POWER TO ENTER INTO MANAGEMENT STATUS OF THE BOD OF THE MANAGED
CONTRACTS – SECTION 43 CORPORATION
SECTION 43. Power to Enter into Management
Contract. — No corporation shall conclude a management
contract with another corporation unless such contract is
approved by the board of directors and by stockholders
owning at least the majority of the outstanding capital stock,
or by at least a majority of the members in the case of a
nonstock corporation, of both the managing and the
managed corporation, at a meeting duly called for the
purpose: Provided, That (a) where a stockholder or
stockholders representing the same interest of both the
managing and the managed corporations own or control
more than one-third (1/3) of the total outstanding capital
stock entitled to vote of the managing corporation; or (b)
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, then the management contract must be
approved by the stockholders of the managed corporation
owning at least two-thirds (2/3) of the total outstanding
capital stock entitled to vote, or by at least two-thirds (2/3)
of the members in the case of a nonstock corporation.
These shall apply to any contract whereby a corporation
undertakes to manage or operate all or substantially all of the
business of another corporation, whether such contracts are
called service contracts, operating agreements or otherwise:
Provided, however, That such service contracts or operating
agreements which relate to the exploration, development,
exploitation or utilization of natural resources may be entered
into for such periods as may be provided by pertinent laws or
regulations.
No management contract shall be entered into for a period
longer than five (5) years for any one (1) term.
MANAGEMENT CONTRACT
An agreement under which a corporation delegates
the management of its affairs to another corporation
for a certain period. Two corporations are involved: (1)
the managing corporation and the (2) managed
corporation
General Rule: Management contract is entered into by a
MAJORITY vote of the Board of Directors and
stockholders of both the managing and managed
corporation
Exception: Approved by the stockholders of the
managed corporation owning at least 2/3 of the
outstanding capital stock or of members in two instances:
(1) The stockholder representing the same
interest of both managing and managed
corporation owns or control MORE THAN
1/3 of the outstanding capital stock
entitled to vote of the managing corporation
(2) Majority of the members of the BOD of the
managing corporation also constitutes
majority of the members of the BOD of the
managed corporation
What could this mean, what happens to the Board
of the managed corporation, do they still function
as a board?
Yes, this is not an abandonment. The BOD of the
managed corporation still retains the control of how
the corporation should exist.
The only thing is that, on the operational side of the
managed corporation is now given to the managing
corporation. There are companies whose business is
just to manage certain portions or operations of
other corporations. The board of the managed
corporation still functions as to the remaining operations.
Examples: ship management corporation, audit managers
POWER TO ISSUE DIVIDENDS – SECTION 42
SECTION 42. Power to Declare Dividends. — The board
of directors of a stock corporation may declare dividends out
of the unrestricted retained earnings which shall be payable
in cash, property, or in stock to all stockholders on the basis
of outstanding stock held by them: Provided, That any cash
dividends due on delinquent stock shall first be applied to the
unpaid balance on the subscription plus costs and expenses,
while stock dividends shall be withheld from the delinquent
stockholders until their unpaid subscription is fully paid:
Provided, further, That no stock dividend shall be issued
without the approval of stockholders representing at least
two-thirds (2/3) of the outstanding capital stock at a regular
or special meeting duly called for the purpose.
Stock corporations are prohibited from retaining surplus
profits in excess of one hundred percent (100%) of their
paid-in capital stock, except: (a) when justified by definite
corporate expansion projects or programs approved by the
board of directors; or (b) when the corporation is prohibited
under any loan agreement with financial institutions or
creditors, whether local or foreign, from declaring dividends
without their consent, and such consent has not yet been
secured; or (c) 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.
TYPES OF DIVIDENDS
(1) Cash dividends
(2) Property dividends
(3) Stock dividends
(4) Combination of the different kinds of dividends
DIVIDENDS
• These are part of the PROFITS distributed as
shares to the stockholders. If there are no
profits, there are no dividends.
General Rule: The Board has the sole authority to
declared dividends. The declaration of dividends is the
sole prerogative of the board.
Exception: The Board may be compelled to issue
dividends when the retained earnings of the
corporation EXCEED 100% of their paid-in capital
stock.
• Note: If they still do not declared dividends,
they will be charged with Improperly
Accumulated Earnings Tax (IAET) – in which
case the corporation is prone to penalties under
the NIRC for undue accumulation.
Exception to the exception: A corporation may not
compelled to declare dividends even if the profits exceed
100% of the paid-in capital in the following instances:
(1) When justified by definite corporate
expansion projects or programs approved
by the board of directors
(2) When the corporation is prohibited under any
loan agreement with financial institutions
or creditors, whether local or foreign, from
declaring dividends without their consent,
and such consent has not yet been secured
(3) 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.
How are dividends payable?
It depends.
(A) CASH DIVIDENDS
Rule: If there are delinquent shares, the cash
dividends shall be applied to the unpaid subscription
which is due and demandable of the shareholder –
OFFSET
• Note: Issuing cash dividends requires a vote
of majority of the Board of Directors without
need of ratification from the stockholders
Atty. Espedido: As much as possible, corporations do
not declare cash dividends because it is taxable twice: (1)
when declared as income by the corporation and (2)
when declared income by the stockholders upon
distribution.
(B) STOCK DIVIDENDS
Rule: It shall be withheld from the delinquent
stockholders UNTIL their unpaid subscription is fully paid.
• Offsetting in cash dividends does not apply in
stock dividends. You cannot issue any stock
dividends UNTIL the unpaid stock are fully paid.
• Note: Issuing stock dividends requires a
majority vote of the BOD and a ratification
of 2/3 vote of the stockholders representing the
outstanding capital stock
CONVERSION OF EARNINGS INTO CAPITAL
THROUGH DECLARATION OF STOCK DIVIDENDS
Important: The law permits the corporation to
convert its earnings into capital, through the
declaration of stock dividends.
In this manner, the board may use such earnings for the
general or specific corporate purpose. It becomes part
of the corporate trust fund and may no longer be
used for dividend distribution. This is an effective
way to retain earnings without having to explain to
SEC/BIR.
INCREASING THE AUTHORIZED CAPITAL STOCK
If there are no more stocks, can we still distribute
stock dividends?
Yes. We can increase the authorized capital stock which is
done by amending the Articles of Incorporation. This is
done through the following processes:
1. A stockholder’s meeting duly called for the
purpose
2. A written notice of the proposed increase or
diminution of the capital stock
3. Majority vote of the Board of Directors
4. A vote of 2/3 of the stockholders representing the
outstanding capital stock
5. A certificate signed by a majority of the directors
and countersigned by the chairman and the
secretary of the stockholder’s meeting
6. Accompanied by the sworn statement of the
treasurer 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
7. Submitted to and approved by the SEC
8. Approval by the Philippine Competition
Commission
Note: In this case, we are now increasing the capital
stock and the it is the corporation who will pay because
instead of paying cash, the shareholders will no longer
need to pay since the corporation will use the profits that
they already have.
NON-TAXABILITY OF STOCK DIVIDENDS
Stock dividends are NOT TAXABLE because these are
not realized income but are considered investments.
CONFLICTING VIEWS ON ISSUANCE OF CASH
DIVIDENDS WHEN THERE ARE NO PROFITS
If it was discovered later that there were no
profits at all but the Board has already declared
and distributed cash dividends and somebody
complained, should we now require the
stockholders to return?
There are conflicting views among authorities:
(1) If solvent corporation
View 1 – No need to return since creditors are still
protected. They will not be prejudiced since the
corporation still has capital
View 2 – Must still be returned as it violates the
Trust Fund Doctrine
(2) If insolvent corporation – it needs to be returned
Atty. Espedido’s opinion: If the corporation is still
solvent, the Trust Fund Doctrine is not violated since
capital remains intact. Thus, there is no need to return.
 ULTRA VIRES ACTS – SECTION 44 regular meetings may be sent to all stockholders or members
of record through electronic mail or such other manner as the
SECTION 44. Ultra Vires Acts of Corporations. — No Commission shall allow under its guidelines.
corporation shall possess or exercise corporate powers other
than those conferred by this Code or by its articles of At each regular meeting of stockholders or members, the
incorporation and except as necessary or incidental to the board of directors or trustees shall endeavor to present to
exercise of the powers conferred. stockholders or members the following:
(a) The minutes of the most recent regular meeting which
shall include, among others:
ULTRA VIRES ACTS (1) A description of the voting and vote tabulation procedures
To be considered ultra vires, it has to be an act which used in the previous meeting;
exceeds the express, implied, or inherent powers of the (2) A description of the opportunity given to stockholders or
corporation – they are UNENFORCEABLE. members to ask questions and a record of the questions
asked and answers given;
RATIFICATION OF ULTRA VIRES ACTS (3) The matters discussed and resolutions reached;
(4) A record of the voting results for each agenda item;
ILLEGAL ULTRA VIRES UNAUTHORIZED ULTRA (5) A list of the directors or trustees, officers and
ACTS VIRES ACTS stockholders or members who attended the meeting; and
Cannot be ratified Can be cured through a (6) Such other items that the Commission may require in the
ratification by a vote of 2/3 interest of good corporate governance and the protection of
of the stockholders minority stockholders; xxx
representing the
Special meetings of stockholders or members shall be held at
outstanding capital stock as
any time deemed necessary or as provided in the bylaws:
long as it DOES NOT Provided, however, That at least one (1) week written notice
AFFECT THIRD PARTIES shall be sent to all stockholders or members, unless a
different period is provided in the bylaws, law or regulation.
QUESTIONING ULTRA VIRES ACTS xxx
Who can question ultra vires acts?
1. State – since it is the state who granted its Whenever for any cause, there is no person authorized or the
existence, it shall also have the right to question person authorized unjustly refuses to call a meeting, the
it. Commission, upon petition of a stockholder or member on a
2. Stockholders – by doing it promptly and if not showing of good cause therefor, may issue an order,
guilty of estoppel directing the petitioning stockholder or member to call a
3. Judgment creditors – if they are victims of fraud meeting of the corporation by giving proper notice required
by this Code or the bylaws. The petitioning stockholder or
Note: Strangers and competitors cannot invoke such member shall preside thereat until at least a majority of the
stockholders or members present have chosen from among
right to question the acts because they are not privy to
themselves, a presiding officer.
the contract.
Unless the bylaws provide for a longer period, the stock and
transfer book or membership book shall be closed at least
MEETINGS twenty (20) days for regular meetings and seven (7) days for
special meetings before the scheduled date of the meeting.
KINDS OF MEETINGS
In case of postponement of stockholders' or members'
SECTION 48. Kinds of Meetings. — Meetings of directors, regular meetings, written notice thereof and the reason
trustees, stockholders, or members may be regular or special therefor shall be sent to all stockholders or members of
record at least two (2) weeks prior to the date of the
How many types of meetings do we have? meeting, unless a different period is required under the
There are 4 Kinds of Meetings: bylaws, law or regulation.
xxx
(1) Meetings of Directors
(2) Meetings of Trustees
SECTION 50. Place and Time of Meetings of
(3) Meetings of Stockholders Stockholders or Members. xxxx Notice of meetings shall
(4) Meetings of Members be sent through the means of communication provided in the
bylaws, which notice shall state the time, place and purpose
Which may either be: of the meetings.
(1) Regular
(2) Special Each notice of meeting shall further be accompanied by the
following:
STOCKHOLDERS MEETING – SECTIONS 49 and 50 (a) The agenda for the meeting;
[Only relevant paragraphs were lifted] (b) A proxy form which shall be submitted to the corporate
SECTION 49. Regular and Special Meetings of secretary within a reasonable time prior to the meeting;
Stockholders or Members. — (c) When attendance, participation, and voting are allowed
Regular meetings of stockholders or members shall be held by remote communication or in absentia, the requirements
annually on a date fixed in the bylaws, or if not so fixed, on and procedures to be followed when a stockholder or
any date after April 15 of every year as determined by the member elects either option; and
board of directors or trustees: Provided, That written notice (d) When the meeting is for the election of directors or
of regular meetings shall be sent to all stockholders or trustees, the requirements and procedure for nomination and
members of record at least twenty-one (21) days prior to the election.
meeting, unless a different period is required in the bylaws, xxx
law, or regulation: Provided, further, That written notice of
 WHEN MEETINGS ARE CONDUCTED Reason for including the minutes of the previous
meeting: The minutes of the previous meeting must be
REGULAR MEETING SPECIAL MEETING attached and must be accompanied by the notices
(a) Held annually on a Anytime deemed necessary because these will require the approval.
date fixed in the or as provided in the bylaws
bylaws Atty. Espedido: If there is any dissenting stockholder
(b) On any date AFTER who objects, then it could be discussed again in the new
April 15 of every meeting.
year as determined
by the BOD This is important because should there be conflict in
the future, they could always refer back to the
Reason for holding it AFTER April 15: minutes. These will be in the custody of the secretary.
For purposes of filing income tax return. By that time, the The secretary among others shall take hold of the AOI,
financial statement is already done. All the data, bylaws, all resolutions approved, minutes of the meeting
information, figures are already available. approved

NOTICE OF MEETING HOW NOTICE OF MEETINGS ARE SENT

Notice of meetings shall be sent through the means of
WHEN NOTICE IS GIVEN communication provided in the bylaws. It can be
through:
Regular Meeting Special Meeting (1) Electronic Mail
Sent to ALL stockholders At least one week written (2) Other means allowed by the Commission
of record at least 21 notice shall be sent to all
days PRIOR to the stockholders UNLESS a Atty. Espedido: Because of the E-Commerce Act, the
meeting UNLESS a different period is provided electronic records can now be presented in court.
different period is in the bylaws, laws, or
required in the bylaws, regulation
law, or regulation CLOSING OF STOCK OR TRANSFER BOOK
Important: Unless the bylaws provide for a longer
CONTENTS OF A NOTICE OF MEETING period, the stock and transfer book or membership book
In order to be a proper notice of meeting, the following shall be closed at least twenty (20) days for regular
must be contained: meetings and seven (7) days for special meetings
BEFORE the scheduled date of the meeting.
1. Shall state the time and place of the meeting;
2. The agenda for the meeting; Regular Meeting Special Meeting
3. A proxy form which shall be submitted to the Closed at least 20 days Closed 7 days BEFORE the
corporate secretary within a reasonable time BEFORE the scheduled schedule date of the meeting
prior to the meeting; date of meeting
4. When attendance, participation, and voting are
allowed by remote communication or in absentia,
the requirements and procedures to be followed Illustration.
when a stockholder or member elects either option; An individual purchased shares of stock on March 10 and
and there is a meeting on March 15. Could he already
5. When the meeting is for the election of directors or vote?
trustees, the requirements and procedure for No, he is still not qualified to vote because there is a
nomination and election. requirement under the law that for regular meetings, the
6. The minutes of the most recent regular transfer of book shall be closed for at least 20 days
meeting which shall include, among others: PRIOR to the scheduled meeting. On the other hand,
(a) A description of the voting and vote for special meetings, the transfer books shall be closed
tabulation procedures used in the for at least 7 days PRIOR to the scheduled date of
previous meeting; meeting. The notice shall include this information on the
(b) A description of the opportunity given closing of the transfer book.
to stockholders or members to ask
questions and a record of the questions
asked and answers given; POSTPONEMENT OF REGULAR MEETING
(c) The matters discussed and resolutions General Rule: Written notice and reason thereof
reached; shall be sent to ALL stockholders at least 2 weeks prior
(d) A record of the voting results for each to the date of meeting
agenda item; – UNLESS a different period is required under the bylaws,
(e) A list of the directors or trustees, law, or regulation
officers and stockholders or members
who attended the meeting; and
(f) Such other items that the Commission
may require in the interest of good
corporate governance and the protection of
minority stockholders;
UNJUST REFUSAL TO CALL A MEETING
[continuation on the discussion of postponement]
HOWEVER, when there is unjust refusal to call a
meeting, a stockholder can petition the Commission to
order the conduct of a meeting.
 The petitioning stockholder shall preside thereat
UNTIL at least a majority of the stockholders or
members present have chosen from among
themselves, a presiding officer.
 IMPORTANT: In case where the Commission will
order the conduct of the meeting, ANY NUMBER
OF THE STOCKHOLDER PRESENT shall already
be considered as a quorum. Such that, when
out of the 100 stockholders, 5 only came, it
shall be constitute a quorum.
MEETING OF THE BOARD OF DIRECTORS
Regular Meeting Special Meeting
When Held monthly Held anytime upon:
UNLESS the (a) the call of the
bylaws provide president or
otherwise (b) as provided in
the bylaws
Notice of Notice of regular or special meetings
Meeting stating the date, time and place of the
meeting must be sent to every director
or trustee at least two (2) days PRIOR
to the scheduled meeting
– UNLESS a longer time is provided in the
bylaws
How May be done electronically or other means
conducted allowed by the Commission.
 IMPORTANT:
teleconferencing is now very
common, it’s a standard way.
Reason why SEC allowed teleconferencing:
 In order to take advantage of the advances
of technology.
 Also to save time of the busy members of
the board. As long as the minutes will reflect
the true and accurate information.
NO REPRESENTATION ALLOWED IN A BOARD
MEETING
IMPORTANT: Directors or trustees cannot attend or
vote by proxy at board meetings.
Reason: The director’s presence is personal due to his
qualification and expertise.
SECTION 54. Right to Vote of Secured Creditors
and Administrators.
SECTION 54. Right to Vote of Secured Creditors and
Administrators. — In case a stockholder grants security
interest in his or her shares in stock corporations, the
stockholder-grantor shall have the right to attend and vote at
meetings of stockholders, unless the secured creditor is
expressly given by the stockholder-grantor such right in
writing which is recorded in the appropriate corporate books.
Executors, administrators, receivers, and other legal
representatives duly appointed by the court may attend and
vote in behalf of the stockholders or members without need
of any written proxy.
CERTIFICATE OF STOCK – best evidence of ownership
of shares of stocks.
IMPORTANT: Shares are personal properties. Being
personal properties, the certificate of stock can be offered
as security for any liability or loan to guarantee payments
of obligations like in pledge and mortgage.
Who takes possession of the certificate?
Pledge Mortgage
Pledgee takes possession The mortgagee does not
of the certificate take possession of the
certificate
There is a transfer of there is no transfer of
possession BUT no possession and
transfer of ownership ownership
RIGHT TO VOTE OF SECURED CREDITORS
General Rule: In case a stockholder grants security
interest in his or her shares in stock corporations,
the stockholder-grantor shall have the right to
attend and vote at meetings of stockholders
Exception: UNLESS the secured creditor is
expressly given by the stockholder-grantor such right
in writing which is recorded in the appropriate corporate
books.
Discussion: It is still the pledgor who has the right to
participate. Even if the pledgee has the possession of the
certificate, there is no ownership that is being
transferred, UNLESS the pledgor grants the pledgee
the right to vote.
In which case, the pledgee may demand from the
pledgor the right to vote to be contained in a
PROXY.
(1) Demand right to vote
(2) Demand for a proxy
WHEN STOCKHOLDER IS DEAD
Note: Executors, administrators, receivers, and other
legal representatives duly appointed by the court may
attend and vote in behalf of the stockholders or
members WITHOUT NEED OF ANY WRITTEN
PROXY.
VOTING IN CASE OF JOINT OWNERSHIP OF STOCK
SECTION 55. Voting in Case of Joint Ownership of
Stock. — The consent of all the co-owners shall be
necessary in voting shares of stock owned jointly by two (2)
or more persons, unless there is a written proxy, signed by
all the co-owners, authorizing one (1) or some of them or
any other person to vote such share or shares: Provided,
That when the shares are owned in an "and/or" capacity by
the holders thereof, any one of the joint owners can vote
said shares or appoint a proxy therefor.
General Rule: The consent of all the co-owners shall
be necessary in voting shares of stock owned jointly by
two (2) or more persons.
When the shares are owned in an "and/or" capacity
by the holders thereof, any one of the joint owners
can vote said shares or appoint a proxy therefor
Exception: Unless there is a written proxy, signed by
all the co-owners, authorizing one (1) or some of
them or any other person to vote such share or
shares.
SUMMARY:
(A) If there are 2 of them – BOTH of them should
consent to the vote UNLESS one or more of them
will authorize the other to represent them and cast
their vote in behalf of the other.
(B) Owned in an ―AND/OR‖ capacity – EITHER of
the co-owners could vote
Example: A and/or B – either A or B could vote
Illustration. Two owners with contradicting vote –
best solution: both should agree
There are 2 owners. Both of them were together taking
lunch and there was an issued that required a vote of
WON there must be an increase of capital stock. How
will we qualify the vote?
If there are 2 stockholders with contradicting votes – NO
VOTE; ZERO VOTE
Best solution: Both should AGREE
PROXIES – SECTION 57
SECTION 57. Manner of Voting; Proxies. — Stockholders
and members may vote in person or by proxy in all meetings
of stockholders or members.
When so authorized in the bylaws or by a majority of the
board of directors, the stockholders or members of
corporations may also vote through remote communication
or in absentia: Provided, That the votes are received before
the corporation finishes the tally of votes.
A stockholder or member who participates through remote
communication or in absentia shall be deemed present for
purposes of quorum.
The corporation shall establish the appropriate requirements
and procedures for voting through remote communication
and in absentia, taking into account the company's scale,
number of shareholders or members, structure and other
factors consistent with the basic right of corporate suffrage.
Proxies shall be in writing, signed and filed, by the
stockholder or member, in any form authorized in the bylaws
and received by the corporate secretary within a reasonable
time before the scheduled meeting. Unless otherwise
provided in the proxy form, it shall be valid only for the
meeting for which it is intended. No proxy shall be valid and
effective for a period longer than five (5) years at any one
time.
MANNER OF VOTING
Rule: Stockholder or members in all meetings of
stockholders or members may vote:
(1) In person
(2) By proxy
(3) Through remote communication or in absentia
when authorized:
(a) in the bylaws or
(b) by a majority vote of the BOD
PROXIES
An instrument that refers to the authority given by
the stockholder to another to represent the former
during meeting
Rule: Proxies shall be in writing, signed, and filed by
the stockholder in any form authorized in the bylaws.
VALIDITY AND EFFECTIVITY OF A PROXY
It shall be valid only for the meeting for which it is
intended UNLESS otherwise provided in the proxy form.
However, no proxy shall be valid and effective for a
period longer than 5 years.
Illustration: If you have a proxy for the year 2020,
you cannot use it for 2021 because it is only
intended for that particular meeting UNLES it is
extended BUT in no case shall it be longer than 5
years.
A PROXY CANNOT BE SUBSTITUTED
A proxy cannot be substituted by reason of the trust and
confidence reposed upon the person given the authority
to represent the other. The authority cannot be
delegated.
Illustration 1. Jin is given a proxy for a particular
meeting. It was scheduled on the same day that she has
a date and she preferred to go on that date instead. She
cannot delegate her authority to attend said meeting to
her sister. Her sister cannot attend the meeting because
a proxy cannot be substituted or delegated.
Illustration 2. On the other hand, Jin is given a proxy all
compliant with the requirements. HOWEVER, at the
meeting, she was told that she cannot participate for no
reason. Can it be done?
No, it cannot be done because she has a vested right
as an owner.
 PROXY GIVEN TO TWO OR MORE PERSONS
(A) IF TWO PROXY HOLDERS
If two persons were given a proxy by the same person,
both of them cannot vote at the same time in the
meeting.
Between two proxy holders, who is entitled to
vote?
RULES:
1. Holder whose proxy instrument bears the latest
date
2. If same date – Proxy holder whose proxy
instrument bear the later time
3. If same time – proxy holder who presents it
first
4. All things being equal (same date, same time,
and present at the same time) – proxy
committee decides
(B) IF THREE PROXY HOLDERS
Where a proxy is given to three persons in one
instrument, the three of them must agree upon the
vote and in case of conflict, the rule of the majority
of the three governs. [See De Leon, Page 512]
No voting trust agreement shall be entered into for purposes
of circumventing the laws against anti-competitive
agreements, abuse of dominant position, anticompetitive
mergers and acquisitions, violation of nationality and capital
requirements, or for the perpetuation of fraud.
Unless expressly renewed, all rights granted in a voting trust
agreement shall automatically expire at the end of the agreed
period. The voting trust certificates as well as the certificates
of stock in the name of the trustee or trustees shall thereby
be deemed cancelled and new certificates of stock shall be
reissued in the name of the trustors.
The voting trustee or trustees may vote by proxy or in any
manner authorized under the bylaws unless the agreement
provides otherwise.
VOTING TRUST AGREEMENT
It is an agreement in writing whereby one or more
stockholders of a stock corporation transfer his or
their shares upon a trustee or trustees for the
purpose of conferring to the latter the right to vote
and other rights pertaining to the shares for a
period not exceeding five years at any time.

Atty. Espedido: The most practical approach is to What happens to these voting rights?
AGREE upon the vote and majority shall prevail. The stockholder transfers his voting rights to another
(trustee).

VOTING TRUST AGREEMENT – SECTION 58

PROXY vs VOTING TRUST AGREEMENT
SECTION 58. Voting Trusts. — One or more stockholders [from Tanya notes, page 9]
of a stock corporation may create a voting trust for the
purpose of conferring upon a trustee or trustees the right to PROXY VOTING TRUST
vote and other rights pertaining to the shares for a period not AGREEMENT
exceeding five (5) years at any time: Provided, That in the
No legal title to the shares Acquires legal title to the
case of a voting trust specifically required as a condition in a
of the stockholder shares of the stockholder
loan agreement, said voting trust may be for a period
exceeding five (5) years but shall automatically expire upon Revocable at any time Irrevocable for a definite
full payment of the loan. A voting trust agreement must be in unless coupled with and limited period of time
writing and notarized, and shall specify the terms and interest
conditions thereof. Can only act at the Not limited to any
specified SH’s meeting particular meeting
A certified copy of such agreement shall be �led with the Votes only in the absence Can vote and exercise all
corporation and with the Commission; otherwise, the of the owner of stock the rights of the
agreement is ineffective and unenforceable. The certificate or transferring SH even when
certificates of stock covered by the voting trust agreement the SH is present
shall be cancelled and new ones shall be issued in the name Shorter duration Longer duration
of the trustee or trustees, stating that they are issued
Need not be notarized nor Notarized and filed with
pursuant to said agreement. The books of the corporation
a copy be filed with the SEC
shall state that the transfer in the name of the trustee or
trustees is made pursuant to the voting trust agreement. SEC
No right of inspection of Has such right
The trustee or trustees shall execute and deliver to the corporate books
transferors, voting trust certificates, which shall be
transferable in the same manner and with the same effect as
certificates of stock.
COVERAGE FOR NEXT MEETING:
The voting trust agreement filed with the corporation shall be Continuation of Title VI until Title VII
subject to examination by any stockholder of the corporation
in the same manner as any other corporate book or record:
Provided, That both the trustor and the trustee or trustees
may exercise the right of inspection of all corporate books
and records in accordance with the provisions of this Code.

Any other stockholder may transfer the shares to the same

trustee or trustees upon the terms and conditions stated in
the voting trust agreement, and thereupon shall be bound by
all the provisions of said agreement.