CHAPTER VI BOARD OF DIRECTORS AND TRUSTEES AND OFFICERS

POWERS OF THE BOARD

- SECTION 23
- The corporation vest upon the corporation,
1. Authority to exercise corporate powers
2. Conduct all business
3. Control and hold properties of the corporation

- BOD ( trustees in non-stock corporation or a designated governing as stated in section 138), is the supreme
authority in matters of management of the regular and special business affairs of the corporation
- Their authority does not extend to the fundamental changes in the corporate charter such as amendments or
substantial changes thereof which belongs to the stockholders as a whole.
- Principle: stockholder may have all the profits but shall turn over the management of the enterprise to the BOD
CLASSIFICATION OF POWERS OF CORPORATE AGENTS/OFFICERS
- It is not entirely accurate to say only the BOD can exercise such corporate powers and functions because, unless
the law so provides, they can be delegated to individual directors or other officers or agents.
Whether or not the acts of individual director, officers, or agents WOULD BIND the corporation depend on
the nature of the agency created or the powers conferred upon such person by the statute, the corporate
charter, the by-laws, the corporate action of the board or stockholders, or whether it is necessary or incidental
to ones office
GR: The high court has ruled that corporate powers, such as the power to enter into contracts, are exercised by the board
of directors
EXP: the board may delegate such powers to either an executive committee or officials or contracted managers.
GR: that a corporation is bound by the acts of its corporate officers, if they act within the scope of the 5 classification of
powers of corporate agents
1. Those expressly conferred or those granted by the AOI, the by-laws, or by the official acts of the board
2. Those that are incidental or those acts that are necessary and reasonable to carry out the corporate purpose/s
3. Those that are inherent or acts that go with the office
4. Those that are apparent or those acts which although not actually granted, the principal knowingly allows or
permits it to be done.
5. Powers arising out of customs, usage or emergency

**ramirez vs. orientalist
**barreto vs. la previsora filipina

QUALIFICATIONS AND DISQUALIFICATIONS
(See discussion on chapter 4)
- Qualifications: SECTION 23
a. Own at least one share of the capital stock, which share shall stand in its name
b. Majority of the directors or trustees of all corporation must be residents of the Philippines

- Disqualifications: SECTION 27
a. Convicted of final judgement for an offense punishable by imprisonment for a period exceeding 6 years
b. Violation of this code committed within 5 years prior to the date of his election or appointment
** Lee vs. CA: VTA, ownership of atleast one share
** Detective and protective bureau vs. cloribel: ownership of at least one share

ELECTION AND VOTING
- SECTION 24
- For the election of directors, Majority of the outstanding stocks, in person or by their duly authorized
representative by written proxy, must be present.
- In non-stock corporations,majority of the members entitled to vote, in person or proxy, if allowed by its AOI
- If for any purpose, the election was not held, as when the proper quorum was not obtained, the meeting may be
adjourned
- On the request of any voting SH or members, the election must be by ballot otherwise, viva-voce will suffice
- Cumulative voting is a matter of righ granted by each stockholder with voting rights
- In non-stock corporations, cumulative voting is generally not available, as a remedy, unless allowed by its AOI or
by-law, since each stockholder is entitled only to one vote ( a member may cast as many votes as there are
trustees to be elected but may not cast more than one vote for one candidate)
CUMULATIVE VOTING: gives SH entitled to vote the right to give a candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal.
He may distribute them among the candidates as he may see fit
The number of votes which a SH can have I the product of the multiplication of his shares with the number of
members of BOD
Reason for cumulative right: to allow the minority to have a rightful representation in the BOD
As for other corporate officer (other than directors or members, SECTION 25 provides for their manner of election by the
directors)
Officers to be elected by directors
1. Presidents ( which must be a director)
2. treasurer (may or may not be a director)
3. secretary
4. other officers as may be provided by the by-laws
any two person may hold 2 or more positions provided that no one shall act as a president and secretary or
president and treasurer at the same time

VALIDITY AND BINDING EFFECT OF ACTIONS OF CORPORATE OFFICERS
- SECTION 25 (second paragraph)
- Quorum requirement: majority of the number of the board as fixed in the AOI

GR: To have a valid corporate act: the decision of at least a majority of the directors or trustees present at a
meeting at which there is a quorum required.
EXC: for the election of officers where the voting requirement would be a majority of all the members of the
board.
- Any action of the board without a meeting and without the required number of votes and quorum requirement will
bind the corporation unless, subsequently ratified, expressly or impliedly.

** Yao ka sin trading vs. CA
**lopez realty inc vs. Fotencha
**pua casim vs. neumark and co
**yu chuck vs. kong li po
**trinidad francisco vs. gsis
**board of liquidator vs. kalaw
**buenaseda vs. bowen & co., inc

REMOVAL AND FILLING UP VACANCIES
A. REMOVAL
SECTION 28
- Corporate by laws may provide for causes or grounds for the removal of a director and if the removal should be
for cause, the proviso that removal shall not deprive the minority of their rightful representation in the board will
not apply.
Requirements for the removal of directors
1. Removal should take place at a general or special meeting duly called for that purpose.
2. The removal must be by vote of the stockholders holding or representing 2/3 of the OCS or the members entitled
to vote in a NSC
3. There must be a previous notice to the SH or members of the intention to propose such removal at the meeting
either by publication or on written notice to the SH or M
- The law, PD 902-A, effectively grants the proper court, the power and authority to hear and decide cases
involving controversies in the election or appointment of directors, trustees officers, or managers of such
corporation, partnership or association.
- In case of deadlock in a close corporation, the SEC has authority to isse an order cancelling, altering, or enjoining
any resolution any act or resolution.

B. VACANCY
SECTION 29
Requirement for filling up vacancy/ies
1. Vacancy occurred other than by removal or by expiration of term.
2. May be filled by the vote of at least the majority of the remaining Directors or members, if still constituting a
quorum; otherwise it will be filled by the stockholders in a general or special meeting called for that purpose
Any change in the constitution of the BOD must be reported to the SEC. (SECTION 26)
- Evident purpose of section 26 is to give the public information, under sanction of oath of responsible officer, of
the nature of the business, financial condition and operational status of the company together with information on
its key officers and managers so that person dealing with it or those intended to deal with it, have the means of
knowing the financial condition and business responsibility of the corporation.
- Vacancy shall only be for the unexpired term
- In the event the successor is not qualified, the law provides that the supposed predecessor shall hold office until
(his) successor is duly elected. He continues to act in a hold-over capacity.