Asian Brothers Corporation

February 20, 1987 Asian Brothers Corporation Villongco Road, Sucat Muntinlupa, Metro Manila Attention : Messr . Francis X . Perez Corporate Secretary Gentlemen: This relates to your letter, dated January 23, 1987 requesting the opinion of this Commission on the queries posed therein. prcd It appears that the articles of incorporation of Asian Brothers Corporation provides for a board of directors composed of five (5) directors. In this connection, your queries are: 1. May the stockholders opt to elect only three (3) directors instead of five (5) at the next annual meeting? Will this act of electing only three (3) directors violate the general rule that there should be at least five (5) directors? 2. Suppose the stockholders decide to increase the number of directors from five (5) to seven (7),will the presence of four (4) directors satisfy the "majority" requisite which proportion would exactly be the same if the number of directors is fixed only at six (6)? What is the formula in determining the "majority of the number of directors" as fixed in the articles of incorporation? As to the effect of an election of less than the required number of directors, cited hereunder is a previous ruling which establishes a precedent on the matter: "an election of a less number of directors than the number which the meeting was called to elect is valid as those actually elected." (In re: Excelsior Ins. Co.,38 Barb. 297; In re: Union Insurance Co.,22 Wend. 591, cited in 2 Fletcher, Cyc. Corp.,1969 Rev. Vol.,sec 291, p. 77). The stockholders of Asian Brothers Corporation may opt to elect only three (3) directors instead of five (5) at the annual stockholders' meeting. Such act would not violate the provisions of the Corporation Code, specifically, Section 14, paragraph 6 thereof, for such situation would merely give rise to vacancies of two (2) seats in the Board, which may be filled up in a subsequent special stockholders' meeting duly called for the purpose. "The general rule is well settled that the power of the board is not suspended by vacancies in the board unless the number is reduced below a quorum." (Fletcher, sec. 421, citing Porter v. Lassen Country Land & Cattle Co., 127 Cal. 261, 59 P 563). In a similar case, the court likewise held that "if a certain number of directors is provided for by statute or the articles of incorporation, the failure of the stockholders to fill all the directorships does not invalidate the title of the directors who are elected or prevent them from legally representing the corporation so long as they constitute a quorum." (Creat Palls & T.C.R. Co., v. Ganong, 48 Mont. 54, 136 P 390, cited in Fletcher, sec. 422, p. 270). In relation to your second queries, quoted hereunder is Section 25 of the Corporation Code which provides in part thus: "SECTION 25. Corporate officers, quorum . 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 a 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. LexLib xxx xxx xxx (Emphasis supplied). Section 4, Article IV of the by-laws of Asian Brothers Corporation states as follows: "SECTION 4. Quorum and manner of voting . 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 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. (Fletcher, sec. 421, p. 275, citing Porter v. Lassen Country Land & Cattle Co.,127 Cal 261, 59 P 563, and others.).It is, therefore, well settled that a majority means a majority of the whole number of the directors and a quorum remains the same even though there may be vacancies. (Cirrincione v. Polizzi, 14 App Div. 2d 281, 220 NYS2d 741, citing Fletcher, Cyc. Corp.,sec. 421). Thus, the formula in determining the "majority of the number of directors" as fixed in the articles of incorporation would be one-half plus one of the number of directors so fixed in the articles. Accordingly, the majority of seven (7) or six (6) directors as may be stated in the articles is four (4). Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman