SUBJECT (2019) MIDTERM REVIEWER
- Required vote to remove is 2/3 of OCS and can be
REMOVAL OF DIRECTORS OR TRUSTEES
Section 27. Removal of directors or trustees. – 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 in a non-stock
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 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 the
stockholders representing or holding at least a majority of
the outstanding capital stock, a majority of the members
entitled to vote.
If there is no secretary, or if 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 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 of
representation to which they may be entitled under
section 23 of this code.
The commission shall, motu propio or upon verified
complaint, and after due notice and hearing, order the
removal of a director or trustee elected despite the
disqualification, or whose disqualification arose or is
discovered subsequent to an election. The removal of a
disqualified directed shall be without prejudice to other
sanctions that the commission may impose on the board
of directors or trustees who, with knowledge of the
disqualification, failed to remove such director or trustee
2 MODES OF REMOVAL OF A DIRECTOR
1. By the Stockholders – through a regular or
special meeting.
- If it is through a special meeting, there must be a
call by the corporate secretary upon order of the
president or upon demand by majority of
stockholders of outstanding capital stock
- Corporate secretary to issue notice indicating the
time and place and intention to remove
NAME | NAME | NAME | NAME
ATTY.
with or without cause except if the director has
been elected by the minority stockholders
through cumulative voting, they cannot be
removed without just cause
2. By the SEC – after notice and hearing and only on
the ground of disqualification
BERNAS V. CINCO, GR NO. 163356-57 JULY 1, 2015
Facts:
The case is about Makati Sports Club where in this case, there is a
certain group that had been managing the sports club. And then
there were rumor that the group was mismanaging and certain
funds were missing. The oversight committee which is made up of
previous/past presidents of the organization, called for a special
meeting to remove the directors. And they were able to call that
meeting and they had that meeting and they were able to remove
and replace the ruling group. So now a case was brought by the
removed directors saying that the oversight committee had no right
to remove them as director.
Ruling:
The SC said that the relationship of the directors and the
stockholder is a Fiduciary Relationship. Such that the stockholder
being the proprietor of the corporate interest and the beneficiary of
the corporate interest should have the power to console the
directors, such that if the directors fail to perform their duty, then
the director has the right under the law, under the by-laws of the
corporation to remove and replace the erring director. So SC said,
of course, the stockholders of a corporation has the right to remove
the directors because of the fiduciary relationship between the
corporation, the stockholders and the directors.
In the case, there is a problem because the special stockholders
meeting was not called by the corporate secretary upon order of
the president. The corporate secretary and the president would not
call because they were part of the ruling group, so it was not called
by the secretary, it was not even called by the members but rather
it was called by the oversight committee. The by-laws of the Makati
Sports Club says that it is the president or the board of directors
who can call for a special meeting. So it did not comply with the
procedure.
So according to the SC that even if you have the right to remove
the directors you have to follow the procedure. Sec 28 says, it is
the corporate secretary or upon written demand of a stockholder.
And even the by-laws says it is the president and board of directors.
SC said that nowhere in the corporation code or in the bylaws of
the Makati Sports Club that the oversight committee is authorized to
set in whenever there is a breach of fiduciary duty and call for
special election for the purpose of removing the existing set of
officers and electing their replacement.
The oversight committee did not have the power to call. Thus, the
special stockholders meeting is void. Even if that special meeting
was later on ratified during the annual stockholders meeting. “SC
said, if the act is invalid it cannot be ratified.” You have to
distinguish an act which is illegal because it is against the law and
an act which is beyong the authority of the officers. SC said that the
act is against the law, it cannot be ratified. The law is very specific,
in order to remove a director you have to comply with the
requirements of the corporation code or the bylaws. There was also
an issue that it’s impossible for the president to call for the meeting
because he’s the person that’s supposed to be removed. SC said, it
doesn’t matter because you are left recourse with the court. If the
officers mentioned in the bylaws fails to call such meeting you can
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go to SEC.

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