crea.te a explantion on this for reporting

e) Non-Holding of Election. When the term of the directors or trustees expired and the meeting for the election of new directors or trustees was not held, a new date should be fixed which shall not be later than sixty (60) days from the original eil of botsJeng scheduled date (Sec. 25, RCCP). bilev s bas basic (1) Power of SEC. If no new date has been des- The requirement of quorum ignated, or if the rescheduled election is is not needed in election likewise not held, the SEC may, upon the ap- plication of a stockholder, member, director held through summary or trustee, and after verification of the unjus- tified non-holding of the election, summar- under by SEC . ily order that an election be held. The SEC twoflot ard of look shall have the power to issue such orders as may be appropriate, including orders direct- ab ass ing the issuance of a notice stating the time and place of the election, designated presid ing officer, and the record date or dates for shottas woooomethe determination of stockholders or mem- bers entitled to vote (Sec. 25, RCCP). compulsory Mandation election ordered2) Majority Not Needed for Quorum. Not- withstanding any provision of the Articles by PEC + of Incorporation or By-Laws to the contrary, imognon word to the shares of stock or membership repre- ad jenga Joaroosig sented at such meeting and entitled to vote shall constitute a quorum for purposes of ard 10 27 conducting an election under Section 25 of Contract between the RCCP. A majority is therefore no longer third person & director required (Sec. 25, RCCP). 10.08. DOCTRINE OF CORPORATE OPPORTUNITY (Sec. 30 and Sec. 33, RCCP) (1985 and 2005 Bar). . blind a) This covers cases when a director takes a business opportunity that belongs to the corporation: (1) Corporation is financially able to undertake;PART IIl BUSINESS ORGANIZATIONS 267 B. Revised Corporation Code of the Philippines (Republic Act No, 11232) (2) * From its nature, it is in line with the corpora- _ tion's business; and (3) It is one in which the corporation has an interest or a reasonable expectancy. b) Conflict of Interest. The self-interest of the direc- tor is in conflict with the interest of the corpora- tion. Hence, the law does not permit him to seize the opportunity even if he will use his own funds in the venture (Sec. 33, RCCP). \"General Rule: If a director by virtue of such office, seizes a business opportunity which should c) profits to the prejudice of the corporation, he must account and refund to the corporation'all " the profits. Exception: The contract or act may be ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock (Ibid.). d) Other Conflict of Interest Situations. The provi- sions on conflict of interest under Section 33 expressly_apply only to directors. However, the conflict of interest provision under Section 30 applies not only to Directors but also to Officers and Trustees. Thus, there is violation of the duty . of loyalty through conflict of interest under'the Corporation Code (RCCP) in the following cases: (1) Seizing corporate opportunity by a director (Sec. 33, RCCP); - (2) Directors, trustees or officers acquire any ecuniary_interest in conflict with their duty as such directors or trustee; they shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons (1st par., Sec. 30, RCCP); and (3) Adirector, trustee or officer who violates his or her duty shall be liable as a trustee for the belong to the corporation thereby obtaining . . .- 268 REVIEWER ON COMMERCIAL LAW -saogaon art New and n corporation and must account for the profits which otherwise would have accrued to the nis esh nollmogToo corporation if the following requirements are present: (i) A director, trustee or officer .omib or 10 attempts to acquire or acquires any inter- -810qos ard. do eswest adverse to the corporation in respect of esise of millionany matter; (ii) The matter must have been ebpif nwo tiger. reposed in him in confidence; (iii) Equity imposes a disability upon him to deal in his own behalf (2nd par., Sec. 30, RCCP). bluof 10.09. SELF-DEALING DIRECTORS (Sec. 31, RCCP) Contract between This covers contracts between the corporation Corp. & Director and (1) a director or trustee or (2) officer or (3) their gem Jas 10 spouses or (4) relatives within the fourth civil degree grinwo arghof consanguinity or affinity. or e Sa) General Rule: The contract is voidable at the option of the corporation. por b). When Valid: The contract with self-dealing director, trustee, officer or their covered relatives set weis valid if the following conditions are present (Sec. 31, RCCP; 1996 and 2002 Bar): Presence to noits (1) The presence of the director or trustee in the Jamsini to board meeting in which the contract was and hir rolled/ disapproved was not necessary to constitute a vote during quorum for such meeting; meeting . not- (2) The vote of such director or trustee was not necessary necessary for the approval of the contract; (3) The contract is fair and reasonable under the circumstances; wo.bomme no (4) In case of corporations vested with public interest, material contracts are approved by at least two-thirds (2/3) of the entire membership of the board, with at least a alil estalory offor tommajority of the independent directors voting brit folg levit an to approve the material contract; and takePART III - BUSINESS ORGANIZATIONS 269 B. Revised Corporation Code of the Philippines (Republic Act No. 11232) ard: 10 nobgo s (5) In case of an officer, the contract has been of inga sill tort Law previously authorized by the board of direc- tors. mish no or c) Exception: Where any of the first two (2) condi- tions set forth above is absent (presence and vote during the meeting is not necessary), in the case 1on 8sob of a contract with a director or trustee, such con- and Mohsinfail totract may be ratified by the vote of the stockhold- Wentmon iflod al ers representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds babivong ababin (2/3) of the members in a meeting called for the ebayingo oldsbio purpose. It is however required that: (1) there is full disclosure of the adverse inter- sill al Isntmon est of the director or trustee involved at such Tobomb gobbolystol ormeeting and -due slidw latumon -bustedvo london (2) the contract is fair and reasonable under the circumstances. -hiov ad lisle toerin Note: Although that last paragraph of Sec- sell madw notation 31 of the RCCP covers situations where any deet) of the first three (3) conditions is absent (instead (gogg of the first two), the third condition cannot be dis- pensed with as reflected in the last phrase of the wollol gnit tiblast paragraph of Section 31. 10.10. INTERLOCKING DIRECTORSHIP (Sec. 32, RCCP). esw lostinco bolt There is an interlocking director in a corporation aluillenoo of when one (or some or all) of the directors in one corporation is (or are) a director(s) in another corpo- asw osteril ration. -noo or to a) Interest Both Substantial. If the interests of the interlocking director in the corporations are both 15bau sidancess substantial (stockholdings exceed 20% of Out- standing Capital Stock) (2011 Bar): General Rule: Valid. A contract between writ to stov orh two or more corporations having interlocking directors shall NOT be invalidated on that ground alone.270 REVIEWER ON COMMERCIAL LAW Exception: Voidable at the option of the Corporation if the contract is fraudulent or not fair and reasonable. It is believed that the right to annul pertains to the corporation that was preju- diced - the victim of fraud or who can claim unfairness or unreasonableness. Note: While Section 32 of the RCCP does not cover cases where the interest of the interlocking director in the two corporations is both nominal, the contract would be valid as a general rule, but it may be annulled under the grounds provided in the New Civil Code for voidable contracts, which include fraud. b ) Interest Substantial in One, Nominal in the Other. If the interest of the interlocking director in one of the corporations is nominal while sub- stantial (stockholdings 20% or more of outstand- ing capital) in the other: General Rule: The contract shall be Void- able at the option of the corporation where the interlocking director has nominal interest (1995 and 2001 Bar; Secs. 31 and Sec. 32, RCCP). Exception: It will only be valid if the follow- ing conditions are present: Presence was 1) the presence of such director / trustee in the not necessary in the meeting board meeting in which the contract was approved was NOT necessary to constitute a quorum for such meeting; vote was not 2) that the vote of such director / trustee was not necessary for the approval of the con- tract; and 3) that the contract is fair and reasonable under the circumstances. c) Ratification: Where any of the first two is absent, the contract can be ratified by the vote of the stockholders representing at least 2/3 of the10.11. PART IIl BUSINESS ORGANIZATIONS 271 B. Revised Corporation Code of the Philippines (Republic Act No, 11232) Outstanding Capital Stock or by the vote of at least 2/3 of the members in a meeting called for the purpose so long as the following are present: 1) fuil disclosure of the adverse interest of the directors / trustees involved is made on such meeting; 2) the contract is fair and reasonable under the circumstances. LIABILITY OF DIRECTORS, TRUSTEES AND OFFICERS (Sec. 30, RCCP) o imevyE) Are corporate agents such as directors, trustees, or officers of a corporation solidarily liable with the corporation they represent? a) General Rule: As'a rule, NO, they are not soli- darily liable with the corporation. Obligations incurred by them, acting as such corporate agents, are not theirs, but the direct accountabilities of the corporation they represent. The fact that they approved the contract or signed the document evidencing the contract will not make them liable (2012 Bar). b) /Personal and Solidary Liability. Solidary/per- sonal liabilities may be incurred in the following cases (1996, 1997, 2011, and 2012 Bar): (1) when directors and trustees or, in appropri- ate cases, the officers of the corporation: (i) vote or assent to patently unlawful acts T (i) -act in bad faith or with gross negli- B oo of the cor Roration; (ii) - are guilty of conflicts of interest to the prejudice of corporation, its stockhold- ers or members, and other persons; (2) when a director has i or Whof havmg 272 REVIEWER ON COMMERCIAL LAW knowledge thereof, did not forthwith file Tol balfes Smutsort with the corporate secretary his written hoegig sis gowobjection thereto;d Grit to tasisin (3) when the director, trustee or officer has love no shentel bavie contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation; and ( (4) when a director, trustee or officer is made, MA e.g. thore NI. by specific provisions of law,_personally pesponsible, for liable for his corporate actions (MAM Realty crime committed Development Corp. v. NLRC, G.R. No. 114787, ess by corp. aslib June 2, 1995). 10.12. OFFICERS (Sec. 24, RCCP) sodropinal in the iloe lon or a) Who are the corporate officers of a corporation. anoilsgildO. now:The Corporate Officers under the RCCP are the (1) alnags stingerico .President (who shall be a director) (2010 Bar), (2) 10 29dividetroop Treasurer (who may or may not be a director but youll Ja( Jost and must be a resident), (3) Corporate Secretary (who forougob ard. be must be a citizen and resident of the Philippines), oldail morli salary (4) Compliance Officer for corporations vested with public interest, and (5) such other officers as may be provided in the By-Laws. aniwollol erb ni b (1) There is no nationality requirement for a Treasurer but the Treasurer must be a resi- dent of the Philippines. (Sec. 24, RCCP). The . Thoserotuma Corporate Secretary must be a resident and citizen of the Philippines (2010 Bar). 4(D). The same person may hold two or more positions concurrently. However, the Treasurer cannot be the President at the same time (2012 Bar). The Corporate Secretary cannot likewise be the President (Sec. 24, grli of desislar 10.. RCCP). In addition, the single stockholder chlor bois all doingin a One Person Corporation may not be appointed as the Corporate Secretary but and of bomgordon he/ she can be the Treasurer subject to the quived offw 10 2 but giving of a bond to the SEC (Sec. 122, RCCP). PART III - BUSINESS ORGANIZATIONS 273 B. Revised Corporation Code of the Philippines (Republic Act No. 11232) (i) The officers are elected by the Indrivit bonotingmr . Board; removal is also by the Board and no A$52 Ste offmall s stockholders' concurrence is required (2001 Bramme Bar) (See also Paragraph d below)