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Title V - by Laws

The document discusses by-laws, which are the rules and regulations enacted by a corporation to govern itself and its members. By-laws are relatively permanent rules that are written into the corporate charter. They bind the corporation and must be followed. A corporation has the inherent power to adopt by-laws for its internal governance. While by-laws are recommended, a corporation will not be dissolved for failing to adopt them within one month of receiving its certificate of incorporation. By-laws can be adopted before or after incorporation but must be consistent with law and not violate public policy or morals. They can be amended by a majority vote of directors and shareholders or through prior delegation of power to the board.

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Julia Unarce
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105 views3 pages

Title V - by Laws

The document discusses by-laws, which are the rules and regulations enacted by a corporation to govern itself and its members. By-laws are relatively permanent rules that are written into the corporate charter. They bind the corporation and must be followed. A corporation has the inherent power to adopt by-laws for its internal governance. While by-laws are recommended, a corporation will not be dissolved for failing to adopt them within one month of receiving its certificate of incorporation. By-laws can be adopted before or after incorporation but must be consistent with law and not violate public policy or morals. They can be amended by a majority vote of directors and shareholders or through prior delegation of power to the board.

Uploaded by

Julia Unarce
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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TITLE V – BY LAWS

Sec. 46 and 47

 The By-laws of a corporation are the rules and regulations or private laws enacted by
the corporation to regulate, govern and control its own actions, affairs and concerns and
of its stockholders or members and directors and officers in relation thereto and among
themselves in their relation to the corporation.
 They are relatively permanent and continuing rules of action adopted by the corporation
for its own government and that of the individuals composing it and those having the
direction, management and control of its affairs and activities.
 They are written into charter and becomes part of the fundamental law of the
corporation, and the corporation, its directors, officers and members are bound by and
must comply with them.

BY LAWS RESOLUTION
Permanent rule of action and mode of Applies only to a single act of a
conduct of corporate affairs corporation

 Every corporation has the inherent power to adopt by-laws for its internal government
and to regulate the conduct and prescribe the rights and duties of its members towards
itself and among themselves.

EFFECT OF NON-ADOPTION:
 As a general rule, the corporation should adopt a code of by-laws for its government
within one month after receipt of official notice of the issuance of the Certificate of
Incorporation by the SEC.
- However, the corporation is not automatically dissolved if no by-laws are adopted
within such period.
- The law is merely directory and not mandatory.
- The fact that the by-laws are allowed to be filed prior to incorporation rules out
mandatory compliance with the requirement of filing the by-laws.
 There are cases where the by-laws are unnecessary to corporate existence or to valid
exercise of corporate powers. In the absence of a law to the contrary, by-laws are not
necessary either to the existence of the corporation or to a valid exercise of power
conferred upon it.
 Until the by-laws have been adopted the corporation may not be able to act for the
purposes of its creation, and that the first and most important duty of the members is to
adopt them. With this, the adoption of the by-laws is a matter of practical and not of
legal necessity.

P.D 902-A
 Provided for the consequences of the non-filing of the by-laws as the Corporation
Code is silent on the matter.
- The SEC has the power to suspend or revoke, after proper notice and hearing, the
franchise or certificate of registration of corporations for failure to file the by-laws
within the required period.
- The fact that the corporation has failed to file the by-laws within the prescribed
period, does not ipso facto lose its powers as such. At the very least, it may be
considered as a de facto corporation whose existence may only be attacked through
a direct proceeding initiated for such purpose.

 The by-laws may be adopted before or after incorporation. In both cases, they shall
only be effective upon issuance of the SEC by a certification that the by-laws are not
inconsistent with the Corporation Code.

PRE-INCORPORATION POST-INCORPORATION
By-laws shall be approved and signed by By laws shall be adopted by the
the incorporators corporation by the affirmative vote of the
stockholders representing at least a
majority of the outstanding capital stock.

By laws shall be signed by the


stockholders or embers voting for them
and shall be kept in the principal office of
the corporation subject to inspection
rights.

A copy, duly certified by a majority of the


directors and trustees and countersigned
by the secretary, shall be filed with the
SEC and shall be attached the original
AOI.

Requisites of a valid AOI:

a. MUST BE CONSISTENT WITH THE CONSTITUTION, CORPORATION CODE AND OTHER


PERTINENT LAWS AND REGULATIONS – because the by-laws are subordinate to the
corporation and related statutes. The corporation cannot acquiesce to its validity as
to waive such is ultra vires.
b. MUST NOT BE CONTRARY TO THE AOI – the by-laws cannot specify powers that are
not expressly provided for or implied in the AOI.
c. MUST NOT BE CONTRARY TO MORALS AND PUBLIC POLICY - the provisions of the
by-laws must be reasonable and must not be discriminatory, arbitrary or oppressive
upon the shareholders.
d. MUST NOT DISTURB VESTED RIGHTS
BINDING EFFECT OF THE AOI –
 The by-laws are binding not only upon the corporation but also on its stockholder,
members, and those having direction, management and control of its affairs.
 However, they are not binding on subordinate employees and third persons having
no actual knowledge thereof.

SEC. 48 AMENDMENTS TO BY-LAWS


Two ways to amend by-laws:
1. Amendments by the stockholders with the board;
 Majority vote of the board of directors or trustees and the owners of at least a
majority of the outstanding capital stock, or at least a majority of the members
in a non-stock corporation, at a regular or special meeting called for the purpose.
2. Amendment by the board after due delegation by the stockholder
 The board alone can amend if there was a prior delegation of such powers. The
owners of the 2/3 of the outstanding capital stock or 2/3 of the members in a
non-stock corporation shall so vote at a regular or special meeting.
 Only a majority vote of the stockholders is required to revoke such power.
 Both should be conducted in a stockholder’s meeting.

The amended by-laws shall be filed with the SEC and the same shall be attached to the AOI and
By-laws. If the SEC approved such, the approval has the presumption of regularity.

*NOTE:
1. The one-month period to file has been amended.
2. the member’s resolution authorizing the adoption of the new by-laws or to amend the same
shall be attached and filed with the SEC.

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