Can Falsified Board Minutes Remove a Director?

Introduction

Fabricating attendance records, signatures, or meeting details in corporate minutes to remove a dissenting director may expose corporate officers to both civil and criminal liability. The risk is especially serious when a corporate secretary or president prepares, certifies, notarizes, or uses a document falsely stating that a board or stockholders’ meeting occurred or that a director participated in it.

Under Philippine law, a director cannot be removed merely through a false corporate record. Removal must comply with the requirements of the Revised Corporation Code of the Philippines, while any falsified secretary’s certificate, minutes, or related document may constitute falsification of a public document under the Revised Penal Code.

What Law Governs the Removal of a Director?

Section 27 of the Revised Corporation Code of the Philippines provides that a director may be removed by the stockholders holding or representing at least two-thirds of the outstanding capital stock. In a nonstock corporation, removal requires the vote of at least two-thirds of the members entitled to vote.

The removal must take place during either a regular meeting or a special meeting called for that purpose. The stockholders or members must receive prior notice of the intention to propose the director’s removal.

A special meeting may be called by the corporate secretary upon the order of the president, or upon the written demand of stockholders holding or representing at least a majority of the outstanding capital stock. If the secretary refuses or fails to call the meeting, the demanding stockholder may call it directly, subject to the statutory notice requirements.

Removal may be with or without cause. However, removal without cause cannot be used to defeat the minority stockholders’ right to board representation under Section 23 of the Revised Corporation Code.

These requirements are found in Republic Act No. 11232, Revised Corporation Code of the Philippines. A fabricated minute or certificate cannot replace the required vote, notice, and valid corporate meeting.

When May Falsified Minutes Become a Crime?

A corporate minute or secretary’s certificate may become the subject of a criminal prosecution when it falsely represents that a meeting occurred, that a person attended or participated, or that a resolution was validly approved.

In Lim, et al. v. People of the Philippines, G.R. No. 226590, 2018, the Supreme Court treated a notarized secretary’s certificate as a public document. The certificate falsely stated that a deceased director had participated in a board meeting and approved a resolution.

The Court held that the corporate secretary and the other participants could be convicted of falsification of a public document under Article 172 of the Revised Penal Code. The falsification consisted principally of certifying under oath that the director attended and approved a meeting when, as a matter of fact, the director was already dead.

The ruling is significant because the underlying board resolution was not itself necessarily a public document. The notarized secretary’s certificate, however, was a public document and could independently support a charge of falsification.

What Acts May Constitute Falsification?

Depending on the evidence and the wording of the document, criminal liability may arise from acts such as:

• stating that a director attended a meeting when the director was absent;
• recording that a director voted for or approved a resolution when the director did not do so;
• forging a director’s signature on minutes, resolutions, or certificates;
• certifying that a meeting was held when no meeting took place;
• making an untruthful narration of facts in a notarized secretary’s certificate; or
• using the falsified document to obtain corporate authority, transfer property, alter corporate records, or remove a director.

Article 172 of the Revised Penal Code covers falsification by a private individual of a public or official document. Article 171 may apply when the offender is a public officer, employee, notary, or ecclesiastical minister who takes advantage of an official position.

Can a Corporate Secretary and President Both Be Prosecuted?

Yes, but criminal liability is personal and must be proved against each accused. The corporate secretary may be directly implicated when the secretary prepared, certified, signed, notarized, or caused the filing or use of the false minutes or certificate.

A president may also be prosecuted if the evidence shows participation in the falsification, conspiracy, inducement, approval, use, or implementation of the false document. The president’s corporate position alone does not establish guilt.

Participation may be shown through communications directing the preparation of false minutes, attendance at a fabricated meeting, signing or approving a false certificate, instructing the secretary to record a nonexistent vote, or using the document to remove the dissenting director or exercise unauthorized corporate powers.

Where several officers act pursuant to a common design, conspiracy may be alleged and proved. Each conspirator may be held liable for the criminal act if the prosecution establishes the agreement and the accused’s intentional cooperation in its execution.

What Evidence Is Important?

The prosecution or complainant will ordinarily need evidence showing both the falsity of the corporate record and the accused’s participation. Useful evidence may include:

• travel, employment, medical, immigration, or death records disproving the director’s alleged attendance;
• emails, text messages, or instructions concerning the preparation of the minutes;
• original corporate books, attendance sheets, notices, and voting records;
• expert testimony regarding disputed signatures;
• notarial register entries and acknowledgments;
• testimony from directors, officers, employees, or meeting participants; and
• subsequent filings, bank instructions, property documents, or corporate acts based on the false record.

Section 73 of the Revised Corporation Code requires corporations to maintain minutes containing, among other matters, the time and place of the meeting, how it was authorized, the notice given, the agenda, whether the meeting was regular or special, the persons present and absent, and the acts done or ordered.

The same provision allows a director, trustee, stockholder, or member to demand that the time of entry or departure and the yeas and nays on a motion be recorded. A director may also demand that a protest against an action or proposed action be entered in full in the minutes.

These requirements make contemporaneous corporate records important evidence. A sudden amendment of minutes, inconsistent attendance records, or a certificate prepared long after the supposed meeting may support an allegation of falsification, although the surrounding facts must still be established in court.

Does a Notarized Document Automatically Prove Its Truth?

No. Notarization gives a document public character and generally supports its authenticity as an executed instrument, but it does not make false factual statements true.

A notary or corporate officer who attests to facts that the officer knows to be false may face criminal, civil, and administrative consequences. The prosecution must still prove the statutory elements of the offense and the accused’s criminal intent or participation as required by the applicable provision of the Revised Penal Code.

In Lim, et al. v. People of the Philippines, G.R. No. 226590, 2018, the Supreme Court recognized that a secretary’s certificate may be a public document even though the corporate resolution described in it is a private corporate record. The false certification itself may therefore form the basis of the prosecution.

What Must an Information Allege?

An information for falsification must state the acts or omissions constituting the offense in ordinary and concise language. It must inform the accused of the nature and cause of the accusation.

In Keh, et al. v. People of the Philippines, G.R. Nos. 217592-93, 2020, the Supreme Court explained that an information need not reproduce every element of the offense verbatim. Matters that are defenses or justifying circumstances generally need not be alleged in the information and may instead be raised and proved during trial.

For a prosecution involving falsified board minutes, the information should ordinarily identify the document, the date or approximate date of its execution, the specific false representation, the manner of falsification, and the accused’s participation.

Is the Criminal Case a Derivative Suit?

Not automatically. A criminal complaint involving corporate records is not converted into a derivative suit simply because the alleged falsification injured the corporation or affected a director’s corporate position.

In Chua v. Court of Appeals, et al., G.R. No. 150793, 2004, the Supreme Court held that a criminal complaint involving corporate documents is not automatically a derivative action unless it is specifically alleged as such and the corporation is impleaded as a party.

The corporation may nevertheless be a proper party in proceedings involving the civil aspect of the criminal case where the alleged offense caused corporate injury. Private prosecutors may also participate in pursuing civil liability arising from the offense, subject to the rules governing criminal proceedings.

Can a Director Demand Access to the Corporate Records?

Yes. Section 73 of the Revised Corporation Code generally allows a director, trustee, stockholder, or member to inspect corporate records during reasonable hours on business days. A written demand may also be made for copies or excerpts at the requesting party’s expense.

The right is subject to statutory limitations. A person who is not a stockholder or member of record, is a competitor, or represents the interests of a competitor generally has no right to inspect or reproduce corporate records. The corporation may also raise improper use, lack of good faith, or absence of a legitimate purpose.

An officer or agent who unlawfully refuses inspection may be liable for damages and may incur criminal liability under the Revised Corporation Code. Conversely, a stockholder who abuses the inspection right may also face penalties.

Can the Defense of Prescription Be Raised on Appeal?

Yes. In Lim, et al. v. People of the Philippines, G.R. No. 226590, 2018, the Supreme Court held that prescription may be invoked even for the first time on appeal. The accused does not necessarily waive the defense by failing to move to quash the information before arraignment.

The date when prescription begins to run depends on the offense and the circumstances of the document. In the same case, the Court held that, where the falsified document was registered with the Register of Deeds, registration constituted constructive notice to the world and affected the commencement of the prescriptive period.

Because prescription is fact-sensitive, counsel should examine the date of execution, notarization, registration, discovery, filing of the complaint, and institution of the criminal action. The applicable penalty and the governing prescription period must also be verified against the current Revised Penal Code and other applicable laws.

Typical Scenario

Assume that a corporation has three directors and one director objects to a transaction. The president instructs the corporate secretary to prepare minutes stating that the dissenting director attended a special meeting and voted in favor of the transaction. The secretary then signs a notarized certificate and submits it to a bank or government office to show that the board approved the transaction.

The validity of the transaction and the director’s removal would still depend on compliance with corporate law. If the document falsely states that the director attended or approved the meeting, the president and secretary may face prosecution if the evidence establishes their intentional participation in falsification or conspiracy.

The affected director should preserve notices, emails, calendar records, attendance evidence, prior minutes, objections, and proof that the document was used. The corporation should secure the original books and electronic records and prevent further alteration of the minutes.

Recommended Steps for Directors and Corporate Officers

1. Preserve the records. Secure original minutes, attendance sheets, notices, resolutions, certificates, emails, and electronic metadata.
2. Make a written protest. Demand that the objection, absence, dissent, or lack of notice be entered in the minutes.
3. Request inspection. Use a written request under Section 73 of the Revised Corporation Code and identify the records sought and the legitimate corporate purpose.
4. Check the corporate procedure. Review the articles, bylaws, notice requirements, quorum, voting threshold, and authority for the meeting.
5. Assess criminal and civil remedies. Consult counsel regarding falsification, use of falsified documents, injunction, corporate remedies, damages, and possible administrative complaints.
6. Avoid altering records. Corrections should be made transparently through a properly approved supplemental entry, not by replacing or backdating the original minutes.

Conclusion

A false board minute or secretary’s certificate cannot lawfully substitute for the notice, vote, and procedural requirements governing the removal of a director. When corporate officers fabricate attendance, signatures, votes, or meeting facts, the resulting document may support a criminal charge for falsification of a public document, particularly when it is notarized or used before a government office, bank, court, or other third party.

Corporate secretaries and presidents should ensure that minutes accurately identify the meeting, notice, attendees, votes, objections, and acts approved. Directors who suspect falsification should promptly preserve evidence, make a written demand for inspection, record their protest, and obtain advice on the appropriate corporate, civil, and criminal remedies.

About Nicolas and De Vega Law Offices

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