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SUMMARY:
Gokongwei acquired a substantial amount of the capital
stock of San Miguel Corporation. SMC amended their
bylaws, inter alia, preventing competitors from being
nominated and elected as directors, which the SC upheld,
because
DOCTRINE:
A corporation is authorized to prescribe the qualifications of
its directors. A provision in the by-laws of the corporation
that no person shall qualify or be eligible for nomination for
elections to the board of directors if he is engaged in any
business which competes with that of the Corporation is
valid, provided, however, that before such nominee is
disqualified, he should be given due process to show that
he is not covered by the disqualification. A director stands
in fiduciary relation to the corporation and its stockholders.
The disqualification of a competition from being elected to
the board of directors is a reasonable exercise of corporate
authority. Sound principles of corporate management
counsel against sharing sensitive information with a
director whose fiduciary duty to loyalty may well require
that he discloses this information to a competitive rival.
FACTS:
John Gokongwei Jr. filed a petition with the SEC for declaration of
nullity of amended by-laws, injunction and damages, alleging
that the bylaws of San Miguel corporation, by which stockholders
who own substantial interests in corporations who are
competitors of San Miguel were prohibited from being elected as
directors.