The Korean National can still be a member of the Board of Directors as long as sixty percent (60%) of the Board of Directors are Filipinos. Corporations that are sixty percent (60%) owned by Filipinos can engaged in the business of exploration, development and utilization of natural resources (Art. XII, Sec. 2, 1987 Constitution). The election of aliens as members of the Board of Directors engaging in partially-nationalized activities is allowed in proportion to their allowable participation or share in the capital of such entities (Sec. 2-A, Anti Dummy Law) Nothing in the facts shows that more than forty percent (40%) of the Board of Directors are foreigners.
a. NO, in approving the transaction, the directors were not acting in their personal capacities but rather on behalf of XYZ Corporation exercising the powers of the corporation and conducting its business. The problem contains no facts that would indicate that the directors acted otherwise.
b. YES. The Board approved the supply contract and the General Manager entered into the contract, both of them acting on behalf of the XYZ Corporation.
c. YES, F could be sued in his personal capacity because he knowingly consented to the non-delivery of the promised supplies contrary to the contract that was duly approved by the Board of Directors. The problem does not indicate any circumstance that would excuse or favorably explain the action of F.
d. A corporation would be liable for the acts of its Board of Directors and officers if the said acts were performed by them in accordance with the powers granted to them under the Corporation Code, the articles of incorporation and by-laws of the corporation, the laws and regulations governing the business of, or otherwise applicable to, the corporation, and, in the case of officers, the resolution approved by the Board of Directors.
As the directors have a personality separate from that of the corporation, they would be personally liable only if they acted willfully and knowingly vote for or assent to a patently unlawful act of the corporation, or when they are guilty of gross negligence or bad faith in directing the affairs of the corporation, or when they acquire any personal or pecuniary interest in conflict with their duty as directors, which acts result in damages to the corporation, its stockholders or other persons, when they agree to hold themselves personally and solidarily liable with the corporation, or when they are made, by a specific provision of law, to personally answer for the corporate action.
The holding of Bernard Fleet equivalent to the outstanding common shares is illegal. His holdings of preferred shares could not exceed 40%. Since the constitutional requirement of 60% Filipino ownership of the capital of public utilities applies not only to voting control but also to beneficial ownership of the corporation, it should also apply to the preferred shares. Preferred shares are also entitled to vote in certain corporate matters (Gamboa v. Teves, 682 SCRA 397, 2012). The state shall develop a self-reliant and independent national economy effectively controlled by Filipinos (Article II, Sec. 19, 1987 Constitution). The effective control here should be mirrored across the board on all kinds of shares.
a. “Gatas Atbp., Inc.” is a close corporation, and its Articles of Incorporation can, as it did, provide that the business of the corporation be managed by the stockholders rather than by a board of directors. The presence of this provision in the Articles of Incorporation, precludes Sakit-ulo from demanding that the stockholders meet in order to elect directors of the company.
b. Ms. Sakit-tiyan has a cause of action against the stockholders who, under the law, are deemed to be directors and subject to liabilities as such. Said stockholders are made personally liable for corporate torts unless the corporation has obtained reasonably adequate liability insurance. Negligence need not be proven to warrant liability by manufacturers of foodstuffs for death or injury caused by any obnoxious or harmful substance used.
a. The corporation must have at least 4 directors. It must also have a president, treasurer, and a secretary.
b. Every director must own at least 1 share of the capital stock of the corporation, which must be recorded in his name on the books of the corporation, and a majority of the directors must be residents of the Philippines. The president must also be a director. The secretary must be a resident and citizen of the Philippines.
It is where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation In such a case, a director shall refund to the corporation all the profits he realizes on a business opportunity which: 1. The corporation is financially able to undertake; 2. From its nature, is in line with corporations business and is of practical advantage to it; and 3. The corporation has an interest or a reasonable expectancy, unless the act has been ratified by a vote of the stockholders owning or representing at least two-thirds of the outstanding capital stock. This shall apply notwithstanding the fact that the director risked his own funds in the venture (Sec 34, CCP).
NO. This is a case of close corporation where the provision on interlocking directors in open corporations also apply. As a general rule, the presence of interlocking directors does not make the contract void or unenforceable. It is further validated when there is no fraud; the contract is fair and reasonable under the circumstances; the interest of the interlocking director in one corporation is substantial and his interest on the other corporation or corporations is merely nominal and compliance with the requirement under Sec 32 in so far as the nominal corporation is concerned. In this case, Pedro owns a substantial interest in both business enterprise, parties to the contract in violation of the legal requirement that in order for a contract with interlocking directors be valid, there must only be substantial interests in one of the corporations he represents and not in both. Pedro has substantial interest in both businesses. He owns a substantial portion of the company which Paolo and Juan are also stockholders while at the same time the owner of the security, janitorial and catering business. Directors/officers are discouraged by law to personally contract with the corporation in which they are directors, trustees and officers because they have fiduciary relationship with the corporation and there can be no real bargaining where the same is acting on both sides of the trade.
“A” should account to the corporation for the profits which he realized from the transaction. He grabbed the business opportunity from the corporation.
a. Under Section 32 of BP 68, the law provides that: a) the presence of such director or trustee in this case Chito in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting; b) that the vote of such director or trustee was not necessary for the approval of the contract; c) that the contract is fair and reasonable under the circumstances; and d) that in case of an officer, the contract has been previously authorized by the board of directors. In the case at bar, Chito must make sure that the following conditions be met for in order that the contract will not be voidable.
b. Under Section 32 of BP 68, the law provides that where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least 2/3 of the outstanding capital stock or of at least 2/3 of the members in a meeting called for the purpose: Provided, that full disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, that the contract is fair and reasonable under the circumstances.
NOTE: See Section 33 as well on interlocking directors.
The dealership agreement is valid PROVIDED the following conditions under Section 32 of BP 68 are complied with. The law provides that a contract of the corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present: 1) that the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting; 2) that the vote of such director or trustee was not necessary for the approval of the contract; 3) that the contract is fair and reasonable under the circumstances; and 4) that in case of an officer, the contract has been previously authorized by the board of directors.
