Pursuant to its By-Laws, Soei Corporation’s Board of Directors created an Executive Committee to manage the affairs of the corporation in between board meetings. The Board of Directors appointed the following members of the Executive Committee: the President, Sarah L; the Vice President, Jane L; and, a third member from the board, Juan Riles. On December 1, 2013, the Executive Committee, with Sarah L and Jane L present, met and decided on the following matters:
1. Purchase of a delivery van for use in the corporation’s retail business;
2. Declaration and approval of the 13th month bonus;
3. Purchase of an office condominium unit at the Fort; and
4. Declaration of P10.00 per share cash dividend.
Are the actions of the Executive Committee valid? (4%)
Suggested answer only. Not an official answer and not legal advice.
No, the actions of the Executive Committee are not valid. Under Section 34 of the Revised Corporation Code (RA 11232), an Executive Committee must be composed of at least three members
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Quick check
What is the statutory requirement regarding the composition of an executive committee under Section 34 of Republic Act Number 11232?
An executive committee must be composed of at least three members of the board of directors.
Which corporate power is expressly non-delegable to an executive committee under Section 34 of the Revised Corporation Code?
The power to declare cash dividends cannot be delegated to an executive committee under Section 34.
What is the legal status of actions taken by an executive committee that includes a non-board member as a committee member?
Actions of an improperly constituted executive committee composed of non-board members are legally invalid.
Can the board of directors delegate the authority to amend corporate by-laws to an executive committee?
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Which primary statute governs executive committee creation, board delegation limits, and dividend declarations in the Philippines?
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Learn more about these topics
1. Executive Committee Composition
Under Section 34 of the Revised Corporation Code of the Philippines (Republic Act Number 11232), an executive committee created pursuant to corporate by-laws must be composed of at least three members of the board of directors. If any member appointed to the executive committee is not a member of the board of directors, the committee is improperly constituted. Any corporate action, transaction, or resolution passed by an improperly constituted executive committee is legally invalid and non-binding on the corporation unless subsequently approved and ratified by a validly constituted board of directors.
2. Non-Delegable Board Powers
Under Section 34 of Republic Act Number 11232, the board of directors is expressly prohibited from delegating certain fundamental corporate powers to an executive committee. These non-delegable matters include board actions requiring shareholder approval, filling board vacancies, amending by-laws, adopting or amending board resolutions that cannot be amended under the charter, and declaring cash dividends. The power to declare cash dividends belongs exclusively to the board of directors sitting as a body, and any attempt to delegate dividend declaration to an executive committee is null and void.
3. Executive Committee Quorum
Under Philippine corporate law, an executive committee acts by majority vote of all its members, provided a valid quorum is present. However, a quorum of an executive committee can only exist if the meeting is attended by validly qualified committee members who are concurrent members of the board of directors. Where a meeting is attended by individuals who are not board members, no valid quorum exists. Consequently, ordinary corporate management decisions—such as purchasing capital equipment or approving employee bonuses—fail for lack of a validly constituted executive committee.