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are sets of rules and regulations that govern the internal

organization and operation of the corporation Managing a

- owners of the corporation; they delegate the
management to a duly elected board of directors

Securities and Exchange

Commission (SEC)
- the entity that supervises the enforcement of the
government enacted laws that are designed to make
available to the stockholders

Board of Directors
- has all the rights of management, except those few
that the law provides which can be exercised but only
with the consent of majority of the stockholders

The election of the BOD by the stockholders is usually

held annually.
Span of stockholders' control in the corporation:
Amendment of the articles of incorporation
Acts which involve the control of the corporation
Acts that affect the propriety rights of the
stockholders Voting


All common stocks listed in the books of the

corporation are entitled to vote except when
specifically prohibited to do so in its charter

Preferred stocks often have restricted voting rights in

exchange for other privilege

Two (2) Methods of Voting:

Voting under the common law -Stockholders cast one
(1) cote regardless of the number of shares he owns
Cumulative Voting - Every stockholder can cast as many
votes as the number of shares he owns multiplied by
the number of board of directors to be elected Liability
of Stockholders Cases when a stockholder may still be
liable for corporate obligations beyond his capital

Liability of Stockholders
a)His unpaid subscription
b)The watered stocks he holds
c)Unpaid salaries of the employees of the firm.

BOD is the policy formulating body
Set of officers is the policy implementing body of the
Stockholder has the ultimate control of the corporation
Incorporators shall not be less than 5 nor more than 15
Incorporating directors shall not be less than 5 nor more than
11 in stock corporations
BOD shall not be less than 5 nor more than 15 in a non stock

Qualifications of the board of

1.He must own at least one (1) share of stock of the same corporation. If
he losses his share during his incumbency, he must vacate his position.
2.He must have good moral character such as: personality integrity and
honesty and is impartial.
3.He should have the capacity to contract.
4.He must have the necessary business acumen to manage the business
5.Two thirds of the board of directors should be Filipino citizens. Some
corporations require 60% to even 100% depending on what corporation
it is.

Basic provisions of the corporation law regarding

board of directors include the following:
1. The directors are elected annually.
2.The cumulative method of voting should be followed.
3.Notice of meetings sgould be sent to the stockholders and
published two weeks before the election in a newspaper of general
circulation. 4.The term of office of the board of director is one year.
5.The majority of all outstanding subscribed stocks are entitled to
vote. Voting may either be in person or by proxy.
6.In case the date of election is mot indicated in the by-laws, it
should take place on the first (1st) Tuesday of every year.

Quorum is specified in the by-laws. Majority of the
board of directors generally constitute a quorum.

Liabilities of the Board of Directors Directors' acts must

be within the powers of the corporate powers. They
should be formed in good faith and exercised with care
and diligence. As long as these are taken into
consideration, the directors are not liable for their
corporate acts.

The following acts can make the directors liable:

1.When they are negligent in the performance of the
2.When they acted in bad faith.
3.When they commit ultra viris act, that is, they acted
beyond what is provided for in the corporate charter.
4. When they commit fraudulent and wrongful acts
inimical to the welfare of the corporation.

Functions of the Board of Directors

1.Elects the chairman of the board from among
2.Elects the president and chief executive officer of the
3.Appoints the heads of the various committees created
by them.
4.Elects the executive secretary.
5.Appoints with the recommendation of the chairman of
the board and the president, the senior and junior