ELECTION OF DIRECTORS/

TRUSTEES (Sec. 23)

a. At any meeting of stockholder or members called for the

election of directors or trustees, there must be present either
in person or by representative authorized to act by written
proxy, the owners of the majority of the outstanding capital
stock or majority of the members entitled to vote.
b. The election must be by ballot if requested by any voting
member or stockholder.
c. A stockholder cannot be deprived in the articles of
incorporation or in the bylaws of his statutory right to use any
of the methods of voting in the election of directors.
 ELECTION OF DIRECTORS/
TRUSTEES

• At any meeting of stockholder or members called for the

election of directors or trustees, there must be present either
in person or by representative authorized to act by written
proxy, the owners of the majority of the outstanding capital
stock or majority of the members entitled to vote. When so
authorized by the bylaws or by a majority of the board of
directors, the stockholders or member may also vote through
remote communication or in absentia. Provided that the right
to vote through such modes may be exercised by corporations
vested with public interest, notwithstanding the absence of a
provision in the by laws of such corporations. A stockholder or
member who participates through remote communication or in
absentia, shall be deemed present for purposes of quorum.
 ELECTION OF DIRECTORS/
TRUSTEES
• The election must be by ballot if requested by any voting member or
stockholder.
• In stock corporations, stockholders entitled to vote shall have the
right to vote the number of shares of stock standing in their own
names in the stock books of the corporation at the time fixed in the
bylaws or where the bylaws are silent, at the time of the election.
The said stockholder may: (a) vote such number of shares for as
many persons as there are directors to be elected; (b) cumulate said
shares and give one (1) candidate as many votes as the number of
directors to be elected multiplied by the number of the shares
owned; or (c) distribute them on the same principle among as many
candidates as may be seen fit: Provided, That the total number of
votes cast shall not exceed the number of shares owned by the
stockholders as shown in the books of the corporation multiplied by
the whole number of directors to be elected.
 ELECTION OF DIRECTORS/
TRUSTEES
1. Manner of election – A quorum must be present. No provision in the
articles of incorporation designating directors without election will
be considered void even with an agreement between stockholders
and directors. Automatic membership in the Board is also not
allowed. Election is mandatory. Elections should be at large and not
by region even if provided for in the By-laws. Election by region is
feasible only in a non-stock corporation. Staggered election of
directors is also not allowed.
2. Voting through remote communication only allowed when: a)
Authorized by by laws; b) authorized by majority of the BOD/BOT; c)
if the corporation is vested with public interest, allowed without
provision in by laws.
3. GOCC – Directors/Trustees are appointed by the government.
4. Highest number of votes shall be declared as duly elected director/
trustee.
 ELECTION OF DIRECTORS/
TRUSTEES

• Quorum – required for every election. Absence of quorum invalidates

the election. The quorum is the majority of the outstanding capital
stock entitled to vote.
• Cumulative voting – allowed for stock corp but only allowed in non-
stock if stated in the articles of inc. Basic effect is to increase the
chances of the minority stockholders to elect a director. Cumulative
voting can vote such number of shares standing/recorded in his/her
name in the stock books for as many persons as there are directors to
be elected. Ex. You have 1,000 shares and there are 10 directors to be
voted upon, you will have 10,000 votes (1,000 X 10) you can vote
either to one candidate or as many as candidate as you want. Top
candidates with highest number of votes wins as a director.
• Presence of candidate not required during election. A director can be
elected in absentia unless otherwise prohibited by the by laws.
 ELECTION OF DIRECTORS/
TRUSTEES

• Advantages of cumulative voting: a) persons with large (but minority)

holdings can elect their own candidate; 2) the minority will be
represented having another view point in the board; 3) minority
director will be able to oppose conflict of interest in other members
of the board.
• Distinguished from straight voting, under straight voting, a
stockholder can cast one vote per share for each candidate up to the
number of positions to be elected. Ex. If a stockholder has 10 shares
and five directors are needed to be elected, he/she can cast 10 shares
to each candidate he/she wants. Whereas in cumulative, they can cast
all cumulate all his 50 votes to one director.
• If the Board or President fail or refuse to hold an election,
stockholders may seek assistance from the SEC to compel elections.
 ELECTION OF DIRECTORS/
TRUSTEES

• no delinquent stock shall be voted. Unless otherwise provided in the

articles of incorporation or in the bylaws, members of non-stock
corporations may cast as many votes as there are trustees to be
elected but may not cast more than one (1) vote for one (1)
candidate. Nominees for directors or trustees receiving the highest
number of votes shall be declared elected.
• If no election is held, or the owners of majority of the outstanding
capital stock or majority of the members entitled to vote are not
present in person, by proxy, or through remote communication or
not voting in absentia at the meeting, such meeting may be
adjourned and the corporation shall proceed in accordance with
Section 25 of this Code.
 METHODS OF VOTING

a. Straight Voting – every stockholder may vote such number of

shares for as many persons as there are directors to be elected.
b. Cumulative voting for one candidate – a stockholder is allowed
to concentrate his votes and give one candidate, as many votes
as the number of directors to be elected multiplied by the
number of his shares shall equal.
c. Cumulative voting by distribution – a stockholder may
cumulate his shares by multiplying the number of his shares by
the number of directors to be elected and distribute the same
among as many candidates as he shall see fit.
 LIMITATIONS ON THE
STOCKHOLDER’S
RIGHT TO VOTE
1. Where the articles of incorporation provides for
classification of shares pursuant to Sec. 6, non-voting shares are
not entitled to vote except as provided for in the last paragraph of
Sec. 6.
2. Preferred or redeemable shares may be deprived of the right to
vote unless otherwise provided in the Code.
3. Fractional shares of stock cannot be voted.
4. Treasury shares have no voting rights as long as they remain in
the treasury.
5. Holders of stock declared delinquent by the board of directors
for unpaid subscription are not entitled to vote or to a
representation at any stockholder’s meeting.
 LIMITATIONS ON THE
STOCKHOLDER’S
RIGHT TO VOTE

6. A transferee of stock cannot vote if his transfer is not registered

in the stock and transfer book of the corporation.
 REMOVAL OF DIRECTORS/
TRUSTEES
a. Vote of the stockholders representing at least 2/3 of the outstanding
capital stock 2/3 of the members entitled to vote
b. At a regular or special meeting after proper notice is given
c. Removal may be with or without cause.
d. A minority director elected through cumulative voting cannot be
removed without cause. (Sec. 23)
e. The Commission shall, motu proprio or upon verified complaint, and
after due notice and hearing, order the removal of a director or trustee
elected despite the disqualification, or whose disqualification arose or is
discovered subsequent to an election. The removal of a disqualified
director shall be without prejudice to other sanctions that the
Commission may impose on the board of directors or trustees who, with
knowledge of the disqualification, failed to remove such director or
trustee.
 Corporate Officers (Sec. 24)
SEC. 24. Corporate Officers. – Immediately after their election, the
directors of a corporation must formally organize and elect: (a) a
president, who must be a director; (b) a treasurer, who must be a
resident; (c) a secretary, who must be a citizen and resident of the
Philippines; and (d) such other officers as may be provided in the
bylaws. 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 officers shall manage the corporation and perform such duties
as may be provided in the bylaws and/or as resolved by the board
of directors.
 Corporate Officers (Sec. 24)

• Four corporate officers: President, Treasurer, Secretary and in

case a corporation is vested with public interest, a compliance
officer. In addition Sect. 62 also added Vice President and
Assistant Secretary. Articles of Inc. may also add other offices
like GM, Auditor, Comptroller or other specified officers as may
be necessary for the corporation.
• Term of office is 1 year after the election of the directors.
Majority vote of all the directors are required.
 Corporate Officers (Sec. 24)

• Office is a creation of the charter of the corporation while an

officer is the person elected by the directors or stockholders. An
employee occupies no office and is generally employed not by
the action of the directors and stockholders but by the
managing officer of the corporation.
• If corporate officer, questions in election and appointment
should be lodged with the Regional Trial Court. If not a
corporate officer, questions about its employment should be
filed with the labor arbiter.
 Corporate Officer
Qualifications (Sec. 24)

• President – Must be a director (and of course a stockholder),

and cannot be concurrently the treasurer or secretary.
• There should only be one president. President is a not covered
by the mandatory retirement age of 60.
• Vice President – Sections 62 and 77 recognized that there may
be a vice president. In the absence of the president, vice
president has the authority to act on the president’s behalf.
• Chairman of the Board – Function varies from different
corporations. May also be concurrently president and
sometimes called Chief Executive Officer (CEO).
 Corporate Officer
Qualifications (Sec. 24)

• Secretary – Corp. Sec must be a resident and citizen of the

Philippines and other qualifications as provided for in the by
laws. Assistance Corp Sec is also allowed in accordance with
Sections 62 and 77. Foreigner cannot be Secretary or Assistant
Secretary.
• Treasurer – Should be a resident of the Philippines.
 EXTENT OF POWERS OR
AUTHORITY OF
CORPORATE OFFICERS

1. The authority which he has by virtue of his office;

2. The authority which is expressly conferred upon him or is
incidental to the effectualness of such express authority;
3. As to third persons dealing with him without notice of any
restriction thereof, the authority which the corporation holds the
officer out as possessing or is estopped to deny.
4. The nature of the corporate business must also be taken into
consideration; and
5. The nature act of an officer though originally unauthorized, may
become upon the corporation by a subsequent ratification.
 EXTENT OF POWERS OR
AUTHORITY OF
CORPORATE OFFICERS

Doctrine of Agency by Estoppel: It is a familiar doctrine that if a

corporation knowingly permits one of it officers, or any other
agent, to act within the scope of an apparent authority, it holds
him out to the public as possessing the power to do those acts;
and thus, the corporation will, as against anyone who has in good
faith dealt with it through such agent, be estopped from denying
the agent’s authority. (LapuLapu Foundation Inc., vs. Court of
Appeals, et al., G.R. No. 126006, January 29, 2004, Callejo, J.)
 EXTENT OF POWERS OR
AUTHORITY OF
CORPORATE OFFICERS

When a corporation intentionally or negligently clothes its agent

with apparent authority to act in its behalf (doctrine of apparent
authority), it is estopped from denying its agent's apparent
authority as to innocent third parties who dealt with this agent in
good faith (Calubad v Ricaren Corp. G.R. No. 202364, August 30,
2017).
 PERSONAL LIABILITY OF
DIRECTORS

1. Willfully and knowingly voting for and assenting to patently

unlawful acts of the corporation; (Sec. 30)
2. Gross negligence or bad faith in directing the affairs of the
corporation; (Sec. 30)
3. Acquiring any personal or pecuniary interest in conflict of duty;
(Sec. 30)
4. Consenting to the issuance of watered stocks, or, having
knowledge thereof, failing to file objections with the secretary;
(Sec. 65)
5. Agreeing or stipulating in a contract to hold himself liable with
the corporation; or
 PERSONAL LIABILITY OF
DIRECTORS

DOCTRINE OF DOCTRINE OF
LIMITED LIABILITY IMMUNITY

Shields the corporators Protects a person acting

from corporate liability for and in behalf of the
beyond their agreed corporation from being
contribution to the himself personally liable
capital or shareholding for his authorized actions
in the corporation.
 Disqualification of
Directors/Trustees/Officers
(Sec. 26)

SEC. 26. Disqualification of Directors, Trustees or Officers. – A person

shall be disqualified from being a director, trustee, or officer of any
corporation if, within five (5) years prior to the election or appointment
as such, the person was:
(a) Convicted by final judgment:
(1) Of an offense punishable by imprisonment for a period exceeding
six (6) years;
(2) For violating this Code; and
(3) For violating Republic Act No. 8799, otherwise known as “The
Securities Regulation Code”;
 Disqualification of
Directors/Trustees/Officers
(Sec. 26)
(b) Found administratively liable for any offense involving fraud acts; and
(c) By a foreign court or equivalent foreign regulatory authority for acts,
violations or misconduct similar to those enumerated in paragraphs (a)
and (b) above.
The foregoing is without prejudice to qualifications or other
disqualifications, which the Commission, the primary regulatory agency,
or the Philippine Competition Commission may impose in its promotion
of good corporate governance or as a sanction in its administrative
proceedings.

• Other grounds may be provided in the articles of inc and by laws.

• Disqualifications are also found in the Code of Corporate Governance
of 2009.
 Removal of Directors or Trustees
(Sec. 27)

• See discussions in Sec. 23