Article 21p. 21

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

SECTION 20. De facto Corporations . — The due

incorporation of any corporation claiming in good faith to

be a corporation under this Code, and its right to exercise

corporate powers, shall not be inquired into collaterally in

any private suit to which such corporation may be a party.

Such inquiry may be made by the Solicitor General in a

quo warranto proceeding. (n)

SECTION 21. Corporation by Estoppel . — All persons

who assume to act as a corporation knowing it to be

without authority to do so shall be liable as general

partners for all debts, liabilities and damages incurred or

arising as a result thereof: Provided , however , That when

any

such

ostensible

corporation

is

sued

on

any

transaction entered by it as a corporation or on any tort

committed by it as such, it shall not be allowed to use as a

defense its lack of corporate personality.

On who assumes an obligation to an ostensible

corporation as such, cannot resist performance thereof

on the ground that there was in fact no corporation. (n)

SECTION

22.

Effects

of

Non-use

of

Corporate

Charter and Continuous Inoperation of a Corporation.

— If a corporation does not formally organize and

commence

the

transaction

of

its

business

or

the

construction of its works within two (2) years from date of

its incorporation, its corporate powers cease and the

corporation shall be deemed dissolved. However, if a

corporation

has

commenced

the

transaction

of

its

business

but

subsequently

becomes

continuously

inoperative for a period of at least five (5) years, the same

shall be a ground for the suspension or revocation of its

corporate franchise or certificate of incorporation. (19a)

This provision shall not apply if the failure to organize,

commence

the

transaction

of

its

business

or

the

construction of its works, or to continuously operate is

due to causes beyond the control of the corporation as

may be determined by the Securities and Exchange

Commission.

TITLE III Board of Directors/Trustees/Officers

SECTION 23. The Board of Directors or Trustees . —

Unless otherwise provided in this Code, the corporate

powers of all corporations formed under this Code shall

be exercised, all business conducted and all property of

such corporations controlled and held by the board of

directors or trustees to be elected from among the

holders of stocks, or where there is no stock, from among

the members of the corporation, who shall hold office for

one

(1)

year

until

their

successors

are

elected and

qualified. (28a)

Every director must own at least one (1) share of the

capital stock of the corporation of which he is a director,

which share shall stand in his name on the books of the

corporation. Any director who ceases to be the owner of

at

least

one

(1)

share

of

the

capital

stock

of

the

corporation of which he is a director shall thereby cease

to be a director. Trustees of non-stock corporations must

be members thereof. A majority of the directors or

trustees of all corporations organized under this Code

must be residents of the Philippines. (30a)

SECTION 24. Election of Directors or Trustees . — At

all elections of directors or trustees, there must be

present, either in person or by representative authorized

to act by written proxy, the owners of a majority of the

outstanding capital stock, or if there be no capital stock, a

majority of the members entitled to vote. The election

must be by ballot if requested by any voting stockholder

or member. In stock corporations, every stockholder

entitled to vote shall have the right to vote in person or by

proxy the number of shares of stock standing, at the time

fixed in the bylaws, in his own name on the stock books of

the corporation, or where the bylaws are silent, at the

time of the election; and said stockholder may vote such

number of shares for as many persons as there are

directors to be elected or he may cumulate said shares

and give one candidate as many votes as the number of

directors to be elected multiplied by the number of his

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 number of votes cast by him shall

not exceed the number of shares owned by him as shown

in the books of the corporation multiplied by the whole

number of directors to be elected: Provided , however ,

That no delinquent stock shall be voted. Unless otherwise

provided in the articles of incorporation or in the bylaws,

members of corporations which have no capital stock

may cast as many votes as there are trustees to be

elected but may not cast more than one vote for one

candidate. Candidates receiving the highest number of

votes shall be declared elected. Any meeting of the

stockholders or members called 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 there are 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 stock, a majority of

the member entitled to vote. (31a)

SECTION

25.

Corporate

Officers ,

Quorum .

—

Immediately

after

their

election,

the

directors

of

a

corporation must formally organize by the election of a

president, who shall be a director, a treasurer who may or

may not be a director, a secretary who shall be a resident

and citizen of the Philippines, and such other officers as

may be provided for in the bylaws. Any two (2) or more

positions may be held concurrently by the same person,

except that no one shall act as president and secretary or

as president and treasurer at the same time.

The directors or trustees and officers to be elected

shall perform the duties enjoined on them by law and the

bylaws

of

the

corporation.

Unless

the

articles

of

incorporation or the bylaws provide for a greater majority,

a majority of the number of directors or trustees as fixed

in the articles of incorporation shall constitute a quorum

for the transaction of corporate business, and every

decision of at least a majority of the directors or trustees

present at a meeting at which there is a quorum shall be

valid as a corporate act, except for the election of officers

which shall require the vote of a majority of all the

members of the board.

Directors or trustees cannot attend or vote by proxy at

board meetings. (33a)

SECTION

26.

Report

of

Election

of

Directors ,

Trustees and Officers . — Within thirty (30) days after the

election of the directors, trustees and officers of the

corporation, the secretary, or any other officer of the

corporation, shall submit to the Securities and Exchange

Commission, the names, nationalities and residences of

the directors, trustees and officers elected. Should a

director, trustee or officer die, resign or in any manner

cease to hold office, his heirs in case of his death, the

secretary, or any other officer of the corporation, or the

director, trustee or officer himself, shall immediately

report

such

fact

to

the

Securities

and

Exchange

Commission. (n)

SECTION 27. Disqualification of Directors , Trustees

or Officers . — No person convicted by final judgment of

an offense punishable by imprisonment for a period

exceeding

six (6) years, or a violation of this Code,

committed within five (5) years prior to the date of his

election

or

appointment,

shall qualify as a director,

trustee or officer of any corporation. (n)

SECTION 28. Removal of Directors or Trustees . —

Any director or trustee of a corporation may be removed

from office by a vote of the stockholders holding or

representing at least two-thirds (2/3) of the outstanding

capital

stock

or

if

the

corporation

be

a

non-stock

corporation, by a vote of at least two-thirds (2/3) of the

members entitled to vote: Provided , That such removal

shall take place either at a regular meeting of the

corporation or at a special meeting called for the purpose,

and in either case, after previous notice to stockholders or

members of the corporation of the intention to propose

such removal at the meeting. A special meeting of the

stockholders or members of a corporation for the purpose

© Compiled by RGL

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