Statutory requirements before and after incorporation corporation and unable to comprehend corporate 1.
omprehend corporate 1. discretionary powers which by provision of law or the by
Provisions of the statute which are mandatory, non-
compliance will prevent the creation of a dejure corporation
but as to those provisions which are merely directory, a
departure will not have the consequence. Strict compliance
even with the mandatory provisions are conditions
precedent to corporate existence is not required. The law
requires only substantial compliance.
Mandatory conditions may be either precedent or conditions
subsequent.
Mandatory provisions prescribe formalities for incorporation
which are designed to protect the public.
Directory regarded relatively inconsequential so that failure
to comply with the directory provision will be fatal to valid
incorporation.
Conditions precedent
Those conditions non- compliance with which will prevent
the legal existence of a corporation.
Conditions subsequent
Conditions to be complied with after acquiring corporate
existence in order that a corporations may continue as such.
SEC 23.
Corporate powers exercised by board of directors or trustees
1. governing body of the coporation – through the aid and by
means of individual
2. binding effect of stockholder’s action- they are not agents
of the corporation, they cannot bind their acts.
Except: some powers reserved by law to stockholders the
directors have sole authority to determine policy and
conduct the ordinary business of the corporation within the
scope of its charter in all thoise matters which do not require
the consent or approval of the stockholders.
Reasons for the rule
The theory of every corp. org. is that stockholders may have
all the profits but shall turn over to the directors the
exclusive authority to manage and control the transaction of
its business and the use of its assets, being limited to a few
specified matters concerning its internal affairs.
Concentration on the board of directors is deemed necessary
to efficacy especially in a large organization. It is Cleary
impractical and unwise to entrust the administration of
corporate affairs to a host of widely scattered stockholders
who are generally unfamiliar with the business of the
6. in case of failure to hold election for any reason, the
management.
Limitations on the power of board of directors or trustees
1. observe the limitations or restrictions imposed by the
constitution, statutes and rules and regulations having the
force of law on the corporations including articles of
incorporation and by laws.
2. it cannot perform substituent acts, acts involving
fundamental or major changes in the corporation.
3. it cannot exercise powers not possessed by the
corporation.
Powers exercised by the board of directors or trustees as
board
Must act together as a body in a awful meeting, not
individually or separately in order to bind the corporation by
their acts. To exercise their powers they must meet as
directors or trustees at which there is quorum.
1. meeting is necessary in order that any action may be
adopted only after full discussion
2. agents of the corporation managing its affairs, directors
have no power other than as a board.
Except:
1. a contract entered into y the directors without a meeting
of the board is binding upon the corporation where the
directors happened to be the sole stockholders
2. corporation is similarly bound by a contract entered into
by any corporate officer, such as general manager,
authorized by the board of directors, either expressly or
impliedly to bind the contact.
3. corporation is also bound by a particular transaction
ratified in a subsequent board meeting.
4. by-laws of a corporation may create an executive
committee with authority to act on such specific matters
within the competence of the board as may be delegated to
it in the by-laws of the corporation or on majority vote of the
board.
5. corporation is expressly allowed subject to certain
limitations.
6. in a close corporation any action by the directors without
a meeting improperly held, shall unless the by0laws
otherwise provide be deemed valid or ratified.
GR. The power to bind the corporation by contracts rests in
its board of directors, but the power may be delegated ether
expressly or impliedly to other officers or agents of the
corporation.
Except:
laws or by the vote of the stockholders are vested exclusively
in the board of directors or are specially delegated to them
cannot be delegated to subordinate officers and agents.
2. cannot delegate entire supervision and control of the
corporation to other for this is not only unnecessary but
inconsistent
3. neither can the board of directors delegate special powers
especially conferred upon it by resolution of the stockholders
or members of the corporation.
4. power of the board to delegate authority is subject to
restrictions as may be provided by the laws.
Term of office – 1 year
Hold-over
Upon failure of a quorum at any meeting.
# of directors or trustees
Not less than 5 nor more than 15
Qualifications of directors and trustees
1. stock corporation
Every director must have at least 1 share of the capital stock
Share of stock held by the director must be registered in his
name on the books of the corporation
Every director must continuously own at least 1 share of
stock during his term
Majority of the stockholders must be residents of the
Philippines.
2. non-stock corporations
Members of good standing
Majority of them must be residents of the Philippines
Only natural persons may be elected as directors or trustees
and they must be elected from among the stockholders or
members.
SECTION 24
Election of officers and trustees
1. stockholders or members called for election of directors
must be present in person or by representative authorized to
act by written proxy, owners of the majority capital stock or
majority of members entitled to vote.
2. election must be by ballot if requested by voting
stockholder or member.
3. stockholder cannot deprive his statutory right to use any
of the methods of voting in the election of directors.
4. o delinquent stock shall be voted
5. if a quorum is present the candidate receiving highest of
votes shall be declared winner.
meeting may be adjourned day to day or from time to time
but it cannot be adjourned sine die or indefinitely.
7. the requisite of notice must be given.
Methods of voting
1. straight voting – vote such member of shares for as many
persons there are directors
2. cumulative voting for one candidate
Give one candidate as many votes as the number of directors
to be elected multiplied by the number of his shares shall
equal.
3. cumulative voting by distribution
Stockholder may cumulate his share by multiplying also the
number if his shares by the director to be elected and
distribute the same as many candidates he shall see fit.
Voting of non stock corporation
Non-stock corporations may cast votes as there are trustees
to be elected but may not cast more than 1 vote for 1
candidate.
SECTION 25.
Extent of authority of corporate officers
Responsible for the dy to day running of the corporation
Quorum
Number of the membership of a collective body as is
competent to transact business or do any other corporate
act.
Directors or trustees cannot validly act by proxy. They must
attend the meeting of the board personally
Constructive or electronic presence is not substitute for
actual presence.
SECTION 26.
SECTION 27.
Disqualification of directors, trustees or officers
Having been convicted by final judgement of an offense
punishable by imprisonment for a period of 6 years or
violation of the code as director , trustee, officer of any
corporation.
SECTION 28.
Board of directors has no power to remove one of its
members as director.
The can only be removed only by the power appointed .
Requisites for removal
1. take place either at a regular meeting or at a special meting
called for the purpose.
2. previous notice to the stockholders or members of the
corporation of the intention to propose such removal.
3. by vote if the stockholders holding or representing 2/3 of
the outstanding corporate stock.

SECTION 29.

Person elected for vacancy holds office only for the

unexpired term of his predecessor.

SECTION 31.

Liability of directors and trustees

1. willfully and unknowingly votes or assents to patently
unlawful acts of the corporation
2. guilty of gross negligence or bad faith in directing the
affiars of the corporation
3. acquires any personal or pecuniary interest in conflict with
his duty as director or trustee.