What must occur before the SEC exercises its power to arbitrate a deadlock in a close corporation?
The SEC’s power to arbitrate a deadlock can be invoked only if the directors or stockholders are so divided on the management of the corporation’s business and affairs that the votes required for a corporate action cannot be obtained (SEC. 103, Revised Corporation Code of the Philippines). The consequence of this division must be that the business and affairs of the corporation can no longer be conducted to the advantage of the stockholders generally. Upon a written petition by any stockholder, the SEC acquires the power to intervene and arbitrate the dispute, notwithstanding any contrary provisions in the articles, bylaws, or stockholder agreements. The SEC’s authority allows it to issue various remedial orders to break the deadlock.
02 November 2025
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