NOTES IN BUSINESS ORGANIZATION II

(The Revised Corporation Code of the Philippines, Republic Act No.

11232)

Dean Zacarias D. Bedona Jr.

Central Philippine University College of Law
Jaro, Iloilo City
April 4, 2021

The first general law on corporations in the Philippines was the

Corporation Law, Act No. 1459, passed by the Philippine Commission
and took effect on April 1, 1906, which was practically a codification of
the American law on corporations.

Batas Pambansa Blg. 68, otherwise known as “The Corporation

Code of the Philippines” (CCP) repealed Act No. 1459. The CCP took
effect on May 1, 1980.

Republic Act No. 11232, otherwise known as “The Revised

Corporation Code of the Philippines” (RCC) repealed Batas Pambansa
Blg. 68. The RCC took effect on February 23, 2019, upon completion of
its publication in Manila Bulletin and Business Mirror (February 23,
2019).

A corporation lawfully existing and doing business in the

Philippines affected by the new requirements of the Code shall be given
a period of not more than two years from the effectivity of Republic Act
No. 11232 within which to comply. (Sec. 185)

Any law, presidential decree or issuance, executive order, letter of

instruction, administrative order, rule or regulation contrary to or
inconsistent with any provision of the Act is repealed or modified
accordingly. (Sec. 187)
 The following are the salient or significant changes under the
RCC:

1. Perpetual Term or Existence

2. One Person Corporation (OPC)
3. No minimum Capital Stock
4. Incorporators, Directors, Trustees and Officers
5. Participation via Remote Communications, In-Absentia
Voting
6. Creation of Emergency Board
7. Electronic Filing and Monitoring System
8. Arbitration for Corporations
9. New Classification of Corporations Vested with Public
Interest and Requires that it must have Independent Directors
and Compliance Officer
10. Corporate Records
11. Issuance of License to Foreign Corporations
12. Jurisdiction over Party-list Organizations
13. Investigation, Prosecution of Offenses and Penalties

The RCC may be subdivided into three (3) parts such as:

1. The birth of the corporation (incorporation);

2. The lifetime of corporation (corporate life or existence); and

3. The death of corporation.

1. What is a corporation?

A corporation is an artificial being created by operation of law,

having the right of succession and the powers, attributes, and properties
expressly authorized by law or incidental to its existence. (Sec. 2)
2. What are the attributes of a corporation?

a. It is an artificial being with separate and distinct personality;

b. It is created by operation of law;
c. It has the right to succession;
d. It has powers, attributes, and properties expressly conferred
by law or incident to its existence.

3. Discussion of Attributes

a. Doctrine of distinct and separate juridical

Personality

The corporation is regarded as person. Article 44 of the New

Civil Code provides that a corporation is a juridical person. As a
juridical person, a corporation is regarded by law with a separate
personality normally possessed by an individual and hereinafter be
known as an artificial being. While a corporation is treated as a
person, unlike human beings, it doers not have any physical
existence. It exists only by legal fiction. It exists only because the
law says so.

The physical existence of a corporation exists only in the

minds, because it is invisible, abstract, theoretical, or intangible,
and still it is regarded as a person, an artificial being, because of its
attributes.

Consequences of separate personality:

1) Properties. It is entitled to own properties in its

own name, and its properties are not properties of its stockholders,
directors, and officers. (Wise v. Man Sung Lung, 69 phil. 309)
Consistently, the properties of its stockholders, directors, and
officers are not properties of the corporation. The interest of the
stockholders over the properties of the corporation is merely
inchoate. (Saw v. Court of Appeals, 195 SCRA 740 [1991]

2) Obligations. It can incur obligations and its

obligations are not obligations of its stockholders, directors and
officers. (Vasquez v. De Borja, 74 Phil. 560) Corollary to this rule,
obligations of stockholders, directors and officers are not
obligations of the corporation.

3) Rights. Rights belonging to the corporation cannot

be invoked by the stockholders, directors and officers even if the
stockholders own a majority of the shares in that corporation and
rights of the stockholders, directors, and officers cannot be invoked
by the corporation. (Stonehill v. Diokno, G.R. No. 19550, June 19,
1967)

Example: The constitutional right of individual against

unreasonable searches and seizure is personal to him and cannot
be invoked by the corporation. Tax exemption in favor of the
corporation cannot be use by its stockholders. (Manila Gas Corp.
v. Collector of Internal Revenue, 62 Phil. 895 [1936])

4) Constitutional rights. Corporations are entitled to

certain constitutional rights.

Example: Right against unreasonable searches and

seizure. It is also considered as a person under the due process
clause (Section 1, Article 3, New Constitution).

A corporation is not entitled to certain constitutional rights,

because it is an artificial being and a mere creature of the law.

5) Torts. It is liable for tort. (PNB v. Court of Appeals, 83

SCRA 237 [1978]) It is liable when the act was committed by the
officer or agent under express direction or authority from the
stockholders or members acting as a body or generally from the
directors as a governing body.

b. Artificial being.

It exists by fiction of law only, hence, it is subject to

limitations that are inherent, because of its nature.

1) Actions.

It can act only through its directors, officers or

employees.

2) Criminal liability.

Corporations are incapable of intent, hence, it cannot

commit felonies which are punishable by the Revised Penal
Code. They cannot commit crimes punishable by special
laws, because crimes are personal in nature.

In addition, the penalty of imprisonment cannot be

imposed.

A corporation cannot be held criminally liable.

Philippine law generally does not impose corporate liability
for the commission of crimes. Rather, it is the responsible
officers – directors, officers or employees of the corporation
who are held responsible for crimes and therefore also
charged and penalized for the same.

However, if the penal law creates an offense for which

a corporation may be punished and then prescribes a fine, or
both fine and imprisonment as penalty, a corporation may be
prosecuted and, if found guilty, may be fined.
 On the other hand, if the statute defines a crime that
may be committed by a corporation but prescribes that the
penalty imposed on the officers, directors or employees of
such corporation or other persons responsible for the offense,
only such individuals will suffer such penalty.

Examples of Corporate Criminal Liability: Anti-Graft

and Corrupt Practices Act – Acting as Intermediaries for graft
and corrupt practices (Sec. 166), Engaging Intermediaries for
Graft and Corrupt Practices (Sec. 167), Tolerating Graft and
Corrupt Practices (Sec. 168); AMLA – the penalty shall be
imposed upon responsible officers.

3) Moral Damages.

Moral damages cannot be awarded to corporations,

because they do not have feelings and mental state. They may
not even claim moral damages for besmirched reputation.
Mental suffering can be experienced only by one having a
nervous system and it flows from real ills, sorrows and griefs
of life – all of which cannot be suffered by an artificial
person. (National Power Corporation v. Philipp Brothers
Oceanic, Inc., G.R. No. 126204, November 20, 2001)

The Supreme Court clarified in ABS-CBN

Broadcasting Corporation v. Honorable Court of Appeals, G.
R. No. 128690, January 21, 1999), that moral damages are
awarded to enable the injured party to obtain means,
diversion, or amusements that will serve to obviate the moral
suffering he has undergone.

The statement in People v. Manero and Mambulao

Lumber Co. v. PNB that a corporation may recover moral
 damages if it has a “good reputation that is debased, resulting
in social humiliation” is an obiter dictum.

However, the Supreme Court ruled in Filipinas

Broadcasting Network Inc. v Ago Medical and Educational
Center, G.R. No. 141994, January 17, 2005, that a corporation
can recover moral damages under Art. 2219 (7) if it was the
victim of defamation.

c. What is the Doctrine of Piercing the Veil

of Corporate Fiction?

The doctrine that a corporation is a legal entity distinct and

separate from the persons composing it. It is a theory introduced
for the purposes of convenience and to serve the ends of justice.
But when the veil of corporate fiction is used as a shield to
perpetuate fraud, to defeat public convenience, justify wrong,
defend crime, this fiction shall be disregarded and the individuals
composing it will be treated identically. This is a judicial function.
(Curz v. Dalisay, AM No. R-181-P, July 31, 1987)

Also the corporate veil cannot be used to shield otherwise

violation of the prohibition against forum shopping (First
International Bank v. CA, G.R. No. 1158949, January 4, 1996)

d. Created by operation of law.

1) Concession Theory

It is a principle in the creation of corporations, under which a

corporation is an artificial creature without any existence until it
has received the imprimatur of the State acting according to law,
through the Securities and Exchange Commission (SEC). The life
of a corporation is a concession made by the State.
 2) General Law

Private corporations are generally created under the

provisions of the Corporation Code. This is done by filing
appropriate Articles of Incorporation with the SEC; the life of the
corporation starts from the issuance of the Certificate of
Incorporation.

3) Special Law. Public corporations are created through

special laws. Private corporations cannot be created by special
laws.

Exceptions: Government-owned or controlled

corporations which are actually private corporations.

1) Processes involving formation of a corporation:

a) the submission and reservation of corporate name;

b) the initial submission of the articles of

incorporation and bylaws for the review of the
Commission’s processors;

c) the submission of the signed and notarized articles

of incorporation and bylaws; and

d) upon approval and payment of the registration

fees, the issuance of the certificate of incorporation with the
attached signed and notarized articles of incorporation and
bylaws.

e. Right of Succession
 It is the capacity to have continuity of existence despite the
changes on the persons who compose it. Thus, the personality continues
despite the change of stockholders, members, board members or
officers.

f. Powers, Attributes and Properties

1) Limited Capacity Doctrine

No corporation under this Code shall possess or exercise any

corporate powers, except those conferred by law, its Articles of
incorporation, those implied from express powers and those as necessary
or incidental to the exercise of the powers so conferred. The
corporation’s capacity is limited to such express, implied and incidental
powers.

2) Powers of a Corporation

a) Kinds of Powers

a.1 Express - those expressly authorized by the Corporation

Code and other laws, and its Articles of Incorporation or Charter.

a.2 Implied - those that can be inferred from or necessary for

the exercise of the express powers.

a.3 Incidental - those that are incidental to the existence of the

corporation.

b) Express Powers under the

Corporation Code

b.1 General Powers (Sec. 35)

- to sue and be sued in its corporate name;

 - succession (perpetual existence);

- to adopt and use a corporate seal;

- to amend Articles of Incorporation;

- to adopt, amend or repeal bylaws;

- for stocks corporations – to issue stocks to subscribers

and to sell treasury stocks; for non-stock corporations –
to admit members;

- to purchase, receive, take, or grant, hold, convey, sell

lease, pledge, mortgage and otherwise deal with real
and personal property, pursuant to its lawful business;

- to enter into partnership, joint venture, merger, or

consolidation;

- to make reasonable donations for public welfare,

hospital, charitable, cultural, scientific, civic or similar
purposes. Prohibited: for partisan political activity.

- To establish pension, retirement, and other plans for the

benefit of directors, trustees, officers and employees;

- other powers essential or necessary to carry out its

purposes.

b.2 Specific Powers (Sec. 36 to Sec. 44)

 - Power to Extend or Shorten Corporate Term (Sec. 36)

- Power to Increase or Decrease Corporate Capital Stock

(Sec. 37)

- Power to Deny Preemptive Right (Sec.

38)

- Power to Incur, Create Bonded Indebtedness (Sec. 38)

- To sell, dispose, lease, encumber all or substantially all

corporate assets (Sec. 39)

- To Purchase or acquire own shares (Sec. 40)

- Power to invest in another corporation, business other

than the primary purpose (Sec. 41)

- Power to Declare Dividends (Sec. 42)

- Power to Enter into Management Contract (Sec. 43)

c) Utra-Vires Acts

Ultra vires acts of the corporation –

An ultra vires act is one committed outside the object for

which a corporation is created as defined by the law of its
organization and therefore beyond the power conferred upon it by
law (Atrium Management Corporation v. Court of Appeals, G.R.
No. 109491, February 28, 2001)

Ultra vires act vs. illegal acts – The term ultra vires is
distinguished from an illegal act for the former is merely voidable
 which may be enforced by performance, ratification, or estoppel,
while the latter is void and cannot be validated.

e) Effects of Ultra Vires acts

Executed contract – court will not set aside or interfere with

such contract;

Executory contract - no enforcement even at the suit of

either party (void and unenforceable)

Part Executed and Part Executory – the principle against

unjust enrichment shall apply.

Distinguished from Unauthorized Acts - The act may be

within the powers of the corporation but not within the powers of
the particular officer. The latter is not an ultra vires act of the
corporation but is sometimes referred to as an ultra vires act of the
officer. The law on agency applies.

Example: The authority of the agent must be in writing under

Article 1874 of the Civil Code, otherwise the sale is void. Hence, if
there is no written authority from the Board of Directors to sell the
land in the form of Resolution, the sale of the realty by an officer
shall be void. (AF Realty & Dev. V. Dieselman Freight Services,
G.R. No. 111448, January 16, 2002.)

f. Who may exercise corporate powers?

The Board of Directors (Trustees) exercises the powers of the

corporation. Generally, the Board alone, without the concurrence of the
stockholders may exercise the powers. Stockholders cannot overrule the
directors (trustees) in the exercise of the corporate powers.

g. In what instances is concurrence of

 the stockholders or members necessary for the exercise of
the powers of the corporation?

g.1 Approval of the majority of the board and concurrence

of the stockholders representing 2/3 of the outstanding capital (or
2/3 of the members whenever applicable) is necessary in the
exercise of the powers provided in Sections 36 to Section 43; Sec.
16)

g.2 Approval of stockholders representing majority of the

outstanding capital is necessary together with the board approval in
instances provided in Sections 45 and 47.

4. Classes of Corporations –

Corporations formed or organized under this Code may be

stock or non-stock corporations. Stock corporations are those
which have capital stock divided into shares and are authorized to
distribute to the holders of such shares, dividends, or allotments of
the surplus profits on the basis of the shares held. All other
corporations are non-stock corporations. (Sec. 4)

5. Corporators and Incorporators, Stockholders and Members –

Corporators are those who compose the corporation,

whether as stockholders or shareholders in a stock corporation or
as members in a non-stock corporation.

Incorporators are those stockholders or members mentioned

in the articles of incorporation as originally forming and
composing the corporation and who are signatories thereof. (Sec.
5)

Number and Qualifications of Incorporators –

 a. Any person, partnership, association or corporation,
singly or jointly with others but not more than 15 in number, may
organize a corporation for any lawful purpose or purposes.

b. Incorporators who are natural persons must be of legal

age.

c. Natural persons who are licensed to practice a

profession, and partnerships or associations organized for the
purpose of practicing a profession, shall not be allowed to organize
as a corporation unless otherwise provided under the special laws.

d. Each incorporator of a stock corporation must own or

be a subscriber to at least one share of the capital stock.

e. A corporation with a single stockholder is considered a

One Person Corporation (OPC). (Sec. 10)

f. An OPC is a corporation with a single stockholder.

Provided, that only a natural person, trust, or an estate may form a
One Person Corporation.

g. Banks and quasi-banks, preneed, trust, insurance, public

and publicly listed companies, and non-chartered government
owned and controlled corporations may not incorporate as a One
Person Corporation. Provided, further that a natural person who is
licensed to exercise a profession may not organize as a One Person
Corporation for the purpose of exercising such profession except
as otherwise provided under special laws.

Under the RCC, aliens and non-residents may all be

incorporators, because as a general rule, there is no citizenship
requirement for incorporators.
 Number of Incorporators – For the purpose of forming a new
domestic corporation under the RCC, two or more persons, but not
more than 15, may organize themselves to form a corporation,
except an OPC that may have a single stockholder as well as sole
director.

Qualifications of Incorporators – Each incorporator of a stock

corporation must own or be a subscriber to at least one share of
stock. Each incorporator of a non-stock corporation must be a
member of the corporation.

Incorporators may be combination of natural persons or SEC

registered partnership, association or partnership as well as
foreign corporations.

Incorporators who are natural persons must sign the Articles

of Incorporation/By-laws.
6. Directors and Trustees –

The Board of Directors is the governing body in a stock

corporation while Board of Trustees is the governing body in a non-
stock corporation. It is the Seat of Power.

Basic is the rule in corporation law that the business and affairs of
a corporation are handled by a Board of Directors and not the controlling
stockholder. All corporate powers are exercised, all business are
conducted and all properties controlled by the Board of Directors.
Hence, become the controlling stockholder by itself alone, cannot have
the physical possession and operate the business of the corporation.
(Majestic Plus International, Inc. v. Bullion Investment and
Development Corporation, G. R. No. 201017, 5 December 2016)

See also PSE v. Litonjua, G.R. No.204014, 5 December 2016;

Cebu Bionic Builders Supply, Inc. v. Development Bank of the
 Philippines, G.R. No. 154366, 17 November 2010; Premium Marble
Resources, Inc. v. CA 264 SCRA 11.

Business Judgment Rule –

Questions of policy or management are left to solely to the honest

decision of officers and directors of a corporation and the courts are
without authority to substitute their judgment for the judgment of the
board of directors; the board is the business manager of the corporation
and so long as it acts in good faith its orders are not reviewable by the
courts or SEC. The directors are also not liable to the stockholders in
performing such acts. (Montelibano v. Bacolod-Murcia Milling Co., 5
SCRA 36; Phil. Stock Exchange, Inc. v. Court of Appeals, 281 SCRA
232, 1997)

Read: Saber v. CA, G.R. No. 132981, 31 August 2004.

So, the members of the board must act with care (diligence),
loyalty, and obedience. These are the duty of diligence, duty of loyalty
and duty of obedience.

Regular and Special Meetings of Directors or Trustees –

1. Regular meetings: It shall be held monthly, unless the by-

laws provide otherwise.

2. Special meetings: It may be held at anytime upon the call of

the president or as provided in the by-laws.

Place of Meeting -

Meetings of directors or trustees of corporations may be held

anywhere in or outside of the Philippines, unless the by-laws provide
otherwise. (Sec. 32)
 Board Meeting –

Unless the articles of incorporation or the by-laws provide for a

greater majority, a majority of the directors or trustees as stated in the
articles of incorporation shall constitute a quorum to transact corporate
business, and every decision reached by at least a majority of the
directors or trustees constituting a quorum, except for the election of the
officers which shall require the vote of a majority of all the members of
the board, shall be valid as a corporate act.

Directors or trustees who cannot physically attend or vote at board

meetings can participate and vote through remote communication such
as videoconferencing, teleconferencing, or other alternative modes of
communication that allow them reasonable opportunity to participate.
Directors or trustees cannot attend or vote by proxy at board meetings.

Who shall Preside at Meetings –

1. The Chairman or, in his absence, the president shall preside

all meetings of the directors or trustees as well as of the stockholders or
members.

2. Unless the by-laws provide otherwise. (Sec. 53)

Notice –

Notice of regular or special meetings stating the date, time and

place of meeting must be sent to every director or trustee at least two
days prior to the scheduled meeting, unless a longer time is provided in
the by-laws. A director of trustee may waive this requirement, either
expressly or impliedly. (Sec. 52)

Term of Directors and Trustees –

 Since the board controls the corporation, the law tempers the
authority of its members by limiting their term, forcing the board to hold
the meeting and permitting the shareholders and members to periodically
replace them.

Thus, the directors have the term of one year, while the trustees
may have a longer term of not exceeding three years. In order to prevent
a void in the management of the corporation, the law mandates each
director or trustee to hold office until his successor is elected and
qualified.

Note: Trustees of educational institutions organized as non-stock

corporations shall not be less than five (5) nor more than fifteen (15);
Provided, that the number of trustees shall be in multiples of five (5).
(Sec. 106)

Qualifications of Directors –

A director must have at least one share registered under his name
in the corporation’s books. A trustee who ceases to be member of a
corporation shall cease to be such. Unlike the old Code, majority of
directors or trustees need not be Philippine citizens.

Disqualifications of Directors, Trustees or Officers -

The grounds for disqualification of directors or trustees are

provided in Section 26. –

Centralized Management –
 The law adopts the principle of centralized management, with the
board as the main policy-making authority save on certain cases
requiring shareholders’ or members’ approval.

In a corporation with numerous shareholders or members, it will be

unwieldy and difficult if not impossible for them to have a timely
decision. There may also be logistical problem in holding meetings and
having quorum, especially if there will be numerous passive
stockholders or members. Further, decisions are best made by a small
group of persons, preferably with perceived expertise.

Number of Directors –

The number of directors shall not be more than 15 if it is a stock

corporation; the trustees of a non-stock corporation may be more than
15.

The board is a collegial body who must take collegial rather than
individual actions.

The Code prescribed the appointment of independent directors

for all corporations that enjoy secondary license, or are subject to special
regulation or regarded to be vested with public interest. The number of
independent directors must be at least 20% of the board membership.

The number of trustees shall be fixed in the articles of

incorporation or by-laws which may or may be more than 15. They shall
hold office for not ore than three years until their successors are elected
and qualified. Trustees elected to fill vacancies occurring before the
expiration of a particular term shall hold office only for the unexpired
period.

Except with respect to independent trustees of non-stock

corporation vested with public interest, only a member of the corporation
shall be elected as trustee.
 Unless otherwise provided in the articles of incorporation or the
by-laws, the members may directly elect officers of a non-stock
corporation. (Sec. 91)

Be able to know what corporations are vested with public interest;

and the meaning of independent director.

Removal of directors or Trustees –

A director or trustee cannot claim a permanent seat, otherwise the

provisions of Sections 27 and 28 of the Revised Corporation Code will
be violated.

1) Vote required: Any director or trustee of a corporation may

be removed from office by a vote of the stockholders holding or
representing at least 2/3 of the outstanding capital stock, or if the
corporation be a non-stock corporation, by a vote of at least two-thirds
(2/3) of the members entitled to vote.

2) At a meeting and notice requirement: The 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.

3) Called by: A special meeting of the stockholders or

members of a corporation for the purpose of removal of directors or
trustees, or any of them must be called by:

a) The secretary on order of the president; or

 b) On the written demand of the stockholders representing or
holding at least a majority of the outstanding capital stock; or

c) If it be a non-stock corporation, on the written demand of a

majority of the members entitled to vote.

d) Should the secretary fail to or refuse to call the special

meeting upon such demand or fail or refuse to give the
notice, or if there is no secretary, the call for the meeting may
be addressed directly to the stockholders or members by any
stockholder or member of the corporation signing the
demand.

4) Notice. Notice of the time and place of such meeting, as well

as of the intention to propose a removal, must be given by
publication or by written notice prescribed in the Code:

5) Cause of Removal;

a) Removal may be with; or

b) 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 the Revised Corporation.

Note of the power of the Commission regarding removal of

directors or trustees.

Note that due process mandates notice, meeting and voting to

validly effect removal of directors or trustees.

Compensation of Directors or Trustees –

 In the absence of any provision in the by-laws fixing their
compensation, the directors shall not receive any compensation.
Exception:

1. Reasonable per diems;

2. Any compensation other than per diems may be granted to

directors by the vote of the stockholders representing at least the
majority of the outstanding capital stock at a regular or special
stockholders’ meeting. In no case shall the total yearly compensation of
directors, as such directors, exceed 10% of the net income before income
tax of the corporation during the preceding year. Read Singson v. COA,
G.R. No. 159355, 9 August 2010.

Directors or trustees shall not participate in the determination of

their own per diems or compensation.

Corporation vested with public interest shall submit to their

shareholders and the Commission, an annual report of the total
compensation of each of their directors or trustees. (Sec. 29)

In case of a non-stock corporation, it is mandated that no part of its

income is distributable as dividends to its members, trustees, or officers,
subject to the provisions of Sec. 86.

Simply put, Section 29 of RCC grants compensation in favor of

directors if provided in the by-laws or simply through a stockholders’
resolution by a majority vote of the outstanding capital stock.

Read: Central Cooperative Exchange, Inc. v. Tibe, Sr., 33 SCRA

596-597; Central Cooperative Exchange, Inc. v. Enciso, G.R. No. L-
35603; and Western Institute of Technology v. Salas, G.R. No. 113032,
21 August 1997,
 Verification and Certification –

With respect to juridical persons, Section 4, Rule 7, on verification

and Section 7, Rule 7 on certification against forum shopping, are silent
as to who the authorized signatory should be. Said rules do not indicate
if the submission of a board resolution authorizing the officer or
representative is necessary.

Authorized Corporate Officers to sign Verification and

Certification Against Forum shopping –

a. In Mactan-Cebu International Airport Authority v. CAQ,

G.R. No. 139495, 27 November 2000, 346 SCRA 126, 132-133, the
Court recognized the authority of a general manager or acting general
manager to sign the verification and certificate against forum shopping;

b. In Pfizer v. Galan, G.R. No. 143389, 25 May 2001, 358

SCRA 240, 246-248, the Court upheld the validity of a verification
signed by an “employment specialist” who had not even presented any
proof of her authority to represent the company;

c. In Novelty Philippines, Inc. v. CA, G.R. No. 146125, 17

September 2003, 411 SCRA 211, 217-220, the Court ruled that a
personnel officer who signed the petition but did no5 attach the authority
from the company is authorized to sign the verification and non-forum
shopping certificate; and

d. In Lepanto Consolidated Mining Company v. WMC

Resources International Pty. Ltd. (Lepanto), G.R. No. 153885, 24
September 2003, 411 SCRA 211, 217-220, the Court ruled that the
Chairperson of the Board and President of the company can sign the
verification and certificate against non-forum shopping even without the
submission of the board’s authorization.
 Therefore, it was held that the following officers or employees of
the company/corporation can sign the verification and certification
without need of a board resolution:

1) The Chairperson of the Board of Directors/Trustees;

2) The President of a corporation;

3) The General Manager or Acting General Manager;

4) Personnel Officer; and

5) An Employment Specialist in a labor case (Fuji Television

Network, Inc. v. Espiritu, G.R. Nos. 204944-45, 3 December 2014)

In my view, it is more practicable to secure a resolution from the

Board on Verification and Certification on Non-Forum Shopping.

7. Corporate Officers –

They are the officers who are identified as such in the Corporation
Code, Articles of Incorporation or the Bylaws of the corporation.

Section 24, Revised Corporation Code provides that immediately

after their election, the directors of a corporation must formally organize
by the election of a president, who shall be a director; a treasurer, who
must be a resident; a secretary, who must be citizen and resident of the
Philippines; and such other officers as may be provided in the by-laws.
If the corporation is vested with public interest, the board shall also elect
a compliance officer.

The same person may hold two (2) or more positions concurrently,
except that no one shall act as president and secretary or as president and
treasurer at the same time, unless otherwise allowed in this Code.
 The compliance officer is tasked to ensure that the members of the
board and corporate officers comply with law, the corporate charter and
by-laws.

The compliance officer should not be member of the board.

8. Removal of Corporate Officer –

Whether termination or removal of an officer of a corporation is an

intra-corporate controversy that falls under the original and exclusive
jurisdiction of the regional trial courts. (Garcia v. Eastern Broadcasting
Philippines, Inc., G. R. No. 173115, 10 April 2009)

9. Stockholders and Members –

In Espiritu v. Petron Corporation, G. R. No. 170891, 24

November 2009, the Supreme Court held that:

The “owners” of a corporate organization are its stockholders and

they are to be distinguished from its directors and officers. In a
corporation, the management of its business is generally vested in the
board of directors, not its stockholders. Stockholders are basically
investors in a corporation. They do not have a hand in running the day-
to-day business operations of the corporation unless they are at the same
time directors or officers of the corporation. Before a stockholder may be
held criminally liable for acts committed by a corporation, therefore, it
must be shown that he had knowledge of the criminal act committed in
the name of the corporation and that he took part in the same or gave his
consent to its commission, whether by action or inaction.
 Meetings –

Meetings of directors, trustees, stockholders or members may be

regular or special. (Sec. 48)

Regular and Special meetings of Stockholders or Members –

1. Regular meetings –

Regular meetings of stockholders or members shall be held

annually on a date fixed in the by-laws, or if not so fixed, on any
date after 15 April of every year as determined by the board of
directors or trustees. Provided, that written notice of regular or
special meetings shall be sent to all stockholders or members of
record at least 21 days prior to the meeting, unless a different
period is required in the by laws, law, or regulation. Provided,
further, that written notice of regular meetings may be sent to all
stockholders or members of record through electronic mail or such
other manner as the Commission shall allow under its guidelines.

2. Special Meetings –

Special meetings of stockholders or members shall be held at

any time deemed necessary or as provided in the by-laws.
Provided, however, that at least one week written notice shall be
sent to all stockholders or members, unless a different period is
provided in the by-laws, law or regulation.

A stockholder or member may propose the holding of a

special meeting and items to be included in the agenda.

Place and time of Meetings of Stockholders or Members –

Stockholders’ or memeber’ meetings, whether regular

or special:
 1. Place: Stockholders’ or members’ meetings,
whether regular or special, shall be held in the principal
office of the corporation as set forth in the articles of
incorporation, or, if not practicable, in the city or
municipality where the principal office of the corporation is
located. Provided, that any city or municipality in Metro
Manila, Metro Cebu, metro Davao, and other Metropolitan
areas shall, for purposes of this section, be considered a city
or municipality.

Notice –

Notice of meetings shall be sent through the means of

communication provided in the by-laws, which notice shall
state the time, place and purpose of the meetings.

Quorum in Meetings for Stockholders or Members-

Unless otherwise provided in the Code or in the by-laws, a

quorum shall consist of the stockholders representing a majority of
the outstanding capital stock or a majority of the members in the
case of non-stock corporations. (Sec. 51)

Outstanding Capital Stock as used in the code means the total

shares of stock issued to subscribers or stockholders whether or not
fully or partially paid (as long as there is binding subscription
agreement) except treasury shares. (Sec. 173)

Non-Stock corporation Voting

In case of non-stock corporation, the right of members of any

class or classes to vote may be limited or broadened or denied to
the extent specified in the articles of incorporation or in the by-
laws. Unless so limited, broadened or denied, each member
regardless of class, shall be entitled to one vote. Further, unless
specified in the articles of incorporation or in the by-laws, a
member may vote by proxy, in accordance with the provisions of
the Revised Corporation Code. The by-laws may likewise
authorize voting through remote communication and/ or in
absentia.

Stockholders Right to Vote Directors or Trustees -

1. By Straight Voting

The stockholder may vote such number of shares for as long

as there are directors to be elected.

2. Cumulative Voting for One Candidate

A stockholder may cumulate said shares and give one

candidate as many votes as the number of directors to be elected
multiplied by the number of his shares.

3. Cumulative Voting by Distribution

A stockholder may distribute them on the same principle

among as many candidates as he shall fit. Provided, that the total
number of votes cast by him shall not exceed the number of shares
owned by him as shown in the books of the corporation multiplied
by the whole number of directors to be elected. Provided, however,
that no delinquent stock shall be voted.

Example: Samson has 5 shares in the XYZ Corporation and

there are 10 directors to be elected. Samson is entitled to 50 votes,
having 5 shares multiplied by the number of 10 directors to be
elected. Thus:
 1. For straight voting, Samson may cast five votes for each 10
candidates.

2. For cumulative voting for one candidate, Samson may cast

ALL 50 votes for just one candidate.

3. For cumulative voting by distribution, Samson may instead

cast 30 votes for one candidate and the other 20 votes or distributes the
said 50 votes as he may desire.

Formula: No. of Shares x No. of Candidates = No. of Votes

10. Articles of Incorporation -

The contents of the corporation bind the corporation and its

stockholders. Its contents cannot be disregarded considering that it was
the basic documents which legally triggered the creation of the
corporation. (Lanuza v. Court of Appeals, G.R. No. 131394, 28 March
2005)

The articles of incorporation has been described as one that defines

the charter of the corporation and the contractual relationships between
the State and the corporation, the stockholders and the State, between the
corporation and the stockholders.

11. By-Laws

Relatively permanent and continuing rules of action adopted by

the corporation for its own government and that of the individuals
composing it and those having the direction, management and control of
its affairs and activities (China Banking Corporation v. CA, 270 SCRA
503)
12. Term Defined

In Valle Verde Country Club, Inc. v. Africa, G.R. No. 151969, 4

September 2009, the Supreme Court ruled that:

The word “term” has acquired a definite meaning in jurisprudence.

In several cases, the Court defined “term” as the time during which the
officer may claim to hold the office as of right, and fixes the interval
after which the several incumbents shall succeed one another. The term
of office is not affected by the holdover. The term is fixed by statute and
it does not change simply because the office may have become vacant,
nr because the incumbent holds over in office beyond the end of the term
due to the fact that a successor has not been elected and has failed to
qualify.

Term is distinguished from tenure in that the officer’s “tenure”

represents the term during which the incumbent actually holds office.
The tenure may be short4er (or, in case of holdover, longer) than the
term for reasons within beyond the power of the incumbent.

14. Doctrine of Holdover

In ValleVerde case, what happened was that:

After the lapse of one year from his election as member of the
VVCC Board in 1996, Makalintal’s term of office is deemed to have
already expired. That he continued to serve in the VVCC Board in a
holdover capacity cannot be considered as extending his term. To be
precise, Makalintal’s term of office began in 1996 and expired in 1997,
but by virtue of the holdover doctrine in Section 23 of the Corporation
Code, he continued to hold office until his resignation on 10 November
1998. This holdover period, however, is not to be considered as part of
his term, which, as declared, had already expired.
 With the expiration of Mqkalintal’s term of office, a vacancy
resulted which, by the terms of Section 29 of the Corporation Code,
must be filled by the stockholders of VVCC in a regular or special
meeting called for the purpose. To assume – as VVCC does – that the
vacancy is caused by Makalintal’s resignation in 1998, not by the
expiration of his term in 1997, both illogical and unreasonable. His
resignation as a holdover director did not change the nature of the
vacancy; the vacancy due to the expiration of Makalital’s term had been
created long before his resignation.

Sources:

1. Revised Corporation Law Illustrated and Simplified by Josephrally

L. Chavez, Jr.;

2. Reviewer on Commercial Law by Jose R. Sundiang, Sr. and

Timoteo B. Aquino;

3. The Revised Corporation Code of the Philippines by Teresita J.

Herbosa and Eric R. Ricalde.