September 17, 1991

Mr. Libertador A. Racaza

NR 05 Doa Juana Subdivision
Pala-o, Iligan City
Sir:
This refers to your letter dated August 26, 1991, requesting clarification on the
query posed therein.
LexLib

As stated, you are a stockholder of a manufacturing corporation. You acquired

your shares, together with other employees, through payroll deduction and through
SSS Incentive Plans as former employees. You believe that no matter how small your
shares may be, you still have an interest in the company. You would like therefore to
be clarified as to your rights and privileges as a stockholder, particularly on whether
you have the right to censor and ask for the repeal of questionable Board Resolutions
to protect the rights of small stockholders.
It is well-settled that the Board of Directors is the governing body of the
corporation with whom the management of the corporate affairs is vested. The
pertinent provision of the Corporation Code provides thus:
"SECTION 23.
The Board of Directors or Trustees. Unless
otherwise provided in this Code, the corporate powers of all corporations
formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks . . . ." (Emphasis
supplied)

The board of directors of a corporation is entrusted with the management of its

business and property for the benefit of all stockholders and occupy the position of
trustees for the collective body of stockholders in respect to such business. It is the
duty of the board to administer the corporate affairs for the common benefit of all
stockholders and exercise best care, skill and judgment in the management of the
corporation business solely in the interest of the corporation. (3 Fletcher, Cyc. Corps.,
Sec. 638 at 142-143 1975 Rev. Vol.) Shareholders entrust their investments in the
corporate business to the management of the board of directors, thus establishing a
fiduciary relationship between them, and unless tainted with bad faith and fraud, the
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CD Technologies Asia, Inc.

Securities and Exchange Commission 2014

stockholders cannot interfere with the exercise of business judgment by the Board
relating to the management of the Corporation. Accordingly, subject to Sections
31-34 of the Corporation Code, all powers directly conferred by law or impliedly
granted by necessity must be exercised by the Board of Directors. The dealings of the
Board may be subjected to review and scrutiny only where the corporation's or
stockholders' interest are prejudiced.
However, it has to be emphasized that the corporate powers conferred upon the
board of directors usually refer to the ordinary business transactions of the
corporation and does not extend beyond the management of ordinary corporate affairs
nor beyond the limits of its authority. There are some powers which are reserved to
the shareholders and which cannot be exercised by the directors until they are
conferred by the stockholders. No board can usurp the power of control of the
corporation vested by law in the shareholders. (19 Am. Jur. 2d p. 577). Thus, while
the performance of the corporate functions pertaining to the management of the
corporation is vested upon the Board of Directors, the Corporation Code has
expressly restricted Board authority and made certain corporate actions to rest for
their validity upon the concurrence of the required statutory votes of the stockholders
by prior action or subsequent ratification, some of which are as follows:
cdtai

1.

Amendment of the articles of incorporations; (Section 16)

2.

Adoption of new amendment or repeal of by-laws; (Section 48)

3.

Sale, lease, exchange, mortgage, pledge or other disposition of all

or substantially all of the corporate assets; (Section 40)

4.

Incurring, creating or increasing bonded indebtedness; (Section 38)

5.

Increase or decrease of capital stock; (Section 38)

6.

Merger or consolidation of the corporation with another

corporation or other corporations; (Section 76)

7.

Dissolution of the corporation; (Sections 118-120)

8.

Investment of corporate funds in another corporation, a business or

for any purpose other than the primary purpose; (Section 42)

9.

Power of the corporation to enter into management contract with

another corporation; (Section 44)

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CD Technologies Asia, Inc.

Securities and Exchange Commission 2014

10.

Power of the corporation to declare stock dividends. (Section 43)

Likewise, a stockholder has the following basic individual rights:

1.

to vote in the election/removal of Directors at all stockholders

meeting;

2.

to appoint proxy to vote at stockholders meeting; (Section 58)

3.

to compel the calling of stockholders' meeting when for any cause

there is no person authorized to call a meeting; (Section 50)

4.

to enter into a voting trust agreement; (Section 59)

5.

to inspect books and records; (Section 74)

6.

to be furnished the most recent financial statements; (Section 75)

7.

to receive dividends; (Section 43)

8.

Appraisal Right; (Section 81)

9.

to participate in the distribution of corporate assets upon

dissolution. (Section 122)

Any grievance or complaint against the corporation, its directors or officers for
violation of the abovementioned rights of stockholders may be filed with the
Securities Investigations and Clearing Department of this Commission pursuant to
P.D. 902-A, as amended.
Please be advised accordingly.

prcd

Very truly yours,

(SGD.) ROSARIO N. LOPEZ
Chairman

Copyright 1994-2015

CD Technologies Asia, Inc.

Securities and Exchange Commission 2014