CORPORATION

 LAW  REVIEWER  (2013-­‐2014)            ATTY.  JOSE  MARIA  G.  HOFILEÑA    

 
or   appointment,   shall   qualify   as   a   director,   trustee   or   officer   of   any   number   of   directors   to   be   elected   multiplied   by   the   number   of   his  
corporation.   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  
• Punishable   by   imprisonment   or   a   period   exceeding   6   years:   number   of   votes   cast   by   him   shall   not   exceed   the   number   of   shares  
regardless   of   your   actual   sentence,   so   long   as   the   crime   was   owned  by  him  as  shown  in  the  books  of  the  corporation  multiplied  by  
punishable   by   a   period   exceeding   6   years,   you   will   be   the  whole  number  of  directors  to  be  elected:   Provided,  however,  That  
disqualified  once  convicted.   no   delinquent   stock   shall   be   voted.   Unless   otherwise   provided   in   the  
• Conviction  of  a  violation  of  the  Corporation  Code:  since  it  is  only   articles   of   incorporation   or   in   the   by-­‐laws,   members   of   corporations  
the   Court   who   can   determine   if   you   have   violated   the   Code,   which   have   no   capital   stock   may   cast   as   many   votes   as   there   are  
then   you   probably   need   to   have   been   convicted   of   such   trustees   to   be   elected   but   may   not   cast   more   than   one   vote   for   one  
violation  in  order  to  be  considered  disqualified.   candidate.   Candidates   receiving   the   highest   number   of   votes   shall   be  
  declared  elected.  Any  meeting  of  the  stockholders  or  members  called  
V.  Election  of  Directors  and  Trustees     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  
A.  Directors  (Sections  24  and  26)   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  
Section  24.  Election  of  directors  or  trustees.   stock,  a  majority  of  the  member  entitled  to  vote.  
At  all  elections  of  directors  or  trustees,  there  must  be  present,  either    
in  person  or  by  representative  authorized  to  act  by  written  proxy,  the   • “Entitle  to  Vote”  à  Do  you  include  in  counting,  for  purposes  of  
owners   of   a   majority   of   the   outstanding   capital   stock,   or   if   there   be   no   a   majority   present   in   a   meeting,   those   delinquent   stockholders?  
capital  stock,  a  majority  of  the  members  entitled  to  vote.  The  election   Does  this  phrase  apply  to  stock  corporations?  
must  be  by  ballot  if  requested  by  any  voting  stockholder  or  member.   • “By   ballot”   à   it   is   not   necessary   that   a   majority   of   the  
In  stock  corporations,  every  stockholder  entitled  to  vote  shall  have  the   stockholders  agree  that  the  election  be  by  ballot.  So  long  as  one  
right   to   vote   in   person   or   by   proxy   the   number   of   shares   of   stock   (“any”)   shareholder   requests   for   the   election   to   be   conducted  
standing,   at   the   time   fixed   in   the   by-­‐laws,   in   his   own   name   on   the   by  ballot,  then  such  should  be  done.  
stock  books  of  the  corporation,  or  where  the  by-­‐laws  are  silent,  at  the   • Atty.   Hofileña   à   the   number   of   seats   for   directors   must   be  
time   of   the   election;   and   said   stockholder   may   vote   such   number   of   maintained.  It  cannot  be  altered  beyond  that  prescribed  by  the  
shares  for  as  many  persons  as  there  are  directors  to  be  elected  or  he   articles   of   incorporation.   However,   in   reality,   if   no   one   objects  
may  cumulate  said  shares  and  give  one  candidate  as  many  votes  as  the  

 
NOTES  BY  RACHELLE  ANNE  GUTIERREZ  (UPDATED  APRIL  3,  2014)  
CORPORATION  LAW  REVIEWER  (2013-­‐2014)            ATTY.  JOSE  MARIA  G.  HOFILEÑA    
 
then   the   stockholders   can   choose   to   just   fill   some   of   the   seats   • Cumulative   voting   is   reckoned   to   be   equitable   since   it   allows  
and  not  all.   stockholders  the  opportunity  for  representation  on  the  board  of  
1. Cumulative  Voting1   directors   in   proportion   to   their   holdings.   Such   minority  
• Cumulative  Voting  v.  Straight  Voting   representation  is  believed  not  to  interfere  with  the  principle  of  
o Cumulative   voting   à   is   a   voting   procedure   wherein   a   majority   rule   since   the   number   of   directors   elected   by   each  
stockholder   is   allowed   to   concentrate   his   votes   and   give   group  will  vary  with  its  proportion  of  ownership.    
one  candidate  as  many  votes  as  the  number  of  directors   o On   the   other   hand,   the   system   of   cumulative   voting   has  
to   be   elected   multiplied   by   the   number   of   his   shares   been   criticized   by   other   sectors   because   in   tends   to  
shall  equal.   partisan   representation   in   the   board,   which   is  
o Straight   voting   à   allows   a   simple   majority   of   the   inconsistent   with   the   notion   that   a   director   properly  
shareholders   to   elect   the   entire   board   of   directors   represents  all  interest  groups  in  the  corporate  setting.    
leaving  the  minority  shareholders  unrepresented.  Under   2. Report  on  Election  of  Directors,  Trustees  and  Officers  
straight   voting,   each   shareholder   simply   votes   the    
number  of  shares  he  owns  for  each  director  nominated.   Section  26.  Report  of  election  of  directors,  trustees  and  officers.  
• Section   24   of   the   Corporation   Code   expressly   provides   for   Within  thirty  (30)  days  after  the  election  of  the  directors,  trustees  and  
cumulative   voting   in   the   election   of   the   directors   of   stock   officers   of   the   corporation,   the   secretary,   or   any   other   officer   of   the  
corporations.   The   provisions   for   cumulative   voting   are   corporation,  shall  submit  to  the  Securities  and  Exchange  Commission,  
mandatory.   the  names,  nationalities  and  residences  of  the  directors,  trustees,  and  
• The  policy  of  cumulative  voting  is  to  allow  minority  stockholders   officers   elected.   Should   a   director,   trustee   or   officer   die,   resign   or   in  
the  capacity  to  be  able  to  elect  representatives  to  the  board  of   any   manner   cease   to   hold   office,   his   heirs   in   case   of   his   death,   the  
directors.2     secretary,   or   any   other   officer   of   the   corporation,   or   the   director,  
o No   exception   is   provided   for   in   Section   24   so   that   the   trustee   or   officer   himself,   shall   immediately   report   such   fact   to   the  
articles  may  not  provide  for  restriction  or  suppression  of   Securities  and  Exchange  Commission.  
the  principle  of  cumulative  voting  in  stock  corporations.      
• The   provisions   of   Section   26   of   the   Corporation   Code   are  
deemed   to   be   mandatory   and   jurisdictional.   And   the  
                                                                                                               
1
 Villanueva,  C.  L.,  &  Villanueva-­‐Tiansay,  T.  S.  (2013).  Philippine  Corporate  Law.   determination  of  who  are  the  legal  directors  and  officers  of  the  
(2013  ed.).  Manila,  Philippines:  Rex  Book  Store.  
2
 Glazer,   Glazer,   &   Grofman,   Cumulative   Voting   In   Corporate   Elections:  
Introducing  Strategy  into  the  Equation,  35  S.  CAROLINA  L.  REV.  295  (1934).  
 
NOTES  BY  RACHELLE  ANNE  GUTIERREZ  (UPDATED  APRIL  3,  2014)  
CORPORATION  LAW  REVIEWER  (2013-­‐2014)            ATTY.  JOSE  MARIA  G.  HOFILEÑA    
 
corporation   is   conditioned   upon   the   reports   submitted   to   the   Reyna   Law   office   is   the   lawyer   of   Belen   and   Nograles   and   not   of  
SEC  pursuant  to  said  section.1   Premium  and  that  the  Articles  of  Incorporation  of  Premium  shows  that  
• Since   under   Section   26   of   the   Corporation   Code   all   corporations   Belen,  Nograles  and  Reyes  are  not  majority  stockholders.  
are   mandated   to   submit   a   formal   report   to   the   SEC   on   the    
changes  in  their  directors  and  officers,  then  only  those  directors   Issue:  Whether  or  not  the  filing  of  the  case  for  damages  against  private  
and   officers   appearing   in   such   report   (General   Information   respondent   bank   (International   Corporate   Bank)   was   authorized   by   a  
Sheet)   to   the   SEC   are   deemed   legally   constituted   to   bind   the   duly  constituted  Board  of  Directors  of  the  petitioner  corporation  
corporation,   especially   in   the   bringing   of   suits   in   behalf   of   the    
corporation.   Premium   Marble   Resources   v.   Court   of   Appeals,   Held:   NO.   The   Minutes   of   the   Meeting   of   the   Board   on   April   1,   1982  
264  SCRA  11  (1996).   states  that  the  newly  elected  officers  for  the  year  1982  were  Oscar  Gan,  
  Mario  Zavalla,  Aderito  Yujuico  and  Rodolfo  Millare,  petitioner  however,  
Premium  Marble  Resources  v.  Court  of  Appeals   failed  to  show  proof  that  this  election  was  reported  to  the  SEC.  In  fact,  
  the   last   entry   in   their   General   Information   Sheet   with   the   SEC,   as   of  
Facts:  The  case  began  when  Premium  Marble  Resources  Inc.,  assisted  by   1986   appears   to   be   the   set   of   officers   elected   in   March   1981.   The   claim,  
Atty.   Arnulfo   Dumadag   as   counsel,   filed   an   action   for   damages   against   therefore,   of   petitioners   as   represented   by   Atty.   Dumadag,   that   Zaballa,  
International   Corporate   Bank.   Later,   the   same   corporation,   i.e.,   et   al.,   are   the   incumbent   officers   of   Premium   has   not   been   fully  
Premium,   but   this   time   represented   by   Siguion   Reyna,   Montecillio   and   substantiated.  Hence,  the  court  agrees  with  the  finding  of  the  Court  of  
Ongsiako  Law  Office  as  counsel,  filed  a  motion  to  dismiss  the  action  of   Appeals,   that   in   the   absence   of   any   board   resolution   from   its   board   of  
petitioners   on   the   ground   that   the   filing   of   the   case   was   without   directors  the  [sic]  authority  to  act  for  and  in  behalf  of  the  corporation,  
authority   from   its   duly   constituted   board   of   directors   as   shown   by   the   the  present  action  must  necessarily  fail.  The  power  of  the  corporation  to  
excerpt   of   the   minutes   of   the   Premium’s   board   of   directors’   meeting.   In   sue  and  be  sued  in  any  court  is  lodged  with  the  board  of  directors  that  
its   opposition   to   the   motion   to   dismiss,   Premium   thru   Atty.   Dumadag   exercises  its  corporate  powers.    
contended   that   the   persons   who   signed   the   board   resolution   namely    
Belen,   Jr.,   Nograles   &   Reyes,   are   not   directors   of   the   corporation   and   Doctrine:  By  the  express  mandate  of  the  Corporation  Code  (Section  26),  
were   allegedly   former   officers   and   stockholders   of   Premium   who   were   all  corporations  duly  organized  pursuant  thereto  are  required  to  submit  
dismissed   for   various   irregularities   and   fraudulent   acts;   that   Siguion   within   the   period   therein   stated   (30   days)   to   the   Securities   and  
Exchange   Commission   the   names,   nationalities   and   residences   of   the  
                                                                                                                directors,  trustees  and  officer  selected.    
1
 Villanueva,  C.  L.,  &  Villanueva-­‐Tiansay,  T.  S.  (2013).  Philippine  Corporate  Law.    
(2013  ed.).  Manila,  Philippines:  Rex  Book  Store.  
 
NOTES  BY  RACHELLE  ANNE  GUTIERREZ  (UPDATED  APRIL  3,  2014)