The articles of incorporation of Dakila Incorporated (DI) provides for a seven- member Board of Directors. Florante, the chairperson of the Board, resigned barely two months into office while Laura, another director, died in a vehicular accident on her sixth month in office, thereby leaving only five members in the Board. The one-year term of office of the remaining directors had just ended without an annual stockholders’ meeting being held since Laura was actually the majority stockholder of DI and her estate was still being settled. May the remaining five directors, acting as the Board, fill in the vacancies in the Board? Explain your answer.
Suggested answer only. Not an official answer and not legal advice.
No, the remaining five directors, acting as the Board, may not fill the vacancies in the Board.
Under Section 28 of the Revised Corporation Code and Valle Verde Country Club, Inc. v. Africa, remaining directors can fill vacancies only if they occur during an unexpired term. Once the term of office expires, hold-over directors lose the statutory power to fill board vacancies, which lodges exclusively with the stockholders.
Here, although the vacancies arose from resignation and death, the one-year term of the remaining directors lapsed before they filled the seats. Now acting merely in a hold-over capacity after term expiration, the remaining directors can no longer fill the vacancies.
Therefore, the remaining five directors cannot legally fill the board vacancies.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
Under Section 28 of the Revised Corporation Code, when may remaining directors fill a board vacancy?
Under Section 28, remaining directors constituting a quorum may fill vacancies occurring during an unexpired term.
In Valle Verde Country Club, Inc. versus Africa, what is the legal effect of term expiration on hold-over directors' power to fill vacancies?
Valle Verde established that hold-over directors lose statutory power to fill vacancies once the original term expires.
Who holds the exclusive authority to fill board vacancies after the original term of office of directors has expired?
Once the term expires, the authority to fill board vacancies resides exclusively in the stockholders or members.
What happens when a director continues to serve after the expiration of their one-year term because no election was held?
Directors whose terms expire continue serving in a hold-over capacity until successors are elected and qualified.
Which statute governs board vacancies and hold-over director capacities in Philippine corporate law?
Republic Act Number 11232, known as the Revised Corporation Code, governs board vacancies and corporate governance.
Learn more about these topics
1. Filling Board Vacancies
Under Section 28 of the Revised Corporation Code (Republic Act Number 11232), vacancies in the board of directors may be filled by the remaining directors if still constituting a quorum, provided the vacancy occurs during an unexpired term for reasons other than removal or expiration of term. When a vacancy arises due to resignation or death during a director's term, the remaining board members possess authority to elect a replacement to serve for the unexpired balance of that specific term.
2. Hold-Over Period Limitation
In Valle Verde Country Club, Inc. versus Africa, the Supreme Court held that the authority of remaining directors to fill board vacancies exists only during an unexpired term. Once a director's one-year term expires, the director continues to hold office merely in a hold-over capacity until a successor is elected and qualified. Directors acting in a hold-over capacity lose the statutory power to fill board vacancies, as the unexpired term has ceased to exist upon term expiration.
3. Stockholders Exclusive Power
When board vacancies exist after the term of office of the remaining directors has expired, the power to elect replacement directors resides exclusively in the stockholders. Hold-over directors cannot perpetuate themselves or fill vacancies on the board. A stockholders' meeting must be convened to conduct an election, ensuring that corporate management remains responsive to the direct mandate of the shareholders holding voting equity in the corporation.