·I =..............,====''r,.._..,....,.~...,~!..=-=----=·---·-·~,..---=:::~'""""== ~- . . ==·- .., ,_,_ .~~:~r. "==-=--"""~·~-~-~--~==~·~-~=·~---_,,_,,,,,,_,.,. ... ·=-,-~---~- The Corporation Code is not the only law governing corporations and other business enterprises in the Philippines, albeit it is held to be the primary basis of any corporate entity's primary franchise. Section 4 of the Corporation Code provides that corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of the Corporation Code, insofar as they are applicable. Sections 87 to 95 of the Corporation Code also allows the creation of non-stock corporations that may be formed or organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agriculture and like chambers, or any combination thereof. Technically, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers. While the rule remains that a corporation has a personality separate and distinct from the individual stockholders, members, directors, or trustees who comprised it, an organization's acts and omissions are decided upon by those who are in control of the entity, and for which they would be held to account. Section 23 of the Corporation Code provides that corporate powers of all corporations formed under said law shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees, unless otherwise provided in the Corporation Code.57 Section 23 of the Corporation Code is an expression of the doctrine of centralized management in corporate law, whereby the consent of the corporation in all contracts and transactions that it enters into as a party is effected through its board of directors. Stated otherwise, the corporation's consent is that of its board of directors. 58 Nevertheless, when members of the board and corporate officers act within the lawful scope of their authority, they do not become personally liable for such acts, which would otherwise be attributed as acts or omissions of the corporation, being a separate juridical entity. Section 31 of the Corporation Code provides when directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. Certainly, in Philippine jurisdiction, the members of the board of directors have a three-fold duty: duty of obedience, duty of diligence, and duty of loyalty. Accordingly, the members of the board of directors (1) shall direct the affairs of the corporation only in accordance with the purposes for which it was organized; (2) shall not willfully and knowingly vote for or assent to patently unlawful acts of the corporation or act in bad faith or with gross negligence in directing the affairs of the corporation; and (3) shall not acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees. 59 On the other hand, there are other specific laws that would impose punitive sanctions on corporations and their responsible officers and directors. For example: • The Comprehensive Agrarian Reform Law of 1988 (Republic Act No. 6657) as amended by Republic Act No. 9700 (2009), Section 25 provides that if the offender is a corporation or association, the officer responsible therefor shall be criminally liable. • The Indigenous Peoples Rights Act (Republic Act No. 8371, October 29, 1997), Section 73 states that if the offender is a juridical person, all officers such as, but not limited to, its president, manager, or head of office responsible for their unlawful act shall be criminally liable therefor, in addition to the cancellation of certificates of their registration and/or license. 57 Take note that there are provisions of the Corporation Code that require the consent or ratification of the stockholders or members, even the approval of the government agency concerned, for a particular exercise of the corporate powers by the Board to be valid and effective. For example, Sec. 16 of the Corporation Code requires that "any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code, or the vote or written assent of two-thirds (213) of the members if it be a non-stock corporation... The amendment shall take effect upon its approval by the Securities and Exchange Commission... " 58 Villanueva, C.L. (2010). Philippine Corporate Law. Quezon City: Rex Printing Company, Inc. 59 Strategic Alliance Development Corporation vs. Radstock Securities Limited, et aL, G.R. No. 178158, December 4, 2009 29