REMOVAL OF CORPORATE PRESIDENT

How can a corporate president be removed?

Under Sec. 28 of the Corporation Code, any director or trustee of a

corporation may be removed from office by a vote of the stockholders holding or
representing at least two-thirds (2/3) of the outstanding capital stock. (This is
based on the premise that under Section 25 of the Corporation Code, the President
must be a director.)

When shall the removal take place?

Such removal shall take place either at a regular meeting of the corporation
or at a special meeting called for the purpose, and in either case, after previous
notice to stockholders or members of the corporation of the intention to propose
such removal at the meeting.

Who will call the special meeting?

A special meeting of the stockholders or members of a corporation for the

purpose of removal of directors or trustees, or any of them, must be called by the
secretary on order of the president or on the written demand of the stockholders
representing or holding at least a majority of the outstanding capital stock.

What will happen if the Secretary fails or refuses to call the special meeting?

Should the secretary fail or refuse to call the special meeting upon such
demand or fail or refuse to give the notice, or if there is no secretary, the call for
the meeting may be addressed directly to the stockholders or members by any
stockholder or member of the corporation signing the demand.

Is notice necessary for the special meeting to take place?

Yes. Notice of the time and place of such meeting, as well as of the intention
to propose such removal, must be given by publication or by written notice
prescribed in this Code.
Is the removal of a corporate officer always be with just cause?

No. Removal may be with or without cause: Provided, That removal without
cause may not be used to deprive minority stockholders or members of the right of
representation to which they may be entitled under Section 24 of this Code.

What constitutes with cause as basis for removal?

The Corporation Code does not define the cause that can be a legal basis for
removal of a member of the Board. What is clear is that for causes goes into the
three duties of a director loyalty, obedience, and diligence.

Duty of Obedience

Section 25, Corporation Code x x x The directors or trustees

and officers to be elected shall perform the duties enjoined on them by
law and the by-laws of the corporation. x x x

Duty of Diligence

Section 31, Corporation Code Directors or trustees who

willfully and knowingly vote for or assent to patently unlawful acts of
the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such 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.

Duty of Loyalty

Embodied in Section 31 (Conflict of Interest), Section 32 (Self-

dealing directors), Section 33 (Interlocking directors), and Section 34
(Usurpation of Corporate Business Opportunity) essentially state that
the director owes loyalty and allegiance to the corporation, a loyalty
that is undivided.
 The jurisprudence, nevertheless, does not also specifically define or
enumerate the instances of just cause. Nevertheless further, there are
disqualifications and factors affecting eligibility of the directors which may be
considered, to wit:

Disqualifications:

1. Conviction by final judgment of an offense punishable by

imprisonment for a period exceeding six (6) years, or a violation of this
Code committed within five (5) years prior to the date of election or
appointment.

2. Other disqualifications under applicable special laws.

In order to be eligible as a director, what is material is the legal title to, not
beneficial ownership, of the stock as appearing on the books of the corporation.
(Lee vs. CA)

With these enumerated, it is safe to conclude that the president/director can

be removed with causes affecting his/her functions as such.

CASE GROUNDS FOR REMOVAL OF BOARD OF DIRECTORS

NECTARINA S. RANIEL and MA. VICTORIA R. PAG-ONG, vs. PAUL

JOCHICO, JOHN STEFFENS and SURYA VIRIYA, G.R. No. 153413, March
1, 2007

x x x Both the SEC and the CA held that Pag-ong's removal as director and
Raniel's removal as director and officer of Nephro were valid. For its part, the SEC
ruled that the Board of Directors had sufficient ground to remove Raniel as officer
due to loss of trust and confidence, as her abrupt and unauthorized leave of
absence exhibited her disregard of her responsibilities as an officer of the
corporation and disrupted the operations of Nephro. The SEC also held that the
Special Board Meeting held on February 2, 1998 was valid and the resolutions
adopted therein are binding on petitioners. x x x

(In this case Sir, the jurisdiction of SEC over intra-corporate dispute was not
yet transferred to RTC by INTERIM RULES OF PROCEDURE FOR INTRA-
CORPORATE CONTROVERSIES, Rule 6, Section 2)

RE: HOLD-OVER PRINCIPLE

To my mind Sir, the president/director may be removed from his office until
his successor has been elected and qualified. In the case of Detective and
Protective Bureau vs. Cloribel, the Supreme Court ruled that if no election is
conducted or no qualified candidate is elected, the incumbent director shall
continue to act as such in a hold-over capacity until the election is held and a
qualified candidate is so elected.

CASE HOLD-OVER PRINCIPLE

VALLE VERDE COUNTRY CLUB, INC. vs AFRICA, G.R. No. 151969,

September 4, 2009

x x x The holdover period is not part of the term of office of a

member of the board of directors

The word term has acquired a definite meaning in jurisprudence. In

several cases, we have defined term as the time during which the officer
may claim to hold the office as of right, and fixes the interval after which
the several incumbents shall succeed one another. The term of office is not
affected by the holdover. The term is fixed by statute and it does not
change simply because the office may have become vacant, nor because the
incumbent holds over in office beyond the end of the term due to the fact
that a successor has not been elected and has failed to qualify.

Term is distinguished from tenure in that an

officers tenure represents the term during which the incumbent actually
 holds office. The tenure may be shorter (or, in case of holdover, longer) than
the term for reasons within or beyond the power of the incumbent.

Based on the above discussion, when Section 23 of the Corporation

Code declares that the board of directors shall hold office for one (1) year
until their successors are elected and qualified, we construe the provision to
mean that the term of the members of the board of directors shall be only
for one year; their term expires one year after election to the office. The
holdover period that time from the lapse of one year from a members
election to the Board and until his successors election and qualification
is not part of the directors original term of office, nor is it a new term; the
holdover period, however, constitutes part of his tenure. Corollary, when an
incumbent member of the board of directors continues to serve in a holdover
capacity, it implies that the office has a fixed term, which has expired, and
the incumbent is holding the succeeding term.

After the lapse of one year from his election as member of the VVCC
Board in 1996, Makalintals term of office is deemed to have already
expired. That he continued to serve in the VVCC Board in a holdover
capacity cannot be considered as extending his term. To be precise,
Makalintals term of office began in 1996 and expired in 1997, but, by virtue
of the holdover doctrine in Section 23 of the Corporation Code, he continued
to hold office until his resignation on November 10, 1998. This holdover
period, however, is not to be considered as part of his term, which, as
declared, had already expired. x x x

With these Sir, it is clear that the PRESIDENT/DIRECTOR can be removed

at any time without corresponding cause since he/she no longer has the right over
the office. This is based