Photo from Unsplash | Ave Calvar
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:
Under Section 22 of the Revised Corporation Code, a director or trustee may hold office until the successor is elected and qualified. The principle is applicable provided that the failure to elect the new set of directors/trustees was due to valid and justifiable reasons. (Revised Corporation Code, SEC-OGC Opinion No. 19-12)
The law says –
Section 22. The Board of Directors or Trustees of a Corporation; Qualification and Term. – Unless otherwise provided in this Code, the board of directors or trustees shall exercise the corporate powers, condict all business, and control all properties of the corporation.
Directors shall be elected for a term of one (1) Year from among the holders of stocks registered in the corporation’s book while trustees shall be elected for a term not exceeding three (3) years from among the members of the corporation. Each director and trustee shall hold office until the successor is elected and qualified. A director who ceases to own at least one (1) share of stock or a trustee who ceases to be a member of the corporation shall cease to be such.
Source: Revised Corporation Code
The principle is applicable provided that the failure to elect the new set of directors/trustees was due to valid and justifiable reasons. In relation thereto, hold-over is not indefinite and that the corporation must still hold its election for directors and officers. In case the non-holding of annual meeting for the election for the Board of Directors and Officers is without justifiable cause, the Commission may compel the officers of any registered corporation or association to call the meetings of stockholders or members thereof under its supervision. Any stockholder or member may petition the Commission to order the calling of a meeting by giving proper notice required by the Code or by the by-laws. (SEC-OGC Opinion No. 19-12)
Jurisprudence says –
Term is distinguished from tenure in that an officer’s “tenure” represents the term during which the incumbent actually holds office. The tenure may be shorter (or, in case of holdover, longer) than the term for reasons within or beyond the power of the incumbent.
Based on the above discussion, when Section 23 of the Corporation Code declares that “the board of directors x x x shall hold office for one (1) year until their successors are elected and qualified”, we construe the provision to mean that the term of the members of the board of directors shall be only for one year; their term expires one year after election to the office. The holdover period — that time from the lapse of one year from a member’s election to the Board and until his successor’s election and qualification — is not part of the director’s original term of office, nor is it a new term; the holdover period, however, constitutes part of his tenure. Corollary, when an incumbent member of the board of directors continues to serve in a holdover capacity, it implies that the office has a fixed term, which has expired, and the incumbent is holding the succeeding term.
Source: MULTINATIONAL VILLAGE HOMEOWNERS’ ASSOCIATION, INC., VS. ARNEL M. GACUTAN, G.R. No. 188307. August 02, 2017
Read also: WHO ACTUALLY OWNS THE PROPERTIES OF A CORPORATION?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
All rights reserved.