BY-LAWS

I. Definition

By-laws

- rules of action adopted by the corporation for its internal regulations and for the
government of its officers and of its stakeholders or members.

II. Discussions

1. What are the elements of valid by-laws?

a. They must not be contrary to existing law and inconsistent with the Code

b. They must not be contrary to morals and public policy

c. They must not impair obligations of contract

d. They must be general and uniform in their operation and not directed against particular
individuals, i.e., not discriminatory;

e. They must be consistent with the articles of the incorporations ; and

f. They must be reasonable.

2. Distinguish articles of incorporation and by-laws?

a. The former constitutes the charter or fundamental law of the corporation, while the latter are
merely rules and regulations adopted by the corporation;

b. The former is executed before incorporation by the incorporators, while the latter, usually
after incorporation by the stakeholders or members; and

c. The filling of the former is a condition precedent to corporate to corporate existence, while the
filling of the latter is a condition subsequent.

3. Why is it necessary that every corporation adopt a code by-laws

Upon the issuance of the certificate of incorporation, the corporation comes into existence. But it
is not yet prepared to do business. It must have the means or instrumentalities for the accomplishment
of its purposes.

The corporation must have executive officers charged with the task of actual management,
and rules governing the management of its affairs. The corporation is in existence but not yet organized.
A code of by-laws of the government of the corporation, its officers and members must be adopted.

III. Problems

Explain or state briefly the rule or reason for your answers.

1. X entered into a contract with a corporation. In a suit against the corporation, its lawyers raise
the defense that the contract was in violation of its by-laws. It this defense tenable?

No because as to third persons, the weight of authority is that they are not also bound by the nby -laws of
a corporation except when they have knowledge of its provisions either, actually or constructively.

2. Can the by-laws of a corporation provide for the place of meetings of stockholders?

No. The place of stockholders' or members' meeting must always be held at the city or municipality where
the principal office of the corporation is located or where practicable in the principal office of the
corporation.

3. The authority given to the board of directors to amend its by-laws was revoked in a meeting of
stockholders without previous notice that such matter could be acted upon in the meeting. Is the
revocation valid?

Yes. It is said that the amendment or repeal of any by-laws or adoption of new by-laws by the
stockholders or members must be made at a regular or special meeting duly called for the purpose,
however this is not true when the stockholders or members revoked such right against the board of
directors.

MEETINGS

I. Definitions

1. Regular meeting of stockholders or members

It is a meeting of the stockholders or members which is being held annually on a date fixed in the
by-laws or if not fixed, on any date in April of every year as determined by the board of directors or
trustees.

2. Voting trust agreement

It is an agreement in writing whereby one or more stockholders of a stock corporation transfer his
or their shares to any person or persons or to a corporation having authority to act as a trustee, for the
purpose of vesting in such person or persons or corporation as trustee or trustees voting or other rights
pertaining to the shares for a certain period not exceeding that fixed by the Code and upon the terms and
conditions stated in the agreement.

3. Representative voting

Refers to the voting manner of a stockholder or member through his/her legal representative,
pledgee or mortgagee of stockholder’s shares or officer or agent of corporation owning shares.

II. Discussions

1. Give the requisites for a valid meeting of stockholders or members.

a. It must be held at the proper place;

b. It must be held at the stated date and at the appointed time or at a reasonable time
thereafter;
 c. It must be called by a proper person;

d. There must be a previous notice;

e. There must be a quorum.

2. What are the three meanings of the term “proxy”?

a. A proxy designates the formal written authority given by the owner or holder of the stock,
who has a right to vote it, or by a member, as principal, to another person, as agent, to exercise the
voting rights of the former

b. It is also used to apply to the holder of the authority or the person authorized by an absent
stockholder or member to vote for him at a stockholders’ or members’ meeting.

c. The term is also applied to refer to the instrument which evidences the authority of the
agent.

3. Give at least three distinctions between proxy and voting trust agreement.

a. The proxy has no legal title to the shares of the stockholder giving the agency, while the
trustee acquires legal title to the shares of the transferring stockholder.

b. A proxy unless coupled with interest, is revocable at any time, while a voting trust
agreement, if validly executed, is irrevocable.

c. A proxy can only act at the specified shareholders' or members' meeting (if the proxy is
not continuing in nature), while a trustee is not limited to any particular meeting.

III. Problems

Explain or state briefly the rule or reason for your answers.

1. A meeting of stockholders was improperly called and held. The business transacted at the
meeting was questioned. What arguments can be raised to uphold its validity?

Section 51 provides that all proceedings had and any business transacted at any meeting of the
stockholders or members, if within the powers or authority of the corporation, shall be valid even if the
meeting be improperly called, provided all the stockholders or members of the corporation are present or
duly presented at the meeting.

2. After the existence of a quorum has been determined in a meeting of stockholders, a number of
them left the meeting, thereby leaving less than a quorum. Is the majority vote of those present
sufficient to validly decide a matter properly presented?

It depends. The majority vote of the present is not valid when there is an express provision in the by-laws
requiring a greater number of vote but in the absence of such is sufficient to decide any question properly
presented. All the stockholders are bound by the result of such vote even notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.

3. X pledged his shares of stock to Y. As between them, who has the right to attend and vote at
meetings of stockholders?

Y, pledgor, shalll have the right to attend and vote at meetings of stockholders, unless the X, pledgee,is
expressly given by the pledgor such right in writing which is recorded on the appropriate corporate books