TITLE I: GENERAL PROVISIONS (f) Merger or consolidation of the corporation with another

DEFINITIONS AND CLASSIFICATIONS corporation or other corporations;

(g) Investment of corporate funds in another corporation or
SECTION. 1. Title of the Code. – This Code shall be known as business in accordance with this Code; and
the “Revised Corporation Code of the Philippines”. (h) Dissolution of the corporation.
Except as provided in the immediately preceding paragraph,
SEC. 2. Corporation Defined. – A corporation is an artificial the vote required under this Code to approve a particular
being created by operation of law, having the right of succession corporate act shall be deemed to refer only to stocks with voting
and the powers, attributes, and properties expressly authorized by rights.
law or incidental to its existence. The shares or series of shares may or may not have a par value:
Provided, That banks, trust, insurance, and preneed companies,
SEC. 3. Classes of Corporations. – Corporations formed or public utilities, building and loan associations, and other
organized under this Code may be stock or nonstock corporations. corporations authorized to obtain or access funds from the public,
Stock corporations are those which have capital stock divided whether publicly listed or not, shall not be permitted to issue
into shares and are authorized to distribute to the holders of such no-par value shares of stock.
shares, dividends, or allotments of the surplus profits on the basis Preferred shares of stock issued by a corporation may be given
of the shares held. All other corporations are nonstock preference in the distribution of dividends and in the distribution
corporations. of corporate assets in case of liquidation, or such
other preferences: Provided, That preferred shares of stock may
SEC. 4. Corporations Created by Special Laws or Charters. – be issued only with a stated par value. The board of directors,
Corporations created by special laws or charters shall be governed where authorized in the articles of incorporation, may fix the
primarily by the provisions of the special law or charter terms and conditions of preferred shares of stock or any series
creating them or applicable to them, supplemented by the thereof: Provided, further, That such terms and conditions shall be
provisions of this Code, insofar as they are applicable. effective upon filing of a certificate thereof with the Securities
and
SEC. 5. Corporators and Incorporators, Stockholders and Exchange Commission, hereinafter referred to as the
Members. – Corporators are those who compose a corporation, “Commission”.
whether as stockholders or shareholders in a stock corporation Shares of capital stock issued without par value shall be
or as members in a nonstock corporation. Incorporators are those deemed fully paid and nonassessable and the holder of such
stockholders or members mentioned in the articles of shares shall not be liable to the corporation or to its creditors
incorporation as originally forming and composing the in respect thereto: Provided, That no-par value shares must be
corporation and who are signatories thereof. issued for a consideration of at least Five pesos (P5.00) per share:
Provided, further, That the entire consideration received by the
SEC. 6. Classification of Shares. – The classification of shares, corporation for its no-par value shares shall be treated as capital
their corresponding rights, privileges, or restrictions, and their and shall not be available for distribution as dividends.
stated par value, if any, must be indicated in the articles of A corporation may further classify its shares for the purpose of
incorporation. Each share shall be equal in all respects to every ensuring compliance with constitutional or legal requirements.
other share, except as otherwise provided in the articles of
incorporation and in the certificate of stock. SEC. 7. Founders’ Shares. – Founders’ shares may be given
The shares in stock corporations may be divided into classes or certain rights and privileges not enjoyed by the owners of other
series of shares, or both. No share may be deprived of voting stocks. Where the exclusive right to vote and be voted for in
rights except those classified and issued as “preferred” or the election of directors is granted, it must be for a limited period
“redeemable” shares, unless otherwise provided in this Code: not to exceed five (5) years from the date of incorporation:
Provided, That there shall always be a class or series of shares Provided, That such exclusive right shall not be allowed if its
with complete voting rights. Holders of nonvoting shares shall exercise will violate Commonwealth Act No. 108, otherwise
nevertheless be entitled to vote on the following matters: known as the “Anti-Dummy Law”; Republic Act No. 7042,
(a) Amendment of the articles of incorporation; otherwise known as the “Foreign Investments Act of 1991”; and
(b) Adoption and amendment of bylaws; other pertinent laws.
(c) Sale, lease, exchange, mortgage, pledge, or other disposition
of all or substantially all of the corporate property; SEC. 8. Redeemable Shares. – Redeemable shares may be
(d) Incurring, creating, or increasing bonded indebtedness; issued by the corporation when expressly provided in the articles
(e) Increase or decrease of authorized capital stock; of incorporation. They are shares which may be purchased by
the corporation from the holders of such shares upon the A corporation whose term has expired may apply for a revival
expiration of a fixed period, regardless of the existence of of its corporate existence, together with all the rights and
unrestricted retained earnings in the books of the corporation, and privileges under its certificate of incorporation and subject to all
upon such other terms and conditions stated in the articles of of its duties, debts and liabilities existing prior to its revival. Upon
incorporation and the certificate of stock representing the shares, approval by the Commission, the corporation shall be deemed
subject to rules and regulations issued by the Commission. revived and a certificate of revival of corporate existence shall be
issued, giving it perpetual existence, unless its application for
SEC. 9. Treasury shares. – Treasury shares are shares of stock revival provides otherwise.
which have been issued and fully paid for, but subsequently No application for revival of certificate of incorporation of
reacquired by the issuing corporation through purchase, banks, banking and quasi�banking institutions, preneed,
redemption, donation, or some other lawful means. Such shares insurance and trust companies, non-stock savings and loan
may again be disposed of for a reasonable price fixed by the board associations (NSSLAs), pawnshops, corporations engaged in
of directors. money service business, and other financial intermediaries shall
be approved by the Commission unless accompanied by a
TITLE II: INCORPORATION AND ORGANIZATION OF favorable recommendation of the appropriate government agency.
PRIVATE CORPORATIONS
SEC. 12. Minimum Capital Stock Not Required of Stock
SEC. 10. Number and Qualifications of Incorporators. – Any Corporations. – Stock corporations shall not be required to have
person, partnership, association or corporation, singly or jointly a minimum capital stock, except as otherwise specifically
with others but not more than fifteen (15) in number, may provided by special law.
organize a corporation for any lawful purpose or purposes:
Provided, That natural persons who are licensed to practice a SEC. 13. Contents of the Articles of Incorporation. – All
profession, and partnerships or associations organized for the corporations shall file with the Commission articles of
purpose of practicing a profession, shall not be allowed to incorporation in any of the official languages, duly signed and
organize as a corporation unless otherwise provided under special acknowledged or authenticated, in such form and manner as may
laws. Incorporators who are natural persons must be of legal age. be allowed by the Commission, containing substantially the
Each incorporator of a stock corporation must own or be a following matters, except as otherwise prescribed by this Code or
subscriber to at least one (1) share of the capital stock. by special law:
A corporation with a single stockholder is considered a One (a) The name of the corporation;
Person Corporation as described in Title XIII, Chapter III of this (b) The specific purpose or purposes for which the corporation is
Code. being formed. Where a corporation has more than one stated
purpose, the articles of incorporation shall indicate the primary
SEC. 11. Corporate Term. – A corporation shall have perpetual purpose and the secondary purpose or purposes: Provided, That a
existence unless its articles of incorporation provides otherwise. nonstock corporation may not include a purpose which would
Corporations with certificates of incorporation issued prior to change or contradict its nature as such;
the effectivity of this Code, and which continue to exist, shall (c) The place where the principal office of the corporation is to be
have perpetual existence, unless the corporation, upon a vote of located, which must be within the Philippines;
its stockholders representing a majority of its outstanding capital (d) The term for which the corporation is to exist, if the
stock, notifies the Commission that it elects to retain its specific corporation has not elected perpetual existence;
corporate term pursuant to its articles of incorporation: Provided, (e) The names, nationalities, and residence addresses of the
That any change in the corporate term under this section is incorporators;
without prejudice to the appraisal right of dissenting stockholders (f) The number of directors, which shall not be more than fifteen
in accordance with the provisions of this Code. (15) or the number of trustees which may be more than fifteen
A corporate term for a specific period may be extended or (15);
shortened by amending the articles of incorporation: Provided, (g) The names, nationalities, and residence addresses of persons
That no extension may be made earlier than three (3) years who shall act as directors or trustees until the first regular
prior to the original or subsequent expiry date(s) unless there are directors or trustees are duly elected and qualified in accordance
justifiable reasons for an earlier extension as may be determined with this Code;
by the Commission: Provided, further, That such extension of the (h) If it be a stock corporation, the amount of its authorized capital
corporate term shall take effect only on the day following the stock, number of shares into which it is divided, the par value of
original or subsequent expiry date(s). each, names, nationalities, and residence addresses of the original
subscribers, amount subscribed and paid by each on the
subscription, and a statement that some or all of the shares are disapproval within which to modify the objectionable portions of
without par value, if applicable; the articles or amendment. The following are grounds for such
(i) If it be a nonstock corporation, the amount of its capital, the disapproval:
names, nationalities, and residence addresses of the contributors, (a)The articles of incorporation or any amendment thereto is not
and amount contributed by each; and substantially in accordance with the form prescribed herein;
(j)Such other matters consistent with law and which the (b)The purpose or purposes of the corporation are patently
incorporators may deem necessary and convenient. unconstitutional, illegal, immoral or contrary to government rules
An arbitration agreement may be provided in the articles of and regulations;
incorporation pursuant to Section 181 of this Code. (c)The certification concerning the amount of capital stock
The articles of incorporation and applications for amendments subscribed and/or paid is false; and
thereto may be filed with the Commission in the form of an (d)The required percentage of Filipino ownership of the capital
electronic document, in accordance with the Commission’s rules stock under existing laws or the Constitution has not been
and regulations on electronic filing. complied with.
No articles of incorporation or amendment to articles of
SEC. 14. Form of Articles of Incorporation. – Unless otherwise incorporation of banks, banking and quasi-banking institutions,
prescribed by special law, the articles of incorporation of all preneed, insurance and trust companies, NSSLAS, pawnshops,
domestic corporations shall comply substantially with the form. and other financial intermediaries shall be approved by the
Commission unless accompanied by a favorable recommendation
SEC. 15. Amendment of Articles of Incorporation. – Unless of the appropriate government agency to the effect that such
otherwise prescribed by this Code or by special law, and for articles or amendment is in accordance with law.
legitimate purposes, any provision or matter stated in the articles
of incorporation may be amended by a majority vote of the board SEC. 17. Corporate Name. – No corporate name shall be
of directors or trustees and the vote or written assent of the allowed by the Commission if it is not distinguishable from that
stockholders representing at least two-thirds (2/3) of the already reserved or registered for the use of another corporation,
outstanding capital stock, without prejudice to the appraisal right or if such name is already protected by law, or when its use is
of dissenting stockholders in accordance with the provisions of contrary to existing law, rules and regulations.
this Code. The articles of incorporation of a nonstock corporation A name is not distinguishable even if it contains one or more
may be amended by the vote or written assent of majority of the of the following:
trustees and at least two-thirds (2/3) of the members. (a) The word “corporation”, “company”, “incorporated”,
The original and amended articles together shall contain all “limited”, “limited liability”, or an abbreviation of one of such
provisions required by law to be set out in the articles of words; and
incorporation. Amendments to the articles shall be indicated by (b) Punctuations, articles, conjunctions, contractions, prepositions,
underscoring the change or changes made, and a copy thereof abbreviations, different tenses, spacing, or number of the same
duly certified under oath by the corporate secretary and a majority word or phrase.
of the directors or trustees, with a statement that the amendments The Commission, upon determination that the corporate name
have been duly approved by the required vote of the stockholders is: (1) not distinguishable from a name already reserved or
or members, shall be submitted to the Commission. registered for the use of another corporation; (2) already protected
The amendments shall take effect upon their approval by the by law; or (3) contrary to law, rules and regulations, may
Commission or from the date of filing with the said Commission summarily order the corporation to immediately cease and desist
if not acted upon within six (6) months from the date of filing from using such name and require the corporation to register a
for a cause not attributable to the corporation. new one. The Commission shall also cause the removal of all
visible signages, marks, advertisements, labels, prints and other
SEC. 16. Grounds When Articles of Incorporation or effects bearing such corporate name. Upon the approval of the
Amendment May be Disapproved.– The Commission may new corporate name, the Commission shall issue a certificate of
disapprove the articles of incorporation or any amendment thereto incorporation under the amended name.
if the If the corporation fails to comply with the Commission’s order,
same is not compliant with the requirements of this Code: the Commission may hold the corporation and its responsible
Provided, That the Commission shall give the incorporators, directors or officers in contempt and/or hold them
directors, trustees, or officers a reasonable time from receipt of administratively, civilly and/or criminally liable under this Code
the and other applicable laws and/or revoke the registration of the
corporation.
SEC. 18. Registration, Incorporation and Commencement of and hearing, place the corporation under delinquent status.
Corporate Existence. – A person or group of persons desiring to A delinquent corporation shall have a period of two (2) years
incorporate shall submit the intended corporate name to the to resume operations and comply with all requirements that the
Commission for verification. If the Commission finds that the Commission shall prescribe. Upon compliance by the
name is distinguishable from a name already reserved or corporation, the Commission shall issue an order lifting the
registered for the use of another corporation, not protected by law delinquent status. Failure to comply with the requirements and
and is not contrary to law, rules and regulations, the name shall be resume operations within the period given by the Commission
reserved in favor of the incorporators. The incorporators shall shall cause the revocation of the corporation’s certificate of
then submit their articles of incorporation and bylaws to the incorporation.
Commission. The Commission shall give reasonable notice to, and
If the Commission finds that the submitted documents and coordinate with the appropriate regulatory agency prior to the
information are fully compliant with the requirements of this suspension or revocation of the certificate of incorporation of
Code, other relevant laws, rules and regulations, the Commission companies under their special regulatory jurisdiction.
shall issue the certificate of incorporation.
A private corporation organized under this Code commences TITLE III: BOARD OF DIRECTORS/TRUSTEES AND
its corporate existence and juridical personality from the date the OFFICERS
Commission issues the certificate of incorporation under its
official seal and thereupon the incorporators, SEC. 22. The Board of Directors or Trustees of a Corporation;
stockholders/members and their successors shall Qualification and Term. – Unless otherwise provided in this
constitute a body corporate under the name stated in the articles of Code, the board of directors or trustees shall exercise the
incorporation for the period of time mentioned therein, unless said corporate powers, conduct all business, and control all properties
period is extended or the corporation is sooner dissolved in of the corporation.
accordance with law. Directors shall be elected for a term of one (1) year from
among the holders of stocks registered in the corporation’s books,
SEC. 19. De facto Corporations. – The due incorporation of any while trustees shall be elected for a term not exceeding three (3)
corporation claiming in good faith to be a corporation under this years from among the members of the corporation. Each director
Code, and its right to exercise corporate powers, shall not and trustee shall hold office until the successor is elected and
be inquired into collaterally in any private suit to which such qualified. A director who ceases to own at least one (1) share of
corporation may be a party. Such inquiry may be made by the stock or a trustee who ceases to be a member of the corporation
Solicitor General in a quo warranto proceeding. shall cease to be such.
The board of the following corporations vested with public
SEC. 20. Corporation by Estoppel. – All persons who assume to interest shall have independent directors constituting at least
act as a corporation knowing it to be without authority to do so twenty percent (20%) of such board:
shall be liable as general partners for all debts, liabilities a) Corporations covered by Section 17.2 of Republic Act No.
and damages incurred or arising as a result thereof: Provided, 8799, otherwise known as “The Securities Regulation Code”,
however, That when any such ostensible corporation is sued on namely those whose securities are registered with the
any transaction entered by it as a corporation or on any tort Commission, corporations listed with an exchange or with assets
committed by it as such, it shall not be allowed to use its lack of of at least Fifty million pesos (P50,000,000.00) and having two
corporate personality as a defense. Anyone who assumes an hundred (200) or more holders of shares, each holding at least one
obligation to an ostensible corporation as such cannot resist hundred (100) shares of a class of its equity shares;
performance thereof on the ground that there was in fact no b) Banks and quasi-banks, NSSLAs, pawnshops, corporations
corporation. engaged in money service business, pre-need, trust and insurance
companies, and other financial intermediaries; and
SEC. 21. Effects of Non-Use of Corporate Charter and c) Other corporations engaged in business vested with public
Continuous Inoperation. – If a corporation does not formally interest similar to the above, as may be determined by the
organize and commence its business within five (5) years from the Commission, after taking into account relevant factors which are
date of its incorporation, its certificate of incorporation shall be germane to the objective and purpose of requiring the election of
deemed revoked as of the day following the end of the five an independent director, such as the extent of minority ownership,
(5)-year period. type of financial products or securities issued or offered to
However, if a corporation has commenced its business but investors, public interest involved in the nature of business
subsequently becomes inoperative for a period of at least five (5) operations, and other analogous factors.
consecutive years, the Commission may, after due notice
 An independent director is a person who, apart from or in the bylaws, members of nonstock corporations may cast as
shareholdings and fees received from the corporation, is many votes as there are trustees to be elected but may not cast
independent of management and free from any business or other more than one (1) vote for one (1) candidate. Nominees for
relationship which could, or could reasonably be perceived to directors or trustees receiving the highest number of votes shall be
materially interfere with the exercise of independent judgment in declared elected.
carrying out the responsibilities as a director. If no election is held, or the owners of majority of the
Independent directors must be elected by the shareholders outstanding capital stock or majority of the members entitled to
present or entitled to vote in absentia during the election of vote are not present in person, by proxy, or through remote
directors. Independent directors shall be subject to rules and communication or not voting in absentia at the meeting, such
regulations governing their qualifications, disqualifications, meeting may be adjourned and the corporation shall proceed in
voting requirements, duration of term and term limit, maximum accordance with Section 25 of this Code.
number of board memberships and other requirements that the The directors or trustees elected shall perform their duties as
Commission will prescribe to strengthen their independence and prescribed by law, rules of good corporate governance, and
align with international best practices. bylaws of the corporation.

SEC. 23. Election of Directors or Trustees. – Except when the SEC. 24. Corporate Officers. – Immediately after their election,
exclusive right is reserved for holders of founders’ shares under the directors of a corporation must formally organize and elect:
Section 7 of this Code, each stockholder or member shall (a) a president, who must be a director; (b) a treasurer, who must
have the right to nominate any director or trustee who possesses be a resident; (c) a secretary, who must be a citizen and resident of
all of the qualifications and none of the disqualifications set forth the
in this Code. Philippines; and (d) such other officers as may be provided in the
At all elections of directors or trustees, there must be present, bylaws. If the corporation is vested with public interest, the board
either in person or through a representative authorized to act by shall also elect a compliance officer. The same person may
written proxy, the owners of majority of the outstanding capital hold two (2) or more positions concurrently, except that no one
stock, or if there be no capital stock, a majority of the members shall act as president and secretary or as president and treasurer at
entitled to vote. When so authorized in the bylaws or by a the same time, unless otherwise allowed in this Code.
majority of the board of directors, the stockholders or members The officers shall manage the corporation and perform such
may also vote through remote communication or in absentia: duties as may be provided in the bylaws and/or as resolved by the
Provided, That the right to vote through such modes may be board of directors.
exercised in corporations vested with public interest,
notwithstanding the absence of a provision in the bylaws of such SEC. 25. Report of Election of Directors, Trustees and
corporations. Officers, Non-holding of Election and Cessation from Office. –
A stockholder or member who participates through remote Within thirty (30) days after the election of the directors, trustees
communication or in absentia, shall be deemed present for and officers of the corporation, the secretary, or any other officer
purposes of quorum. of the corporation, shall submit to the Commission, the names,
The election must be by ballot if requested by any voting nationalities, shareholdings, and residence addresses of the
stockholder or member. directors, trustees, and officers elected.
In stock corporations, stockholders entitled to vote shall have The non-holding of elections and the reasons therefor shall be
the right to vote the number of shares of stock standing in their reported to the Commission within thirty (30) days from the date
own names in the stock books of the corporation at the time of the scheduled election. The report shall specify a new date
fixed in the bylaws or where the bylaws are silent, at the time of for the election, which shall not be later than sixty (60) days from
the election. The said stockholder may: (a) vote such number of the scheduled date.
shares for as many persons as there are directors to be elected; (b) If no new date has been designated, or if the rescheduled
cumulate said shares and give one (1) candidate as many votes as election is likewise not held, the Commission may, upon the
the number of directors to be elected multiplied by the number of application of a stockholder, member, director or trustee, and after
the shares owned; or (c) distribute them on the same principle verification of the unjustified non-holding of the election,
among as many candidates as may be seen fit: Provided, That the summarily order that an election be held. The Commission shall
total number of votes cast shall not exceed the number of shares have the power to issue such orders as may be appropriate,
owned by the stockholders as shown in the books of the including orders directing the issuance of a notice stating the time
corporation multiplied by the whole number of directors to be and place of the election, designated presiding officer, and the
elected: Provided, however, That no delinquent stock shall be record date or dates for the determination of stockholders or
voted. Unless otherwise provided in the articles of incorporation members entitled to vote.
 Notwithstanding any provision of the articles of incorporation deprive minority stockholders or members of the right of
or bylaws to the contrary, the shares of stock or membership representation to which they may be entitled under Section 23 of
represented at such meeting and entitled to vote shall constitute a this Code.
quorum for purposes of conducting an election under this section. The Commission shall, motu proprio or upon verified
Should a director, trustee or officer die, resign or in any manner complaint, and after due notice and hearing, order the removal of
cease to hold office, the secretary, or the director, trustee or officer a director or trustee elected despite the disqualification, or whose
of the corporation, shall, within seven (7) days from knowledge disqualification arose or is discovered subsequent to an election.
thereof, report in writing such fact to the Commission. The removal of a disqualified director shall be without prejudice
to other sanctions that the Commission may impose on the
SEC. 26. Disqualification of Directors, Trustees or Officers. – board of directors or trustees who, with knowledge of the
A person shall be disqualified from being a director, trustee or disqualification, failed to remove such director or trustee.
officer of any corporation if, within five (5) years prior to the
election or appointment as such, the person was: SEC. 28. Vacancies in the Office of Director or Trustee;
(a) Convicted by final judgment: Emergency Board. – Any vacancy occurring in the board of
(1) Of an offense punishable by imprisonment for a period directors or trustees other than by removal or by expiration of
exceeding six (6) years; term may be filled by the vote of at least a majority of the
(2) For violating this Code; and remaining directors or trustees, if still constituting a quorum;
(3) For violating Republic Act No. 8799, otherwise known as otherwise, said vacancies must be filled by the stockholders or
“The Securities Regulation Code”; members in a regular or special meeting called for that purpose.
(b) Found administratively liable for any offense involving When the vacancy is due to term expiration, the election shall
fraudulent acts; and be held no later than the day of such expiration at a meeting called
(c) By a foreign court or equivalent foreign regulatory authority for that purpose. When the vacancy arises as a result of removal
for acts, violations or misconduct similar to those enumerated in by the stockholders or members, the election may be held on the
paragraphs (a) and (b) above. same day of the meeting authorizing the removal and this fact
The foregoing is without prejudice to qualifications or other must be so stated in the agenda and notice of said meeting. In all
disqualifications, which the Commission, the primary regulatory other cases, the election must be held no later than forty-five (45)
agency, or the Philippine Competition Commission may impose in days from the time the vacancy arose. A director or trustee elected
its promotion of good corporate governance or as a sanction in its to fill a vacancy shall be referred to as replacement director or
administrative proceedings. trustee and shall serve only for the unexpired term of the
SEC. 27. Removal of Directors or Trustees. – Any director or predecessor in office.
trustee of a corporation may be removed from office by a vote of However, when the vacancy prevents the remaining directors
the stockholders holding or representing at least two-thirds (2/3) from constituting a quorum and emergency action is required to
of the outstanding capital stock, or in a nonstock corporation, by a prevent grave, substantial, and irreparable loss or damage to
vote of at least two-thirds (2/3) of the members entitled to vote: the corporation, the vacancy may be temporarily filled from
Provided, That such removal shall take place either at a regular among the officers of the corporation by unanimous vote of the
meeting of the corporation or at a special meeting called for the remaining directors or trustees. The action by the designated
purpose, and in either case, after previous notice to stockholders director or trustee shall be limited to the emergency action
or members of the corporation of the intention to propose such necessary, and the term shall cease within a reasonable time from
removal at the meeting. A special meeting of the stockholders or the termination of the emergency or upon election of the
members for the purpose of removing any director or trustee must replacement director or trustee, whichever comes earlier. The
be called by the secretary on order of the president, or upon corporation must notify the Commission within three (3)
written demand of the stockholders representing or holding at days from the creation of the emergency board, stating therein the
least a majority of the outstanding capital stock, or a majority of reason for its creation.
the members entitled to vote. If there is no secretary, or if the Any directorship or trusteeship to be filled by reason of an
secretary, despite demand, fails or refuses to call the special increase in the number of directors or trustees shall be filled only
meeting or to give notice thereof, the stockholder or member of by an election at a regular or at a special meeting of
the corporation signing the demand may call for the meeting by stockholders or members duly called for the purpose, or in the
directly addressing the stockholders or members. Notice of the same meeting authorizing the increase of directors or trustees if so
time and place of such meeting, as well as of the intention to stated in the notice of the meeting.
propose such removal, must be given by publication or by written In all elections to fill vacancies under this section, the
notice prescribed in this Code. Removal may be with or without procedure set forth in Sections 23 and 25 of this Code shall apply.
cause: Provided, That removal without cause may not be used to
SEC. 29. Compensation of Directors or Trustees. – In the Where any of the first three (3) conditions set forth in the
absence of any provision in the bylaws fixing their compensation, preceding paragraph is absent, in the case of a contract with a
the directors or trustees shall not receive any compensation in director or trustee, such contract may be ratified by the vote of the
their capacity as such, except for reasonable per diems: Provided stockholders representing at least two-thirds (2/3) of the
however, That the stockholders representing at least a majority of outstanding capital stock or of at least two-thirds (2/3) of the
the outstanding capital stock or majority of the members may members in a meeting called for the purpose: Provided, That full
grant directors or trustees with compensation and approve the disclosure of the adverse interest of the directors or trustees
amount thereof at a regular or special meeting. involved is made at such meeting and the contract is fair and
In no case shall the total yearly compensation of directors reasonable under the circumstances.
exceed ten (10%) percent of the net income before income tax of
the corporation during the preceding year. SEC. 32. Contracts Between Corporations with Interlocking
Directors or trustees shall not participate in the determination Directors. – Except in cases of fraud, and provided the contract is
of their own per diems or compensation. fair and reasonable under the circumstances, a contract between
Corporations vested with public interest shall submit to their two (2) or more corporations having interlocking directors shall
shareholders and the Commission, an annual report of the total not be invalidated on that ground alone: Provided, That if the
compensation of each of their directors or trustees. interest of the interlocking director in one (1) corporation is
substantial and the interest in the other corporation or corporations
SEC. 30. Liability of Directors, Trustees or Officers. – is merely nominal, the contract shall be subject to the provisions
Directors or trustees who willfully and knowingly vote for or of the preceding section insofar as the latter corporation or
assent to patently unlawful acts of the corporation or who are corporations are concerned.
guilty of Stockholdings exceeding twenty percent (20%) of the
gross negligence or bad faith in directing the affairs of the outstanding capital stock shall be considered substantial for
corporation or acquire any personal or pecuniary interest in purposes of interlocking directors.
conflict with their duty as such directors or trustees shall be liable
jointly and severally for all damages resulting therefrom suffered SEC. 33. Disloyalty of a Director. – Where a director, by virtue
by the corporation, its stockholders or members and other persons. of such office, acquires a business opportunity which should
A director, trustee, or officer shall not attempt to acquire, or belong to the corporation, thereby obtaining profits to the
acquire any interest adverse to the corporation in respect of any prejudice of such corporation, the director must account for and
matter which has been reposed in them in confidence, and upon refund to the latter all such profits, unless the act has been ratified
which, equity imposes a disability upon themselves to deal in their by a vote of the stockholders owning or representing at least
own behalf; otherwise the said director, trustee, or officer shall be two�thirds (2/3) of the outstanding capital stock. This provision
liable as a trustee for the corporation and must account for the shall be applicable, notwithstanding the fact that the director
profits which otherwise would have accrued to the corporation. risked one’s own funds in the venture.

SEC. 31. Dealings of Directors, Trustees or Officers with the SEC. 34. Executive, Management, and Other Special
Corporation. – A contract of the corporation with (1) one or Committees. – If the bylaws so provide, the board may create an
more of its directors, trustees, officers or their spouses and executive committee composed of at least three (3) directors. Said
relatives within the fourth civil degree of consanguinity or affinity committee may act, by majority vote of all its members, on such
is voidable, at the option of such corporation, unless all the specific matters within the competence of the board, as may be
following conditions are present: delegated to it in the bylaws or by majority vote of the board,
(a) The presence of such director or trustee in the board meeting except with respect to the: (a) approval of any action for which
in which the contract was approved was not necessary to shareholders’ approval is also required; (b) filling of vacancies in
constitute a quorum for such meeting; the board; (c) amendment or repeal of bylaws or the adoption
(b) The vote of such director or trustee was not necessary for the of new bylaws; (d) amendment or repeal of any resolution of the
approval of the contract; board which by its express terms is not amendable or repealable;
(c) The contract is fair and reasonable under the circumstances; and (e) distribution of cash dividends to the shareholders.
(d) In case of corporations vested with public interest, material The board of directors may create special committees of
contracts are approved by at least two-thirds (2/3) of the entire temporary or permanent nature and determine the members’ term,
membership of the board, with at least a majority of the composition, compensation, powers, and responsibilities.
independent directors voting to approve the material contract; and
(e) In case of an officer, the contract has been previously
authorized by the board of directors.