Legal Answers

Brief Answers to Specific Questions about Philippine Law

What is the rule concerning the retention of surplus profits by stock corporations?

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What is the rule concerning the retention of surplus profits by stock corporations? Stock corporations are generally prohibited from retaining surplus profits in excess of one hundred percent (100%) of their paid-in capital stock (SEC. 42, Revised Corporation Code of the Philippines). This rule, known as the “improperly accumulated earnings tax” principle, encourages the distribution […]

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How can a voidable contract with an interested director be ratified if quorum or voting conditions were absent?

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How can a voidable contract with an interested director be ratified if quorum or voting conditions were absent? If any of the first three validating conditions (quorum, voting, or fairness) are absent in a contract involving a director or trustee, the contract may still be ratified by the stockholders (SEC. 31, Revised Corporation Code of

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What are the general voting requirements for a corporation to enter into a management contract with another corporation?

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What are the general voting requirements for a corporation to enter into a management contract with another corporation? A corporation cannot conclude a management contract with another corporation unless the contract is approved by the board of directors and by stockholders owning at least the majority of the outstanding capital stock of both the managing

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When is a contract between two corporations having interlocking directors subject to stricter scrutiny?

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When is a contract between two corporations having interlocking directors subject to stricter scrutiny? Generally, a contract between two or more corporations with interlocking directors will not be invalidated solely on that ground, provided there is no fraud and the contract is fair and reasonable (SEC. 32, Revised Corporation Code of the Philippines). However, the

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When must a management contract be approved by a two-thirds (2/3) vote of the managed corporation’s stockholders?

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When must a management contract be approved by a two-thirds (2/3) vote of the managed corporation’s stockholders? A management contract requires approval by the stockholders of the managed corporation owning at least two-thirds (2/3) of the total outstanding capital stock entitled to vote under two specific scenarios (SEC. 43, Revised Corporation Code of the Philippines).

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What is the deadline and content requirement for reporting the election of corporate officers and directors to the SEC?

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What is the deadline and content requirement for reporting the election of corporate officers and directors to the SEC? Within thirty (30) days after the election of directors, trustees, and officers, the corporate secretary or another authorized officer must submit a report to the SEC (SEC. 25, Revised Corporation Code of the Philippines). This report

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What action must the Securities and Exchange SEC take if an election is not held as scheduled due to unjustified reasons?

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What action must the Securities and Exchange SEC take if an election is not held as scheduled due to unjustified reasons? If a scheduled election is not held, the non-holding and the reasons must be reported to the SEC within thirty (30) days, specifying a new election date that is no later than sixty (60)

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What are the three categories of final judgment convictions that disqualify a person from holding corporate office?

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What are the three categories of final judgment convictions that disqualify a person from holding corporate office? A person is disqualified from being a director, trustee, or officer of any corporation if, within five (5) years prior to election, they were convicted by final judgment for specific offenses (SEC. 26, Revised Corporation Code of the

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What is the required procedure and vote for the removal of a director or trustee by stockholders or members?

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What is the required procedure and vote for the removal of a director or trustee by stockholders or members? Any director or trustee may be removed from office by a vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock, or two-thirds (2/3) of the members entitled to vote

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How is a vacancy in the board of directors filled, excluding removal or expiration of term?

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How is a vacancy in the board of directors filled, excluding removal or expiration of term? A vacancy occurring in the board of directors or trustees due to reasons other than removal or expiration of term may be filled by a vote of at least a majority of the remaining directors or trustees, provided they

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