Gokongwie v. SEC

GR NO. L- 45911 April 11, 1979

Antonio, J.:

Facts:

John Gokongwei Jr., as stockholder of San Miguel

Corporation, filed with the SEC a petition for "declaration of

nullity of amended by-laws, cancellation of certificate of filing of

amended by-laws, injunction and damages with prayer for a

preliminary injunction" against the majority of the members of the

Board of Directors and San Miguel Corporation as an unwilling

petitioner.

Gokongwei alleged that the Board amended the bylaws of

the corporation, prescribing additional qualifications for its

directors, "that no person shall qualify or be eligible for

nomination if he is engaged in any business which competes

with that of the Corporation."

The board based their authority to do so on a resolution of

the stockholders. It was contended that according to section 22

of the Corporation Law and Article VIII of the by-laws of the

corporation, the power to amend, modify, repeal or adopt new

by-laws may be delegated to the Board of Directors only by the

affirmative vote of stockholders representing not less than 2/3 of

the subscribed and paid up capital stock of the corporation,

which 2/3 should have been computed on the basis of the

capitalization at the time of the amendment. Since the

amendment was based on the 1961 authorization, Gokongwei

contended that the Board acted without authority and in

usurpation of the power of the stockholders.

Gokongwei claimed that prior to the questioned

amendment, he had all the qualifications to be a director of the

corporation, being a substantial stockholder thereof; that as a

stockholder, Gokongwei had acquired rights inherent in stock

ownership, such as the rights to vote and to be voted upon in the

election of directors; and that in amending the by-laws, Soriano,

et. al. purposely provided for Gokongwei's disqualification and

deprived him of his vested right as afore-mentioned, hence the

amended by-laws are null and void.

QUESTION : Whether or not the amended by-laws of SMC disqualifying a competitor from nomination or election to the Board of Directors of SMC is valid and reasonable.

please answer with explanation thanks!