[T/F] In-progress-[Corp] Board of Directors/Trustees, Corporate Officers

Question 1

Qualification

In the by-laws of a corporation, one of the qualifications to be elected as a director is that the stockholder must hold at least 10 shares.

True or False

This qualification is in conflict with the mininimum qualifications stated in the Revised Corporation Code.

Answer 1

FALSE

The qualifications stated in the RCC are minimum qualifications, hence a corporation can include in its by-laws higher qualifications.

Question 2

Qualification

True or False

As minimum qualifications, each of the directors must hold at least one stock in his own name and majority of them must be residents of the Philippines.

Answer 2

FALSE

The requirement that majority of the directors must be residents of the Philippines is no longer included in the Revised Corporation Code.

As to stock ownership, the stockholder must be the legal owner (i.e. must be the one listed in the book of the corporation), hence a a mere pledgee is not qualified to be a director.

Question 3

Qualification

True or False

Corporations with significant public interest or financial involvement are required to have at least 20% of their board composed of independent directors.

Answer 3

TRUE

Question 4

Qualification

True or False

To be considered independent, a director should not have any business interest or relationships with the corporation beyond their director’s role.

Question 5

Election

True or False

In a meeting held for the election of BOD/BOT, the quorum is 2/3 of the outstanding capital stock (for stock corporations) or 2/3 of the members (for non-stock corporations).

Answer 5

TRUE

For stock corporations, the basis for quorum should be the outstanding capital stock, not the number of stockholders.

Question 6

Compensation

True or False

Whether or not authorized by the by-laws or by the stockholders or members, directors or trustees are entitled to receive reasonable per diems.

Answer 6

TRUE

The law expressly stated that directors/trustees are entitled to receive reasonable per diems.

Question 7

Compensation

Hogwarts Corporation’s net income before tax during the preceding year is P10,000,000. During the current year, the directors received a total of P50,000 reasonable per diems..

True or False

The total compensation of the directors (in their role as directors) for the current year should not exceed P950,000.

Answer 7

FALSE

should not exceed P1,000,000.

The total compensation of directors (in their role as directors) should not exceed 10% of the previous year’s net income before tax. Per diems are not compensation, hence, such are not included in the computation of the 10% limit.

Question 8

Compensation

True or False

If the by-laws of a corporation does not provide for a compensation of directors or trustees, they can still be granted a compensation by the vote of a majority of the outstanding capital stock of a stock corporation or majority of the members of a non-stock corporation.

Question 9

Compensation

True or False

A minority director is allowed to participate in the determination of their own per diems or compensation.

Answer 9

FALSE

Directors should not participate in the determination of their own per diems or compensation.

Question 10

Compensation

True or False

Corporations vested with public interest shall submit to their shareholders and the Commission, an annual report of the total compensation and per diems of each of their directors or trustees.

Answer 10

True

Question 11

Election

Question 12

Corporate Officers

Hogwarts Corporation’s BOD is composed of 10 members. In election for corporate officers, 7 were present in the meeting.

True or False

The required mimimum number of votes to elect an officer is 4 votes

Answer 12

FALSE

minimum should be 6 votes

In the election of corporate officers, the mimimum number of votes should be majority of ALL the members of the board (not majority of those present in the meeting).

Question 13

Corporate Officers

Hogwarts Corporation’s BOD is composed of 5 members, namely Godric, Helena, Rowena, Salazar, and Gellert.

True or False

In an election for corporate officers, the board can elect Mr. Albus, a holder of 20% of the outstanding capital stock for the position of president so long as he meet the qualifications stated in the corporation’s by-laws.

Answer 13

FALSE

The president should be a director (or a trustee in case of a non-stock corporation).

Question 13

Corporate Officers

Mr. Xenophilius, a resident and citizen of the Philippines, and one of the Lovegoods Corporation’s BOD is elected as corporate treasurer.

True or False

He is also qualified to be elected as corporate secretary.

Answer 13

TRUE

Treasurer must be a resident.
Secretary must be a resident-citizen.

Question 14

Removal

True or False

The required votes to remove a director is at least 2/3 of the issued capital stock.

Answer 14

FALSE

at least 2/3 of the outstanding capital stock (or at least 2/3 of the members for non-stock corporations)

Question 14

Removal

True or False

The removal of a director can happen at a regular meeting or special meeting called for that purpose.

Answer 14

TRUE

Question 15

Removal

Mr. Cornelius, a stockholder of Hogsmeade Corp. was elected as director through the cumulative votes of the minority stockholders.

True or False

Since the removal of a director can be with or without cause, the stockholders can vote to remove Mr. Cornelius as a director.

Answer 15

FALSE

The removal of a director can be with or without cause. However, removal without cause should not be made at the disadvantage of minority stockholders.

Question 16

Removal

Ms. Bellatrix, a stockholder of Lestrange Corporation has been found administratively liable for an offense that involves fraudulent act in October 2018. In July 2023, she is elected as a director of Lestrange Corp.

True or False

The SEC has the power to order the removal of Ms. Bellatrix on the ground that she is disqualified to be elected as director.

Answer 16

TRUE

The SEC has the power to order the removal of a director who has been elected as such despite the disqualification.

Question 17

Removal

Ms. Narcissa is elected as a director of Malfoy Corp. on July 1, 2023. On September 8, 2023, she is convicted in violation of the Securities Regulations Code.

True or False

The SEC does not have the power to order the removal of Ms. Narcissa because the disqualification arises after the election.

Answer 17

FALSE

The SEC has the power to order the removal of a director even if the disqualification arises after the election.

Question 17

Removal

True or False

The SEC can only take action to remove a disqualified director upon verified complaint.

Answer 17

FALSE

The SEC can take action to remove a disqualified director motu propio (own initiative) or upon verified complaint.