Asian Brothers Corporation

December 17, 1986 Asian Brothers Corporation Villongco Road, Sucat Muntinlupa, Metro Manila Gentlemen: This relates to your letter, dated December 5, 1986, requesting the opinion of this Commission on the query posed therein. cdll It appears therein that your stockholders elected five (5) directors conformably with what is provided for in the articles of incorporation. If two (2) of the five (5) directors automatically cease to become directors because of sale/transfer of all their respective shares, your queries are: 1. May the three (3) remaining directors convene and constitute themselves as the Board of Directors? 2. Is it mandatory that an election be held to fill in the slots vacated by the two (2) directors? Anent thereto, quoted hereunder is Section 25 of the Corporation Code which provides in part thus: "SECTION 25. Corporate Officers, quorum . xxx xxx xxx The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and by the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at the meeting at which there is a quorum shall be valid as a corporate act ,except for the election of officers which shall require the vote of a majority of all the members of the board. xxx xxx xxx (emphasis supplied). Corollary thereto, Section 4, Article IV of your by-laws reads thus: "A majority of the entire membership of the Board shall be necessary to constitute a quorum at any meeting of the Board of Directors and to decide any matter that may come before a meeting. ...." The general rule is well settled that the power of a board of directors is not suspended by vacancies in the board unless the number is reduced below a quorum, the rule being that the number necessary to constitute a quorum under a by-law which provides that a majority of the directors shall be necessary and sufficient to constitute a quorum, is a majority of the entire board, notwithstanding there may be vacancies in the board at the time. (2 Fletcher, Cyc. Corps. 1954 Rev. Ed.,sec. 421, p. 276-277). Hence, your first query is answered in the affirmative. Regarding your second query, the following provision of the Corporation Code is quoted: "SECTION 29. Vacancies in the office of directors or trustees . Any vacancy occurring in the board of directors or trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum ;otherwise, said vacancies must be filled by the stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be elected only for the unexpired term of his predecessors in office. xxx xxx xxx (emphasis supplied) Likewise, Section 11, Article IV of your by-laws reads thus: "Any vacancy in the Board of Directors caused by death, resignation, disqualification or any other cause, except by removal or expiration of term may be filled by the majority vote of the remaining directors then in-office constituting a quorum, and each directors so elected shall hold office for a term to expire at the net annual election of directors, and until his successors shall be duly elected and qualified or until his death or until he shall resign or shall have been removed in the manner herein provided." (emphasis ours) The remaining members of the board of Asian Brothers Corporation, constituting a quorum, are conferred the statutory and contractual privilege to fill-in the existing vacancies in the board. It must be emphasized that both the law and your by-laws used the word " may ".In this connection, "may" ordinarily denotes permission and not a command. (Crawford, Statutory Construction, sec. 410, p. 765).Thus, it is not mandatory that an election be held to fill in the slots vacated by the two (2) directors, for as long as a quorum is obtained in the board. prcd Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman