TITLE III

BOARD OF DIRECTOR/TRUSTEES
AND OFFICERS

REVISED CORPORATION CODE

SECTION 22 OF THE RCCP
THE BOARD OF DIRECTORS OR
TRUSTEES OF A CORPORATION;
QUALIFICATION AND TERM.
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.

Directors shall be elected for a term of one (1) year from among the holders of stocks
registered in the corporation’s books, while trustees shall be elected for a term not exceeding
three (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.
SECTION 22 OF THE RCCP
CONT.
The board of the following corporations vested with public interest shall have
independent directors constituting at least twenty percent (20%) of such board:

a. Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as
“The Securities Regulation Code”, namely those whose securities are registered with the
Commission, corporations listed with an exchange or with assets of at least Fifty million
pesos (P50,000,000.00) and having two hundred (200) or more holders of shares, each
holding at least one hundred (100) shares of a class of its equity shares;

b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service

business, pre-need, trust and insurance companies, and other financial intermediaries;
and
SECTION 22 OF THE RCCP
CONT.
c. Other corporations engaged in business vested with public interest similar to the above, as may be
determined by the Commission, after taking into account relevant factors which are germane to the
objective and purpose of requiring the election of an independent director, such as the extent of
minority ownership, type of financial products or securities issued or offered to investors, public
interest involved in the nature of business operations, and other analogous factors.

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

Independent directors shall be subject to rules and regulations governing their qualifications,
disqualifications, voting requirements, duration of term and term limit, maximum number of board
memberships and other requirements that the Commission will prescribe to strengthen their
independence and align with international best practices.
 SECTION 22
QUALIFICATION AND TERM

Corporate Management Proxy

Concentration of Power Term

Independence Qualifications

Business Judgment Rule Effect of Disqualification

Resolution Re-election

Ratification Hold-over
 The Board is a body which:
1. exercises all powers provided for under the

CORPORATE RCCP and other existing laws;

2. conducts all business of the corporation; and
MANAGEMENT 3. controls and holds all properties of the
corporation
 The concentration of pwers of control
of corporate business and appointment
CONCENTRATION of corporate officers and managers in
the Board is necessary for efficiency in
OF POWER any large organization.
NATURE OF ORIGINAL and UNDELEGATED.
POWERS OF Directly conferred by statute
BOD/BOT
 POWERS
Acting together as a body in a meeting
EXERCISED BY Binding effect individual declarations
BOD/BOT AS A of board members
BOARD
 directors happen to be the sole stockholders
authorized by the board of directors
POWERS EXERCISED BY ratified in a subsequent board meeting
BOD/BOT AS A BOARD directors or agents held out by the corporation to the
public
EXCEPTIONS the board being inactive
TO THE RULE theory of corporate ratification
create an executive committee
enter into a management contract
in a close corporation
 The independence of directors is reflected in
Section 22 of the RCCP that expressly states
that the directors control all businesses of the

INDEPENDENCE corporation. In the management of affairs of

the corporation, the directors are dependent
solely upon their own knowledge of its
business and their own judgment as to what
the corporation’s interest requires.
 The members of the Board of Directors hold
BUSINESS such office charged with the duty to act for the
corporation according to their best judgment,
JUDGMENT and is so doing they cannot be controlled in

RULE the reasonable exercise and performace of

such duty.
 1. the presence of business decision including decisions onpolicy,
management and administration;
BUSINESS 2. the decision must be intra vires and must comply with the
JUDGMENT procedural and substantive requirements of law;
RULE 3. good faith;
REQUIREMENTS 4. due care in making the decision; and
5. the director must not have personal interest or must not be self-
dealing or must not otherrwise be in breach of the duty of loyalty
governed by provisions of the RCCP, specifically Sections 30-33
 The Board must act, not individually or separately, but as a
body in a lawful meeting.43 The actions of the Board are
expressed in resolutions passed in its meetings. The Board
RESOLUTION of Directors or Trustees acts as a body and the directors are
not agents individually. The collective action of the
directors is required in order that action may be deliberately
taken after opportuiiity for discussion and an interchange of
views.
 Unless the Articles of rporation or the By-Laws provides
for a greater majority, a majority of the number of
directors or trustees as fixed in the Articles of In
APPROVAL OF orporation shall constitute a quorum for the transaction
RESOLUTION of corporate business, and every decision of at least a
majority of the directors or trustees present at a meeting
at which there is a quorum shall be valid as a corporate
act.
 A Secretary's Certificate - a certificate issued by the
Corporate Secretary of the corporation - is sufficient
proof of the existence of a resolution adopted by the
PROOF OF Board. The truthfulness of the certification is presumed.
RESOLUTION To overcome the presumption, there must be sufficient,
clear and convincing evidence as to exclude all
reasonable controversy as to the falsity of the
certificate.
 The general rule is that a corporation, through its board of
directors, should act in the manner and within the formalities, if
any, prescribed by its charter or by the general law. Thus,
RATIFICATION directors must act as a body in a meeting called pursuant to the
law or the corporation's bylaws, otherwise, any action taken
therein may be questioned by any objecting director or
shareholder. However, the actions taken in such a meeting by
the directors or trustees may be ratified expressly or impliedly.
 Section 52 of the RCCP provides that directors or
trustees cannot attend or vote by proxy at Board
PROXY ARE meetings. A director cannot even delegate his powers
NOT ALLOWED as director to another person. An alternate director who
will act as a director in the absence of the duly elected
director is also unacceptable under Section 52.
 Section 22 of the RCCP states the following rules:
(1) Directors shall be elected for a term of one (1) year from
among the holders of stocks registered in the corporation's
TERM books;
(2) Trustees shall be elected for a term not exceeding three (3)
years from among the members of the corporation; and
(3) Each director and trustee shall hold office until the successor
is elected and qualified.
 The RCCP prescribes the following qualifications for directors or
trustees:
(1) He must own at least one share of the capital stock of the
corporation in his own name or if the corporation is a non-stock
corporation, he must be a member thereof;
QUALIFICATIONS (2) He must not be disqualified under the RCCP or any
applicable special law or rules;
(3) He must be of legal age; and
(4) He must possess other qualifications as may be prescribed in
special laws or regulations or in the by-laws of the corporation.
 (1) Under the RCCP, the number of directors in a stock corporation
shall "not be more than fifteen (15)" (Sec. 13[f]).
(2) In ordinary non-stock corporations, the boards of trustees, shall
NUMBER OF be fixed in the articles of incorporation or the by-laws, "may be more
DIRECTORS OR than fifteen (15). (See Sec.91, par.1)
TRUSTEES TO BE (3) In a close corporation, the articles of incorporation may provide
ELECTED that the business of the corporation shall be managed by its
stockholders rather than by a board of directors in which case no
meeting of stockholders need be held to elect directors, (see Sec. 96,
par. 2.)
 (4) Trustees of non-stock educational corporation "shall not
be less than five (5) nor more than fifteen (15)," with the term
NUMBER OF of office of 1/5 of their number expiring every year, (see Sec.
DIRECTORS OR 10, pars. 1, 2.)
TRUSTEES TO BE (5) In a corporation sole, there is no board of directors or
ELECTED trustees as it consists of one member or corporator only.
CONT. (6) The board of trustees of religious societies shall also "be
not less than five (5) nor more than fifteen (15)." (see Sec.
114[f])
 A disqualified stockholder cannot run for election as
director. If the ground for disqualification was present at
the time of election, but the disqualified stockholder
EFFECT OF was nevertheless elected as a director, the subsequent
DISQUALIFICATIONS disqualification of the director would not render the
Board incapable of transacting business for as long as
the remaining directors still constitute a quorum.
 Unless there is a provision in the Articles
oflncorporation or By-Laws that disqualifies an
RE-ELECTION incumbent director or officer from seeking another
term of office, the incumbent is not prevented from
seeking re-election
 The policy of the law is to avoid or shorten the tenure of
hold-over directors or trustees. This will be discussed
under Section 23 in relation to Section 25 of the RCCP. It is
HOLD-OVER noted that the presence of hold-over directors or trustees
cannot be totally avoided. If no election is held, the
directors and officers shall hold­ over until their successors
are elected.
 Under Section 22 of the RCCP, "an independent director is
a person who, apart from shareholdings and fees received
from the corporation, is mdependent of management and
INDEPENDENT free from any business or other relationship which could,
DIRECTOR or could reasonably be perceived to materially interfere
with the exercise of independent judgment in carrying out
the responsibilities as a director."
SECTION 25 OF THE RCCP
REPORT OF ELECTION OF DIRECTORS,
TRUSTEES AND OFFICERS, NON-
HOLDING OF ELECTION AND
CESSATION FROM OFFICE.
Within thirty (30) days after the election of the directors, trustees and officers of the corporation,
the secretary, or any other officer of the corporation, shall submit to the Commission, the names,
nationalities, shareholdings, and residence addresses of the directors, trustees and officers
elected.
The non-holding of elections and the reasons therefor shall be reported to the Commission
within thirty (30) days from the date of the scheduled election. The report shall specify a new
date for the election, which shall not be later than sixty (60) days from the scheduled date.
 SECTION 25 OF THE RCCP
CONT.
If no new date has been designated, or if the rescheduled election is likewise not held, the
Commission may, upon the application of a stockholder, member, director or trustee, and after
verification of the unjustified non-holding of the election, summarily order that an election be held.
The Commission shall have the power to issue such orders as may be appropriate, including orders
directing the issuance of a notice stating the time and place of the election, designated presiding
officer, and the record date or dates for the determination of stockholders or members entitled to
vote.

Notwithstanding any provision of the articles of incorporation or bylaws to the contrary, the shares
of stock or membership represented at such meeting and entitled to vote shall constitute a quorum
for purposes of conducting an election under this section.

Should a director, trustee or officer die, resign or in any manner cease to hold office, the secretary, or
the director, trustee or officer of the corporation, shall, within seven (7) days from knowledge
thereof, report in writing such fact to the Commission.
 To give public information so that those who want to deal
with the corporation and intends to do business with it
OBJECTIVE may know or have the means of intend to do business with
it may know or have the means of knowing facts
concerning the corporation’s financial resources and
business responsibility.
SECTION 26 OF THE RCCP
DISQUALIFICATION OF DIRECTORS,
TRUSTEES OR OFFICERS.
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 six (6) years;
(2) For violating this Code; and
(3) For violating Republic Act No. 8799, otherwise known as “The Securities Regulation Code”;
(b) Found administratively liable for any offense involving fraudulent 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.

The foregoing is without prejudice to qualifications or other disqualifications, which the Commission, the
primary regulatory agency, or the Philippine Competition Commission may impose in its promotion of
good corporate governance or as a sanction in its administrative proceedings.
 To give public information so that those who want to deal
with the corporation and intends to do business with it
OBJECTIVE may know or have the means of intend to do business with
it may know or have the means of knowing facts
concerning the corporation’s financial resources and
business responsibility.
SECTION 27 OF THE RCCP
REMOVAL OF DIRECTORS OR TRUSTEES.
Any director or trustee of a corporation may be removed from office by a vote of the stockholders holding or
representing at least two-thirds (2/3) of the outstanding capital stock, or in a nonstock corporation, by a vote of
at least two-thirds (2/3) of the members entitled to vote: Provided, That such removal shall take place either at a
regular meeting of the corporation or at a special meeting called for the purpose, and in either case, after
previous notice to stockholders or members of the corporation of the intention to propose such removal at the
meeting. A special meeting of the stockholders or members for the purpose of removing any director or trustee
must be called by the secretary 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 there is no secretary, or if the secretary, despite demand, fails or refuses to call the special meeting or
to give notice thereof, the stockholder or member of the corporation signing the demand may call for the
meeting by directly addressing the stockholders or members. 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 of representation to which they may be entitled under
Section 23 of this Code.

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.
 POWERS OF Section 27 prescribes the rules on removal of the directors
STOCKHOLDERS
OR MEMBERS TO or trustees of the corporation, by providing, among others,
REMOVE the persons authorized to call the meeting and the number
DIRECTORS OR of votes required for removal.
TRUSTEES
 GENERAL RULE: A director or trustee may be removed by
the prescribed vote without cause.
EXCEPTION: A director or trustee cannot be removed
WHERE DIRECTOR
without cause if such removal deprives minority
OR TRUSTEE
ELECTED BY stockholders or members who united in cumulative voting
CUMULATIVE to elect such director.
VOTING EXCEPTION TO THE EXCEPTION: Where the removal is
initiated by the minority stockholdders or members
themselves.
WHERE REMOVAL
DONE BY The incumbent directors or trustees cannot be removed
ELECTING merely by electing a new set of directors or trustees.
REPLACEMENT
 WHERE REMOVAL In case of disqualification by operation of law, there is no
DONE FOR need to follow the procedure. A mere declaration of such
DISQUALIFICATION disqualification is sufficient to remove him from office.
 It has been held that a director removed by the stockholders
who elected another person in his place cannot be
WHERE
compelled to vacate his office where is shown that the
REPLACEMENT
ELECTED NOT successor is not qualified not being the owner of any share
QUALIFIED in the corporation and because under the bylaws of the
corporation, “directors shall serve until the election and
qualification of their duly qualified successors.”
 It has been held that a director removed by the stockholders
WHERE who elected another person in his place cannot be
AUTHORIZED compelled to vacate his office where is shown that the
OFFICER REFUSES,
successor is not qualified not being the owner of any share
FAILS OR
NEGLECTS TO in the corporation and because under the bylaws of the
CALL A MEETING corporation, “directors shall serve until the election and
qualification of their duly qualified successors.”
 1. The SEC is given thepower, motu proprio or upon verified
complaint, and after due notice and hearing, to order the
removal of a director or trustee elected despite the
POWER OF THE SEC disqualification, or whose disqualification arose or is
TO REMOVE discovered after an election.
DIRECTORS OR 2. The removal of a disqualified director shall be without
TRUSTEES
prejudice to other sanctions that the SEC may impose on the
board of directors or trustees who, with knowledge of the
disqualification, failed to remove such director or trustee.
 The board of directors has no power to remove one (1)
POWER OF THE of its members as director or trustee. Neither can it
BOARD TO
REMOVE A replace the vacancy caused byu removal effected by the
MEMBER stockholders or members of the corporation.
 General Rule: The power of removal is in the
POWER OF COURT
TO REMOVE corporation itself.
DIRECTORS OR
TRUSTEES
Exception: Appointment of Receiver
 1. The removal must “take place either at a regular meeting of
the corporation or at a special meeting called for the
purpose;”
2. There must be “previous notice to the stockholders holding
REQUISITES FOR
or representing 2/3 of the outstanding capital stock, or if the
REMOVAL OF
DIRECTORS OR corporation be a non-stock corporation, by a vote of 2/3 of
TRUSTEES the members entitled to vote; “
3. The removal must be “by a vote of the stockholders holding
or representing 2/3 of the outstanding capital stock, or by a
vote of 2/3 of the members entitled to vote.”
 1. For removal - notice of the meeting called for the removal of
any director or trustee must expressly state “the intention to
propose such removal.”
REQUIREMENT OF 2. For choosing replacements - when the vacancy arises
NOTICE OF
because of removal by the stockholders or members, the
MEETING
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 the meeting.
 1. Right to resign
RESIGNATION OF 2. Liability for wrongful resignation
DIRECTORS OR
3. Form and report of resignation
TRUSTEES
4. Effectivity of resignation
ABANDONMENT 1. Acceptance of incompatible office
OF OFFICE AND 2. Absence for unreasonable length of time
FAILURE TO 3. Mere absence or continued failure to attend meetings
ATTEND 4. Specified number of unjustified absences as ground for
MEETINGS automatic disqualification