NATIONAL COLLEGE

LAW 012 – BUSINESS LAW

MIDTERM
OF SCIENCE AND 1ST SEMESTER
TECHNOLOGY BSA31M2
WRITTEN REPORT / 10:00AM – 11:00AM / MS. CINDY LORRREINE DE LEON

REVISED CORPORATION CODE OF THE PHILIPPINES

TITLE V
BYLAWS
BY-LAWS.
 Rules and regulations or private laws.
 To regulate, govern, and control.
 Adopted by the stockholders, directors, and officers.

PURPOSE OF A BY-LAW.
 To regulate the conduct and define the duties of the members.
 Self-imposed.
 Bylaws has no status as public law.

SEC. 45. ADOPTION OF BYLAWS.

 Voted and signed by the stockholders who holds at least a majority of the outstanding capital stock (for
stock corporation), or at least a majority of the members (for non-stock corporation).
 Bylaws shall be kept in the principal office.
 A duly certified copy must be created and signed by a majority of the directors or trustees.
 The duly certified copy must also be signed by the secretary and shall be filed with the SEC.

IS ADOPTION AND FILING OF BY-LAWS NECESSARY?

 Adoption and filing of by-laws are not a pre-requisite to acquire corporate existence.
 But it is required by the law.
 Bylaws are subordinate and/or supplementary to articles of incorporation.

DIFFERENCE BETWEEN ARTICLES OF INCORPORATION AND THE BY-LAWS.

Articles of Incorporation By-laws
Condition precedent. Condition subsequent.
It is the charter or fundamental law. It is the rules and regulations.
Executed before incorporation. Executed before or after the incorporation.
Amended by a majority of BOD representing 2/3 Amended by a majority vote of the BOD and
of the outstanding capital stock. stockholders who holds at least majority of the
outstanding capital stock or member.
The power to amend or repeal cannot be delegated. The power to amend or repeal may be delegated by the
2/3 of the outstanding capital stock or members.

ADOPTION OF BY-LAWS BEFORE INCORPORATION.

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LAW 012 – BUSINESS LAW

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
The by-laws must be signed and approved by all the incorporators and filed with the SEC together with
the articles of incorporation.
ADOPTION OF BY-LAWS AFTER INCORPORATION.
 The affirmative vote of the stockholders who holds at least a majority of the outstanding capital stock
(for stock corporation), or at least a majority of the members (for non-stock corporation).
 The by-laws shall be signed by the stockholders or members voting for them.

PRESIDENTIAL DECREE NO. 902-A.

 Under Section 6 of PD No. 902-A, failure to file by-laws within the required period is a ground for
suspension or revocation of franchise and certificate of registration of a corporation.
 Non-filing of by-laws will not result to outright demise of a corporate existence.
 Incorporators must be given the chance to explain their neglect or omission and remedy the same.

BY-LAWS ARE INDISPENSABLE TO CORPORATIONS.

 By-laws are required by law for an orderly governance and management of corporations.

WHEN DO BYLAWS BECOME EFFECTIVE?

 The bylaws shall be effective when it is approved by the SEC, and upon the issuance of a certification
that the bylaws are in accordance with the law.

SEC. 46. CONTENTS OF BYLAWS.

 A private corporation may provide the following in its by-laws.

a. The time, place and manner of calling and conducting regular or special meetings of the directors or
trustees’
b. The time and manner of calling and conducting regular or special meetings and mode of notifying the
stockholders or members thereof;
c. The required quorum in meetings of stockholders or members and the manner of voting therein;
d. The mode by which a stockholder, member, director, or trustee may attend meetings and cast their votes.
e. The form for proxies of stockholders and members and the manner of voting them.
f. The directors’ or trustees’ qualifications, duties and responsibilities, the guidelines for setting the
compensation of directors or trustees and officers, and the maximum number of other board
representation that an independent director or trustee may have which shall, in no case, be more than the
number prescribed by the Commission;
g. The time for holding the annual election of directors or trustees and the mode or manner of giving notice
thereof;
h. The manner of election or appointment and the term of office of all officers other than directors or
trustees;
i. The penalties for violation of the bylaws;
j. In the case of stock corporation, the manner of issuing stock certificates; and
k. Such other matters as may be necessary for the proper or convenient transaction of its corporate affairs
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LAW 012 – BUSINESS LAW

MIDTERM
OF SCIENCE AND 1ST SEMESTER
TECHNOLOGY BSA31M2
WRITTEN REPORT / 10:00AM – 11:00AM / MS. CINDY LORRREINE DE LEON
for the promotion of good governance and anti-graft and corruption measures.

SEC. 47. AMENDMENT TO BYLAWS.

WHO HAS THE POWER TO AMEND OR REPEAL THE BY-LAWS OR ADOPT A NEW BY-LAWS?
 Stockholders who hold at least a majority of the outstanding capital stock, or at least a majority of the
members.

DELEGATION.
 The power to amend or repeal the by-laws or adopt a new by-laws may be delegated to the Board of
Directors/Trustees.

HOW TO DELEGATE?
 To delegate such power to the Board of Directors/Trustees, you will need the approval of at least 2/3 of
the outstanding capital stock or at least 2/3 of the members.

REVOCATION OF THE POWER DELEGATED.

 The delegated power to amend or repeal the by-laws or adopt a new by-laws may be revoked by the vote
of the stockholders who hold at least a majority of the outstanding capital stock, or at least a majority of
the members.

BINDING EFFECT OF THE BYLAWS:

AS TO DIRECTORS OR TRUSTEES, OFFICERS, AND STOCKHOLDERS OR MEMBERS.
a. They are bound and must comply because they are presumed to know the provisions of the
bylaws.
AS TO THIRD PERSONS.
b. Third persons are not bound by by-laws, unless they have knowledge of the provisions either
actually or constructively.
 NATIONAL COLLEGE

LAW 012 – BUSINESS LAW

MIDTERM
OF SCIENCE AND 1ST SEMESTER
TECHNOLOGY BSA31M2
WRITTEN REPORT / 10:00AM – 11:00AM / MS. CINDY LORRREINE DE LEON

REVISED CORPORATION CODE OF THE PHILIPPINES

TITLE VI
MEETINGS

PURPOSE OF STOCKHOLDERS’ OR MEMBERS’ MEETINGS.

 Electing directors or trustees.
 Transacting some other business calling for or requiring the action or consent of the shareholders or
members.

IN THE ABSENCE OF AN EXPRESS CHARTER OR STATUTORY PROVISION TO THE

CONTRARY.
 General rule, every member of a nonstock corporation, and every legal owner of shares in a stock
corporation, has a right to be present and to vote in all corporate meetings.
 Conversely, those who are not stockholders or members have no right to vote.
 Voting may be expressed personally, or through proxies who vote in their representative capacities.
 Generally, the right to be present and to vote in a meeting is determined by the time in which the
meeting is held.

DEFINITION OF TERMS.
a. Remote Communication
It means the transfer of data between two or more devices not located at the same site.
b. Teleconferencing
It is the holding of a conference among people remote from one another by means of telecommunication
devices such as telephone or computer terminals that can bring people together under one roof even
though they are separated by hundred miles.
c. Videoconferencing
It is the holding of a conference among people in remote locations by means of transmitted audio and
video signals.
d. Computer Conferencing
It is teleconferencing supported by one or more computers.
e. Audio Conferencing
It is a conference in which people at different locations speak to each other via telephone or Internet
connections.

SEC. 48. KINDS OF MEETINGS.

 Meetings of directors, trustees, stockholders, or members may be regular or special.

SEC. 49. REGULAR AND SPECIAL MEETINGS OF STOCKHOLDERS OR MEMBERS.

REGULAR MEETINGS.
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Shall be held annually on a date fixed in the bylaws, or if not so fixed, on any date after April 15 of
every year as determined by the board of directors or trustees:
 Written notice shall be sent to all stockholders or members of record at least twenty-one (21) days prior
to the meeting.
 May be sent through electronic mail or other means by which the law allows.
SPECIAL MEETINGS.
 Shall be held at any time deemed necessary or as provided in the bylaws.
 Shall be sent at least one (1) week prior to the meeting, unless a different period is provided in the
bylaws.
 May be sent through electronic mail or other means by which the law allows.

REQUIREMENTS FOR STOCKHOLDERS' OR MEMBERS' MEETINGS.

1. It must be held at the proper place;
2. It must be held at the stated date and at the appointed time;
3. It must be called by the proper person;
4. The person or persons designated in the by-laws have authority to call stockholder's or member's
meeting;
5. In the absence of such provision in the by-laws, it may be called by a director or trustee or by an officer
entrusted with the management of the corporation;
6. A petitioning stockholder or member may make the call on order of the SEC whenever for any cause,
there is no person authorized to call a meeting or the person authorized unjustly refuses to call a meeting:
7. There must be a previous notice; and
8. There must be a quorum.

SEC. 50. PLACE AND TIME OF MEETINGS OF STOCKHOLDERS OR MEMBERS.

 Shall be held in the principal place of business if practicable
 If not practicable, within 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 of meetings shall be sent through the means of communication provided in the bylaws, which notice
shall state the time, place and purpose of the meetings.

EACH NOTICE OF MEETING SHALL FURTHER BE ACCOMPANIED BY THE FOLLOWING:

a. The agenda for the meeting;
b. A proxy form which shall be submitted to the corporate secretary within a reasonable time prior to the
meeting;
c. When attendance, participation, and voting are allowed by remote communication or in absentia, the
requirements and procedures to be followed when a stockholder or member elects either option; and
d. When the meeting is for the election of directors or trustees, the requirements and procedure for
nomination and election.
 NATIONAL COLLEGE

LAW 012 – BUSINESS LAW

MIDTERM
OF SCIENCE AND 1ST SEMESTER
TECHNOLOGY BSA31M2
WRITTEN REPORT / 10:00AM – 11:00AM / MS. CINDY LORRREINE DE LEON

SEC. 51. QUORUM IN MEETINGS.

 Unless otherwise provided in this Code or in the bylaws, 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.

MEETINGS OF STOCKHOLDERS OR MEMBERS

PARTICIPATION IN STOCKHOLDERS' OR MEMBERS' MEETINGS THROUGH REMOTE

COMMUNICATION
 Members who cannot physically attend may participate in such meetings through remote communications or
other alternative modes of communication.

QUORUM IN MEETINGS
 Unless otherwise provided in the Revised Corporation Code or in the bylaws, 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 nonstock corporations.

VOTING IN THE ELECTION OF DIRECTORS, TRUSTEES AND OFFICER THROUGH REMOTE

COMMUNICATION
 The right to vote of stock holders or members may be exercised in person, through a proxy, or when so
authorized in the bylaws, through remote communication or in absentia.

NOTICES
 The Secretary shall send out the notices of the election/meeting to all stockholders or member.

NOTICE OF REGULAR MEETINGS

a. State the date, time, and place of the meeting
b. Must be sent at least twenty-one (21) days prior to the scheduled meeting, unless a longer time is provided
in the bylaws.

NOTICE OF SPECIAL MEETINGS

a. State the date, time, and place of the meeting
b. Must be sent at least one (1) week prior to the scheduled meeting, unless a longer time is provided in the
bylaws.

PLACE OF MEETINGS OF STOCKHOLDERS OR MEMBERS

a. At the principal office of the corporation as provided in the articles of incorporation, or
b. In the city or municipality where the principal office of the corporation is located.
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LAW 012 – BUSINESS LAW

MIDTERM
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SEC. 52. REGULAR AND SPECIAL MEETINGS OF DIRECTORS OR TRUSTEES

QUORUM AT A REGULAR OR SPECIAL MEETING OF DIRECTORS OR TRUSTEES
General Rule:
Majority of the number of directors or trustees as stated in the articles of incorporation.
Exception:
If the articles of incorporation or the by-laws provide for a greater majority.

VALID CORPORATE ACT

General Rule:

Every decision reached by at least a majority of the directors or trustees constituting a quorum shall be
valid as a corporate act.

Exception:
The election of officers shall require the vote of a majority of all of the members of the board.

WHAT IS QUORUM at the meeting of directors or trustees?

General rule:
A majority of the number of directors or trustees, as fixed in the articles of incorporation, Majority
means fifty percent plus one (50% + 1), shall constitute a quorum for the transaction of corporate
business.
Exception:
If the articles of incorporation or the by-laws provide for a greater majority.

MEETINGS OF DIRECTORS OR TRUSTEES

1. Regular Meeting
When:
 Monthly, unless the by-laws provide otherwise.
Where:
 Anywhere in or outside of the Philippines, unless the by-laws provide otherwise.
Notice:
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LAW 012 – BUSINESS LAW

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 Stating the date, time and place of the meeting
 Must be given at least 2 days prior to the scheduled meeting unless a longer time is provided in the
bylaws.

2. Special Meeting
When:
 Any time upon the call of the president or as provided in the by-laws.

Where:
 Anywhere in or outside of the Philippines, unless the by-laws provide otherwise.
Notice:
 Stating the date, time and place of the meeting
 Must be given to the directors or trustees at least 2 days prior to the scheduled meeting, unless a
longer time is provided in the bylaws.

Note:
 Directors or trustees can participate and vote through remote communication
 Cannot attend or vote by proxy at board meetings.
 A director or trustee who has a potential interest in any related party transaction must recuse from
voting on the approval of the related party transaction without prejudice to compliance with the
requirements of Section 31 of this Code.

SEC. 53. WHO SHALL PRESIDE AT MEETINGS.

General Rule:
The chairman or, in his absence, the president shall preside at all meetings of the directors or trustees as
well as of the stockholders or members.
Exception:
Unless the bylaws provide otherwise.

BOARD MEETINGS OF DIRECTORS OR TRUSTEES

A. PARTICIPATION IN BOARD MEETINGS THROUGH REMOTE COMMUNICATION;
INTERNAL PROCEDURES.

B. QUORUM

C. NOTICE OF MEETINGS

D. ROLL CALL
1. Full name and position;
2. Location;
3. Confirmation that he/she can clearly hear and/or see the other attendees;
4. Confirmation that he/she received the Notice of the Meeting including the agenda and materials; and
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5. Specify the device being used (ie., smartphone, tablet, laptop, desktop, television, etc.)

Thereafter, the Corporate Secretary shall confirm and note the participants and certify the existence of
quorum.
E. Voting
 The Presiding Officer shall direct the Corporate Secretary to note the vote of each director or trustee.
 Director or trustee participating in the meeting via remote communication may cast his vote through
electronic mail, messaging service. The vote shall be sent to the Presiding Officer and the Corporate
Secretary for notation.

SEC. 54. RIGHT TO VOTE OF SECURED CREDITORS AND ADMINISTRATORS

● In case a stockholder grants security interest in his or her shares in stock corporations, the stockholder-
grantor shall have the right to attend and vote at meetings of stockholders, unless the secured creditor is
expressly given by the stockholder, unless the secured creditor is expressly given by the stockholder-
grantor such right in writing which is recorded in the appropriate corporate books.
● Executors, administrators, receivers, and other legal representations duly appointed by the court may
attend and vote in behalf of the stockholders or members without need of any written proxy.

NOTE
● There is no transfer of ownership in case a stockholder grants security interest in his or her shares in
stock corporations (Examples: contract of pledge and contract of mortgage). Thus, the general rule is
that it is the pledgor or mortgagor (stockholders-grantor) who has the right to attend and vote at
meetings of stockholders, unless they authorized their pledge or mortgage (secured creditor). The
authority must be put into writing and recorded in the appropriate corporate books.

SEC. 55. VOTING IN CASE OF JOINT OWNERSHIP OF STOCK

General Rule:
● In case of shares of stock owned jointly by two or more persons, in order to vote the same, the consent
of all the co-owners shall be necessary.

Exception:
● There is a written proxy, signed by all the co-owners, authorizing one or some of them or any other
person to vote such share or or shares; and
● The shares are owned in an “and/or” capacity by the holders thereof, any one of the joint owners can
vote said shares or appoint a proxy therefor.

SEC. 56. VOTING RIGHTS FOR TREASURY SHARES

● Treasury shares shall have no voting right as long as such shares remain in the Treasury.
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SEC. 57. MANNER OF VOTING: PROXIES

Voting Trust Agreement Proxy

Governed by law on trust Governed by law on agency

Trustee acquires legal title to the shares of Proxy has no legal title to the shares of the principal.
transferring stockholder; only beneficial title remains
with the stockholder.

The trustee votes as owners The proxy votes as agent

The agreement must be notarized. Proxy need not be notarized.

The trustee may vote in person or by proxy. The proxy must vote in person.

The trustee is not limited to act at any particular The proxy can only act at a specified stockholder’s
meeting meeting.

A trustee can vote even when the stockholder is A proxy can only vote in the absence of the owners of
present. the stock.

An agreement must not exceed 5 years at any one A proxy is usually of shorter duration although the
time except when the same is made a condition of a corporation law provides that it cannot exceed 5 years
loan.. at any one time.

As a rule, voting trust agreement is intended to be As a rule, a proxy is revocable.

irrevocable for a definite and limited period of time.

A trustee has the right to inspect corporate books. A proxy does not have a right of inspection of
corporate books.

The stock certificate shall be canceled and as new one There is no cancellation of the stock certificate.
in the name of the trustee shall be issued stating that
they are issued stating that they are issued pursuant to
a voting trust agreement.

REQUIREMENTS FOR VALIDITY OF A PROXY

● It shall be in writing in any form authorized in the by-laws;
● It shall be signed by the stockholder or member
● It shall be filed before the scheduled meeting with the corporate secretary
● Unless otherwise provided in the proxy, it shall be valid only for the meeting which it is intended.
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● No proxy shall be valid and effective for a period longer than 5 years at any one time.
NOTE:
Directors or trustees cannot attend or vote by proxy at board meetings but there is no prohibition for them
to act as proxies in stockholder’s meetings.

PURPOSE OF PROXY
● For convenience
● It assures the presence of quorum
● It enables those who do not wish to attend the meeting to protect their interest
● It secures voting control.

NOTE:
In the above section, there is no limitation as to who may be a proxy.

THE RIGHT TO VOTE BY PROXY

● Election of the Board of Directors or Board of Trustees
● Voting in case of joint ownership of stock.
● Voting by trustee under voting trust agreement.
● Voting by members in a non-stock corporation
● In case of pledge or mortgage of shares
● In all meetings of stockholders or members
● In all other matters as may be provided in the by-laws.

REVOCATION OF PROXIES
 Revocation may be made through:
a. Formal notice
b. Verbal Communication
c. Conduct

NOTE
● The last proxy given revokes all previous proxies.
● When so authorized in the by-laws or by a majority of the board of directors, the stockholders or
members of corporations may also vote through remote communication or in absentia: Provided, That
the votes are received before the corporation finishes the tally of votes.
● A stockholder or member who participates through remote communication or in absentia shall be
deemed present for the purpose of quorum.

SEC. 58. VOTING TRUST

● is defined in Ballentine’s Law Dictionary as follows: trust created by an agreement between a group of
stockholders of a corporation and the trustee or by a group of identical agreements between individual
stockholders and a common trustee.
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● Are formed for many reasons, including preventing hostile takeovers, retaining majority control, and
resolving conflict of interest.

NATURE OF VOTING TRUST AGREEMENT

● A voting trust agreement results in the separation of the voting rights of the stockholder from his other
rights

THREE TEST OF VOTING AGREEMENT

1. That the voting rights of the stock are separated from the other attributes of ownership.
2. That the voting rights granted are intended to be irrevocable for a definite period of time
3. That the principal purpose of the grant of voting rights is to acquire voting control of the
corporation.

REQUIREMENTS AND LIMITATIONS

● The agreement must be in writing and notarized and specify the terms and conditions thereof;
● A certified copy of such agreement shall be filed with the corporation and with the Securities and
Exchange Commission; otherwise, said agreement is ineffective and unenforceable.
● The certificate or certificate of stocks covered by the voting trust agreement shall be canceled and new
ones shall be issued in the name of the trustee or trustees stating that they are issued pursuant to said
agreement.
● The books of the corporation shall state that the transfer in the name of the trustee or trustees is made
pursuant to said voting trust agreement
● The trustee or trustees shall execute and deliver to the transferors voting trust certificates, which shall be
transferable in the same manner and with the same effect as certificates of stock
● A voting trust agreement shall be entered into for a period not exceeding 5 years at any time. However,
in the case of a voting trust specifically requires as condition in a loan agreement, said voting trust may
be for a period exceeding five (5) years but shall automatically expire upon full payment of the loan
● No voting trust agreement shall be entered into for a purpose of circumventing the laws against anti-
competitive agreements, abuse of dominant position, anti-competitive mergers, and acquisitions,
violation of nationality and capital requirements, or for the perpetuation of fraud.

NOTE:
The voting trustee or trustees may vote by proxy or in any manner authorized under the bylaws unless the
agreement provides otherwise.