TITLE I

GENERAL PROVISIONS
Definitions and Classifications

Section 1. Title of the Code. - This Code shall be known as "The Corporation Code of the
Philippines".

Sec. 2. Corporation defined. - 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 incident to its existence.

Sec. 3. Classes of corporations. - Corporations formed or organized under this Code may be
stock or non-stock corporations. Corporations 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 are stock corporations. All other corporations are non-stock corporations.

Sec. 4. Corporations created by special laws or charters. - Corporations created by special

laws or charters shall be governed primarily by the provisions of the special law or charter creating
them or applicable to them, supplemented by the provisions of this Code, insofar as they are
applicable.

Sec. 5. Corporators and incorporators, stockholders and members. - Corporators are

those who compose a corporation, whether as stockholders or as members. Incorporators are those
stockholders or members mentioned in the articles of incorporation as originally forming and
composing the corporation and who are signatories thereof.

Corporators in a stock corporation are called stockholders or shareholders. Corporators in a non-

stock corporation are called members.

Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into
classes or series of shares, or both, any of which classes or series of shares may have such rights,
privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share
may be deprived of voting rights except those classified and issued as "preferred" or "redeemable"
shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class or
series of shares which have complete voting rights. Any or all of the shares or series of shares may
have a par value or have no par value as may be provided for in the articles of incorporation:
Provided, however, That banks, trust companies, insurance companies, public utilities, and building
and loan associations shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in the distribution of the
assets of the corporation in case of liquidation and in the distribution of dividends, or such other
preferences as may be stated in the articles of incorporation which are not violative of the provisions
of this Code: Provided, That preferred shares of stock may be issued only with a stated par value. The
board of directors, where authorized in the articles of incorporation, may fix the terms and conditions
of preferred shares of stock or any series thereof: Provided, That such terms and conditions shall be
effective upon the filing of a certificate thereof with the Securities and Exchange Commission.

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the
holder of such shares shall not be liable to the corporation or to its creditors in respect thereto:
Provided; That shares without par value may not be issued for a consideration less than the value of
five (P5.00) pesos per share: Provided, further, That the entire consideration received by the
corporation for its no-par value shares shall be treated as capital and shall not be available for
distribution as dividends.

A corporation may, furthermore, classify its shares for the purpose of insuring compliance with
constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each
share shall be equal in all respects to every other share.

Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code,
the holders of such shares shall nevertheless be entitled to vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all
of the corporate property;

4. Incurring, creating or increasing bonded indebtedness;

5. Increase or decrease of capital stock;

6. Merger or consolidation of the corporation with another corporation or other

corporations;

7. Investment of corporate funds in another corporation or business in accordance with

this Code; and

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to approve a
particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting
rights.

Sec. 7. Founders' shares. - Founders' shares classified as such in the articles of incorporation may
be given certain rights and privileges not enjoyed by the owners of other stocks, provided that where
the exclusive right to vote and be voted for in the election of directors is granted, it must be for a
limited period not to exceed five (5) years subject to the approval of the Securities and Exchange
Commission. The five-year period shall commence from the date of the aforesaid approval by the
Securities and Exchange Commission.

Sec. 8. Redeemable shares. - Redeemable shares may be issued by the corporation when
expressly so provided in the articles of incorporation. They may be purchased or taken up by the
corporation upon the expiration of a fixed period, regardless of the existence of unrestricted retained
earnings in the books of the corporation, and upon such other terms and conditions as may be stated
in the articles of incorporation, which terms and conditions must also be stated in the certificate of
stock representing said shares.

Sec. 9. Treasury shares. - Treasury shares are shares of stock which have been issued and fully
paid for, but subsequently reacquired by the issuing corporation by purchase, redemption, donation
or through some other lawful means. Such shares may again be disposed of for a reasonable price
fixed by the board of directors. 

TITLE II
INCORPORATION AND ORGANIZATION
OF PRIVATE CORPORATIONS

Sec. 10. Number and qualifications of incorporators. - Any number of natural persons not
less than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents
of the Philippines, may form a private corporation for any lawful purpose or purposes. Each of the
incorporators of s stock corporation must own or be a subscriber to at least one (1) share of the capital
stock of the corporation.

Sec. 11. Corporate term. - A corporation shall exist for a period not exceeding fifty (50) years from
the date of incorporation unless sooner dissolved or unless said period is extended. The corporate
term as originally stated in the articles of incorporation may be extended for periods not exceeding
fifty (50) years in any single instance by an amendment of the articles of incorporation, in accordance
with this Code; Provided, That no extension can be made earlier than five (5) years prior to the
original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as
may be determined by the Securities and Exchange Commission.

Sec. 12. Minimum capital stock required of stock corporations. - Stock corporations

incorporated under this Code shall not be required to have any minimum authorized capital stock
except as otherwise specifically provided for by special law, and subject to the provisions of the
following section.

Sec. 13. Amount of capital stock to be subscribed and paid for the purposes of
incorporation. - At least twenty-five percent (25%) of the authorized capital stock as stated in the
articles of incorporation must be subscribed at the time of incorporation, and at least twenty-five
(25%) per cent of the total subscription must be paid upon subscription, the balance to be payable on
a date or dates fixed in the contract of subscription without need of call, or in the absence of a fixed
date or dates, upon call for payment by the board of directors: Provided, however, That in no case
shall the paid-up capital be less than five Thousand (P5,000.00) pesos.

Sec. 14. Contents of the articles of incorporation. - All corporations organized under this code
shall file with the Securities and Exchange Commission articles of incorporation in any of the official
languages duly signed and acknowledged by all of the incorporators, containing substantially the
following matters, except as otherwise prescribed by this Code or by special law:

1. The name of the corporation;

2. The specific purpose or purposes for which the corporation is being incorporated.
Where a corporation has more than one stated purpose, the articles of incorporation
shall state which is the primary purpose and which is/are he secondary purpose or
purposes: Provided, That a non-stock corporation may not include a purpose which
would change or contradict its nature as such;

3. The place where the principal office of the corporation is to be located, which must be
within the Philippines;

4. The term for which the corporation is to exist;

 5. The names, nationalities and residences of the incorporators;

6. The number of directors or trustees, which shall not be less than five (5) nor more
than fifteen (15);

7. The names, nationalities and residences of persons who shall act as directors or
trustees until the first regular directors or trustees are duly elected and qualified in
accordance with this Code;

8. If it be a stock corporation, the amount of its authorized capital stock in lawful money
of the Philippines, the number of shares into which it is divided, and in case the share
are par value shares, the par value of each, the names, nationalities and residences of
the original subscribers, and the amount subscribed and paid by each on his
subscription, and if some or all of the shares are without par value, such fact must be
stated;

9. If it be a non-stock corporation, the amount of its capital, the names, nationalities and
residences of the contributors and the amount contributed by each; and

10. Such other matters as are not inconsistent with law and which the incorporators may
deem necessary and convenient.

The Securities and Exchange Commission shall not accept the articles of incorporation of any stock
corporation unless accompanied by a sworn statement of the Treasurer elected by the subscribers
showing that at least twenty-five (25%) percent of the authorized capital stock of the corporation has
been subscribed, and at least twenty-five (25%) of the total subscription has been fully paid to him in
actual cash and/or in property the fair valuation of which is equal to at least twenty-five (25%) percent
of the said subscription, such paid-up capital being not less than five thousand (P5,000.00) pesos.

Sec. 15. Forms of Articles of Incorporation. - Unless otherwise prescribed by special law,

articles of incorporation of all domestic corporations shall comply substantially with the following
form: 
 

ARTICLES OF INCORPORATION
OF
__________________________
(Name of Corporation)

KNOW ALL MEN BY THESE PRESENTS:

The undersigned incorporators, all of legal age and a majority of whom are
residents of the Philippines, have this day voluntarily agreed to form a (stock)
(non-stock) corporation under the laws of the Republic of the Philippines;

AND WE HEREBY CERTIFY:

FIRST: That the name of said corporation shall be

".............................................., INC. or CORPORATION";

SECOND: That the purpose or purposes for which such corporation is
incorporated are: (If there is more than one purpose, indicate primary and
secondary purposes);

THIRD: That the principal office of the corporation is located in the

City/Municipality of ............................................., Province
of .................................................., Philippines;

FOURTH: That the term for which said corporation is to exist is ................ years
from and after the date of issuance of the certificate of incorporation;

FIFTH: That the names, nationalities and residences of the incorporators of the
corporation are as follows:

NAME             NATIONALITY             RESIDENCE

..................................... ..................................... .....................................

..................................... ..................................... .....................................

..................................... ..................................... .....................................

..................................... ..................................... .....................................

..................................... ..................................... .....................................

SIXTH: That the number of directors or trustees of the corporation shall

be .............; and the names, nationalities and residences of the first directors or
trustees of the corporation are as follows:

NAME             NATIONALITY             RESIDENCE

..................................... ..................................... .....................................

..................................... ..................................... .....................................

..................................... ..................................... .....................................

..................................... ..................................... .....................................

..................................... ..................................... .....................................

SEVENTH: That the authorized capital stock of the corporation

is ................................................. (P......................) PESOS in lawful money of the
Philippines, divided into ............... shares with the par value
of ................................... (P.......................) Pesos per share.

(In case all the share are without par value):

That the capital stock of the corporation is ........................... shares without par
value. (In case some shares have par value and some are without par value): That
the capital stock of said corporation consists of ........................ shares of
which ....................... shares are of the par value of ..............................
(P.....................) PESOS each, and of which ................................ shares are
without par value.

EIGHTH: That at least twenty five (25%) per cent of the authorized capital stock
above stated has been subscribed as follows:

Name of Subscriber Nationality No of Shares Amount

Subscribed Subscribed

.................................. .................... ........................ .......................

.................................. .................... ........................ .......................

.................................. .................... ........................ .......................

.................................. .................... ........................ .......................

.................................. .................... ........................ .......................

NINTH: That the above-named subscribers have paid at least twenty-five (25%)
percent of the total subscription as follows:

Name of Subscriber Amount Subscribed Total Paid-In

................................... ...................................... ...............................

................................... ...................................... ...............................

................................... ...................................... ...............................

................................... ...................................... ...............................

................................... ...................................... ...............................

(Modify Nos. 8 and 9 if shares are with no par value. In case the corporation is
non-stock, Nos. 7, 8 and 9 of the above articles may be modified accordingly, and it
is sufficient if the articles state the amount of capital or money contributed or
donated by specified persons, stating the names, nationalities and residences of
the contributors or donors and the respective amount given by each.)

TENTH: That ....................................... has been elected by the subscribers as

Treasurer of the Corporation to act as such until his successor is duly elected and
qualified in accordance with the by-laws, and that as such Treasurer, he has been
authorized to receive for and in the name and for the benefit of the corporation, all
subscription (or fees) or contributions or donations paid or given by the
subscribers or members.

ELEVENTH: (Corporations which will engage in any business or activity reserved

for Filipino citizens shall provide the following):
"No transfer of stock or interest which shall reduce the ownership of Filipino
citizens to less than the required percentage of the capital stock as provided by
existing laws shall be allowed or permitted to recorded in the proper books of the
corporation and this restriction shall be indicated in all stock certificates issued by
the corporation."

IN WITNESS WHEREOF, we have hereunto signed these Articles of Incorporation,

this ................... day of .............................., 19 ........... in the City/Municipality
of ........................................, Province of ................................................., Republic
of the Philippines.

............................................ .............................................

............................................ .............................................

................................................

(Names and signatures of the incorporators)

SIGNED IN THE PRESENCE OF:

............................................ .............................................

(Notarial Acknowledgment) 
  

TREASURER'S AFFIDAVIT

REPUBLIC OF THE PHILIPPINES )

CITY/MUNICIPALITY OF ) S.S.

PROVINCE OF )

I, ...................................., being duly sworn, depose and say:

That I have been elected by the subscribers of the corporation as Treasurer

thereof, to act as such until my successor has been duly elected and qualified in
accordance with the by-laws of the corporation, and that as such Treasurer, I
hereby certify under oath that at least 25% of the authorized capital stock of the
corporation has been subscribed and at least 25% of the total subscription has
been paid, and received by me, in cash or property, in the amount of not less than
P5,000.00, in accordance with the Corporation Code.

.......................................

(Signature of Treasurer)

SUBSCRIBED AND SWORN to before me, a Notary Public, for and in the
City/Municipality of .................................. Province of ..........................................,
this ............. day of ........................., 19 ........; by ............................................ with
 Res. Cert. No. ..................... issued at ................. on ......................, 19 .......... 
 

NOTARY PUBLIC

    My commission expires on ..........................., 19 ........

Doc. No. ...............;

Page No. ...............;

Book No. ..............;

Series of 19..... (7a)

Sec. 16. Amendment of Articles of Incorporation. - Unless otherwise prescribed by this Code

or by special law, and for legitimate purposes, any provision or matter stated in the articles of
incorporation may be amended by a majority vote of the board of directors or trustees and the vote or
written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital
stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the
provisions of this Code, or the vote or written assent of at least two-thirds (2/3) of the members if it
be a non-stock corporation.

The original and amended articles together shall contain all provisions required by law to be set out in
the articles of incorporation. Such articles, as amended shall be indicated by underscoring the change
or changes made, and a copy thereof duly certified under oath by the corporate secretary and a
majority of the directors or trustees stating the fact that said amendment or amendments have been
duly approved by the required vote of the stockholders or members, shall be submitted to the
Securities and Exchange Commission.

The amendments shall take effect upon their approval by the Securities and Exchange Commission or
from the date of filing with the said Commission if not acted upon within six (6) months from the date
of filing for a cause not attributable to the corporation.

Sec. 17. Grounds when articles of incorporation or amendment may be rejected or

disapproved. - The Securities and Exchange Commission may reject the articles of incorporation or
disapprove any amendment thereto if the same is not in compliance with the requirements of this
Code: Provided, That the Commission shall give the incorporators a reasonable time within which to
correct or modify the objectionable portions of the articles or amendment. The following are grounds
for such rejection or disapproval:

1. That the articles of incorporation or any amendment thereto is not substantially in

accordance with the form prescribed herein;

2. That the purpose or purposes of the corporation are patently unconstitutional, illegal,
immoral, or contrary to government rules and regulations;

3. That the Treasurer's Affidavit concerning the amount of capital stock subscribed
and/or paid if false;

4. That the percentage of ownership of the capital stock to be owned by citizens of the
Philippines has not been complied with as required by existing laws or the Constitution.
No articles of incorporation or amendment to articles of incorporation of banks, banking and quasi-
banking institutions, building and loan associations, trust companies and other financial
intermediaries, insurance companies, public utilities, educational institutions, and other corporations
governed by special laws shall be accepted or approved by the Commission unless accompanied by a
favorable recommendation of the appropriate government agency to the effect that such articles or
amendment is in accordance with law.

Sec. 18. Corporate name. - No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or is patently deceptive, confusing
or contrary to existing laws. When a change in the corporate name is approved, the Commission shall
issue an amended certificate of incorporation under the amended name.

Sec. 19. Commencement of corporate existence. - A private corporation formed or organized

under this Code commences to have corporate existence and juridical personality and is deemed
incorporated from the date the Securities and Exchange Commission issues a certificate of
incorporation under its official seal; and thereupon the incorporators, stockholders/members and
their successors shall constitute a body politic and corporate under the name stated in the articles of
incorporation for the period of time mentioned therein, unless said period is extended or the
corporation is sooner dissolved in accordance with law.

Sec. 20. De facto corporations. - The due incorporation of any corporation claiming in good faith
to be a corporation under this Code, and its right to exercise corporate powers, shall not be inquired
into collaterally in any private suit to which such corporation may be a party. Such inquiry may be
made by the Solicitor General in a quo warranto proceeding.

Sec. 21. Corporation by estoppel. - All persons who assume to act as a corporation knowing it to
be without authority to do so shall be liable as general partners for all debts, liabilities and damages
incurred or arising as a result thereof: Provided, however, That when any such ostensible corporation
is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it
shall not be allowed to use as a defense its lack of corporate personality.

On who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof
on the ground that there was in fact no corporation.

Sec. 22. Effects on non-use of corporate charter and continuous inoperation of a

corporation. - If a corporation does not formally organize and commence the transaction of its
business or the construction of its works within two (2) years from the date of its incorporation, its
corporate powers cease and the corporation shall be deemed dissolved. However, if a corporation has
commenced the transaction of its business but subsequently becomes continuously inoperative for a
period of at least five (5) years, the same shall be a ground for the suspension or revocation of its
corporate franchise or certificate of incorporation.

This provision shall not apply if the failure to organize, commence the transaction of its businesses or
the construction of its works, or to continuously operate is due to causes beyond the control of the
corporation as may be determined by the Securities and Exchange Commission.

TITLE III
BOARD OF DIRECTORS/TRUSTEES/OFFICERS

Sec. 23. The board of directors or trustees. - Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks, or where there is no stock, from among the
members of the corporation, who shall hold office for one (1) year until their successors are elected
and qualified.

Every director must own at least one (1) share of the capital stock of the corporation of which he is a
director, which share shall stand in his name on the books of the corporation. Any director who ceases
to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director
shall thereby cease to be a director. Trustees of non-stock corporations must be members thereof. a
majority of the directors or trustees of all corporations organized under this Code must be residents of
the Philippines.

Sec. 24. Election of directors or trustees. - At all elections of directors or trustees, there must
be present, either in person or by representative authorized to act by written proxy, the owners of a
majority of the outstanding capital stock, or if there be no capital stock, a majority of the members
entitled to vote. The election must be by ballot if requested by any voting stockholder or member. In
stock corporations, every stockholder entitled to vote shall have the right to vote in person or by proxy
the number of shares of stock standing, at the time fixed in the by-laws, in his own name on the stock
books of the corporation, or where the by-laws are silent, at the time of the election; and said
stockholder may vote such number of shares for as many persons as there are directors to be elected
or he 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 shall equal, or he may distribute them on the same
principle among as many candidates as he shall see 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. Unless otherwise provided in the articles of incorporation or in the by-laws,
members of corporations which have no capital stock may cast as many votes as there are trustees to
be elected but may not cast more than one vote for one candidate. Candidates receiving the highest
number of votes shall be declared elected. Any meeting of the stockholders or members called for an
election may adjourn from day to day or from time to time but not sine die or indefinitely if, for any
reason, no election is held, or if there not present or represented by proxy, at the meeting, the owners
of a majority of the outstanding capital stock, or if there be no capital stock, a majority of the member
entitled to vote.

Sec. 25. Corporate officers, quorum. - 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 may or may not be a director, a secretary who shall be a resident and citizen of the Philippines,
and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be
held concurrently by the same person, except that no one shall act as president and secretary or as
president and treasurer at the same time.

The directors or trustees and officers to be elected shall perform the duties enjoined on them by law
and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a
greater majority, a majority of the number of directors or trustees as fixed in the articles of
incorporation shall constitute a quorum for the transaction of corporate business, and every decision
of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall
be valid as a corporate act, except for the election of officers which shall require the vote of a majority
of all the members of the board.

Directors or trustees cannot attend or vote by proxy at board meetings.

Sec. 26. Report of election of directors, trustees and officers. - Within thirty (30) days after
the election of the directors, trustees and officers of the corporation, the secretary, or any other officer
of the corporation, shall submit to the Securities and Exchange Commission, the names, nationalities
and residences of the directors, trustees, and officers elected. Should a director, trustee or officer die,
resign or in any manner cease to hold office, his heirs in case of his death, the secretary, or any other
officer of the corporation, or the director, trustee or officer himself, shall immediately report such fact
to the Securities and Exchange Commission.

Sec. 27. Disqualification of directors, trustees or officers. - No person convicted by final

judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation
of this Code committed within five (5) years prior to the date of his election or appointment, shall
qualify as a director, trustee or officer of any corporation.

Sec. 28. Removal of directors or trustees. - Any director or trustee of a corporation may be

removed from office by a vote of the stockholders holding or representing at least two-thirds (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: Provided, That such 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. 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 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, if it be a non-stock corporation, on the written demand
of a majority of the members entitled to vote. Should the secretary fail 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. Notice of the time and place of such meeting, as well as of the
intention to propose such removal, must be given by publication or by written notice prescribed in
this Code. Removal may be with or 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 24 of this Code.

Sec. 29. Vacancies in the office of director or trustee. - Any vacancy occurring in the board of
directors or trustees other than by removal by the stockholders or members or by expiration of term,
may be filled by the vote of at least a majority of the remaining directors or trustees, if still
constituting a quorum; otherwise, said vacancies must be filled by the stockholders in a regular or
special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be
elected only or the unexpired term of his predecessor in office.

A directorship or trusteeship to be filled by reason of an increase in the number of directors or

trustees shall be filled only by an election at a regular or at a special meeting of stockholders or
members duly called for the purpose, or in the same meeting authorizing the increase of directors or
trustees if so stated in the notice of the meeting.

Sec. 30. Compensation of directors. - In the absence of any provision in the by-laws fixing their
compensation, the directors shall not receive any compensation, as such directors, except for
reasonable pre diems: Provided, however, That any such compensation other than per diems may be
granted to directors by the vote of the stockholders representing at least a 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 ten (10%) percent of the net income before
income tax of the corporation during the preceding year.
Sec. 31. Liability of directors, trustees or officers. - Directors or 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 or trustees shall be liable jointly and severally for
all damages resulting therefrom suffered by the corporation, its stockholders or members and other
persons.

When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any
interest adverse to the corporation in respect of any matter which has been reposed in him in
confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be
liable as a trustee for the corporation and must account for the profits which otherwise would have
accrued to the corporation.

Sec. 32. Dealings of directors, trustees or officers with the corporation. - A contract of

the corporation with one or more of its directors or trustees or officers is voidable, at the option of
such corporation, unless all the following conditions are present:

1. That the presence of such director or trustee in the board meeting in which the
contract was approved was not necessary to constitute a quorum for such meeting;

2. That the vote of such director or trustee was nor necessary for the approval of the
contract;

3. That the contract is fair and reasonable under the circumstances; and

4. That in case of an officer, the contract has been previously authorized by the board of
directors.

Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a
contract with a director or trustee, such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of
the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest
of the directors or trustees involved is made at such meeting: Provided, however, That the contract is
fair and reasonable under the circumstances.

Sec. 33. Contracts between corporations with interlocking directors. - Except in cases of

fraud, and provided the contract is fair and reasonable under the circumstances, a contract between
two or more corporations having interlocking directors shall not be invalidated on that ground alone:
Provided, That if the interest of the interlocking director in one corporation is substantial and his
interest in the other corporation or corporations is merely nominal, he shall be subject to the
provisions of the preceding section insofar as the latter corporation or corporations are concerned.

Stockholdings exceeding twenty (20%) percent of the outstanding capital stock shall be considered
substantial for purposes of interlocking directors.

Sec. 34. Disloyalty of a director. - Where a director, by virtue of his office, acquires for himself a
business opportunity which should belong to the corporation, thereby obtaining profits to the
prejudice of such corporation, he must account to the latter for all such profits by refunding the same,
unless his act has been ratified by a vote of the stockholders owning or representing at least two-
thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the
fact that the director risked his own funds in the venture.
Sec. 35. Executive committee. - The by-laws of a corporation may create an executive committee,
composed of not less than three members of the board, to be appointed by the board. 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 by-laws or on a majority vote of the board, except with respect
to: (1) approval of any action for which shareholders' approval is also required; (2) the filing of
vacancies in the board; (3) the amendment or repeal of by-laws or the adoption of new by-laws; (4)
the amendment or repeal of any resolution of the board which by its express terms is not so
amendable or repealable; and (5) a distribution of cash dividends to the shareholders.