1. Limitations imposed by the Constitution, statutes, articles of incorporation or by-laws. 2. Cannot perform constituent or those involving fundamental changes in the corporation requiring the approval of stockholders or members.
3. Cannot exercise powers not possessed by the corporation. (The Corporation Code of the Philippines Annotated, Hector de Leon, 2002 ed.) NATURE OF POWERS OF BOARD OF DIRECTORS/TRUSTEES (The Corporation Code of the Philippines Annotated, Hector de Leon, 2002 ed.)
a. Under the Theory of Original Power, the powers of the board of directors or trustees are ORIGINAL and UNDELEGATED. The stockholders or members do not confer, nor can they revoke those powers.
b. They are DERIVATIVE only in the sense of being received from the State in the act of incorporation.
2. TENURE, QUALIFICATIONS
AND DISQUALIFICATIONS OF DIRECTORS
Qualifications:
1. For a stock corporation, ownership of at least 1 share capital stock of the corporation in his own name, and if he ceases to own at least one share in his own name, he automatically ceases to be a director. (Sec. 23) For a non-stock corporation, only members of the corporation can be elected to seat in the Board of Trustees.
In order to be eligible as a director, what is material is the legal title to, not beneficial ownership of the stocks appearing on the books of the corporation
2. A majority of the directors/trustees must be residents of the Philippines. (Sec. 23)
3. He must not have been convicted by final judgment of an offense punishable by imprisonment for a period exceeding 6 years or a violation of the Corporation Code, committed within five years from the date of his election. (Sec. 27)
4. Only natural persons can be elected directors/trustees.
In case of corporate stockholders or members, their representation in the board can be achieved by making their individual representatives trustees of the shares or membership to make them stockholders/members of record. 5. Other qualifications as may be
prescribed in the by-laws of the corporation.
6. Must be of legal age
Disqualifications of Directors, Trustees or Officers
1. Conviction by
final judgment of offenses punishable by imprisonment for excess of 6 years, or
2. Violation of
code committed within 5 years prior to date of his election or appointment.
Terms of Directors
For 1 year or until their successors are elected and qualified (Hold – over Principle)
3. ELECTION OF DIRECTORS
OR TRUSTEES
a. Quorum in Meeting for Election
Majority of the outstanding capital stock or member entitled to vote
Present either in person or by representative by WRITTEN PROXY b. How
Viva Voce, or
By ballot if requested by any voting stockholder or member
c. Stock Corporations
Methods of Voting on the Election of Directors
g. STRAIGHT VOTING – Every stockholder through this method, may vote such number of shares for as many persons as there are directors.
h. CUMULATIVE VOTING
i. Every stockholder is entitled to such number of votes that his number of shares multiplied by the total number of directors to be elected will bring. He may give all such votes to one candidate (CUMULATIVE VOTING FOR ONE CANDIDATE) or he may distribute them among as many candidates as he sees fit
(CUMULATIVE VOTING BY
DISTRIBUTION). (Sec. 24)
ii. A minority director elected through cumulative voting cannot be removed without cause. (Sec. 28)
iii. A PROXY is a written instrument, signed by the stockholder or member (as principal) and filed before the scheduled meeting with the corporate secretary, and given to another person (as agent) authorizing such person to exercise the voting rights of the former.
What is the period of validity of proxy? Unless otherwise provided in the proxy, it should be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a longer period than five years at any one time. (Sec. 58)
Instances whereby Right to vote by Proxy may be exercised:
1. Election of the
board of directors or trustees;
2. Voting in case
of joint ownership of stock;
3. Voting by
trustee under voting trust agreement;
4. Pledge or
mortgage of shares;
5. As provided for
in it’s by – laws.
Stockholders or members may attend and vote in their meeting by proxy (Sec. 58); but directors cannot do so. Directors must always act in person. (Sec. 25)
A VOTING TRUST is an agreement whereby one or more stockholders transfer their shares of stocks to a trustee, who thereby acquires for a period of time the voting rights (and/ or any other rights) over such shares; and in return, trust certificates are given to the stockholder/s, which are transferrable like stock certificates, subject however, to the trust agreement.
d. Non – Stock Corporations
Members may cast as many votes as there are trustees to be elected (seats)
But may not cast more than one vote for a single candidate
EXCEPT: when the AOI or by – laws provide otherwise
e. Adjournment of Meeting for Elections
May adjourn from day to day or from time to time
But NOT sine die or indefinitely if quorum is not met (majority of stockholders or members are not present).
NOTE: Proposed amendment to by – laws stipulating permanent director even without election is contrary to law. (Grace Christian
High School vs. CA)
4. REMOVAL OF DIRECTORS
OR TRUSTEES
a. How may be removed
i. 2/3 vote of stockholders or members entitled to vote
ii. During a regular meeting or a special meeting called by the secretary upon:
Written demand from majority of stockholders or members entitled to vote
iii. Upon previous notice to stockholders or members
Of the intention to propose such removal at the meeting
Of the time and place of meeting
Must be given by publication or by written notice prescribed in the Code. b. If secretary refuses/ fails to call for the
special meeting or give the notice, or there is no secretary, call may be directly addressed to stockholders or members by demanding stockholder or member.
c. Causes for Removal
1. May be with or without cause
Cause is usually related to the 3 duties of an officer or director – a. loyalty
b. obedience c. diligence
2. Provided that removal without cause may not be used to deprive minority stockholders or members of their right of representation under Sec. 24. NOTE: Removal of Board of Director or