Topic: Compensation of Directors

Name: Carmela Abergos

Corporation Code Provision: Section 30
After many difficult years, which called for sacrifices on the part of the
companys directors, ABC Manufacturing Inc. was finally earning substantial
profits. Thus, the President proposed to the BOD that the directors be paid a
bonus equivalent to 15% of the companys net income before tax during the
preceding year. The Presidents proposal was unanimously approved by the BOD.
A stockholder of ABC questioned the bonus. Does he have grounds to object?
ANSWER:
Yes, the stockholder as a valid and legal ground to object to the payment to the
directors of a bonus equivalent to15% of the companys net income. The law
provides that the total annual compensation of the directors, in the preceding
year, cannot exceed 10% of the companys net income before income tax (Sec
30 Corp Code).

Topic: Disloyalty of a director

Name: Carmela Abergos
Corporation Code Provision: Section 34
ABC Piggery Inc is engaged in raising and selling hogs in the local market. Mr de
Dios, one of its directors, while travelling abroad, met a leather good
manufacturer who was interested in buying pig skins from the Phil. Mr De Dios
set up a separate company and started exporting pig skins to his foreign contract
but pig skins were not sourced from ABC. His fellow directors in ABC complained
that he should have given this business to ABC. How should you decide on this
matter?
ANSWER:
I would decide in favour of Mr De Dios. ABC Inc is engaged in raising and selling
hogs in the local market. The company that Mr De Dios had set up was to
engage, as it did, in the export of pig skins. There is thus no conflict of interest
between Mr De Dios and ABC Inc so as to make the case fall within the conflict of
interest situation under the law. (Sec 34, Corporation Code)

Topic: Power to declare dividends

Name: Carmela Abergos
Corporation Code Provision: Section 43
During the annual stockholders meeting, Riza, a stockholder proposed to the
body that a part of the corporations unreserved earned surplus be capitalized
and stock dividends be distributed to the stockholders, arguing that as owners of
the company, the stockholders, by a majority vote, can do anything. As chairman
of the meeting, how would you rule on the motion to declare stock dividends?
ANSWER:
As the chairman of the meeting, I would rule against the motion considering that
a declaration of stock dividends should initially be taken by the BOD and
thereafter to be concurred in by a 2/3 vote of the stockholders (Sec 43Corp
Code). There is no prohibition, however, against the stockholders resolving to
recommend to the BOD that it consider a declaration of stock dividends for
concurrence thereafter by the stockholders.

Topic: Jurisdiction of the RTC

Name: Carmela Abergos

On December 6, 1988, A, an incorporator and the General Manager of the Paje

Multi Farms Co, resigned as GM and sold to the corporation his shares of stocks
in the corporation for P300th, the book value thereof, payable as follows: a)
P100th as down payment; b) P100th on or before 31 July1989; and c) the
remaining balance of P100th on or before 30 Sep 1989. A promissory note, with
an acceleration clause, was executed by the corporation for the
unpaid balance. The corporation failed to pay the first instalment on due date. A
then sued Paje on the promissory note in the RTC.
a) Does the court have jurisdiction over the case?
b) Would your answer be the same if A instead sold his shares to his friend Mabel
and the latter filed a case with the RTC against the corporation to compel it to
register the sale and to issue new certificates of stock in her name?

ANSWER:

a) The RTC has jurisdiction over the case. The SC said that a corporation may
only buy its own shares of stock if it has enough surplus profits therefore.
b) Yes. An action to compel a corporation to register a sale and to issue new
certificates of stock is itself an intra-corporate matter that exclusively lies with
the RTC. The RTC has jurisdiction over the cases which nvolves intra-corporate
controversy. As of 2006,
the
applicable
rule
is
that
there
is
a
TRANSFERRED JURISDICTION under Sec. 5.2 of the SRC (Securities Regulation
Code), the Commissions jurisdiction over all cases enumerated under PD 902-A
sec. 5 has been transferred to the Courts of general jurisdiction or the
appropriate Regional Trial Court.