Photo from Unsplash | Dane Deaner
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Section 27 of the Revised Corporation Code provides a clear legal framework for the removal of corporate directors and trustees, balancing the need for effective governance with safeguards for minority rights.
Section 27 of the Revised Corporation Code provides for the manner in which a director of a corporation can be removed. It provides:
Section 27. Removal of Director or Trustees. – Any director or trustee of a corporation may be removed fro office by vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock, or in a nonstock corporation, by a vote of at least two-thirds (2/3) of the member 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 for the purpose of removing any director or trustee must be called by the secretary on order of the president, or upon written demand of stockholders representing or holding at least a majority of the outstanding capital stock, or a majority of the members entitled to vote. If there is no secretary, or the secretary, despite demand, fails or refuses to call the special meeting or to give notice thereof, the stockholder or member of the corporation signing the demand may call the special meeting or to give notice thereof, the stockholder or member of the corporation signing the demand may call for the meeting by directly addressing the stockholders or members. 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 representation to which they may be entitled under Section 23 of this Code.
Who May Be Removed?
Under the Revised Corporation Code, any director of a stock corporation or a trustee of a non-stock corporation may be removed from office.
Requirements for Removal
The removal of a director or trustee requires the affirmative vote of at least two-thirds (2/3) of the outstanding capital stock (in the case of stock corporations) or at least two-thirds (2/3) of the members entitled to vote (in non-stock corporations). This vote ensures that the decision to remove a director or trustee reflects the interests of a significant majority of shareholders or members, thereby promoting fair representation.
The removal of a director or trustee may occur during either a regular or special meeting of the corporation. However, a special meeting specifically convened for the purpose of removal requires advance notice to the stockholders or members, indicating that the removal of a director or trustee will be discussed and voted upon.
For the purpose of removal, a special meeting must be called. This may be initiated in the following ways:
- By the Secretary: A special meeting can be called by the corporate secretary, upon the order of the president.
- By a Majority of Stockholders or Members: A special meeting can be called upon the written demand of stockholders representing or holding at least a majority of the outstanding capital stock, or a majority of the members entitled to vote.
Proper notice of the meeting must be issued in advance, and this notice should specify the time, place, and purpose of the meeting, with particular reference to the intention to propose the removal of a director or trustee. The notice may be delivered either by way of publication or through a written notice as prescribed by the Revised Corporation Code.
Grounds for Removal
Directors and trustees may be removed with or without cause. This flexibility allows for the removal of a corporate officer even in the absence of a specific reason. However, it is important to note the exception: the removal without cause cannot be used in a manner that deprives minority stockholders or members of their right to proper representation.
Click here to subscribe to our newsletter
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
All rights reserved.