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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:
Every corporation incorporated under the Revised Corporation Code (RCC) has the power and capacity to adopt bylaws, not contrary to law, morals or public policy, and to amend or repeal the same. The RCC provides the voting requirements for the adoption, amendment, and repeal of bylaws.
It is recognized by authorities that ‘every corporation has the inherent power to adopt by-laws ‘for its internal government, and to regulate the conduct and prescribe the rights and duties of its members towards itself and among themselves in reference to the management of its affairs. (Gokongwei v. SEC, G.R. No. 45911)
Section 35 of the Revised Corporation Code (RCC) provides that every corporation incorporated under its provisions has the power and capacity to adopt bylaws, not contrary to law morals or public policy, and to amend or repeal the same.
Contents of Bylaws
Under Section 46 of the RCC, a private corporation may provide the following in its bylaws:
- The time, place and manner of calling and conducting regular or special meetings of the directors or trustees;
- The time and manner of calling and conducting regular or special meetings and mode of notifying the stockholders or members thereof;
- The required quorum in meetings of stockholders or members and the manner of voting therein;
- The modes by which a stockholder, member, director, or trustee may attend meetings and cast their votes;
- The form for proxies of stockholders and members and the manner of voting them;
- The directors’ or trustees’ qualifications, duties and responsibilities, the guidelines for setting the compensation of directors or trustees and officers, and the maximum number of other board representations that an independent director or trustee may have which shall, in no case, be more than the number prescribed by the Commission;
- The time for holding the annual election of directors or trustees and the mode or manner of giving notice thereof;
- The manner of election or appointment and the term of office of all officers other than directors or trustees;
- The penalties for violation of the bylaws;
- In the case of stock corporations, the manner of issuing stock certificates; and
- Such other matters as may be necessary for the proper or convenient transaction of its corporate affairs for the promotion of good governance and anti-graft and corruption measures.
An arbitration agreement may be provided in the bylaws pursuant to Section 181 of the RCC.
Voting Requirements
Section 45 of the RCC provides that for the adoption of bylaws 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 nonstock corporations, shall be necessary.
The bylaws 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 by a majority of the directors or trustees and countersigned by the secretary of the corporation, shall be filed with the Securities and Exchange Commission (SEC) and attached to the original articles of incorporation.
On the other hand, Section 47 provides that a majority of the board of directors or trustees, and the owners of at least a majority of the outstanding capital stock, or at least a majority of the members of a nonstock corporation, at a regular or special meeting duly called for the purpose, may amend or repeal the bylaws or adopt new bylaws.
The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a nonstock corporation may delegate to the board of directors or trustees the power to amend or repeal the bylaws or adopt new bylaws: Provided, That any power delegated to the board of directors or trustees to amend or repeal the bylaws or adopt new bylaws shall be considered as revoked whenever stockholders owning or representing a majority of the outstanding capital stock or majority of the members shall so vote at a regular or special meeting.
Whenever the bylaws are amended or new bylaws are adopted, the corporation shall file with the SEC such amended or new bylaws and, if applicable, the stockholders’ or members’ resolution authorizing the delegation of the power to amend and/or adopt new bylaws, duly certified under oath by the corporate secretary and a majority of the directors or trustees.
The amended or new bylaws shall only be effective upon the issuance by the SEC of a certification that the same is in accordance with the RCC and other relevant laws.
To summarize:
- The adoption of bylaws requires the affirmative vote of the stockholders representing at least a majority of the outstanding capital stock.
- To amend, repeal, or adopt new bylaws, the vote of a majority of the board of directors or trustees and the vote of the owners of at least a majority of the outstanding capital stock is required.
- If the authority to amend the bylaws will be delegated by the stockholders to the board, a vote of at least 2/3 of the outstanding capital stock is required. To revoke this delegation of authority, a vote of at least majority of the outstanding capital stock would suffice.
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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/ 0917-5772207/ 09778050020.
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