There is now a provision in the Revised Corporation Code (RCC) permitting the constitution of an “emergency board” to allow a corporation to deal with certain contingencies. The general rule is that any vacancy occurring in the board of directors, other than by removal or expiration
The corporate treasurer mb.com.ph - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from mb.com.ph Daily Mail and Mail on Sunday newspapers.
Corporations can sue only by and through the authority of its board of directors. The stockholders, who are the owners, by law and necessity, are deemed to have turned over the complete management of the enterprise to their representatives who are called directors. If these directors, by default, unwillingness or breach of loyalty, do not take any action to protect the corporation from ultra vires or injurious acts, a stockholder, as an exception, can initiate legal action under the principle of derivative suits.
A derivative suit is defined as one brought by one or more stockholders in the name and on behalf of the corporation to redress wrongs committed against it whenever its officials refuse to sue, or are the ones to be sued, or hold control of the corporation (De Leon, The Corporation Code, p. 577). In cases of mismanagement where the wrongful acts are committed by the directors themselves, a stockholder may find that he has no redress because the former are vested by law with
Ultra vires, as used in corporate law, is not synonymous with an act being null and void. It is a Latin phrase (“beyond the powers”) describing an act which requires legal authority but which is done without it (Wikipedia). The Revised Corporation Code (Sec. 44) describes it as an act performed by a corporation “other than those conferred by this Code or by its articles of incorporation and except as necessary or incidental to the exercise of the powers conferred.”
There are two types of ultra vires acts: the first are those which are contrary to law and are, therefore, void; and the second are those which are performed outside the scope of the powers granted under the articles of incorporation (Herbosa&Recalde, the Revised Corporation Code, p.201). An ultra vires act is not necessarily null and void except when it is done for an illegal or unlawful purpose, such as when the corporation authorizes the smuggling of contraband goods.