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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:
In the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation. If a corporation, however, consciously lets one of its officers, or any other agent, to act within the scope of an apparent authority, it will be estopped from denying such officer’s authority. (WESTMONT BANK et. al v. INLAND CONSTRUCTION AND DEVELOPMENT CORP., G.R. NO. 123650 : March 23, 2009)
The law says –
SEC. 24. Corporate Officers. – Immediately after their election, the directors of a
corporation must formally organize and elect: (a) a president, who must be a director; (b) a treasurer, who must be a resident; (c) a secretary, who must be a citizen and resident of the Philippines; and (d) such other officers as may be provided in the bylaws. If the corporation is vested with public interest, the board shall also elect a compliance officer. The same person may hold two (2) or more positions concurrently, except that no one shall act as president and secretary or as president and treasurer at the same time, unless otherwise allowed in this Code.
The officers shall manage the corporation and perform such duties as may be provided in the bylaws and/or as resolved by the board of directors.
Jurisprudence says –
Acts of an officer that are not authorized by the board of directors/trustees do not bind the corporation unless the corporation ratifies the acts or holds the officer out as a person with authority to transact on its behalf.
Unauthorized acts that are merely beyond the powers of the corporation under its articles of incorporation are not void ab initio.
In Pirovano, et al., the court explained that corporate acts may be ultra vires but not void. Corporate acts may be capable of ratification:
[A] distinction should be made between corporate acts or contracts which are illegal and those which are merely ultra vires. The former contemplates the doing of an act which is contrary to law, morals, or public order, or contravene some rules of public policy or public duty, and are, like similar transactions between individuals, void. They cannot serve as basis of a court action, nor acquire validity by performance, ratification, or estoppel. Mere ultra vires acts, on the other hand, or those which are not illegal and void ab initio, but are not merely within the scope of the articles of incorporation, are merely voidable and may become binding and enforceable when ratified by the stockholders.
Thus, even though a person did not give another person authority to act on his or her behalf, the action may be enforced against him or her if it is shown that he or she ratified it or allowed the other person to act as if he or she had full authority to do so.
Source: UNIVERSITY OF MINDANAO, INC. vs. BANGKO SENTRAL NG PILIPINAS, ET AL., G.R. No. 194964-65, January 11, 2016
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