How Can Holdover Directors Be Removed From Office?

Introduction

Holdover directors do not automatically lose authority merely because the corporation’s election period has ended. Under Philippine corporate law, incumbent directors may continue temporarily until their successors are elected and qualified. However, the holdover principle cannot be used to defeat a valid election, obstruct the assumption of office by duly elected directors, or perpetuate incumbents indefinitely.

The proper response depends on the facts. If a valid election has already produced qualified successors, the corporation must complete the required corporate records, turnover, and regulatory filings. If the holdover directors refuse to recognize the election or prevent the new board from assuming office, the aggrieved directors or stockholders may seek appropriate relief before the proper tribunal.

What Is a Holdover Director?

Section 22 of the Revised Corporation Code provides that directors hold office for one year and until their successors are elected and qualified. This prevents a corporation from being left without a functioning board when an election is delayed for a valid reason.

The holdover rule is temporary. It does not give incumbent directors a permanent right to remain in office, nor does it authorize them to disregard a valid election in which a new board has been chosen.

The Securities and Exchange Commission has explained that a holdover board may continue exercising corporate powers while awaiting the election and qualification of successors, but the corporation must still conduct the required election. Holdover status is not indefinite and cannot be used to perpetuate incumbents in office. See [SEC-OGC Opinion No. 19-12 (2019)](#I3.2) and [SEC-OGC Opinion No. 07-08 (2007)](#I4.1).

When Does a Holdover Director Lose the Right to Remain?

A holdover director should step down when a successor has been duly elected and qualified. Both elements matter. An election alone may not be sufficient if the successor has not yet complied with applicable qualification requirements, but once the successor is validly elected and qualified, the predecessor’s holdover authority ends.

The election must also have been conducted in accordance with the Revised Corporation Code, the articles of incorporation, and the corporation’s bylaws. Defects in notice, quorum, voting, authority to call the meeting, or the counting of votes may affect whether the alleged successor was legally elected.

In Bernas et al. v. Cinco et al., G.R. Nos. 163356-57, 2015, the Supreme Court held that directors could not invoke the holdover principle to remain in office after new directors had been duly elected. The Court also emphasized that a properly conducted stockholders’ meeting, including one supervised by the Securities and Exchange Commission, supported the presumption that the elected officers were de jure officers. See [Bernas et al. v. Cinco et al. (2015)](#J2.22).

First Step: Verify the Validity of the New Election

Before attempting to remove or replace holdover directors, the corporation should establish that the new election was legally valid. The following matters should be examined:

• Whether the meeting was a regular meeting or a properly called special meeting;
• Whether the notice was sent to the stockholders or members entitled to vote;
• Whether the notice stated the date, time, place, and purpose of the meeting;
• Whether the required quorum was present;
• Whether the votes were properly counted and recorded;
• Whether the elected directors possess the qualifications required by law, the articles, and the bylaws; and
• Whether the election results were entered in the minutes and supported by the corporation’s records.

For an election compelled because a scheduled election was not held, Section 25 of the Revised Corporation Code permits the Securities and Exchange Commission, upon application by a stockholder, member, director, or trustee, to order that an election be conducted after verifying the unjustified failure to hold it.

Can Incumbent Directors Be Physically Removed?

Corporate law does not authorize private parties to use force, seize corporate premises, change locks, confiscate records, or physically eject incumbent directors without lawful authority. Such conduct may create separate civil, criminal, labor, or administrative exposure, depending on the circumstances.

The proper objective is not physical confrontation but the legal recognition and enforcement of the right of the duly elected board to assume office. If the holdover directors refuse to surrender corporate records, block access to corporate property, or continue acting as directors despite the election of qualified successors, the affected parties should seek an order from the proper court or agency rather than resort to self-help.

Intra-corporate controversies involving the election, removal, or assumption of corporate directors generally fall within the jurisdiction of the appropriate Regional Trial Court acting as a special commercial court, subject to the applicable procedural rules and the specific nature of the relief sought. The complaint should identify the corporate act being challenged and the precise order required from the court.

Removal Under the Revised Corporation Code

Section 27 of the Revised Corporation Code governs the removal of directors and trustees. A director may be removed, with or without cause, by the vote of 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.

Removal must take place at a regular meeting or at a special meeting called for that purpose. Previous notice must be given to the stockholders or members, including notice that removal will be proposed at the meeting.

A special meeting for removal must generally be called by the 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 or issue the notice, the stockholder or member who signed the demand may directly call the meeting in accordance with the Code.

Removal without cause cannot be used to deprive minority stockholders or members of the right of representation to which they may be entitled under Section 23 of the Revised Corporation Code. See [Revised Corporation Code of the Philippines, R.A. No. 11232 (2019)](#L1.32).

Election Is Different From Removal

A holdover director may cease to hold office because a successor has been validly elected and qualified. This is conceptually different from removing a director before the end of the director’s term under Section 27.

Situation	Usual legal consequence
A successor is validly elected and qualified	The predecessor’s holdover authority ends.
A director is removed before the end of the term	The two-thirds stockholder or member vote and statutory notice requirements apply.
The election was not held without valid justification	A qualified applicant may ask the SEC to order that an election be conducted.
The election was defective or unauthorized	The election may be challenged in the proper proceeding.

Using the removal procedure is not always necessary when the issue is simply that the incumbent’s holdover period has ended because a successor has already been elected and qualified. Conversely, an election cannot be used as a substitute for statutory removal when the election itself was invalid or when the incumbent’s term has not otherwise ended.

What If the Secretary Refuses to Call a Meeting?

Section 27 supplies a remedy when the secretary refuses or fails to call a special meeting for the removal of directors. The stockholders who made the written demand may call the meeting directly, provided that the statutory requirements on authority, notice, voting, and meeting procedure are observed.

The corporation should preserve proof of the demand, including the date of delivery, the names of the requesting stockholders, their voting percentages, and the secretary’s refusal or failure to act. The notice of meeting should clearly state that the purpose is to propose the removal of identified directors.

Failure to comply with the notice and meeting requirements may expose the resulting removal to challenge. A majority vote by itself is not enough if the law requires a two-thirds vote or if the meeting was called by an unauthorized person.

Can the SEC Remove a Disqualified Director?

The SEC has a distinct administrative power to order the removal of a director or trustee who was elected despite a disqualification, or whose disqualification arose or was discovered after the election. This administrative removal is separate from stockholder removal under Section 27.

The SEC’s procedure covers independent administrative actions for removal, removal as a sanction in SEC proceedings, and sanctions against directors or trustees who knowingly failed to remove a disqualified director or trustee. See [SEC Memorandum Circular No. 04, Series of 2022 (2022)](#I5.3).

This remedy is appropriate where the problem is a statutory or regulatory disqualification. It is not a general substitute for a corporate election contest or a stockholder vote to remove a director for loss of confidence, disagreement, or other corporate reasons.

Possible Court Remedies

Depending on the facts, the proper complaint or petition may seek one or more of the following remedies:

• A declaration that the new directors were validly elected and qualified;
• An order recognizing the new board’s authority to act for the corporation;
• An injunction preventing holdover directors from representing themselves as the corporation’s lawful board;
• An order requiring the turnover of corporate books, records, funds, passwords, and property;
• An order directing the filing or correction of corporate reports; and
• Damages or other relief for acts performed without authority, where legally warranted.

Urgent injunctive relief requires specific factual allegations showing a clear legal right, a substantial invasion of that right, and the need to prevent continuing or irreparable injury. The applicant should support the request with the notice of election, minutes, ballot or voting records, certifications of qualification, stock and transfer records, and evidence of the holdover directors’ refusal to recognize the new board.

Corporate Filings After the Election

Section 25 of the Revised Corporation Code requires the secretary or another authorized corporate officer to report to the SEC, within thirty days after the election, the names, nationalities, shareholdings, and residence addresses of the elected directors, trustees, and officers.

If a director, trustee, or officer dies, resigns, or otherwise ceases to hold office, the corporation must report that fact in writing to the SEC within seven days from knowledge of the event. These filings do not independently determine who won a disputed election, but they are important evidence of the corporation’s official position and support regulatory compliance.

Common Mistakes to Avoid

• Changing locks or taking corporate property without a court order or other lawful authority;
• Assuming that a majority vote is sufficient when Section 27 requires a two-thirds vote;
• Calling a special meeting without authority under the Code or the bylaws;
• Failing to give notice that removal will be proposed;
• Treating an unqualified winner as a legally installed successor; and
• Using the holdover rule to justify remaining in office after a successor has been elected and qualified.

The Supreme Court has held that a special stockholders’ meeting called by persons without authority under the Corporation Code or the bylaws may be void from the beginning and cannot necessarily be cured by later ratification. The Court also rejected the use of the holdover principle to perpetuate directors after valid elections. See [Bernas et al. v. Cinco et al. (2015)](#J2.10) and [Bernas et al. v. Cinco et al. (2015)](#J2.22).

Recommended Evidence and Procedure

A party seeking to replace holdover directors should first collect the corporation’s articles of incorporation, bylaws, stock and transfer book, notices of meeting, proof of service, minutes, voting returns, election certificates, board resolutions, and SEC filings.

The party should then send a formal written demand for turnover and recognition of the newly elected board. The demand should identify the election date, the elected directors, their qualifications, the corporate records to be surrendered, and the deadline for compliance.

If the demand is ignored, the affected parties should file the appropriate proceeding and request provisional relief when necessary. The pleading should avoid treating a corporate dispute as a private physical confrontation and should clearly distinguish between an election dispute, statutory removal, SEC administrative removal, and enforcement of a duly completed election.

Conclusion

Holdover directors may continue temporarily only until their successors are duly elected and qualified. They cannot rely on holdover status to defeat a valid election or indefinitely retain control of the corporation.

If the new election was valid, the proper course is to document the election, demand turnover, complete the required SEC reports, and seek judicial relief if the incumbents refuse to recognize the new board. If the objective is removal before the end of the term, the corporation must comply with the two-thirds voting and notice requirements under Section 27 of the Revised Corporation Code. Where the issue is disqualification, an administrative proceeding before the SEC may be available.

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