Henry is a board director in XYZ Corporation. For being the “fiscalizer” in the Board, the majority of the board directors want him removed and his shares sold at auction, so he can no longer participate even in the stockholders’ meetings. Henry approaches you for advice on whether he can be removed as board director and stockholder even without cause. What is your advice? Explain “amotion” and the procedure in removing a director. (5%)
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Henry cannot be removed by fellow directors, nor can he be ousted as a stockholder. Under Section 27 of the Revised Corporation Code (RA 11232), removing a director requires a two-thirds vote of the
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Quick check
Under Section 27 of the Revised Corporation Code (R.A. No. 11232), who possesses the sole legal power to remove a corporate director?
Section 27 provides that only stockholders holding two-thirds of outstanding capital stock can remove a director.
Can a director who represents minority stockholders be removed from the board of directors without cause?
Removal without cause cannot be used to deprive minority stockholders of their statutory right to representation.
What is the legal definition of 'amotion' in corporate law jurisprudence?
Amotion refers to the premature removal or ousting of a director or officer from office before his term ends.
Can fellow board directors vote to auction off a stockholder's shares because he acts as a dissenting fiscalizer?
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Which primary statute governs the removal of directors, corporate amotion, and stockholders' rights in the Philippines?
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Learn more about these topics
1. Removal of Directors
Under Section 27 of the Revised Corporation Code of the Philippines (Republic Act Number 11232), the power to remove a director belongs exclusively to the stockholders or members of the corporation. Board directors have no legal authority to remove a fellow director. Removal requires a vote of stockholders representing at least two-thirds of the outstanding capital stock at a regular or special meeting called for that purpose. Furthermore, while removal may be with or without cause, removal without cause cannot be used to deprive minority stockholders of their statutory right to cumulative voting representation on the board.
2. Corporate Amotion Definition
Under Philippine corporate jurisprudence, amotion is defined as the premature ousting or removal of a director or officer from corporate office before the expiration of his lawful term. Amotion can only be lawfully executed by the body possessing the statutory power of removal, which is the stockholders holding two-thirds of the outstanding capital stock. Any attempted amotion of a director executed solely by vote of fellow board directors is completely void ab initio for total lack of statutory authority, regardless of whether the majority directors cite cause or act without cause.
3. Protection of Stockholders
Under Republic Act Number 11232, ownership of shares of stock in a corporation is personal property that cannot be arbitrarily confiscated or sold at auction by fellow directors. A stockholder cannot be ousted or deprived of his proprietary membership shares without legal cause and due process, such as delinquency in paying subscription calls under Section 67. Being a fiscalizer or dissenting voice in board meetings does not constitute delinquency or statutory ground for auctioning shares. Henry retains his full legal rights as a stockholder to attend meetings and vote.