Ultra Vires Acts H. To enter a..

1. Outside Express/implied & incidental - Partnership

power of the corporation. - JV
2. Executed w/out proper authority of - Consolidation
BOD. - Commercial Agreements
3. Those contrary to laws.
I. Make REASONABLE Donations for;

a. Public welfare
CORPORATE POWERS
b. Hospital, charitable,
A. To sue & be sued in it Corporate name
 President or Managing Director c. cultural, scientific
Cannot file a derivative suit on d. Civic, or similar purposes
behalf of the corp.
 (Unless given special authority  Provided that no foreign corporation
by BOD) shall give donations in aid of any
political party or candidate or for
B. To have perpetual existence.
purposes of partisan political activity.
C. To adopt and use a corporate seal.
 Corp may exist w/out seal.

D. Amend AOI CORPORATE POWERS

(SPECIFIC)
E. To adopt by-laws.
(not contrary to law, morals, or public policy) 1. Extend/Shorten Corporate terms.
 To amend & repeal it.  Requirements
a. Majority of BOD/T
b. 2/3 outstanding capital stock
F. Stock corporations
c. 2/3 members ( NON- STOCK)
 to issue or sell stocks to subscribers  Member/stockholder DISSENTS from
corporate action ( in cases provided by
 to sell treasury stocks, law)
- HAS RIGHT TO DEMAND PAYMENT
 NON-stock – to admit members
OF FV of his SHARE. (Appraisal
G. Purchase, Receive, take or grant, hold, Right)
convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal
property, including securities and bonds of
other corporations.

 Corp. may assign agent to negotiate, but the

final approval of BOD is needed to finalize the
transaction.
2. Increase/Decrease or Incur/ increase ii. To collect or compromise an
Bonded Indebtedness. indebtedness to the corporation,
 Requirements arising out of unpaid subscription,
a. Majority of BOD in a delinquency sale, and to
b. 2/3 of Outstanding capital stock purchase delinquent shares
 To increase/decrease Capital stock sold during said sale;
a. Increase/Decrease # of shares
authorized to be issued without iii. To pay dissenting or withdrawing
Increasing/ Decreasing PAR Value. stockholder entitled to payment for
their shares. (Sec. 40,
b. Increase/Decrease PAR VALUE Corporation Code)

c. Increase/ Decrease BOTH CONDITIONS (to exercise)

Authorized capital stock to be 1. Capital (not impaired)
issued & PAR value. 2. Legitimate & Proper purpose
3. Has UNRESTRICTED RE
3. To deny Pre-emptive rights 4. In good faith (w/out prejudice
 May be denied by AOI of the rights of cr & sh)
EXCEPTIONS 5. Conditions of corporate affairs
warrant it.

Trust fund Doctrine

4. To sell, dispose all/ substantially all of - Basis for MANDATORY requirement
Corporate asset of Unrestricted retained earnings
 Requirements when acquiring own shares.
a. Majority of BOD
b. 2/3 OCS  Assets, Property, and Capital stock is
c. 2/3 members ( NON-stock) regarded as equity in trust for the
- In NON-Stock: If no member has payment of corporate creditors.
voting rights  majority of  NO distribution to stockholders before
trustees. payment to corporate creditors
 Dissenting stockholder may practice - If paid first to stockholders
appraisal rights.  FRAUD (therefore VOID)

5. Acquire Own Share

- If for a legitimate corporate
purpose.
- Provided it has UNRESTRICTED RE.

i. To eliminate fractional shares

arising out of stock dividends.
 6. To invest funds in another financial institution or creditor
corporation/ business without their his/her consent;

 Requirements • That such retention is

a. Majority of BOD/Trustees necessary under special
b. 2/3 OCS circumstances obtaining in the
 If investment is REASONABLY corporation, such as when
NECESSARY to accomplish Corporate’s there is a need for special
primary purpose reserve for probable.
 Stockholders Approval (NOT contingencies. (Sec. 42, par 2)
necessary)

 Dissenting Stockholder may exercise 8. Enter Management Contract

appraisal right.
- Management contracts
(NOT LONGER THAN 5 YRS)
7. To declare dividends EXCEPT for
a. Exploitation
 Provided CASH DIVIDEND due on b. Development
DELIQUENT STOCK shall be applied c. Exploration
to the unpaid balance of the d. Utilization
subscription cost plus expenses.  OF NATURAL RESOURCES
- If Stock dividend, WITHHELD until  Can be entered into periods
fully paid. provided by law.

ADDITIONAL REQ (STOCK DIV) REQUIREMENTS

a. 2/3 OCS ( In a meeting duly a. Resolution of a quorum of the Board of

called for its purpose) Directors/Trustees
b. Existence of URE b. Ratified by a majority vote by the
stockholders representing the
GR: A stock corporation is outstanding capital stock or members,
prohibited from retaining as the case may be,in a meeting called
surplus profit in excess of 100% for the purpose; - In both cases, such
of their paid-in capital votes must be made by both the
stock, except: - managing and managed corporation.
• When justified by definite
corporate expansion projects/
programs approved by BOD

• When prohibited under any

loan agreement with any
EXCEPT: That 2/3 votes of the managed Special Meetings of SH/Members
corporation shall be necessary if: - Stockholder WHEN: Anytime deemed Necessary
who represents the interest of both  WHERE: As determined by BOD
corporations owns 1/3 of the outstanding - In the principal office ( in AOI)
capital stock of the managing corporation. - - If not, Municipality of the office
Majority of the members of the Board  WRITTEN NOTICE 1 WEEK PRIOR TO
of the managing corporation also constitute MEETING
majority of the members of the board of the
managed corporation

ULTRA VIRES v ILLEGAL ACTS

(VERY IMPORTANT)

Ultra Vires (Not illegal)

- Voidable
- Can be enforced by
a. Performance
b. Ratification
c. Estoppel
Illegal Act
- VOID

MEETINGS

2 types
1. BOD/T meetings
2. Stockholders meeting

REGULAR Meeting of SH

- Annually on a fixed date (in Bylaws)

- IF not (ANY DATE AFTER APRIL 15)
 As determined by BOD
- In the principal office ( in AOI)
- If not, Municipality of the office
 WRITTEN OTICE MUST BE GIVEN TO SH
21 DAYS PRIOR TO MEETING UNLESS
provided by bylaws
  BYLAWS (filing & Adption) ARE
BYLAWS CONDITIONS SUBSEQUENT.
- Relatively permanent & continuing  Not necessarily needed to perfect
corporate personality
rules of action adopted by the
 Substantial compliance is sufficient.
corporation for its own
government, and that of individuals CONTENTS
composing it.
a. Time, Place, Manner of Calling &
 To Regulate the conduct, & Define the condusting Regular/ Special Meeting of
duties of the members towards the BOD/T.
b. Time & Manner of calling/ conducting
corporation & amongst themselves.
SP/REG meeting, & MODE OF
NOTIFYING sh/members.

- Authorization of MAJORITY of the c. REQUIRED Quorum & Manner of

OS/members. voting.

- Shall be signed by SH/Members d. Modes sh/mem/d/t may attend and

cast vote.
voting for them.
e. Form for proxies.
- KEPT in PRINCIPAL OFFICE of the
corporation. f. Directors/ Trustees
Qualifictions/Responsibilities &
 Subject to the inspection of SH Guidelines for Setting compensation.
DURING OFFICE HOURS
g. TIME for holding ANNUAL ELECTION &
MODE of giving notice.
- A COPY is filed w/ COMMISSION
ATTACHED TO ORIGINAL AOI.
h. Manner of election, Term of office &
 Certified by MAJORITY of BOD officers
 Countersigned by SECRETARY
i. Penalties for violation of Bylaws.

- IF Filed BEFORE incorporation j. Manner of issuing Stock Certificate.

 Approved & Signed by ALL
incorporators, TOGETHER with the AOI. k. Other matters necessary for proper/
convenient transaction of its corp
affairs for the promotion of good
-BOTH CASES : Effective upon the
govrnance, anti graft & corruption
COMMISSION’s issuance of certificate that measures.
bylaws are in accordance with the code.

 Arbiration Agreement may be provided

in the bylaws.
Amendment of bylaws

- Majority of BOD/T
- Majority of OS
 @ a regular/special meeting duly called
for its purpose.

 2/3 of OS MAY DELEGATE to the board

the Power to Amend/ Repeal Bylaws.
 Majority of OS may also REVOKE
delegated power @ a reg/special
meeting.

 When amended, or adopted a new.

 File w/ COMMISSION
 With SH resolution authorizing the
delegation of power to amend.

BINDING EFFECT

Director, Trustees, SH, Member, Officer

- Bound & must comply
 Presumed to know provisions.

3rd Party
- NOT, except if they have knowledge
of the bylaws.
Meetings For REGULAR MEETINGS
 Written notice & Reason
- Generally, for electing directors or; (2 weeks b4 meeting)
- For other business calling requiring
SHAREHOLDER’s CONSENT.
Right to vote
1. In person
Kinds of Meeting 2. Through proxy
1. Special meeting 3. Thru Remote Communication
2. Regular meetings  When Authorized in the bylaws
 Commission shall issue rules
governing voting thru remote
Regular meetings comms.
- Held ANNUALLY @ FIXED DATE in  NOTIFY in advance Presiding officer
the BYLAWS. & SECRETARY.
 NOT FIXED – ANY DATE AFTER
APRIL 15 Place & Time

 Written Notice sent to all SH. PLACE: Principal Office

 (21 days) b4 meeting - If not, City of municipality where
PO is located.
Special Meeting - Notice of meeting should state
- Held when DEEMED NECESSARY TIME, PLACE, PURPOSE of the
 Written Notice (1 week) b4 meeting meeting.

 All business transacted @ meeting is

valid, even if called for IMPROPERLY.
 Stockholder/Member may propose Provided
holding of SPECIAL MEETING & items a. All SH are present, or present thru
to be included in the agenda. representation.
b. No SH states that the purpose of
meeting is to object to that transaction.
 NO person authorized / Unjustly
refuses to call meeting. QUORUM
 Commission may issue an order TO - MAJORITY of OS
DIRECT an SH to call a meeting.  If thru remote/ thru absentia DEEMED
(Upon PETITION of the SH & Upon PRESENT for purpose of quorum.
PROPER NOTICE by COMMISSION)

 Petitioning Stockholder shall preside

until MAJORITY of SH chose among
themselves a Presiding officer.

MEMBERSHIP SHALL BE CLOSED

REGULAR (20 days b4 meeting)
SPECIAL (7 days b4 meeting)

Postponement REGULAR/ Special Meeting of DIRECTOR

 - Majority shall constitute a quorum - Stockholder grants security interest
to TRANSACT & MAKE DECISIONs. (pledge, mortgage), but STILL HAS
- EXCEPT for the ELECTION of VOTING RIGHTS UNLESS expressly
OFFICER (NEED MAJORITY OF ALL given such right by stockholder.
MEMBERS OF THE BOARD)  Right must be RECORDED AT
APPROPRIATE CORP. BOOKS.
 HELD MONTHLY / Anytime upon call of
president. JOINT- OWNERSHIP voting
- Consent of ALL co-owners is
 Held ANYWHERE in/out the PH. necessary, UNLESS there is
WRITTEN PROXY AUTHORIZING 1/
 Notified (2days) b4 meeting some of them.

 FOR BOARD MEETINGS CANNOT TREASURY SHARE

attend/ vote thru proxies - SHALL HAVE NO VOTING RIGHTS
as long as it remains in Treasury.
 CAN ACT AS PROXIES in
SHAREHOLDER’s MEETING.
VOTING TRUST
 Director who has potential interest in a - Transfer of the right to vote & other
related party transaction is EXCLUDED rights pertaining to the share
from voting on the approval of that - NOT EXCEEDING (5yrs)
transaction. - BUT, if LOAN AGREEMENT CAN
EXCEED 5yrs.
- Automatically expire upon full
Quorum in MEETING of DIRECTOR/TRUSTEE payment of loan
- Majority of directors/trustees. - MUST BE IN WRITING
- Except for election of OFFICERS. (NOTARIZED)
 Otherwise, INEFFECTIVE/
WHO SHALL PRESIDE @ Meetings UNENFORCEABLE
1. Chairman - Certificate of stock of SH is
2. President (in chairman’s absence) cancelled (bcoz, ownership is
transferred)
- New one shall be issued
- Has RIGHT TO INSPECT book,
records.
- EXPIRE @ end of agreed period
- May vote by PROXY.

SECURED CREDITOR’s RIGHT TO VOTE