HISTORY OF PHILIPPINE CORPORATE LAW
1. Sociedades Anonimas
-considered a commercial partnership, not a general partnership nor a limited
co-partnership
-becomes a juridical person upon the execution of a public instrument in which its articles of agreement appear, and the contribution of funds and personal property (Mead v. McCullough,1911)
2. Cuentas en Participacion -accidental partnership
-its existence was only known to those who had an interest in the same because there is no mutual agreement between the partners, and without a corporate name
3. Corporation Law (Act No. 1459) -April 1, 1906
4. Corporation Code (BP No. 68) -May 1, 1980
DEFINITION OF CORPORATION
Sec. 2. Corporation defined. - A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.
Attributes of a corporation 1. Artificial Being
-has a personality with capacity to enter into contractual relations, separate and distinct from those persons comprising it as well as from any other legal entity to which it may be related
2. Creature of law
-dependent on the consent or grant of the State
-corporation cannot come into existence by mere consent of the parties, there must be a law granting it
-fact that a corporation is created by operation of law ensures its strong juridical personality 3. Right of Succession
-it can exist continuously despite the death or replacement of its stockholders or members 4. Creature of Enumerated powers, attributes,
and properties
-it has powers limited to those granted to it by the law
Theories on the Formation of a Corporation A. Theory of Concession
-Ability to organize a corporation is not a matter of absolute right but a privilege which may be enjoyed only under such terms as the State may deem necessary to impose
-a corporation is dependent of state recognition
-the grant to create a corporation is only by virtue of a primary franchise
-a corporation is a creature without any existence until it has received the imprimatur of the state acting according to law.
-a corporation is a creature of the state with limited powers and capabilities
-a corporation is bound by forms of words in a charter, minute books, and books of account. -contrary to genossenschaft theory
(corporation is a group as a social and legal entity, independent of state recognition and concession)
-underlying basis for the ultra vires doctrine B. Theory of Enterprise Entity
-State‟s approval of the corporate form sets up a prima facie case that the assets, liabilities and operations of the corporation are those of the enterprise
-where corporate entity is defective, its existence may be determined by the actual existence and operations of the underlying enterprise.
-a corporation is bound by economics rather than as an artificial juridical personality bound by forms of words in a charter and books of account.
-this theory hinges itself on the fact that there can be no corporate existence without persons to compose it; there can be no association without associates.
-whenever necessary, for the interest of the public or protection or enforcement of rights of members, courts will disregard the legal fiction and operate upon both the corporate
enterprise and the persons composing it. Legal Provisions on the formation of corporations
Section 16. Article XII 1987 Constitution The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations.
Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. Sec. 4. Corporation Code Corporations created by special laws or charters. - Corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of this Code, insofar as they are applicable.
Boy Scouts v. COA (2011)
Whether or not the Boy Scout of the Philippines is considered as a Public Corporation, hence under the audit jurisdiction of the COA.
BSP is a public corporation and its funds are subject to the COA’s audit jurisdiction. The public, rather than private, character of the BSP is recognized by the fact that, along with the Girl Scouts of the Philippines, it is classified as an attached agency of the DECS under Executive Order No. 292, or the Administrative Code of 1987. An "agency of the Government" is defined as referring to any of the various units of the Government including a department, bureau, office, instrumentality, government-owned or -controlled corporation, or local government or distinct unit therein. "Government instrumentality" is in turn defined in the 1987 Administrative Code in the following manner:
Instrumentality - refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.
The same Code describes a "chartered institution" in the following terms:
Chartered institution - refers to any agency organized or operating under a special charter, and vested by law with functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges, and the monetary authority of the State.
Section 16, Article XII deals with “the formation, organization, or regulation of private corporations,”[52] which should be done through a general law enacted by Congress, provides for an exception, that is: if the corporation is government owned or controlled; its creation is in the interest of the common good; and it meets the test of economic viability.
The BSP is a public corporation or a government agency or instrumentality with juridical personality, which does not fall within the constitutional prohibition in Article XII, Section 16,
notwithstanding the amendments to its charter. Not all corporations, which are not government owned or controlled, are ipso facto to be considered private corporations as there exists another distinct class of corporations or chartered institutions which are otherwise known as “public corporations.” These corporations are treated by law as agencies or instrumentalities of the government which are not subject to the tests of ownership or control and economic viability but to different criteria relating to their public purposes/interests or constitutional policies and objectives and their administrative relationship to the government or any of its Departments or Offices.
Liban v. Gordon (2009)
The Philippine Red Cross is a private corporation to ensure and maintain its autonomy, neutrality, and independence. Moreover, it does not have government assets and does not receive any appropriation from Congress.
Resolution (2011)
To recognize the country’s adherence to the Geneva Convention, and to respect the sui generis status of the PRC, the Supreme Court held that the PRC can be validly created through a special charter.
ILLUSTRATION
X Corpo intends to invest in a public utility business in the Philippines. It has 30% Filipino and 30% Samoan stockholders. Y Realty, a Philippine corporation that is 60% Filipino-40%Foreign owned, is also a stockholder owning 40% of X. Is X Corpo Filipino owned?
UNDER CONTROL TEST, Yes. Y Realty is automatically considered a Philippine Corpo as it is 60% Filipino owned. Thus, Filipino ownership in X Corpo is 30 (Filipinos)+ 40 (Y Realty) = 70%
UNDER GRANDFATHER RULE, No. Y Realty is only 24% Filipino owned, thus, 60(Filipino in Y) x 40(its percentage in X) = 24%. Therefore, X is only 30(Filipinos) + 24( Y Realty) = 54% Filipino owned.
Franchises of Corporations
-PRIMARY/CORPORATE/GENERAL: Franchise to exist as a corporation, vested in the individuals who compose the corporation, and cannot be conveyed in the absence of a legislative authority to do so.
-SECONDARY/SPECIAL:
Rights and privileges conferred upon existing corporations, vested in the corporation, and may be conveyed or mortgaged under a general power granted to a corporation, except such special franchises
charged with public use.
CLASSES OF CORPORATION
Sec. 3. Classes of corporations. - Corporations formed or organized under this Code may be stock or non-stock corporations. Corporations which have capital stock divided into shares and are authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held are stock corporations. All other corporations are non-stock corporations.
NATIONALITY OF CORPORATION
1. Place of Incorporation Test
A corporation is a national of the country under whose laws it has been organized and registered.
2. Control Test
Nationality is determined by the nationality of the majority of the stockholders on whom equity control is vested. (Once a corporation appears to be 60% Filipino owned, it is already considered as a Philippine
corporation.)
3. Grandfather Rule
Mere legal title is insufficient to meet the 60 percent Filipino-owned “capital” required in the Constitution.
Full beneficial ownership of 60 percent of the
outstanding capi tal stock, coupled with 60 percent
of the voting rights, is required. The legal and
beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with the constitutional
mandate. Otherwise, the corporation is “considered as non Philippine national[s].” (Gamboa v. Teves, 2011)
Concept Builders v NLRC (1996)
Three-tiered Test in determining the applicability of the Doctrine of Piercing the Veil:
1. Complete domination not only of finances but also of policies and business practice
2. Such control should have been used to commit fraud or wrong
3. Such control and breach of duty must be the proximate cause of the injury or unjust loss complained of.
General Credit v. Alsons
Three basic areas where the piercing doctrine applies: 1. When the corporate entity is used to defeat public
convenience or as a vehicle to evade an obligation 2. Fraud cases or used to justify a wrong, protect fraud, or
defend a crime
3. Alter ego or corporation is merely a business conduit or so organized and controlled as its affairs are so conducted as to make it merely an instrumentality of another corporation
CORPORATE JURIDICAL PERSONALITY
A. Liability for Torts
- A corporation is civilly liable only when the tortuous act arises from an express direction or pursuant to the exercise of powers given by the BOD or one that arises as a necessary incident of the business transaction of the corporation - The corporate officer who caused the tort
act to be committed in the name of the corporation is also personally liable to the victims of the act as a joint-tortfeasor. B. Liability for Crimes
- Tan Boon Kong Case: officers responsible shall be personally liable for the crimes committed by the corporation
- Trust Receipts Law expressly makes the corporate officers acting on behalf of the corporate entrustee personally liable for the crime of estafa.
- Anti-Money Laundering Act of 2001 provides the penalty of suspension or revocation of license or franchise for offending corporations.
C. Recovery of Moral Damages - General Rule: No
- Exception: Unless, there is 1) proof of the existence of the factual basis of the damage or actual injury, and 2) its causal relation to the defendant‟s acts.
- Article 2219(7) of the Civil Code expressly authorizes the recovery of moral damages in cases of libel, slander or other forms of defamation
D. Applying the Doctrine of Piercing the Veil of Corporate Fiction
-There must be proof that the corporation is used as a cloak or cover for fraud or illegality or to work injustice.
-not a contravention of the principle that the corporate personality of a corporation cannot be collaterally attacked.
-it is a judicial remedy not available to a sheriff (Cruz v. Dalisay, 1987)
INCORPORATION AND ORGANIZATION
A. Promoter – a person who takes initiative in founding and organizing the business or enterprise of the issuer and receives consideration therefor.
1. Liability of Promoter – every promoter or representative of a corporation in the process of incorporation binds himself to ensure that the corporation once formed will ratify the contract entered into in its name, becomes personally liable for such contract in the event that the corporation does not so ratify it once it comes into existence.
2. Liability of Corporation for Promoter‟s contract –following the principle of ratification, it is valid and binding against the corporation once it has come into legal existence
3. Pre-incorporation Subscription Agreements Section 60. Subscription contract.
- Any contract for the acquisition of unissued stock in an existing corporation or a
corporation still to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that the parties refer to it as a purchase or some other contract. Section 61. Pre-incorporation subscription. - A subscription for shares of stock of a corporation still to be formed shall be irrevocable for a period of at least six (6) months from the date of subscription, unless all of the other subscribers consent to the revocation, or unless the incorporation of said corporation fails to materialize within said period or within a longer period as may be stipulated in the contract of subscription: Provided, That no pre-incorporation subscription may be revoked after the submission of the articles of incorporation to the Securities and Exchange Commission. Offer Theory construes subscription
agreements as a mere continuing offer to a proposed corporation which does not ripen to a contract until accepted by the corporation when organized.
Hall v. Piccio (1950)
In the absence of a formal issuance by SEC of a certificate of incorporation, any other colorable attempt in good faith to incorporate would not qualify the application of the de facto doctrine.
Reasons why the de facto doctrine does not apply in this case:
The suit was essentially an intra-corporate dispute. De facto doctrine only apply to contracts and transactions made by or on behalf of a corporation with third persons
Good faith is the underlying element of the de facto doctrine.
Albert v. University Publishing (1965)
In this case, the estoppel doctrine was applied to hold the actors behind the purported corporation as personally liable, at the same time corporate liability was upheld by piercing the veil of the corporate fiction.
Lim Tong Lim v. Philippine Fishing (1999) The liability for a contract entered into on behalf of an
unincorporated association or an ostensible corporation may lie in a person who may not have directly transacted on its behalf but reaped the benefits from that contract.
Contract Theory construes a subscription agreement as a binding and irrevocable contract from the time of subscription.
**Sec. 60 and 61 fused the essential features of both theories making a subscription contract a contract between a corporation and a
subscriber. The essence of a stock subscription is an agreement to take and pay for original unissued shares of a corporation formed or to be formed.
Other promoter contracts include contracting services to draw up feasibility studies, leasing of corporate business premises, hiring of key employees, and deeds of assignment entered into by subscribers who transfer their property holdings to the corporation as payment for their paid-up capital subscription.
B. De facto Corporations 1. Requisites:
a. existence of a valid law under which the corporation may be incorporated
b. colorable compliance with the provisions on incorporation
c. assumption of corporate powers Section 20. De facto corporations.
- The due incorporation of any corporation claiming in good faith to be a corporation under this Code, and its right to exercise corporate powers, shall not be inquired into collaterally in any private suit to which such corporation may be a party. Such inquiry may be made by the Solicitor General in a quo warranto proceeding.
**juridical personality can only be pursued in a direct suit of quo warranto
**noncompliance with laws, defects in the incorporation papers, noncompliant corporate name, ineligibility of incorporators, defects in the execution of incorporation papers does not make a corporation a de facto corporation, thus can be attacked collaterally.
C. Corporations by Estoppel
Section 21.Corporation by estoppel. - All persons who assume to act as a
corporation knowing it to be without authority to do so shall be liable as general partners for
all debts, liabilities and damages incurred or arising as a result thereof: Provided, however, That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate personality. On who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation.
D. Corporators and Incorporators
Section 5. Corporators and incorporators, stockholders and members.
- Corporators are those who compose a corporation, whether as stockholders or as members. Incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.
Corporators in a stock corporation are called stockholders or shareholders. Corporators in a non-stock corporation are called members. Section 10. Number and qualifications of incorporators.
- Any number of natural persons not less than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents of the Philippines, may form a private
corporation for any lawful purpose or purposes. Each of the incorporators of s stock corporation must own or be a subscriber to at least one (1) share of the capital stock of the corporation. **All incorporators are corporators but not all corporators are incorporators. They can be stockholders or members.
E. Corporate Name
SEC Memorandum No. 5 Series of 2008 Guidelines
Shall contain Corporation or Incorporated or the abbreviations Corp., or Inc.
A term in the corporate name which described the business should pertain to its primary purpose
Names shall not be identical, misleading, or confusingly similar. Otherwise, the applicant should add distinctive words
Names of persons may be used if they are stockholders or, if deceased, with the consent of the estate
Names of dissolved or revoked corporations shall not be used by another within 3 years from the approval of dissolution or 6 years from the date of revocation unless it has been allowed by the stockholders who represent the majority of the
outstanding capital stock SEC Memorandum No. 5 Series of 2011 provides that it is not necessary for subsidiaries or affiliates of a foreign
corporation to have the word „Philippines‟ or „Phil.‟ to be part of the corporate name. SEC Memorandum No. 12 Series of 2008 provides that a company may have more than one business or trade name.
**the change of name of a corporation does not result in its dissolution. It does not make a new corporation and has no effect on the identity, property, rights, or liabilities of a corporation. It is the same corporation with a different name. (PC Javier v. CA, 2005) ** SEC has quasi-judicial powers to hear and decide a controversy between two corporations as to who has a better right to the use of a particular corporate name. (Industrial Refractories v. CA, 2002)
F. Corporate Term
Section 11. Corporate term.
- A corporation shall exist for a period not exceeding fifty (50) years from the date of incorporation unless sooner dissolved or unless said period is extended. The corporate term as originally stated in the articles of incorporation may be extended for periods not exceeding fifty (50) years in any single instance by an amendment of the articles of incorporation, in accordance with this Code; Provided, That no extension can be made earlier than five (5) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined by the Securities and Exchange Commission. Section 19. Commencement of corporate existence.
- A private corporation formed or organized under this Code commences to have corporate
existence and juridical personality and is deemed incorporated from the date the Securities and Exchange Commission issues a certificate of incorporation under its official seal; and thereupon the incorporators, stockholders/members and their successors shall constitute a body politic and corporate under the name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or the corporation is sooner dissolved in accordance with law.
G. Minimum Capital Stock and Subscription Requirements
Section 12. Minimum capital stock required of stock corporations.
- Stock corporations incorporated under this Code shall not be required to have any minimum authorized capital stock except as otherwise specifically provided for by special law, and subject to the provisions of the following section.
Section 13. Amount of capital stock to be subscribed and paid for the purposes of incorporation.
- At least twenty-five percent (25%) of the authorized capital stock as stated in the articles of incorporation must be subscribed at the time of incorporation, and at least twenty-five (25%) per cent of the total subscription must be paid upon subscription, the balance to be payable on a date or dates fixed in the contract of subscription without need of call, or in the absence of a fixed date or dates, upon call for payment by the board of directors: Provided, however, That in no case shall the paid-up capital be less than five Thousand (P5,000.00) pesos.
**Capital Stock – amount fixed in the articles of incorporation procured to be subscribed and paid-in. Shares issued in excess of the
authorized capital stock are void.
**Outstanding capital stock – total shares of stock issued to subscribers or stockholders whether or not fully or partially paid, except treasury shares.
**Subscribed capital stock – that portion of capital stock subscribed whether or not fully paid. Includes those bought but were repurchased by the issuing corporation and became treasury shares.
**Par Value- one stated in the certificate of stock which appears an amount in pesos as the nominal value of shares. It must be stated in the Articles of Incorporation and may be changed only through amendment of the articles.
**If there is no par value, such must be stated in the articles and the issued value may be fixed in any of the following:
-by the articles of incorporation
-by the BOD when so authorized in the articles or by-laws
-by the stockholders representing at least a majority of the outstanding capital stock **Corporations which cannot issue no par value shares by reason of public interest: -banks
-public utilities -insurance companies
-building and loan associations H. Articles of Incorporation
This is a contract between the corporation and the state, stockholders and state, and
corporations and stockholders. (Government v. Manila Railroad 1929)
If a corporation‟s purpose, as stated in its Articles of Incorporation, is lawful, then, the SEC has no authority to inquire whether the corporation has purposes other than those stated, and mandamus will lie to compel it to issue the certificate of incorporation. (Gala v. Ellice, 2003)
Section 14. Contents of the articles of incorporation.
- All corporations organized under this code shall file with the Securities and Exchange Commission articles of incorporation in any of the official languages duly signed and
acknowledged by all of the incorporators, containing substantially the following matters, except as otherwise prescribed by this Code or by special law:
1. The name of the corporation;
2. The specific purpose or purposes for which the corporation is being incorporated. Where a corporation has more than one stated purpose, the articles of incorporation shall state which is the primary purpose and which is/are the secondary purpose or purposes: Provided, That a non-stock corporation may not include a purpose which would change or contradict its nature as such;
3. The place where the principal office of the corporation is to be located, which must be within the Philippines;
4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the incorporators;
6. The number of directors or trustees, which shall not be less than five (5) nor more than fifteen (15);
7. The names, nationalities and residences of persons who shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified in accordance with this Code;
8. If it be a stock corporation, the amount of its authorized capital stock in lawful money of the Philippines, the number of shares into which it is divided, and in case the share are par value shares, the par value of each, the names, nationalities and residences of the original subscribers, and the amount subscribed and paid by each on his
subscription, and if some or all of the shares are without par value, such fact must be stated;
9. If it be a non-stock corporation, the amount of its capital, the names, nationalities and residences of the contributors and the amount contributed by each; and
10. Such other matters as are not inconsistent with law and which the incorporators may deem necessary and convenient.
The Securities and Exchange Commission shall not accept the articles of incorporation of any stock corporation unless accompanied by a sworn statement of the Treasurer elected by the subscribers showing that at least twenty-five (25%) percent of the authorized capital stock of the corporation has been subscribed, and at least twenty-five (25%) of the total subscription has been fully paid to him in actual cash and/or in property the fair valuation of which is equal to at least twenty-five (25%) percent of the said subscription, such paid-up capital being not less than five thousand (P5,000.00) pesos.
**Other documentary requirements:
-certificate of deposit covering the deposit of paid-up capital
-letter of authority to examine bank deposit Section 16. Amendment of Articles of Incorporation.
- Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code, or
Fleischer v. Botica Nolasco Co. (1925)
The original subscriber of the shares in issue is Gonzales. Such shares were transferred to Fleischer as payment of Gonzales to his debt to the former. Botica is now offering to buy from Fleischer the said shares claiming that under the by-laws, the corporation has the preferential right to buy the shares from Gonzales. Is such provision in the by-laws valid?
No. Shares of stock so issued are personal property and may be transferred by delivery of the certificate indorsed by the owners or his attorney in fat or other person legally authorized to make such transfer. The power to enact by-laws restraining the sale and transfer of stock must be found in the governing statute or the charter.
the vote or written assent of at least two-thirds (2/3) of the members if it be a non-stock corporation.
The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation. Such articles, as amended shall be indicated by underscoring the change or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees stating the fact that said amendment or amendments have been duly approved by the required vote of the
stockholders or members, shall be submitted to the Securities and Exchange Commission. The amendments shall take effect upon their approval by the Securities and Exchange Commission or from the date of filing with the said Commission if not acted upon within six (6) months from the date of filing for a cause not attributable to the corporation.
Section 17. Grounds when articles of
incorporation or amendment may be rejected or disapproved.
- The Securities and Exchange Commission may reject the articles of incorporation or disapprove any amendment thereto if the same is not in compliance with the
requirements of this Code: Provided, That the Commission shall give the incorporators a reasonable time within which to correct or modify the objectionable portions of the articles or amendment. The following are grounds for such rejection or disapproval: 1. That the articles of incorporation or any amendment thereto is not substantially in accordance with the form prescribed herein; 2. That the purpose or purposes of the corporation are patently unconstitutional, illegal, immoral, or contrary to government rules and regulations;
3. That the Treasurer's Affidavit concerning the amount of capital stock subscribed and/or paid is false;
4. That the percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution. No articles of incorporation or amendment to articles of incorporation of banks, banking and quasi-banking institutions, building and loan associations, trust companies and other financial intermediaries, insurance companies, public utilities, educational institutions, and
other corporations governed by special laws shall be accepted or approved by the Commission unless accompanied by a
favorable recommendation of the appropriate government agency to the effect that such articles or amendment is in accordance with law.
**Matters in the Articles that are beyond amendment because they are fait accompli or established and accomplished facts:
Names of incorporators Names of incorporating
directors/trustees
Names of the original subscribers to the capital stock of the corporation and their subscribed and paid-up capital The treasurer-in-trust
Members who contributed to the initial capital of a non-stock corporation Witnesses and acknowledgment
thereof
**Upon satisfaction that all legal requirements in the course of its examination, SEC issues a certificate of incorporation. Only then shall the corporation have a personality separate and distinct from its stockholders or members. I. By-Laws
By-laws are intended merely for the protection of the corporation, and prescribe regulation, not restrictions. Restrictions on transfers provided in the by-laws contrary to law cannot have legal effect. (Rural Bank of Salinas v. CA, 1992)
In order for by-laws provisions to be binding upon third parties, such third parties must have acquired knowledge of the pertinent laws at the time the transaction or agreement was entered into. (China Banking v. CA, 1997)
*Requisites of a valid by-laws: Must not contravene the law Must not contravene the charter Must be reasonable and
Section 46. Adoption of by-laws.
- Every corporation formed under this Code must, within one (1) month after receipt of official notice of the issuance of its certificate of incorporation by the Securities and Exchange Commission, adopt a code of by-laws for its government not inconsistent with this Code. For the adoption of by-laws by the corporation the affirmative vote of the
stockholders representing at least a majority of the outstanding capital stock, or of at least a majority of the members in case of non-stock corporations, shall be necessary. The by-laws shall be signed by the stockholders or
members voting for them and shall be kept in the principal office of the corporation, subject to the inspection of the stockholders or members during office hours. A copy thereof, duly certified to by a majority of the directors or trustees countersigned by the secretary of the corporation, shall be filed with the Securities and Exchange Commission which shall be attached to the original articles of incorporation.
Notwithstanding the provisions of the
preceding paragraph, by-laws may be adopted and filed prior to incorporation; in such case, such by-laws shall be approved and signed by all the incorporators and submitted to the Securities and Exchange Commission, together with the articles of incorporation.
In all cases, by-laws shall be effective only upon the issuance by the Securities and Exchange Commission of a certification that the by-laws are not inconsistent with this Code.
The Securities and Exchange Commission shall not accept for filing the by-laws or any
amendment thereto of any bank, banking institution, building and loan association, trust company, insurance company, public utility, educational institution or other special
corporations governed by special laws, unless accompanied by a certificate of the appropriate government agency to the effect that such by-laws or amendments are in accordance with law. (20a)
Section 47.Contents of by-laws.
- Subject to the provisions of the Constitution, this Code, other special laws, and the articles of incorporation, a private corporation may provide in its by-laws for:
1. The time, place and manner of calling and conducting regular or special meetings of the directors or trustees;
2. The time and manner of calling and conducting regular or special meetings of the stockholders or members;
3. The required quorum in meetings of stockholders or members and the manner of voting therein;
4. The form for proxies of stockholders and members and the manner of voting them; 5. The qualifications, duties and compensation of directors or trustees, officers and
employees;
6. The time for holding the annual election of directors of trustees and the mode or manner of giving notice thereof;
7. The manner of election or appointment and the term of office of all officers other than directors or trustees;
8. The penalties for violation of the by-laws; 9. In the case of stock corporations, the manner of issuing stock certificates; and 10. Such other matters as may be necessary for the proper or convenient transaction of its corporate business and affairs. (21a)
Section 48. Amendments to by-laws. - The board of directors or trustees, by a majority vote thereof, and the owners of at least a majority of the outstanding capital stock, or at least a majority of the members of a non-stock corporation, at a regular or special meeting duly called for the purpose, may amend or repeal any laws or adopt new by-laws. The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a non-stock corporation may delegate to the board of directors or trustees the power to amend or repeal any by-laws or adopt new by-laws: Provided, That any power delegated to the board of directors or trustees to amend or repeal any by-laws or adopt new by-laws shall be considered as revoked
whenever stockholders owning or representing a majority of the outstanding capital stock or a majority of the members in non-stock
corporations, shall so vote at a regular or special meeting.
Whenever any amendment or new by-laws are adopted, such amendment or new by-laws shall be attached to the original by-laws in the office of the corporation, and a copy thereof, duly certified under oath by the corporate secretary and a majority of the directors or trustees, shall be filed with the Securities and Exchange Commission the same to be attached
to the original articles of incorporation and original by-laws.
The amended or new by-laws shall only be effective upon the issuance by the Securities and Exchange Commission of a certification that the same are not inconsistent with this Code.
**Matters which cannot be provided in the by-laws:
Classification of shares of stocks and their preferences
Provisions on founder‟s shares Provisions on redeemable shares Provisions on the purposes of the
corporation
Capitalization of stock corporations Provisions on corporate term Corporate name
Denial of pre-emptive rights **Amendment of a by-law provision to undermine the right to security of tenure of a regular employee of the corporation cannot be allowed. (Salafranca v Philamlife, 1998)
CORPORATE POWERS
Related Theories
a) Theory of Concession – corporations as mere creatures and completely within the control of the state
b) Principle of Limited Powers- a corporation has no power except those conferred on it by the Code and its charter, and those incidental to its existence.
c) Principle of Centralized Management
Section 23. The board of directors or trustees. - Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified.
d) Ultra Vires Doctrine
Contracts and transactions entered into beyond the powers of the corporation as provided by law or in its charter Those entered into on behalf of the corporation by persons who have no corporate authority
Acts or contracts which are per se illegal as being contrary to law
** 3 doctrines that serve as countervailing acts to ultra vires: estoppel, ratification, doctrine of apparent authority POWER MAJORITY VOTE OF BOARD VOTE OF SH APPRAISAL SEC Extend Corporate Term 2/3 Shorten Corporate Term 2/3 Temporary Cessation of Business 2/3 x x Permanent Cessation of Business 2/3 x x Increase Authorized Capital Stock 2/3 x Decrease Authorized Capital Stock 2/3 x
Power to issue bonds 2/3 x
Power to issue debentures x x x Sale of Property as a Primary Purpose x x x Sale of ALL corporate assets 2/3 x Sale of Substantially
ALL of corpo assets 2/3 x
Lease of ALL/
Substantially all 2/3 x
Encumbrance of
ALL/ Substantially all 2/3 x
Power to Purchase own shares x x x Invest pursuant to primary purpose x x x Invest pursuant to secondary purpose 2/3 x Invest as to other
purposes Ultra vires of the 1
st kind Declare CASH dividends x x x Declare PROPERTY dividends x x x Declare STOCK dividends 2/3 x x Enter into management contract with an INDIVIDUAL/ PARTNERSHIP x x x Enter into management contract with a CORPORATION Sec. 44 Power to make Donations x x x Grant pension, retirement, others x x x Enter into a partnership x x x
**An application for the registration and issuance of bonds can only be filed by the issuing corporation which has a minimum net worth of P25M at the time of filing of the application and must have been in
operation for 3 years. (SEC Interim Guidelines) **A sale or other disposition shall be deemed to cover substantially all the corporate property and assets if thereby the corporation would be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated. (Sec. 40 ¶2)
**After the authorization or approval by the stockholders or members, the board of directors or trustees may, nevertheless, in its discretion, abandon such sale, lease, exchange, mortgage, pledge or other disposition of property and assets, subject to the rights of third parties under any contract relating thereto, without further action or approval by the stockholders or members. (Sec. 40 ¶3)
**If the corporation has Php 20,000.00 available funds and it decides to put it in a time deposit, there is no ratificatory vote necessary. This case is similar to investing on idle lands.
**Section 41. Power to acquire own shares.
- A stock corporation shall have the power to purchase or acquire its own shares for a legitimate corporate purpose or purposes, including but not limited to the following cases: Provided, That the corporation has unrestricted retained earnings in its books to cover the shares to be purchased or acquired:
1. To eliminate fractional shares arising out of stock dividends;
2. To collect or compromise an indebtedness to the corporation, arising out of unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold during said sale; and
3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the provisions of this Code.
EXCEPT: SEC. 8 Redeemable shares which may be acquired regardless of the inexistence of unrestricted retained earnings.
** Sale of ALL corporate assets uses the Quantitative test while the Sale of SUBSTANTIALLY all corporate assets uses the Qualitative test.
**Section 43. Power to declare dividends. - The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which shall be payable in cash, in property, or in stock to all stockholders on the basis of outstanding stock held by them: Provided, That any cash dividends due on delinquent stock shall first be applied to the unpaid balance on the subscription plus costs and expenses, while stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully paid: Provided, further, That no stock dividend shall be issued without the approval of stockholders representing not less than two-thirds (2/3) of the outstanding capital stock at a regular or special meeting duly called for the purpose. (16a) Stock corporations are prohibited from retaining surplus profits in excess of one hundred (100%) percent of their paid-in capital stock, except:
(1) when justified by definite corporate expansion projects or programs approved by the board of directors; or
(2) when the corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its/his consent, and such consent has not yet been secured; or
(3) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when there is need for special reserve for probable contingencies.
**Section 44. Power to enter into management contract.
- No corporation shall conclude a management
contract with another corporation unless such contract shall have been approved by the board of directors and by stockholders owning at least the majority of the outstanding capital stock, or by at least a majority of the members in the case of a non-stock corporation, of both the managing and the managed corporation, at a meeting duly called for the purpose: Provided, That (1) where a stockholder or stockholders representing the same interest of both the managing and the managed corporations own or control more than one-third (1/3) of the total outstanding capital stock entitled to vote of the managing corporation; or (2) where a majority of the members of the board of directors of the managing corporation also constitute a majority of the members of the board of directors of the managed corporation, then the management contract must be approved by the stockholders of the managed corporation owning at least two-thirds (2/3) of the total outstanding capital stock entitled to vote, or by at least two-thirds (2/3) of the members in the case of a non-stock corporation. No management contract shall be entered into for a period longer than five years for any one term.
The provisions of the next preceding paragraph shall apply to any contract whereby a corporation
undertakes to manage or operate all or substantially all of the business of another corporation, whether such contracts are called service contracts, operating agreements or otherwise: Provided, however, That such service contracts or operating agreements which relate to the exploration, development, exploitation or utilization of natural resources may be entered into for such periods as may be provided by the pertinent laws or regulations.
**Donations made by the Board pursuant to social obligations through the mandate of corporate social responsibility would not constitute ultra vires acts.
TRUST FUND DOCTRINE
-the capital and properties of the corporation, during its life, are held in trust for the creditors
Exceptions: 1. Dissolution 2. Appraisal Right 3. Treasury Shares
4. Liquidating Dividends when there is a decrease in Authorized Capital Stock
5. Power to purchase own shares 6. Redeemable Shares
7. Amendment of Articles to reduce ACS 8. In the case of CLOSE CORPORATIONS where
stockholders can demand the withdrawal of shares provided the corporation has sufficient assets 9. In case of Deadlocks where SEC requires the
purchase at fair value of shares regardless of the existence of unrestricted retained earnings **Sources of financing in a corporation:
Shares of stock/ equity financing Loans/debt financing
Income from operations/profit financing
BOARD OF DIRECTORS AND TRUSTEES
Related Theories
a. Principle of Centralized Management
Section 23. The board of directors or trustees. - Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified.
b. Business Judgment Rule –it is in the hands of the Board to declare dividends and do other acts and the court cannot compel nor can it substitute its decision to that of the Board -Directors acting within such business judgment cannot be held personally liable for the
consequences of the act EXCEPTION: Derivative Suit c. Doctrine of Apparent Authority
If a corporation knowingly permits one of its officers or any of its agents to act within the scope of apparent authority, it holds him out to the public as possessing the power to do those acts; and, thus, the corporation will , as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent‟s authority.
EXCEPTION: Self-dealing contracts entered into by the Board in their personal capacities and as members of the Board, corporation is not liable for any ultra vires acts
Sources of Power of Board
1. Theory of Original Power –source of power is the law
2. Theory of Delegated Power –source of power is the stockholders
Section 23.The board of directors or trustees.
- Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified. (28a)
Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. Trustees of non-stock corporations must be members thereof. A majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines. **The Board must act as a body. Contracts or acts made by a director or an agent absent the necessary valid delegation or authorization by the Board will not be binding on the corporation.
**The fact that a director is only holding the share as a nominee of another person does not disqualify him as a director. What the law only requires is that he has legal title to the share.
Section 27. Disqualification of directors, trustees or officers.
- No person convicted by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of this Code committed within five (5) years prior to the date of his election or appointment, shall qualify as a director, trustee or officer of any corporation.
**The by-laws of a corporation can provide other qualifications and disqualifications in addition to those provided under the code. (Gokongwei v SEC, 1979) Section 24. Election of directors or trustees.
- At all elections of directors or trustees, there must be present, either in person or by representative
authorized to act by written proxy, the owners of a majority of the outstanding capital stock, or if there be no capital stock, a majority of the members entitled to vote. The election must be by ballot if requested by any voting stockholder or member. In stock
corporations, every stockholder entitled to vote shall have the right to vote in person or by proxy the number of shares of stock standing, at the time fixed in the by-laws, in his own name on the stock books of
the corporation, or where the by-laws are silent, at the time of the election; and said stockholder may vote such number of shares for as many persons as there are directors to be elected or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit: Provided, That the total number of votes cast by him shall not exceed the number of shares owned by him as shown in the books of the corporation multiplied by the whole number of directors to be elected: Provided, however, That no delinquent stock shall be voted. Unless otherwise provided in the articles of incorporation or in the by-laws, members of corporations which have no capital stock may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate. Candidates receiving the highest number of votes shall be declared elected. Any meeting of the stockholders or members called for an election may adjourn from day to day or from time to time but not sine die or indefinitely if, for any reason, no election is held, or if there are not present or represented by proxy, at the meeting, the owners of a majority of the outstanding capital stock, or if there be no capital stock, a majority of the member entitled to vote.
CUMULATIVE VOTING
Number of shares x number of directors to be elected = number of votes
-this voting scheme allows minority stockholders to elect representatives in the Board
Straight voting: 1 vote for 1 person
For example, if the election is for four directors and you hold 500 shares (with one vote per share), under the regular method you could vote a maximum of 500 shares for any one candidate (giving you 2,000 votes total - 500 votes per each of the four candidates). With cumulative voting, you could choose to vote all 2,000 votes for one candidate, 1,000 each to two candidates, or otherwise divide your votes whichever way you wanted.
Section 25. Corporate officers, quorum.
- Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the articles of
incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the members of the board. Directors or trustees cannot attend or vote by proxy at board meetings.
Stockholders Meeting BOD/BOT Meeting
Proxy is allowed Proxy is not allowed Must be in the same city/
municipality as the principal place of business
Can be anywhere in the Philippines
Once annually Can be regular or special Section 28. Removal of directors or trustees.
- Any director or trustee of a corporation 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 if the corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of the members entitled to vote: Provided, That such removal shall take place either at a regular meeting of the corporation or at a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting. A special meeting of the stockholders or members of a corporation for the purpose of removal of directors or trustees, or any of them, must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock, or, if it be a non-stock corporation, on the written demand of a majority of the members entitled to vote. Should the secretary fail or refuse to call the special meeting upon such demand or fail or refuse to give the notice, or if there is no secretary, the call for the meeting may be addressed directly to the
stockholders or members by any stockholder or member of the corporation signing the demand. Notice of the time and place of such meeting, as well as of the intention to propose such removal, must be given by publication or by written notice prescribed in this Code. Removal may be with or without cause:
Provided, That removal without cause may not be used to deprive minority stockholders or members of the right of representation to which they may be entitled under Section 24 of this Code.
**The power to remove is vested in the stockholders and such power cannot be exercised by the BOD, whether pursuant to a resolution or even when such is granted to the Board through the provisions of the articles or by-laws.
**The Board does not also have the power to discipline its members, even for cause. If a member of the Board
has caused damage to the corporation, the Board should bring an action in behalf of the corporation to recover damages against the erring director. This is part of good corporate governance.
Section 29.Vacancies in the office of director or trustee.
- Any vacancy occurring in the board of directors or trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must be filled by the stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be elected only or the unexpired term of his predecessor in office.
Any directorship or trusteeship to be filled by reason of an increase in the number of directors or trustees shall be filled only by an election at a regular or at a special meeting of stockholders or members duly called for the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated in the notice of the meeting.
Vacancy to be filled by SH Vacancy to be filled by directors Vacancy as a result of
removal or expiration of term
When they still constitute a quorum
Other causes and when the remaining directors do not constitute a quorum
Vacancy is not a result of removal or expiration of term
Increase in the number of directors
Section 30. Compensation of directors.
- In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation, as such directors, except for reasonable per diems: Provided, however, That any such
compensation other than per diems may be granted to directors by the vote of the stockholders representing at least a majority of the outstanding capital stock at a regular or special stockholders' meeting. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year.
**If a person is compensated as an employee of the corporation, there is no limit as to such compensation. However, if a person is compensated as member of the Board, such is subject to the limitations under the law. Section 31. Liability of directors, trustees or officers. - Directors or trustees who wilfully and knowingly vote for or assent to patently unlawful acts of the
corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict
with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. **By the nature of the fiduciary relationship of
directors, trustees, and officers to the corporation and stockholders, is has a 3-fold common law duty: duty of obedience, duty of loyalty, and duty of diligence. Section 32. Dealings of directors, trustees or officers with the corporation.
- A contract of the corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such
meeting;
2. That the vote of such director or trustee was not necessary for the approval of the contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in case of an officer, the contract has been previously authorized by the board of directors. Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, That the contract is fair and reasonable under the circumstances.
Section 33. Contracts between corporations with interlocking directors.
- Except in cases of fraud, and provided the contract is fair and reasonable under the circumstances, a
contract between two or more corporations having interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking director in one corporation is substantial and his interest in the other corporation or
Garcia v. Eastern Telecommunication (2009)
One who is included in the by-laws in its roster of corporate officers is an officer of the corporation and not a mere employee – being a corporate officer, his removal is deemed to be an intra-corporate dispute cognizable by the SEC, now the RTC, and not by the labor arbiter, even if the complaint includes money claims since such claims are actually part of the prerequisites of his position, and therefore interlinked with his relations with the corporation.
the provisions of the preceding section insofar as the latter corporation or corporations are concerned. Stockholdings exceeding twenty (20%) percent of the outstanding capital stock shall be considered
substantial for purposes of interlocking directors. **Doctrine of corporate opportunity - a director is made to account to his corporation, gains and profits from transactions entered into by him/another competing corporation in which he has substantial interest, which should have been a transaction undertaken by the corporation. This is a breach of fiduciary relationship.
Section 34. Disloyalty of a director.
- Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture.
Section 35. Executive committee.
- The by-laws of a corporation may create an executive committee, composed of not less than three members of the board, to be appointed by the board. Said committee may act, by majority vote of all its members, on such specific matters within the
competence of the board, as may be delegated to it in the by-laws or on a majority vote of the board, except with respect to:
(1) approval of any action for which shareholders' approval is also required;
(2) the filing of vacancies in the board; (3) the amendment or repeal of by-laws or the adoption of new by-laws;
(4) the amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable; and
(5) a distribution of cash dividends to the shareholders.
**Corporate Officers –voted by the directors.
A corporate officer‟s dismissal is always a corporate act or intra-corporate controversy and that nature us not altered by the reason or wisdom which the Board may have in taking such action.
-positions created in the by-laws are likewise considered corporate officers
**A corporate treasurer cannot bind the corporation in a sale of assets since selling is obviously foreign to his functions, unless he is duly authorized by the Board. **An external auditor is not an officer of the
corporation for he is essentially a contractor of service.
Stockholders and Members
Doctrine of Equality of shares
Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share. (Sec. 6 ¶ 5)
**ON NON-STOCK Corporations: all rights are personal and non-transferrable ; rights may be limited,
broadened, or denied by the articles of incorporation and by-laws
A. Participation in Management Proxy
Section 58. Proxies.
- Stockholders and members may vote in person or by proxy in all meetings of stockholders or members. Proxies shall in writing, signed by the stockholder or member and filed before the scheduled meeting with the corporate secretary. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at any one time. **The right to issue a proxy is vested with public interest when it comes to stock corporations; although it may be regulated under the by-laws, it cannot be denied since it is an aspect of ownership interest of stockholders.
**SEC Opinion September 20, 1994: Rights of members in non-stock corporations to vote by proxy may be denied entirely by the appropriate provisions in the articles of incorporation or by-laws.
**Proxy is a special form of agency. Generally, it is revocable in nature. However, when a proxy is
coupled-with-interest and the same is an integral part of the security by which a loan or indebtedness is to be paid, it may be rendered irrevocable.
**A proxy does not have the right to inspect the books unless he is specifically given such power.
**A proxy does not have the power to exercise appraisal right unless such is expressly granted.
Voting Trust Agreements Section 59. Voting trusts.
- One or more stockholders of a stock corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote and other rights pertaining to the shares for a period not exceeding five (5) years at any time:
