Board of Directors
Board of Directors
Board of Directors
22 to 34)
1) Board of Directors (sec. 22)
Directors shall be elected for a term of 1 year from among the holders of
stock registered in the 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 one (1) share of stock or a trustee
who ceases to be a member of the corporation shall cease to be such.
a) Independent directors
An independent director is a person who apart from shareholdings and fees
received from any business or other relationship which could, or could
reasonable be received to materially interfere with the exercise of independent
judgment in carrying out the responsibilities as a director.
The directors or trustees elected shall perform their duties as prescribed by law,
rules of good corporate governance, and bylaws of the corporation.
c) Nationality
ELECTION REQUIREMENTS:
There must be present, either in person or through a representative
owners of majority of the outstanding capital stock, or if there be no
capital stock, a majority of the members entitled to vote.
When so authorized in the bylaws or by a majority of the board of
directors, the stockholders or members may also vote through remote
communication or in absentia: Provided, That the right to vote through
such modes may be exercised in corporations vested with public
interest, notwithstanding the absence of a provision in the bylaws of
such corporations.
The election must be by ballot if requested by any voting 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 bylaws or where the bylaws are silent at the time of the election.
IN NON-STOCK CORPORATIONS:
Members of nonstock corporations may cast as many votes as there are trustees
to be elected by may not cast more than one (1) vote for one (1) candidate.
IN DEPTH NOTES:
A. NOMINATION
GR: Board must nominate
B.PRESCRIBED QUORUM
There must be present either in person or through a representative
authorized to act by written proxy, the owners of the majority of the
outstanding capital stock, or if there be no capital stock, a majority of
the members entitled to vote. No majority = no election. (The Code
does not permit a contrary stipulation!!)
HOWEVER, in EXCEPTIONAL CASES where there is UNJUSTIFIED
NON-HOLDING OF ELECTION and the Commission issues a summary
order calling for special election: Quorum = shares of stock or
membership represented at such meeting and entitled to vote.
PRESCRIBED VOTE
Plurality voting = highest vote. The winning party need not have the support of
the majority of the OCS or if there be no OCS, a majority of the members entitled
to vote
Majority Voting= a vote will not carry if the majority votes are withheld
DISTRIBUTION OF VOTES
a. STRAIGHT VOTING
In stock corporations: Stockholders shall have the right to vote the number of
shares of stock standing in their own names, vote such number of shares for as
many persons as there are directors to be elected and distribute them on the
same principle among as many candidates as may be seen fit.
Limitations:
- Total number of votes should not exceed 500
- Controlling bloc may cast 400 votes
- Minority bloc may cast 100 votes
In non-stock corporations
GR: As many votes as there are directors to be elected but may not
cast more than 1 vote for 1 candidate
EXCPN: Unless otherwise provided in the AOI/ By laws
b. CUMULATIVE VOTING
In stock corporations
Stockholders entitled to vote shall have the right to vote the number of shares of
stock standing in their own names, vote such number of shares for as many
persons as there are directors to be elected and 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.
(see book explanation)
ELECTION CONTESTS
Must follow the prescribed procedure in the bylaws including the period
in instituting the same
Take note if there is an arbitration clause in the bylaws
In the absence of these procedure and the period, the election contest must be
filed in court within 15 days from the date of election (cf with intracorporate
controversy)
Notice of the time and place of such meeting, as well as of the intention
to propose such removal, must be given by publication or by written
notice prescribed in this Code. Removal may be with or without
cause: Provided, That removal without cause may not be used to
deprive minority stockholders or members of the right representation to
which they may be entitled
In all other cases, the election must be held no later than forty-five (45) days from
the time the vacancy arose.
When the vacancy prevents the remaining directors from constituting a quorum
and emergency action is required to prevent grave, substantial, and irreparable
loss or damage to the corporation:
Vacancy may be temporarily filled from among the officers of the
corporation by unanimous vote of the remaining directors or
trustees. Action by the designated director or trustee shall be limited to
the emergency action necessary, and the term shall cease within a
reasonable time form the termination of the emergency or upon election
of the replacement director or trustee, whichever comes earlier.
The corporation must notify the Commission within three (3) days from the
creation of the emergency board, stating therein the reason for its creation.
PER DIEM
Reasonable per diem is not subject to tax however, an excessive per diem is
already considered as compensation thus subject to tax.
For DIRECTORS: Total yearly compensation must not exceed 10% of the
corporation’s income before tax.
HOW COMPUTED?
Based on the net income before income tax of the year during which the
directors have served as such
-Mere errors in judgment are not sufficient to hold board members accountable
for their business judgement.
- Not absolute, as the courts may interfere with decisions of the board when the
contracts entered into by the latter are unconscionable and oppressive to the
point it amounts to the wanton destruction of the rights of the minority
(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 a majority of the
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.
Where any of the first three (3) conditions set forth in the preceding
paragraph is absent, in the case of a contract with a director or trustee,
such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or
of at least two-thirds (2/3) of the members in a meeting called for the
purpose:
The board may create an executive committee composed of at least three (3)
directors.
SCOPE OF POWER: Said committee may act, by majority of vote of all its
members, on such specific matters within the competence of the board, as may
be delegated to it in the bylaws or by majority vote of the board, EXCEPTIONS:
(a) approval of any action for which shareholders' approval is also required;
(b) filing of vacancies in the board;
(c) amendment or repeal of bylaws or the adoption of new bylaws;
(d) amendment or term is not amendable or repealable; and
(e) distribution of cash divendends to the shareholders.
The board of directors may create special committees of temporary or permanent
nature and determine the members' term, composition, compensation, powers,
and responsibilities.
-As to the creation of special committees, the authorization in the by-laws is not
anymore necessary