Notes 3 CORPORATION
Notes 3 CORPORATION
CORPORATIONS
* CC – Corporation Code
* RCC – Revised Corporation Code (RA 11232)
INDEPENDENT DIRECTOR
✓ An “independent director” shall mean a person other than an officer or employee of the
corporation, its parent or subsidiaries, or any other individual having a relationship with
the corporation, which would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director.
✓ The board of the following corporations vested with public interest shall have
independent directors constituting at least twenty percent (20%) of such board (Sec. 22,
RCC):
1. Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise
known as “The Securities Regulation Code”;
- Namely those:
a. Whose securities are registered with the SEC;
b. Corporations listed with an exchange or with assets of at least Fifty
million pesos (P50,000,000.00); and
c. Those having two hundred (200) or more holders of shares, each
holding at least one hundred (100) shares of a class of its equity
shares;
2. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money
service business, pre-need, trust and insurance companies, and other financial
intermediaries; and
3. Other corporations engaged in business vested with public interest similar to
the above, as may be determined by the SEC.
TENURE OF OFFICE
✓ BOD: They shall be elected for a term of 1 year.
✓ BOT: They shall be elected for a term not exceeding three (3) years.
✓ Under the CC, the term for trustees is 1 year.
✓ If no election is held, the directors and officers will continue to occupy position even after
the lapse of their term under a Hold-Over Capacity until their successors are elected and
qualified.
QUALIFICATIONS
✓ The following are the qualifications of directors/trustees:
1. For stock corporations, he must be the owner of at least 1 share of stock which
shall stand in his name on the books of the corporation.
- Any director who ceases to be the owner of at least 1 share of stock shall
also cease to be a director.
2. For non-stock corporations, he must be a member of the corporation.
3. Must not have been convicted by final judgment of an offense punishable by
imprisonment for period exceeding 6 years or a violation of the Corporation
Code, committed within 5 years prior to the date of his election.
4. Must be of legal age.
5. Other qualifications as may be prescribed in special laws or regulations or in
the by-laws of the corporation.
Let’s say there are 20 candidates, but Carlo only chose Ana, Bea,
Ejay, Niko and Angelo as the candidates he wanted to be
elected. Thus, under straight voting, he can give them 100 votes
each.
Shall be liable solidarily for all the damages resulting therefrom suffered by the
corporation, its stockholders and other persons.
✓ Duty of Loyalty - A director, trustee, or officer shall not attempt to acquire, or acquire
any interest adverse to the corporation in respect of any matter which has been reposed
in them in confidence, and upon which, equity imposes a disability upon themselves to
deal in their own behalf.
- Otherwise, the said director, trustee, or officer shall be liable as a trustee for
the corporation and must account for the profits which otherwise would have
accrued to the corporation. (Sec. 30, par. 2, RCC)
- Instances of Conflict of Interes:
1. Self-dealing directors;
2. Fixing their own compensation;
3. Interlocking directors;
4. Seizing corporate opportunity; and
5. Using inside information.
Illustration:
X Corporation and Y Corporation entered into a contract with each other. Ana
is a director in both corporations; thus, Ana is considered as an interlocking
director.
However, let us say that Ana owns 35% of shares in X Corporation while she
owns only 10% shares in Y Corporation.
References:
1. Sundiang, Sr. and Aquino. 2017. “Reviewer on Commercial Law.”
2. Soriano. 2011. “Notes on Business Law.”
3. Divina. “Highlights of the Revised Corporation Code.”
4. Comparative Matrix of the Corporation Code and the Revised Corporation Code
(https://www.sec.gov.ph/wp-content/uploads/2019/11/2019Legislation_Revised-
Corporation-Code-Comparative-Matrix_as-of-March-22-2019.pdf)
5. UST Golden Notes. 2018. Mercantile Law Reviewer
6. Divina. “Highlights of the Revised Corporation Code.”
7. RA 11232