TITLE III – BOARD OF DIRECTORS/TRUSTEES/OFFICERS
Derivative suit
1. Correlation among the BOD/BOT, officers and stockholders
Stockholders/members periodically elect the board of directors or
trustees, who are charged with the management of the corporation.
The board, in turn, periodically elects officers to carry out
management functions on a day-to-day basis.
Stockholders/members – owners who have residual powers over
fundamental and major corporate changes.
2. Acts of management vs. ownership
Acts of management pertain to the board while Acts of ownership
pertain to stockholders or members.
3. What is business judgment rule?
Contracts intra vires (beyond the powers) entered into by the board of
directors are binding upon the corporation and courts will not interfere
unless such contracts are unconscionable and oppressive as to
amount to wanton destruction to the rights of the minority, as when
plaintiffs aver that the defendants (members of the board), have
concluded a transaction among themselves as will result in serious
injury to the plaintiffs stockholders.
o Unconscionable – not right or reasonable
o Wanton – deliberate and unprovoked
o Plaintiff – the one who sues
o Defendant – the one being sued
4. Where do corporate powers reside?
The stockholders/members relinquish corporate powers to the board
in accordance with law.
5. Who has power to manage the corporation?
The board of directors or trustees
6. What is the meant by apparent or ostensible authority?
It is the power of an agent to legally bind its principal with a third party,
and. arises from conduct of a principal, by permitting the agent to
make contracts of a particular kind on its behalf.
7.
It is a lawsuit brought by a shareholder on behalf of a corporation
against a third party.
8. Authority of the BOD or BOT
The board of directors or trustees has the sole authority to determine
policies, enter into contracts, and conduct the ordinary business of the
corporation within the scope of its charter, i.e., its articles of
incorporation, bylaws, and relevant provisions of law.
9. What are the 3 levels of control?
 The board of directors – they are responsible for corporate
policies and the general management of the business affairs of
the corporation.
 The officers – they execute the policies laid down by the
board, but in practice often have wide latitude in determining
the course of business operations.
 The stockholders – they have the residual power over
fundamental corporate changes, like amendments of the
articles of incorporation.
10. Who has the power to decide whether a corporation can enter
into a binding contract?
The board of directors. In the absence of the authority of board of
directors, no person, not even its officers, can validly bind a
corporation.
11. May the corporate powers be directly conferred upon corporate
officers?
Yes, by statute, the articles of incorporation, the bylaws or by
resolution or other act of the board of directors.
12. Qualifications of BOD/BOT
 For a stock corporation, ownership of at least 1 share of the
capital stock of the corporation in his own name. For a non-
stock corporation, only members of the corporation can be
elected.
 The director or trustee must be capacitated.
  The director or trustee must be of legal age. If such acts exceed their authority, it cannot bind the corporation,
 Other qualifications as may be prescribed in the by-laws of the unless it has ratified such acts or is estopped from disclaiming them.
corporation. 17. Who are the corporate officers? (requirement, citizenship,
13. Who is an independent director? residency)
Is a person who, apart from shareholdings and fees received from the
Officer Requirement Citizenship Residency
corporation, is independent of management and free from any
President > Must be a Need not be a Need not be a
business or other relationship which could or could reasonably be director Filipino citizen resident of the
perceived to materially interfere with the exercise of independent > Must be a Philippines
judgment in carrying out the responsibilities as a director. stockholder on
14. What are the requirements for the elections of directors or record of at
trustees? least one share
 The owners of majority of the outstanding capital stock or a
majority of members entitled to vote, of the corporation must Secretary May or may not Must be a Must be a
be present, either in person or through a representative be a director Filipino citizen resident of the
authorized to act by written proxy. Philippines
 When so authorized in the bylaws or by a majority of the board Treasurer May or may not Need not be a Must be a
be a director Filipino citizen resident of the
of directors, the stockholders or members may also vote
Philippines
through remote communication or in absentia. (absentia – “in
Compliance If the corporation is vested with public interest.
the absence”)
Officer
 The election must be by ballot, if requested by any voting Other Officers Qualification may be provided for in the by-laws.
stockholder or member
 In stock corporations, the total number of votes cast shall not 18. Who is a corporate employee?
exceed the number of shares owned by the stockholder as A corporate employee is employed by the action of the managing
shown in the books of the corporation multiplied by the whole officer of the corporation.
number of directors to be elected. Provided that no delinquent 19. Quorum at the meeting of the BOD/BOT
stock shall be voted. A majority of the directors or trustees, as fixed I the articles of
15. Define corporate officer incorporation, shall constitute a quorum for the transaction of
Is one who shall manage the corporation and perform such duties as corporate business (unless the articles of incorporation or the bylaws
may be provided in the bylaws or as resolved by the board of provide a greater majority)
directors. The position must be expressly mentioned in the by-laws in o Majority – at least 51%
order to be considered as a corporate office. 20. Requirement regarding report of election and its objectives
16. Are the acts of corporate officers binding on the corporation?  The secretary or any other officer of the corporation shall
Yes if it is within the scope of their authority. submit to the commission the names, nationalities,
 shareholdings, and residence addresses of the directors,
trustees and officers elected.
(Done within 30 days after the election)
 The non-holding of elections and the reasons therefor shall be
reported to the commission within 30 days from the date of
scheduled election. The report shall specify a new date for the
election which shall not be later than 60 days from the
scheduled date.
 If there is no new date or if the rescheduled election
was not held, the commission may summarily order
that an election be held
 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 report in writing such
fact to the commission within 7 days from knowledge thereof.
21. Grounds for disqualification of directors, trustees or officers
A person shall be disqualified if within 5 years prior to the election, 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 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 the ones mentioned
earlier
22. Can a director be removed with or without cause?
Yes
23. How are directors (trustees) removed?
By a vote of the stockholders holding or representing at least 2/3 of
the outstanding capital stock or in a nonstick corporation, by a vote of
at least 2/3 of the members entitled to vote. Removal shall take place
either at a regular meeting or at a special meeting called for the
purpose.
24. Who has the powers to removed directors or trustees?
The stockholders or members exclusively. However, the securities
and exchange commission shall, motu proprio or upon verified
complaint, and after due notice and hearing, order the removal of a
director or trustee elected.
25. Requisites for the removal of directors or trustees
1. The removal should take place at a regular or special meeting
duly called for the purpose
2. The director or trustee can only be removed by a vote of the
stockholders representing at least 2/3 of the outstanding capital
stock or 2/3 of the members entitled to vote in case of non-stock
corporations.
3. There must be a previous notice to stockholder or members of the
corporation of the intention to propose such removal at the
meeting
4. The special meeting of the stockholders or members of a
corporation for the purpose of removal must be called by the
secretary on order of the president or on the written demand of the
stockholders representing or holding at least a majority of the
outstanding capital stock or the majority of the members entitled to
vote.
26. In case of a special meeting for the removal of director or
trustee, who shall call the meeting?
 Secretary
27. If the president does not order the special meeting to be called,
who shall call the meeting?
The stockholders representing or holding at least a majority of the
outstanding capital stock, or the majority of the members entitled to
vote.
28. Who may call the meeting if the secretary fails or refuses to give
notice?
 The stockholder or member of the corporation signing the demand
may call for the meeting by directly addressing the stockholders or
members.
29. In what manner shall the notice of the time and place of such
meeting as well as the intention to propose such removal be
made?
By publication or by written notice
30. What vote is required for the removal of a director or trustee?
A vote of stockholders representing at least 2/3 of the outstanding
capital stock or of the members entitled to vote for a non-stock
corporation.
31. How are vacancies in the office of the director/trustee be filled?
By the vote of at least a majority of the remaining directors of the
remaining directors or trustees, if still constituting a quorum;
otherwise, such vacancies must be filled by the stockholders or
members in a regular or special meeting called for that purpose.
32. Rules in filling of vacancies
 Vacancy due to term expiration, the election shall be held no
later than the day of such expiration at a meeting called for
such purpose.
 Vacancy as a result of removal by the stockholders/members,
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 the said meeting.
 In all other cases, the election must be held no later than 45
days from the time the vacancy arose.
 A director or trustee elected to fill a vacancy shall be referred
to as replacement director and shall serve only for the
unexpired term of the predecessor in office.
Vacancy shall be filled by the stockholders or members if it is due to:
o Removal by the stockholders or members
o Expiration of term
o Increase in the number of directors or trustees due to
amendment of the articles of incorporation
o Other than removal or expiration of term, like death,
resignation, abandonment, or disqualification, if the remaining
directors or trustees do not constitute a quorum for the
purpose of filling the vacancy.
Vacancy shall be filled by the members of the board of directors or
trustees if:
o Still constituting a quorum, at least a majority of them are
empowered to fill any vacancy occurring in the board other than
by removal by stockholders/members or expiration of term
33. How shall vacancy resulting from removal be filled?
By electing a stockholder or member
34. When may vacancies in the board be filled up by the remaining
members of the board?
If still constituting a quorum, at least a majority of them are
empowered to fill any vacancy occurring in the board other than by
removal by stockholders/members or expiration of term.
35. In case of amendment of the articles of incorporation increasing
the number of directors or trustees, how shall such directorship
or trusteeship be filled?
By electing a stockholder or member
36. Give instances where vacancies in the board are filled by
stockholders
o Removal by the stockholders or members
o Expiration of term
o Increase in the number of directors or trustees due to
amendment of the articles of incorporation
o Other than removal or expiration of term, like death,
resignation, abandonment, or disqualification, if the remaining
 directors or trustees do not constitute a quorum for the
purpose of filling the vacancy.
37. Do directors receive compensation as such directors?
Directors shall not receive any compensation, as such directors,
except for reasonable per diems.
38. May directors be granted compensation other than per diem?
Yes when it is fixed by the corporation’s by-laws or when the
stockholders, representing at least the majority of the capital stock, or
majority of the members, vote to grant the same.
39. Is there a limit to the compensation granted to the directors?
Yes, the total yearly compensation must not exceed 10% of the net
income before income tax of the corporation during the preceding
year.
40. How directors are therefore compensated
Through reasonable per diems
41. When are directors, trustees or officers jointly and severally
liable to the corporation?
Directors/trustees who willfully and knowingly vote for or assent to
patently unlawful acts of the corporation or who are guilty of gross
negligence or bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict with their duty as
such directors/trustees shall be liable jointly and severally for all
damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.
Assent – expression of approval or agreement
Pecuniary – relating to or consisting of money
Jointly and severally – both together and separately
42. What is the doctrine of corporate opportunity?
The doctrine of corporate is the legal principle providing that directors,
officers, and controlling shareholders of a corporation must not take
for themselves any business opportunity that could benefit the
corporation.
43. When is a director accountable for secret profits obtained by
him?
When such profits acquired are adverse to the corporation in respect
of any matter reposed in them in confidence, and upon which, equity
imposes a disability upon themselves to deal in their own behalf
44. May a director enter into a contract with the corporation of which
he is a director?
No, unless
o the presence of a such director or trustee in the board meeting
in which the contract was approved was not necessary to
constitute a quorum for such meeting
o the vote of such director/trustee was not necessary for the
approval of the contract
o the contract is fair and reasonable under circumstances
45. May a corporate officer enter into a contract with corporation of
which he is an officer?
No, unless the contract has been previously authorized by the board
of directors.
46. What is the status of contracts entered into by the director or
trustee with the corporation if the above conditions are not met?
Contract is voidable
47. Can such contract be ratified?
Yes by the vote of the stockholders representing at least 2/3 of the
outstanding capital stock or at least 2/3 of the members in a meeting
called for the purpose.
Requisites:
o Any of the first 3 conditions set forth is absent
o Full disclosure of the adverse interest of the directors or
trustees involved is made at such meeting
 o The contract is fair and reasonable under the circumstances
48. Who are considered interlocking directors?
These are members of the board of directors in a certain corporation
who are also directors in another corporation.
49. What percentage of stock ownership is considered substantial
for purposes of interlocking directors?
More than 20%
50. What is the status of contracts entered into between
corporations with interlocking directors?
It shall not be invalidated on that ground alone.
51. On what ground may such contracts be invalidated?
If the interest of the interlocking director in one corporation is
substantial and his interest in the other corporation is merely nominal.
52. What conditions should be met in the event of interlocking
director’s interest is nominal?
53. If the interest of the interlocking directors is substantial
(stockholding) exceeds 20% of the outstanding stock, what 2
basic conditions are required so that the contract be valid?
1. The contract is not fraudulent
2. The contract is fair and reasonable under the circumstances
54. Who may appoint an executive committee and what are its
functions?
The board may create an executive committee if provided by the by-
laws. The said committee may act, by majority 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.
55. What are the matters that cannot be delegated to the executive
committees?
o Approval of any action for which shareholders’ approval is also
required
o Filing of vacancies in the board
o Amendment or repeal (revoke) of bylaws or the adoption of
new bylaws
o Amendment or repeal of any resolution of the board which by
its express terms is not amendable or repealable.
o Distribution of cash dividend to shareholders
56. How much vote of the members of the executive committee is
required
Majority vote of all its members
TITLE IV – POWERS OF CORPORATION
1. How are corporate powers classified?
o Expressly conferred by the corporation code
o Implied/incidental to its existence
2. Give examples of implied powers of a corporation?
o Acts in the usual course of the business
- borrowing money; making ordinary contracts; executing
promissory notes, checks or bills of exchange;
o Acts to protect debts owing to a corporation
- A corporation may purchase property, act as guarantor or
sometimes even run a business temporarily to collect a debt.
o Embarking in different business
- A corporation may temporarily conduct an outside business
to collect a debt out of its profits
o Acts in part or wholly to protect or aid employees
- While the cases are divided, the better view favors such acts
as building homes, places of amusement, hospitals, etc., for
employees as within corporate powers
o Acts to increase business
- A corporation may conduct contests or sponsor radio or
television programs, or promote fairs and other gatherings to
advertise and increase its business
3. Which are the express powers of the corporation?
o Power
 o Power to extend or shorten corporate term
o Power to increase or decrease capital stock
o Power to deny preemptive right
o Power to sell, lease, etc. all or substantially all corporate
assets
o Power to acquire own shares
o Power to invest corporate funds in another corporation or
business or for any other purpose
o Power to declare dividends
o Power to enter into management contract
4. May the corporate term be extended or shortened?
Yes, as stated in the articles of incorporation when approved by a
majority vote of the board of directors/trustees and ratified at a
meeting by the stockholders or members representing at least 2/3 of
the outstanding capital stock or of its members.
5. May the reduction or extension of the corporate term be
approved by merely assent of 2/3 outstanding capital stock or
2/3 members in case of non-stock?
No, mere assent would not be sufficient.
6. If the corporate term is reduced will that bring about a voluntary
dissolution?
Yes, a voluntary dissolution of a corporation may be effected by
amending the articles of incorporation to shorten the corporate term.
7. Appraisal right defined
A stockholder who dissented and voted against the proposed
corporate action, may choose to get out of the corporation by
demanding payment of the fair market value of his shares.
8. Instances of distribution of corporate capital
o Amendment of the articles of incorporation to reduce the
authorized capital stock
o Purchase of redeemable shares by the corporation, regardless
of the existence of unrestricted retained earnings
o Dissolution and eventual liquidation of the corporation
9. What vote is necessary to increase or decrease capital stock and
to incur or create bonded indebtedness?
Majority vote of the board of directors and 2/3 of the outstanding
capital stock at a stockholders’ meeting duly called for the purpose.
10. What requirements must be met for the increase or decrease of
capital stock?
o Written notice of the proposed increase or diminution of the
capital stock and of the time and place of the stockholders’
meeting at which the proposed increase or diminution of the
capital stock is to be considered, must be addressed to each
stockholder at his place of residence as shown on the books of
the corporation and deposited to the addressee by mail, or
served 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
o No decrease of the capital stock shall be approved if its effect
shall prejudice the rights of corporate creditors
o Approval by a majority vote of the board of directors
o Ratification by the stockholders holding at least 2/3 of the
outstanding capital stock
o 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
o Approval thereof by the Securities and Exchange Commission
o Treasurer’s affidavit showing that at least 25% of such
increased capital stock has been subscribed and that at least
25% of the amount subscribed has been paid.
11. May non-stock corporations incur, create or increase bonded
indebtedness?
Non-stock corporations may incur, create or increase bonded
indebtedness when approved by the majority of the board of trustees
and of at least 2/3 of the members in a meeting duly called for the
purpose.
12. Define bonded indebtedness
It is a long-term indebtedness secured usually by real property.
13. How much real property or real estate may a corporation hold?
As the transaction of the lawful business of the corporation may
reasonably and necessarily require.
14. What is the meaning of stockholder’s pre-emptive right?
It is the preferential right of all stockholders of a stock corporation to
subscribe to all issues or disposition of shares of any class, in
proportion to their respective shareholdings.
15. What are the purposes of pre-emptive right of stockholders?
To enable the shareholder to retain his proportionate control in the
corporation.
16. To what case may stockholder exercise his pre-emptive right?
Pre-emptive right must be exercised within the period of stated in the
articles of incorporation or the by-laws.
17. To what cases is the pre-emptive right not applicable?
o Shares to be issued in compliance with laws requiring stock
offerings or minimum stock ownership by the public.
o Shares to be issued in good faith with the approval of the
stockholders representing 2/3 of the outstanding capital stock,
in exchange for property needed for corporate purposes or in
payment of a previously contracted debt.
18. What are the limitations on power of the corporation to sell or
dispose all or substantially all it corporate assets including
goodwill?
It must be authorized by the vote of the stockholders representing at
least 2/3 of the outstanding capital stock or at least 2/3 of the
members, in a meeting duly called for the purpose.
19. What is the test to apply in order to determine whether the
disposition is for all or substantially all assets of the
corporation?
It must be computed based on its net asset value as shown in the
latest financial statements.
20. What may be the consideration for such sale or disposition?
Money, stocks, bonds or other instruments
21. In case where there are no members with voting rights in a non-
stock corporation who may approve the same disposition as
mentioned?
The vote of at least majority of the trustees in office will be sufficient
authorization.
22. May such disposition after having been approved by the
required vote of stockholders or members be abandoned?
Yes, subject to the rights of third parties under any contract relating
thereto, without further action or approval by the stockholder or
members.
23. In cases of disposition or corporate assets in the course of the
business done by the board of directors (or trustees), do they
require the approval of stockholders or members?
No
24. Suppose all or substantially all the corporate property or assets
shall be disposed of, is the corporation dissolved?
Yes because then the corporation would be rendered incapable of
continuing the business or accomplishing the purpose for which it was
incorporated.
25. Do stockholders of the close corporations enjoy the same pre-
emptive right?
No
26. To what cases shall such pre-emptive right in close corporations
extend?
It extends to all stock to be issued, including reissuance of treasury
shares, whether for money or for property or personal services, or in
payment of corporate debts, unless the articles of incorporation
provides otherwise.
27. May the pre-emptive right of stockholders in close corporations
be limited?
28. What are fractional shares?
Shares which are less than one share.
29. When may a corporation be allowed to acquire its own shares?
In the presence of unrestricted retained earnings.
30. What basic conditions must be met before a corporation can
acquire its own shares?
The corporation has unrestricted retained earnings in its books to
cover shares to be purchased or acquired for legitimate purposes
such as:
 To eliminate fractional shares arising out of stock dividends
 To collect or compromise an indebtedness to the corporation,
arising out of unpaid subscription, in a delinquency sale, and
to purchase delinquent shares sold during the said sale
 To pay dissenting or withdrawing stockholders entitled to
payment for their shares under the provisions of this code
31. Basis of unrestricted retained earnings
Trust fund doctrine – which means that the capital stock, property and
other assets of a corporation are regarded as equity in trust for the
payment of corporate creditors. The reason is that creditors of a
corporation are preferred over stockholders in the distribution of
corporate assets. There can be no distribution among stockholders
without first paying corporate creditors. Hence, any disposition of
corporate funds to the prejudice of creditors is null and void.
32. Instances of distribution of corporate capital
 Amendment of the articles of incorporation to reduce the
authorized capital stock
 Purchase of redeemable shares by the corporation regardless
of the existence of unrestricted retained earnings
 Dissolution and eventual liquidation of the corporation
33. May a corporation invest its corporate funds in another
corporation for a purpose other than its main purpose?
Yes, when approved by a majority of the board of directors/trustees
and ratified by the stockholders representing at least 2/3 of the
outstanding capital stock or the members of a non-stock corporation
at a meeting duly called for the purpose.
34. May such investment be made even without the approval of
stockholders or members?
Yes
35. Define dividend
Corporate profits set aside, declared, and ordered to be paid by the
directors for distribution among stockholders at a fixed time.
36. Who has the power to declare dividends in a corporation?
The board of directors
37. From what source shall the dividend be declared?
Unrestricted retained earnings
38. In what forms shall the dividends be declared?
Cash, property or in stock
39. Which stockholders are entitled to dividends?
To all stockholders on the basis of outstanding stock held by them
40. May delinquent stocks earn dividends?
Yes, however, cash dividends due on delinquent shares shall first be
applied to the unpaid balance on the subscription plus costs and
expense while stock dividends shall be withheld from delinquent
stockholders until their unpaid subscription is fully paid.
41. Can the board alone declare stock dividends?
No, because for stock dividends, there are additional requirements:
o A vote representing not less than 2/3 of outstanding capital
o A corporation must also have a sufficient number of authorized
unissued shares for distribution to stockholders.
42. May stock corporations retain surplus profits without declaring
them into dividends?
No, stock corporations are prohibited from retaining surplus profits in
excess of 100% of their paid-in capital stock.
43. When may SEC compel corporations to declare dividends?
44. What are the valid reasons acceptable to the SEC for retaining
surplus profits in excess of 100% of paid-in without having to
declare said excess into dividends
o When justified by definite corporate expansion projects or
programs approved by the board of directors
o When the corporation is prohibited under any loan agreement
with any financial institution or creditor, whether local or
foreign, from declaring dividends without its/his consent, and
such consent has not yet been secured
o When it can be clearly shown that such retention is necessary
under special circumstances obtaining in the corporation, such
as when there is need for special reserve for probable
contingencies
45. Is stock dividend taxable income to stockholders?
No
46. Can stock dividends be issued to a person who is not a
stockholder in payment for services rendered?
Yes
47. Can dividends be declared out of capital?
Yes, in a wasting asset corporation
48. What is a wasting assets corporation?
It is a corporation engaged in mining or cutting timber or some such
business, so that dividends are in fact paid out of capital, the assets
being consumed in the regular course of operations.
49. Can dividends be declared out of re-appraisal surplus?
50. May cash dividends be declared out of paid-in or premium
surplus?
No
51. May dividend declaration be revoked?
No
52. May a corporation be managed by a corporation?
Yes
53. What two basic regulatory conditions are required before a
corporation concludes a management contract with another
corporation?
o The contract must be approved by the board of directors
owning at least the majority of outstanding capital stock, or by
at least a majority of the members in the case of a nonstick
corporation, of both the managing and managed corporation at
a meeting duly called for the purpose
o No management contract shall be entered into for a period
longer than 5 years for any one term
 Except for 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 by the pertinent
laws or regulations
54. When shall a bigger vote of stockholders or members be
required to approve such management contract?
o Interlocking stockholder
- where a stockholder or stockholders representing the
same interest of both the managing and the managed
corporations own or control more than 1/3 of the total
outstanding capital stock entitled to vote of the
managing corporation
o Interlocking directors
- Where a majority of the members of the board of
directors of the managing corporation also constitute a
majority of the members of the board of directors of the
managed corporation
55. What is the vote required in the above two cases?
Approval by the stockholders of the managed corporation owning at
least 2/3 of the total outstanding capital stock entitled to vote, or by at
least 2/3 of the members in the case of a non-stock corporation.
56. What is an ultra-vires act?
 It refers to an act outside or beyond corporate powers including those
that may ostensibly be within such powers but are by general or
special laws, prohibited or declared illegal.
57. Is an ultra-vires act necessarily illegal?
No. On the contrary, it may be lawful, moral or even praiseworthy.
58. What is an intra-vires act?
Acts within the legitimate powers of a corporation.
59. What is the effect if an ultra-vires act is executory on both sides?
When an ultra vires contract has been fully performed on both sides,
neither party thereto can lawfully set aside the same or to recover
what has been given. No public interest is involved here since both
parties have already received to their advantage the benefits of the
contract voluntarily entered into
60. Can an ultra vires act be ratified?
o When the contract is illegal per se, it is wholly void or
inexistent. It cannot be ratified or validated.
o Where the contract is not illegal per se but merely beyond the
power of a corporation, the same is merely voidable and may
be enforced by performance, ratification, or estoppel or on
equitable ground.