Delegation to BOD of power to amend

By vote of stockholders representing 2/3 of the OCS or 2/3 of the members.

Delegation to BOD may be revoked

Any power delegated to the BOD or trustees to amend or repeal any by-laws or adopt new by-
laws shall be considered revoked whenever stockholders owning and representing a majority
of the OCS or majority of the members in non-stock corporations, shall so vote at a regular or
special meeting. (Sec. 47)

Filing with SEC

Whenever the by-laws are amended or new by-laws are adopted, the corporation shall file with
the Commission:
1. Such amended or new by-laws; and
2. If applicable, the stockholders’ or members’ resolution authorizing the delegation of
the power to amend and/or adopt new by-laws, duly certified under oath by the
corporate secretary and a majority of the directors or trustees. (Sec. 47)
 Effectivity of Amended By-Laws
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. (Sec. 47)

F. Corporate Powers
1. General Powers, Theory of General Capacity

The Theory of General Capacity states that a corporation is said to hold such powers as are
not prohibited or withheld from it by general law.

Every corporation has the power and capacity:

a) To sue and be sued in its corporate name;
b) To have perpetual existence; unless the certificate of incorporation provides otherwise
c) To adopt and use a corporate seal;
d) To amend its AOI in accordance with the provisions of this Code;
e) To adopt bylaws, and to amend or repeal the same in accordance with this Code;
f) In case of stock corporations: To issue or sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this Code; and in case of non-
stock corporations: to admit members to the corporation;
g) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and
otherwise deal with such real and personal property, including securities and bonds of
other corporations;
h) To enter with natural and juridical persons, into a:
 Partnership
 Joint Venture
 Merger
 Consolidation
 Any other commercial agreement
i) To make reasonable donations, provided that no foreign corporation shall give
donations in aid of any political party or candidate or for purposes of partisan political
activity;
j) To establish pension, retirement, and other plans for the benefit of its directors,
trustees, officers, and employees; and
k) To exercise such other powers as may be essential or necessary to carry out its
purpose or purposes as stated in the AOI. (Sec. 35)

2. Specific Powers, Theory of Specific Capacity (Secs. 36-43, & 15)

The Theory of Specific Capacity states that the corporation cannot exercise powers except
those expressly/impliedly given.

Under the Theory of Specific Capacity, the specific powers of a corporation are as follows:
a) Power to extend or shorten corporate term (Sec. 36)
b) Power to increaser or decrease capital stock, or incur, create, increase bonded
indebtedness (Sec. 37)
c) Power to deny pre-emptive rights (Sec. 38)
d) Power to sell or dispose corporate assets (Sec. 39)
e) Power to acquire own shares (Sec. 40)
 f) Power to invest corporate funds in another corporation or business, or for any other
purpose (Sec. 41)
g) Power to declare dividends (Sec. 42)
h) Power to enter into management contract (Sec. 43)
i) Power to amend AOI (Sec. 15)

a. Power to Extend or Shorten Corporate Term

When Exercised
Period to extend the corporate term has been reduced by the RCC to three years before
expiration. When the term expires, it is not ipso facto dissolved but may apply for a revival
of its corporate existence.

Requirements
1. Approval of majority vote of the BOD or trustees, and
2. Ratification at a meeting by the stockholders or members representing at least
2/3 of the OCS and of its members
3. Notice Requirement – Written notice of the proposed action and the time and
place of the meeting shall be:
 Sent to stockholders or members at their respective place of residence
as shown in the books of the corporation and
 Either
a) Deposited to the addressee in the post office with postage
prepaid, served personally OR
b) Sent electronically in accordance with the rules and regulations
of the Commission on the use of electronic data messages,
when allowed in the by-laws or done with the consent of the
stockholder (Sec. 36)

b. Power to Increase or Decrease Capital Stock on Incur, Create, Increase Bonded

Indebtedness
Aside from the requisites in Sec. 37, when the capital stock is increased or decreased, the
provisions of Sec. 15 on the amendment of the AOI must also be complied with.

Requirements (Sec. 37)

1. Approval by a majority vote of the BOD or trustees
2. Approval by 2/3 of the OCS or at least 2/3 of the members at a stockholders’
meeting duly called for the purpose
3. Notice Requirement – 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 as shown in the
books of the corporation and
 Served on the stockholders personally, OR through electronic means
recognized in the corporation’s bylaws and/or the Commission’s rules as
a valid mode for service of notices.
4. Certification Requirement – A certificate must be signed by a majority of the
directors of the corporation and countersigned by the chairperson and secretary
of the stockholders’ meeting, setting forth:
a) That the requirements of this section have been complied with;
b) The amount of the increase and decrease in the capital stock;
c) In case of an increase of the capital stock:
 i. The amount of capital stock or number or number of shares of
no-par stock thereof actually subscribed,
ii. The names, nationalities and addresses of the persons
subscribing,
iii. The amount of capital stock or number of no-par stock
subscribed by each, and
iv. The amount paid by each on the subscription in cash or
property, or 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;
d) Any bonded indebtedness to be incurred, created or increased;
e) The amount of stock represented at the meeting; and
f) The vote authorizing the increase or decrease of the capital stock, or the
incurring, creating or increasing of any bonded indebtedness.
5. Sworn Statement of the Treasurer – a sworn statement of the corporation’s
treasurer must accompany the filling of the certificate, and it must show that:
a) At least 25% of the increase in the capital stock has been subscribed;
and
b) 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
6. Prior SEC Approval – The application with the Commission shall be made within
6 months from the date of approval of the BOD and stockholders, which period
may be extended for justifiable reasons.
7. Prior PCC Approval
8. SEC Registration – Applicable only to bonds issued by a corporation.

c. Power to Deny Pre-emptive Rights (Share-a-like basis)

GR: All shareholders of a stock corporation have the pre-emptive right to subscribe to all
issues or disposition of shares of any class, in proportion to their respective shareholdings.

XPN: If such right is denied by the AOI or an amendment thereto.

Requirements: Sec. 36

Pre-emptive right when denied:

 Shares to be issued are to comply with laws requiring stock offerings or minimum
stock ownership by the public;
 Shares to be issued are in good faith with the approval of the stockholders
representing 2/3 of the OCS in exchange for property needed for corporate
purposes;
 Shares to be issued are issued in payment of previously contracted debts;
 In case the right is denied in the AOI;
 Waiver of the right by the stockholder.

d. Power to Sell or Dispose of Corporate Assets

Requirements (Sec. 39)
1. Vote of the stockholders representing at least 2/3 of the OCS, or at least 2/3 of
the members, in a stockholders’ or members’ meeting duly called for the
purpose; OR
 Vote of at least majority of the trustees in office in non-stock corporations, where
there are no members with voting rights
2. Notice Requirement – Sec. 39
Where only the approval of a quorum of the BOD/T is required:
a) If the same is necessary in the usual and regular course of business of the
corporation or
b) If the proceeds of the sale will be appropriated for the conduct of its remaining
business
c) If the transaction does not cover all or substantially all of the assets. (Sec. 39)

e. Power to Acquire Own Shares

GR: The corporation may only acquire its own stocks in the presence of URE. (Sec. 40)

Rationale: Existence of URE is required before a corporation acquires its own shares bc:
a) The repurchase of shares is a method of distribution or withdrawal of assets, and
is subject to abuse, as creditors have a right to assume that so long as there are
debts and liabilities, the Board will not use corporate assets to purchase its own
stock; and
b) Treasury shares may be availed of to perpetrate control of the enterprise without
the expensive requisite of a majority voting stock.
XPN:
a) Redeemable shares may be acquired even without surplus profit for as long as it
will not result to the solvency of the Corporation;
b) In cases that the corporation conveys its stocks in payment of a Debt;
c) In a Close corporation, a stockholder may demand the payment of the fair value
of shares regardless of existence of retained earnings for as long as it will not
result to the insolvency of the corporation.

f. Power to Invest Corporate Funds in Another Corporation or Business

Rule in case a corporation wants to invest in an undertaking

 Investment of a corporation in a business which is in line with its primary purpose
requires only the approval of the board.
 Investment of assets for any or its secondary purposes required the prior
approval of its shareholders/members
 If the investment is outside the purpose/s for which the corporation was
organized, AOI must be amended first, otherwise it will be an Ultra Vires act.
Requirements: Same Sec. 36
g. Power to Declare Dividends

Requirements:
1. Must be distributed out of URE
2. Payable in cash, in property, or in stock to all shareholders on the basis of
outstanding stock held by them
3. Resolution by the Board

h. Power to Enter into Management Contract

 Management Contract
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.

Period of every management contract

GR: No management contract shall be entered into for a period longer than 5 years for
any one term.

XPN: Service contracts or operating agreements which relate to exploration, development,

exploitation or utilization of natural resources may be entered into for such periods as may
be provided in the pertinent laws and regulations.

Requirements:
1. Approval of majority vote of the BOD of both the managing and the managed
corporation.
2. Approval by shareholders owning at least the majority of the OCS or at least a
majority of the members of both the managing and the managed corporation.
However, the contract must be approved by 2/3 of stockholders owning OCS/members of
the managed corporation when:
i. Stockholders representing the same interest of both the managing and managed
corporations own more than 1/3 of the total OCS entitled to vote of the managing
corporation (Interlocking stockholders)
ii. A majority of the members of the BOD of the managing corporation also
constitute a majority of the BOD of the managed corporation (Interlocking
directors)

i. Ultra Vires Acts

I. Applicability of Ultra Vires Doctrine
The application of the Ultra Vires Doctrine is a question, in each case, of the logical
relation of the act to the corporate purpose expressed in the charter.

It may fairly be considered within the charter powers if:

1. The act is one which is lawful in itself, and not otherwise prohibited;
2. The act is done for the purpose of serving corporate ends; AND
3. The act reasonably tributary to the promotion of those ends, in a substantial,
and not in a remote and fanciful sense.
The test to be applied is whether the act in question is in direct and immediate furtherance
of the corporation’s business, fairly incident to the express powers and reasonably
necessary to their exercise.
II. Consequences of Ultra Vires Acts
a) Executed contract – courts will not set aside or interfere with such contracts;
b) Executory contracts – no enforcement even at the suit of either party (void
and unenforceable);
c) Partly executed and partly executory – principle of “no unjust enrichment at
expense of another” shall apply;
 d) Executory contracts apparently authorized but ultra vires – the principle of
estoppel shall apply.

3. How Exercised
a. By Shareholders

Corporate Acts Requiring All (Voting and Non-Voting) Shareholder’s Approval

GR: Vote necessary to approve a particular corporate act as provided in this Code shall be
deemed to refer only to stocks with voting rights. (Sec. 6)

XPN: Voting and non-voting shares shall be entitled to vote in the following cases:
a) Amendment of AOI
b) Adoption, amendment and repeal of bylaws
c) Sale, lease, mortgage or other disposition of substantially all corporate assets
d) Incurring, creating or increasing bonded indebtedness
e) Increase or decrease of capital stock
f) Merger and consolidation
g) Investment of funds in another corporation or business or for any purpose other
than the primary purpose for which it was organized
h) Dissolution of the corporation

Corporate Acts Requiring Voting Shareholder’s Approval

1. Declaration of stock dividends

2. Management contracts
3. Fixing the consideration of no-par shares
4. Fixing compensation of directors

b. By the Board of Directors

Majority vote of the Board is needed in the exercise of the ff. powers:

1. Filing of vacancies in the Board, except when it is due to removal by the

stockholders/members or by expiration of term
2. Extension or shortening of the corporate term
3. Increase or decrease of capital stock or the creation of bonded indebtedness
4. Sale or other disposition of all or substantially all assets
5. Acquisition of its own shares
6. Investment of corporate funds in any corporation or business or for any purpose
other than its primary purpose
7. Declaration of cash, property, and stock dividends
8. Entering into management contracts
9. Amendment of AOI
10. Amendment of the bylaws
11. Approval of the plan or merger or consolidation
12. Dissolution of the corporation

c. By the Officers

Doctrine of Apparent Authority

 Corporate officers have apparent authority to bind the corporation on matters that are
generally within the domain of corporate business, and the scope of their usual duties.
If a corporation knowingly permits one of its officers or any other agent, to act within the
scope of an apparent authority, it holds him out to the public as possessing the power to
do those acts; the corporation will, as against anyone who has in good faith dealt with it
through such agent, be estopped from denying the agent’s authority.

4. Trust Fund Doctrine

- States that the capital stock, properties and other assets of a corporation are regarded as
equity in trust for the payment of corporate creditors.
 All funds received by the corporation in payment of the shares of stock shall be held
in trust for the corporate creditors and other stockholders of the corporation.
 No fund shall be used to buy back the issued shares of stock except only in instances
specifically allowed by the CC.
Effects of the TFD
1. Dividends must never impair the subscribed capital stock and must only be declared
out of the URE.
2. Subscription commitments cannot be condoned or remitted.
3. GR: The corporation cannot buy its own shares using the subscribed capital as the
consideration therefore.
XPN:
1. Redeemable shares may be acquired even without surplus profit for as long as it
will not result to the insolvency of the Corporation;
2. In cases that the corporation conveys its stocks in payment of a debt; or
3. In a Close Corporation, a stockholder may demand the payment of the fair value
of shares regardless existence of retained earnings for as long as it will not result
to the insolvency of the corporation.
4. Rescission of a subscription agreement is not allowed since it will effectively
result in the unauthorized distribution of the capital assets and property of the
corporation.
When distribution of Corporate Capital is allowed:
1. Amendment of the AOI to reduce the ACS
2. Purchase of redeemable shares by the corporation, regardless of the existence of
URE
3. Dissolution and eventual liquidation of the corporation

Specific Power Approval Required Appraisal Right

Power to extend or
G. Board of Directors and Trustees
1. Basic Principles
a. Doctrine of Centralized Management

BOARD IS SEAT OF CORPORATE POWERS.

GR: Unless otherwise provided in this Code, the board of directors or trustees shall exercise
the corporate powers, conduct all business, and control all properties of the corporation.

XPN:
1. In case of an Executive Committee duly authorized in the by-laws (Sec. 34)
XPN to the XPN: The following may not be delegated to the executive committee:
a. Approval of any action for which shareholders’ approval is also required;
b. The filing of vacancies in the board;
c. The amendment or repeal of by-laws or the adoption of new by-laws;
d. The amendment or repeal of any resolution of the board which by its express
terms is not so amendable or repealable; and
e. A distribution of cash dividends to the shareholders. (Sec. 34)
2. In case of a contracted manager which may be an individual, a partnership, or
another corporation
3. In case of close corporations, the stockholders may manage the business of the
corporation rather than by a BOD, if the AOI so provides.

b. Business Judgment Rule

GR:
Questions of policy or management are left solely to the honest decision of officers and
directors of a corporation and the courts are without authority to substitute their judgment for
the judgment of the board of directors.

XPN:
a) If the contracts are so unconscionable and oppressive as to amount to a wanton
destruction of the rights of the minority;
b) If they violate their duties under Sec. 30 (director wilfully and knowingly assents to
patently unlawful acts of the corporation or are guilty of gross negligence or bad faith);
and
c) If they violate Sec. 33 (disloyalty of a director who acquires for himself a business
opportunity that should have belonged to the corporation, unless his act is ratified by
a 2/3 vote of stockholders).
Requirements for the Business Judgment Rule to Apply
a) Presence of a business decision including decisions on policy management and
administration;
b) The decision must be ultra vires and must comply with the procedural and substantive
requirements of law;
c) Good faith;
d) Due care in making the decision;
e) The director must not have personal interest or nor self-dealing or otherwise on
breach of the duty of loyalty.
 Remedies in Case of Mismanagement
a) Removal of directors pursuant to Sec. 27
b) Derivative suit or complaint filed with the RTC
c) Receivership
d) Injunction if the act has not yet been done
e) Dissolution if abuse amounts to a ground for quo warranto but Solicitor General
refuses to act

2. Tenure, Qualifications and Disqualifications of Directors or Trustees

Tenure
Directors – Term of 1 year from among the holders of stocks registered in the corporation’s books
(Sec. 22)

Trustees – Term not exceeding 3 years from among the members of the corporation (Sec. 22)

Holdover Principle
Upon failure of a quorum at any meeting of the stockholders or members called for an election
the directorate naturally holds over and continues to function until another directorate is chosen
and qualified.
Each director and trustees shall hold office until the successor is elected and qualified. (Sec.
22)
Qualifications
1. Director: Must own at least one (1) share of stock.
Trustee: Must be a member of the corporation.
 A director who ceases to own at least one (1) share of stock or a trustee
who ceases to be a member of the corporation shall cease to be such.
 In order to be eligible as a director, what is material is the legal title to,
not beneficial ownership of, the stock as appearing on the books of the
corporation.
2. Must be a natural person, of legal age, possess full legal capacity
3. Must not be convicted by final judgment of an offense punishable by
imprisonment for a period exceeding 6 years (Sec. 26)
4. Other qualifications as may be prescribed in the by-laws of the corporation. (Sec.
46)
Note: The RCC removed the requirement that majority of the directors or trustees
must be residents of the Philippines.
Disqualifications:
A person shall be disqualified from being a director, trustee, or officer of any corporation if,
within five (5) years prior to the election or appointment as such, the person was:
a) Convicted by final judgment:
1. Of an offense punishable by imprisonment for a period exceeding 6 years;
2. For violating this Code;
3. For violating RA 8799 (The Securities Regulation Code)
b) Found administratively liable for any offense involving fraud acts; and
 c) By a foreign court or equivalent foreign regulatory authority for acts, violations or
misconduct similar to those enumerated in paragraphs (a) and (b) above. (Sec. 26)
Independent Directors
An independent director is a person who, apart from shareholdings and fees received from the
corporation, is independent of management and 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. (Sec. 22)
Requirement for Independent Directors
Corporations vested with public interest are now required to have independent directors constituting at
least 20% of the board. (Sec. 22)
These corporations include:
a) Corporations covered by the Securities Regulation Code, namely:
i. Those whose securities are registered with the Commission;
ii. Corporations listed with an exchange or with assets of at least 50M; and
iii. Having 200 or more holders of shares, each holding at least 100 shares of a class of its
equity share;
b) Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business,
pre-need, trust, and insurance companies, and other financial intermediaries;
c) Other corporations engaged in business vested with public interest similar to the above, as may be
determined by the Commission. (Sec. 22)

3. Elections
Methods of Voting
 Straight Voting
 Cumulative Voting for one candidate
 Cumulative Voting by distribution

a. Cumulative Voting / Straight Voting

Straight Voting
Every stockholder may vote such number of shares for as many persons as there are directors to
be elected. (Sec. 23)
Cumulative Voting
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. (Sec. 23)
Illustration:
If there are 5 directors to be elected and Pedro, as shareholder, has 100 shares, Pedro can give
500 (5 x 100 shares) votes to just one candidate.
Cumulative Voting by Distribution
A stockholder may accumulate his shares by the multiplying 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. (Sec. 23)
 Illustration:
Pedro may choose to give 100 votes to candidate 1, 100 votes to candidate 2, 100 votes to
candidate 3, 150 votes to candidate 4 and 50 votes to candidate 5.
b. Quorum

At all elections of directors or trustees, there must be present, either in person or through a
representative authorized to act by written proxy:
 Stock corporations: The owners of majority of the OCS
 Non-Stock: A majority of the members entitled to vote

d) Removal
GR: Any director or trustee of a corporation may be removed from office, with or without cause.
XPN: If the director was elected by the minority, there must be cause for removal the right of
representation to which they may be entitled to under Sec. 23 of the Code. (Sec. 27)

Requisites for Removal:

1. It must take place either at a regular meeting or special meeting of the
stockholders or members called for the purpose;
2. A special meeting for the purpose of removing directors or trustees must be
called by:
a. The secretary, on order of the president; or
b. The secretary, upon written demand of the stockholders representing or holding
at least a MAJORITY of the capital stock or a MAJORITY of the members entitled
to vote;
3. There must be previous notice to the stockholders or members of the intention to
remove a director; and
4. There must be a vote of the stockholders representing 2/3 of the OCS or in case
of a non-stock corporation, 2/3 of members entitled to vote.
New Power of the SEC under the RCC (Sec. 27)
The Commission shall, motu proprio or upon verified complaint, and after due notice and hearing,
order the removal of a director or trustee elected despite the disqualification, or whose
disqualification arose or is discovered subsequent to an election.
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. (Sec. 27)
e) Filling of Vacancies (Sec. 28)
Ways which the filling of a vacancy may occur:
1. Expiration of term
2. Removal
3. Grounds other than the above, but the remaining directors can constitute a
quorum.
4. Grounds other than the above, but the remaining directors cannot constitute a
quorum for the purpose of filling the vacancy.
5. By reason of an increase in the number of directors or trustees.

Cause of Vacancy Procedure

Expiration of Term The election by stockholders shall be held no later than the
day of such expiration at a meeting called for that purpose.
 Removal The election may be held on the same day of the meeting
authorizing the removal and this fact must be so stated in
the agenda and notice of said meeting.
Other grounds, but the The election must be held no later than 45 days from the
remaining directors can time the vacancy arose.
constitute a quorum
Other grounds, but the a. The vacancy must be filled by the stockholders or
remaining directors cannot members in a regular or special meeting for that
constitute a quorum purpose; or
b. In case of the necessity of emergency action, the
vacancy may be temporarily lifted from among the
officers of the corporation by unanimous vote of the
remaining directors or trustees.
By reason of an increase in Shall be filed only by an election at a regular or at a special
the number of directors or meeting of stockholders duly called for the purpose; or in
trustees the same meeting authorizing the increase of directors or
trustees if so stated in the notice of the meeting.

f) Compensation
GR: Directors or trustees are only entitled to reasonable per diems. They are not entitled to
compensation as directors or trustees.
XPN:
1. When Articles of Incorporation, by-laws, or an advance contract provides for
compensation.
2. Compensation other than per diems may also be granted to directors by a vote of
the stockholders representing at least a majority of the OCS or a majority of the
members at a regular or special stockholders’ meeting.

g) Fiduciary Duties and Liability Rules

Three-Fold Duty
1. Duty of Obedience
2. Duty of Diligence
3. Duty of Loyalty
Duty of Obedience – shall direct the affairs of the corporation only in accordance with the purposes
for which it was organized.
Duty of Diligence – shall not wilfully and knowingly vote for or assent to patently unlawful acts of the
corporation or act in bad faith or with gross negligence in directing the affairs of the corporation.
Duty of Loyalty – shall not acquire any personal or pecuniary interest in conflict with their duty as
such directors or trustees.
GR: Where the 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, the director
must account for or refund to the latter all such profits.
XPN: Unless the act has been ratified by a vote of the stockholders owning or representing at least
2/3 of the OCS. (Sec. 33)
Solidary Liabilities for Damages
The directors and trustees are solidarily liable for damages arising from the ff:
 a) Wilfully and knowingly voting for and assenting to patently unlawful acts of the corporation;
(Sec. 30)
b) Gross negligence or bad faith in directing the affairs of the corporation; (Sec. 30)
c) Acquiring any personal or pecuniary interest in conflict of duty; (Sec. 30)
d) Consenting to the issuance of watered stocks, or, having knowledge thereof, failing to file
objections with secretary; (Sec. 64)
e) Agreeing or stipulating in a contract to hold himself liable with corporation; or
f) By virtue of a specific provision of law.

h) Responsibility for Crimes

Under Sec. 170, if the corporation committed violations of this Code, the same may, after notice
and hearing, be dissolved in appropriate proceedings before the Commission.

If the offender is a corporation, the penalty may, at the discretion of the court, be imposed upon:
a) Such corporation and/or upon its directors, trustees, stockholders, members, officers,
employees responsible for the violation or indispensable to its commission;
b) Anyone who shall aid, abet, counsel, command, induce, or procure any violation of this
Code, or any rule, regulation, or order of the Commission.

i) Inside Information
The fiduciary position of insiders, directors, and officers prohibits them from using confidential
information relating to the business of the corporation to benefit themselves or any competitor
corporation in which they may have a mere substantial interest.

An insider means:
a) The issuer;
b) A director or officer of, or a person controlling the issuer; gives or gave him access to
material information about the issuer or the security that is not generally available to the
public;
c) A government employee, director, or officer of an exchange, clearing agency and/or self-
regulatory organization who has access to material information about an issuer or a
security that is not generally available to the public; or
d) A person who learns such information by a communication from any foregoing insiders.
(Sec. 3.8 Securities Regulation Code)

j) Contracts
a. By Self-Dealing Directors with the Corporation
GR: A contract of the corporation with 1 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. (Sec. 31)

XPN: Such contract is VALID if all of the ff. conditions are present:
(a) 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;
(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 2/3 of the entire membership of the board, with at least a majority of independent
directors voting to approved the material contract; and
 (e) In case of an officer, the contract has been previously authorized by the board of directors.
(Sec. 31)

Ratification
In case of absence of the first three* conditions above, contract may be ratified if:
a) Stockholders representing at least 2/3 of the OCS or at least 2/3 of the members in a
meeting called for the purpose voted to ratify the contract;
b) There is full disclosure of the adverse interest of the directors or trustees involved is
made at such meeting; AND
c) The contract is fair and reasonable under the circumstances. (Sec. 31)
*Amended from two to three in the RCC.

b. Between Corporations with Interlocking Directors

GR: A contract between two or more corporations having interlocking directors shall NOT be
invalidated on that ground alone. (Sec. 32)

XPN: If contract is fraudulent or not fair and reasonable under the circumstances, such
contract is invalid. (Sec. 32)

Interlocking director with nominal and substantial interest

Nominal Interest – His stockholdings are 20% or less of the OCS
Substantial Interest – his stockholdings exceeds 20% of the OCS

Interest of interlocking director in one corporation is substantial, nominal in the other; the
contract shall be VALID if the ff. conditions are met:
(a) 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;
(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;

Where (a) and (b) are absent, the contract can be ratified by the vote of the stockholders
representing at least 2/3 of the OCS or at least 2/3 of the members in a meeting called for the
purpose voted to ratify the contract, provided that:
1. Full disclosure of the adverse interest of the directors/trustees involved is made on
such meeting;
2. The contract is fair and reasonable under the circumstances. (Sec. 31-32)

k) Executive Committee
The by-laws may provide for the creation of an executive committee, composed of not less than 3
members of the board, to be appointed by the Board. (Sec. 34)

Limitations on its Power

The ff. cannot be delegated to the Executive Committee:
a) Matters needing stockholder approval;
b) Filling up of board vacancies;
c) Amendment, repeal or adoption of new by-laws;
d) Amendment or repeal of any resolution of the Board which by its express terms is not
amendable or repealable;
e) Cash dividend contribution;
 f) Acts which would render the BOD powerless and free from all responsibilities imposed on
it by law.
l) Meeting
SUMMARY OF MEETINGS

Regular Meetings Special Meetings

Description Meetings that are fixed by Meetings that are called for a
law or as provided by the by- special purpose
laws
Date and Time Held monthly, unless Held anytime upon call
otherwise provided by the
by-laws
Venue Anywhere in and outside the PH, unless otherwise provided
by by-laws
Notice  Date, time and place of the meeting must be sent to
every director or trustee at least 2 days prior to the
scheduled meeting, unless a longer time is provided
in the by-laws
 This requirement may be waived.
Who presides  The chairman
 In his absence, the president
Quorum GR: Majority of the directors or trustees, as stated in the AOI
XPN: Unless the AOI or the by-laws provide for GREATER
majority

a. Quorum
Quorum to Transact Corporate Business
GR: Majority of the directors or trustees as stated in the AOI, shall constitute a quorum to
transact corporate business. (SEC. 52)

XPN: Unless the AOI or the by-laws provide for a GREATER majority.

b. Rule on Abstention
No inference can be drawn in a vote of abstention. When the director or trustee abstains, it
cannot be said that he intended to acquiesce in the action taken by those who voted
affirmatively. Neither, for that matter, can such inference be drawn from the abstention that he
was abstaining because he was not then ready to make a decision.