From what source must the board of directors declare dividends, and in what forms may they be paid? The board of directors of a stock corporation is authorized to declare dividends only out of the unrestricted retained earnings of the corporation (SEC. 42, Revised Corporation Code of the Philippines). Dividends may be made payable in
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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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
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).
What are the rules concerning the adoption and filing requirements for corporate bylaws? For the adoption of bylaws, the affirmative vote of the stockholders representing at least a majority of the outstanding capital stock is necessary (SEC. 45, Revised Corporation Code of the Philippines). The bylaws must be signed by the voting 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
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
What are the functions and how is an emergency board to fill a vacancy constituted? An emergency board may be temporarily formed when a vacancy prevents the remaining directors from constituting a quorum, and critically, emergency action is required to prevent grave, substantial, and irreparable loss or damage to the corporation (SEC. 28, Revised Corporation
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What is the limit on the total yearly compensation for directors or trustees? In the absence of a provision in the bylaws fixing their compensation, directors or trustees shall not receive any compensation in their capacity as such, except for reasonable per diems (SEC. 29, Revised Corporation Code of the Philippines). However, stockholders representing a
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Under what conditions are directors, trustees, or officers liable jointly and severally for damages? Directors or trustees are held jointly and severally liable for all resulting damages if they willfully and knowingly vote for or assent to patently unlawful acts of the corporation (SEC. 30, Revised Corporation Code of the Philippines). Liability also arises if
