1. TITLE 5
BY-LAWS
1. Definition by-laws.
By-laws are the rules of action adopted by the corporation for its internalgovernmentand
for the governmentof its officers and of its stockholdersormembers.
2. The difference of by-laws from resolution.
(1) A by-law may be in the form of a resolutionbut a resolutionis not necessarily a by-law;
and
(2) A by-law, until repealed, is a permanentor continuing rulefor the governmentof the
corporation andthe individuals are composing it, while a resolutionpertains to a single
act of the corporation.
3. The requisites of valid by-lawsare.
They are:
(1) They must be consistent with existing law;
(2) They must be consistent with the articles of incorporation;
(3) They must be consistent public policy;
(4) They must be generaland uniform in their operation;
(5) They must be reasonable;and
(6) They must notimpair vested rights or the obligationsof a contract.
4. The bindingeffect of valid by-laws are.
(1) Upon the corporation and its officers – They are boundby and mustcomply with their
provisions as they are deemed part of the corporate charter;
(2) Upon the stockholders and members – As a general rule,they are presumed to know the
corporation’sby-laws and,therefore, said by-laws are binding uponthem;
(3) Subordinate employees – those without actualknowledge are not bound;and
(4) Third persons – As a general rule,they are not bound,except when they have knowledge
of the provisions either actually or constructively.
5. The matters that may be provided in the by-lawsare.
2. The CorporationCode authorizesa corporationto provide for the following:
(1) Time, place, and the mannerof calling and conductingregularor special meetings of its
directors or trustees;
(2) Time and manner of callingand conducting regularandspecial meetings of stockholders
or members;
(3) Required quorumin meetings of stockholdersor members and the manner of voting
therein;
(4) Forms for proxies of stockholdersormembers andthe mannerof voting them;
(5) Qualifications, duties and compensationof directors or trustees,officers and employees;
(6) Time for holdingthe annualelection of directors or trusteesand the mode and manner
of giving notice thereof;
(7) Mannerof election or appointmentand the term office of allofficers other than
directors or trusteesand those elected by the directors;
(8) Penalties for violation of by-laws;
(9) Mannerof issuing stock certificates in case of stock corporations;and
(10) Such other mattersas may be necessary for the properor convenient transaction of its
corporate businessand affairs. (Sec. 47.)
6. The matter thatmay not be provided in the by-laws are.
As to those mattersalready regulatedby the CorporationCode, a different or contrary rule
cannot be provided in the by-laws.For instance:
(1) The place where meetings of stockholdersor members shallbe held (Sec. 51, infra);
(2) The mannerof election andterms of office of directors (Secs. 23, 24.);
(3) The manner(by sharesand not per capita) in which stockholdersshallvote ( infra);
(4) The by-laws cannotprovide thata lesser number shallconstitute a quorum in thosecases
where a certain requisite numberof votes is necessary for approval(see infra.); and
(5) The by-laws cannotdispense with the minimum legal qualifications for a director or
trustee.(Sec. 23, infra.)
7. Distinguishingbetween articles of incorporation and by-laws of a corporation.
The distinctions are:
3. (1) The former constitutesthe charter or basic law of the corporation,while the latter are
merely rulesand regulationsadopted by the corporation;
(2) The former is executed before incorporation by the incorporators,while the latter,
usuallyafter incorporation by the stockholdersor members; and
(3) The filing of the former is a condition precedent to corporateexistence, while the filing
of the latteris a condition subsequent.
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TITLE 6
MEETINGS
1. Kinds of meetings under the Corporation Code.
They are:
(1) Meetings of stockholdersormembers.- they may be:
(a) Regular or thoseheld annuallyon a date fixed in the by-laws, or if notso fixed,
on any date in April of every year as determined by the board of directors or
trustees;or
(b) Special orthose held at any time deemed necessary or as provided in the by-
laws(Sec. 49,50)
(2) Meetings of directors or trustees. – they may be:
(a) Regularor those heldby the board monthly, unlessthe by-laws provide
otherwise; or
(b) Special orthose held by the boardat any time uponthe call of the president
or as provided in the by-laws. (Secs. 49-53)
2.The requisitesof a valid meeting.
They are:
4. (1)It must be held at the proper place (Sec. 51);
(2) It mustbe held at the stated date andat the appointed time or at a reasonabletime
thereafter;
(3) It must be called by the proper person (Sec. 50, last par);
(4)There mustbe a previous notice (Sec. 50, 51);and
(5) There must be a quorum. (Sec. 52)
3. The proper place for holding meetings is in.
(1)Of stockholders or members. – “in the city or municipality where the principal office of the
corporation is located and if practicable, in the principal office of the corporation.”(Sec.51)
(2) Of Directors or trustees. – “anywhere in or outside the Philippines, unlessthe by-laws
provide otherwise.” (Sec.53)
4. The proper person to call a meeting is.
(1)The personor personsdesignatedin the by-laws;
(2) In the absence of such provision, a director / trusteeor an officer entrustedwith the
management of the corporation, unlessotherwise provided by law;
(3) Stockholderor member authorizedby the Securities and Exchange Commission
whenever for any cause, there is no personauthorized to call a meeting (Sec. 50, lastpar);
(4)The special meeting for the removal of directors or trusteesmay be calledby the
secretary of the corporation or by a stockholderor member. (Sec.28)
5. The various votingproportions required for the approval of certain corporate acts are.
(1)To amend the articles of incorporation - a majority vote of the boardof directors or
trusteesand vote or written assent of 2/3 of the outstandingcapital stock or of the
members. (Sec. 16.);
5. 6. The meeting of its stockholder or members alwaysnecessary in order to bind the
corporation by their acts is.
No, in at least (2) cases:
(1)A corporationmay amend its articles of incorporationby a majority of vote of its boardof
directors or trusteesand the vote or written assent of 2/3 of its members or of the
stockholdersrepresentingat least 2/3 of the outstandingcapital stock(sec. 16);and
(2) A corporationwill be bound by the unanimousact or agreement of its stockholdersor
members althoughexpressed elsewhere other thana meeting.
7. An action taken in an improperly held or called meeting be valid when.
If the following requisites are present:
(1)The proceedings had andthe businesstransactedare within the power of the
corporation, thatis, they are not ultravires;and
(2) All the stockholdersor members of the corporationare presentor presented at the
meeting.
8. The manner by which a stockholder or member may vote.
A stockholderor member may vote:
(1)Directly; or
(2) Indirectly, througha representative -
(a) by means of a proxy.
(b) by a trusteeundera votingtrustagreement
(c) by executor, administrator,receiver, or other legalrepresentative duly appointed by
the court.
6. 9. In case of pledged or mortgaged shares of stock corporations, the one who should have
the right to attendand vote at meetings of stockholders
The pledgoror mortgagor,unlessthe pledgee or mortgagee is expressly given suchright in
writing which is recorded on the appropriate corporatebooks by the Pledgoror mortgagor.
Note: Treasury sharesshallhave no voting right as longas such remains in the treasury.
10. Rule as to votingin case of joint ownership of stock.
In case of sharesof stock owned jointly by two or more persons,Section 56 requires the
consent of all the co-owners in order to vote such stock. Such consentis not necessary
where:
(1)There is a written proxy executed by the joint-owners authorizing one or some of them or
any other person to vote for all; and
(2) The sharesare owned in an "and/ or" capacity by the holdersthereof, in which case any
one of the joint-owners can vote said sharesor appointa proxy thereof.
11. Definition of Proxy.
The term proxy is used to refer to:
(1)The formal authority given by the holderof a stock, who hasa rightto vote it, or by a
member, to anotherperson to exercise the voting rightsof the former;
(2) The personso authorized; or
(3) The instrumentwhich evidences the authorityof the agent.
12. Give the limitations on the use of proxies.
Under Section 58, they are as follows:
(1)Proxies mustbe in writing signed by the stockholderor member andfiled before the
scheduledmeeting with the corporatesecretary;