Board of Directors/Trustees and Officers

Question 1

When is a corporation is mandated to submit to the SEC the names, nationality, shareholdings, and residences of its newly elected directors, trustees, or officers?

Answer 1

Within 30 days

Question 2

When can a director, trustee, or officer be disqualified?

Answer 2

CFB
-Convicted by final judgment within 5 years prior to election or appointment
-Found administratively liable for any offense involving fraudulent acts
-By a foreign court or equivalent foreign regulatory authority for acts, violations, and misconduct

Question 3

Requisites of disqualification due to conviction by final judgment

Answer 3

PCR
-Punishable by imprisonment for a period exceeding 6 years
-Violation of the Corporation Code
-Violation of RA 8799 (The Securities Regulation Code)

Question 4

Requisites for removal of a director, trustee, or officer

Answer 4

-Must take place in a regular or special meeting duly called for the purpose
-Must be voted by shareholders or members representing 2/3 of the capital stock
-Previous notice to shareholders or members about the said removal that will take place in the meeting
-Special meeting must be called by the secretary in the order of the president or a written demand by the shareholders representing at least a majority

Question 5

Filling of vacancy in the office of the director/trustee by the stockholders/members

Answer 5

REIO
-Removal by stockholders/members
-Expiration of term
-Increase in the number of directors/trustees due to the amendment of the articles of incorporation
-Other causes

Question 6

What are the other causes of vacancy by the stockholders/members?

Answer 6

DRAD
-Death
-Resignation
-Abandonment
-Disqualification

Question 7

What are the causes for filling a vacancy by the members of the board of members/trustees?

Answer 7

At least a majority are empowered to fill a vacancy occurring in the board

Question 8

When shall an election occur if vacancy is caused by expiration of term?

Answer 8

Later than the day of such expiration at a meeting called for that purpose

Question 8

When shall an election occur if vacancy is caused by removal?

Answer 8

Same day of the meeting for the removal

Question 9

When shall election occur in other causes of vacancy?

Answer 9

Not later than 45 days when the vacancy arose

Question 10

In case of an emergency board of director, when shall the corporation notify the SEC?

Answer 10

Within 3 days of formation of emergency board

Question 11

Requisite for emergency board of director?

Answer 11

Unanimous vote of the remaining directors or trustees

Question 12

Exceptions when directors or trustees can receive compensation

Answer 12

-Fixed in the corporation by-laws
-Voted upon by the shareholders or members representing at least a majority

Question 13

Total yearly compensation of the directors shall not exceed…

Answer 13

10% of the net income before income tax of the corporation during the preceding year

Question 14

What is doctrine of corporate opportunity?

Answer 14

A corporate director is personally liable if he/she is found guilty of bad faith and gross negligence which caused injury to the corporation

Question 15

What is bad faith?

Answer 15

It implies a breach of faith and willful failure to respond to plain and well-understood obligation

Question 16

What is gross negligence?

Answer 16

Want, absence of, or failure to exercise slight care or diligence, or the entire absence of care

Question 17

Exception in entering to a contract with one or more of its directors, spouses and relatives within fourth civil degree of consanguinity or affinity

Answer 17

-Presence of director/trustee is not necessary to constitute a quorum
-Vote of director/trustee is not necessary for the approval
-Contract is fair and reasonable
-Approved by 2/3 of the entire membership of the board with + at least a majority of the independent directors
-Contract has been authorized by the board of directors

Question 18

What are interlocking directors?

Answer 18

Directors of a corporation who are, at the same time, a director of another corporation

Question 19

Exception as to contracts between corporations with interlocking directors

Answer 19

If interest in one corporation is substantial (20%) and interest in other corporation is nominal

Question 19

A contract between corporation with interlocking directors shall not be invalidated if…

Answer 19

Contract is not fraudulent
Contract is just and reasonable

Question 20

What is an executive committee?

Answer 20

Body created by the corporation’s by-laws, composing of not less than 3 members which has all the authority of the board of directors