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Section
28 of the of the Corporation Code states that any
director or trustee of a corporation may be removed from
office by a vote of the stockholders holding or
representing at least two-thirds (2/3) of the
outstanding capital stock, or if the corporation be a
nonstock corporation, by a vote of at least two-thirds
(2/3) of the members 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 of a
corporation for the purpose of removal of directors or
trustees, or any of them, must be called by the
secretary on order of the president or on the written
demand of the stockholders representing or holding at
least a majority of the outstanding capital stock, or,
if it be a nonstock corporation, on the written demand
of a majority of the members entitled to vote. Should
the secretary fail or refuse to call the special meeting
upon such demand or fail or refuse to give the notice,
or if there is no secretary, the call for the meeting
may be addressed directly to the stockholders or members
by any stockholder or member of the corporation signing
the demand. 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 the Corporation 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 of representation to which they
may be entitled under Section 24 of the Corporation Code
(Section 28, Corporation Code of the Philippines).
An
incorporating stockholder cannot be involuntarily
deprived of his interest or right to his shareholdings
by the directors. He may, however, transfer his shares
anytime, at his option though. And the directors cannot
exercise this option which belongs to the shareholder
himself. Hence, he cannot be removed as a stockholder
by the directors. Shares of stock are personal property
having the same characteristics as any other property,
and the owner, has absolute control over his
shareholdings to the exclusion of others including the
board of directors (SEC Opinion dated 9-30-2002).
It is a
well-known doctrine that the stockholders shall be the
ultimate masters, not the directors, “to make the
corporate government responsible to the owners.” If the
directors have a right to continue in office in
contemplation of their term, in spite of a change in
controlling stockholders, those who acquire control will
have to wait or else make some bargain with the existing
directors to resign in order that they may put in office
a new board of directors representing their views of
policy (Ballantine, pp. 434-435).
To help
illustrate the aforementioned principles, let us
consider the case of Alexander Van Twest vs. Edwin A.
Moran, et. al., (SEC Case 3896, September 23, 1994),
where one of the issues raised is whether or not
complainant was illegally ousted as president and
director of the aforementioned corporation. This was a
complaint filed to declare illegal the special
stockholders’ and directors’ meeting held by the four
other stockholders and directors of a corporation which
ousted complainant as director, president and chairman
of the Board of the corporation. The complainant
alleged in the complaint that the meeting held by the
other stockholders where he was ousted as president and
director of the corporation was illegal for lack of
required notice, and that under the corporation’s
bylaws, only the president or secretary can call a
meeting of the Board of Directors. Respondents admitted
in their respective answers that only the president or
secretary can call a meeting of the Board of Directors
under the corporation’s bylaws but they contended that
the meeting was called by the stockholders of record
themselves and was a meeting of stockholders and
directors of the corporation.
After a
careful review and scrutiny of the evidence adduced by
the parties, it was shown that no such written notice or
notice by publication was sent to the
stockholders/directors, much less to the complainant, of
said stockholders’ and/or Board of Directors’ meeting
called for the purpose of removing the complainant as
director of the corporation. Moreover, the removal of
the complainant was not valid for the same was not made
by a vote of the stockholders holding or representing
two-thirds (2/3) of the outstanding capital stock of the
corporation because complainant held 2,000 shares or 40
percent of the outstanding subscribed capital stocks of
the corporation.
The
Board of Directors has no inherent power to remove one
of its members (SEC Opinion dated September 5, 1979
addressed to Ramon G. Hechanova, citing Bruch v.
National Guarantee Credit Corp. 13 Del Ch. 1801).
Neither can the Board replace the vacancy in the Board
by removal effected by the members of the corporation
(SEC Opinion dated February 2, 1988). |
