Who can become directors/trustees in a corporation? How long can they sit as director/trustee?

Summary

Attorney Chris Batan Lasko's YouTube channel simplifies legal concepts, focusing on the role and composition of boards in corporations. He explains the term limits for directors and trustees, with directors serving one year and trustees up to three in non-stock corporations. Becoming a director requires stock ownership, registration, and maintaining shares throughout the term. The channel also covers additional qualifications set by bylaws and the importance of independent directors in corporations vested with public interest, who must constitute at least 20% of the board.

Takeaways

• 📚 The speaker, Attorney Chris Batan Lasko, aims to simplify the law in under 10 minutes on his YouTube channel.
• 👔 The role of the board of directors in a stock corporation and the board of trustees in a non-stock corporation are discussed, with the former being the governing body of the corporation.
• 🔑 Directors must be holders of at least one share of stock and must be the registered owner of such shares to qualify for the position.
• 🔄 Directors are elected for a term of one year, while trustees in a non-stock corporation can hold a term not exceeding three years, according to the Revised Corporation Code.
• 🏢 Juridical persons, such as corporations or partnerships, cannot serve as directors, but they can appoint someone to represent them on the board by providing that person with a qualifying share.
• 🌐 There is no citizenship or residence requirement for becoming a director in a corporation under the Revised Corporation Code.
• 👮‍♂️ Independent directors are required in corporations vested with public interest to act as watchdogs and protect the interests of the corporation and its stakeholders.
• 🔢 At least 20% of the board in such corporations must be composed of independent directors, who are shareholders with no other connection to the corporation except their stock ownership.
• 🏦 Corporations covered by specific regulations, such as those listed on an exchange or with assets over 50 million pesos, are required to have independent directors.
• 📝 The qualifications to become a trustee in a non-stock corporation are simpler, requiring only that the individual is a member in good standing of the corporation.
• 👋 The video concludes with an invitation for viewers to like, subscribe, and turn on notifications for new uploads, emphasizing the educational value of the content.

Q & A

What is the purpose of Attorney Chris Batan Lasko's YouTube channel?

The purpose of Attorney Chris Batan Lasko's YouTube channel is to simplify the law by discussing concepts and principles of law in under 10 minutes.

What is the role of the board of trustees in a non-stock corporation?

The role of the board of trustees in a non-stock corporation is to act as the governing body of the corporation, overseeing its management and ensuring the interests of the corporation are protected.

According to the revised corporation code, what is the standard term for a director in a stock corporation?

The standard term for a director in a stock corporation, as per the revised corporation code, is one year.

What is the maximum term for a trustee in a non-stock corporation as stated in the revised corporation code?

The maximum term for a trustee in a non-stock corporation is not more than three years, according to section 22 of the revised corporation code.

What are the basic qualifications required to become a director in a stock corporation?

To become a director in a stock corporation, one must be a holder of at least one share of stock, be the registered owner of such share(s), and continue to hold those shares for the entire period of their term as a director.

Why is there a stock ownership requirement for directors?

The stock ownership requirement ensures that directors, as shareholders, have a vested interest in the corporation and will act in the best interest of the corporation.

Can a juridical person become a director in a corporation?

No, only natural persons can be directors. Juridical persons, such as corporations or partnerships, cannot serve as directors, although they can be incorporators.

What is the purpose of having independent directors in corporations vested with public interest?

The purpose of having independent directors is to act as a watchdog, ensuring that the corporation operates in the best interest of its stakeholders and adheres to regulations, especially since it is vested with public interest.

What corporations are required to have independent directors constituting at least 20 percent of their board?

Corporations required to have independent directors include those covered by the Securities Regulation Code, banks, quasi-banks, non-bank financial institutions, pre-need companies, insurance companies, and other corporations engaged in businesses with public interest.

What is the qualification needed to become a trustee in a non-stock corporation?

The only qualification needed to become a trustee in a non-stock corporation is to be a member in good standing of the corporation.

Can the corporation add more qualifications for becoming a director beyond what is provided in the revised corporation code?

Yes, the corporation can add more qualifications for becoming a director, provided that these additional qualifications are included in the corporation's bylaws.

Outlines

00:00

📚 Introduction to Simplified Legal Concepts

Attorney Chris Batan Lasko introduces his virtual classroom and YouTube channel, which aims to simplify the law by discussing concepts and principles in under 10 minutes. He revisits the topic of the board of directors' role in a stock corporation and introduces the role of the board of trustees in a non-stock corporation, including the business judgment rule. The video will focus on the composition of the board of directors or trustees, their qualifications, term limits, and the specific requirements for directors or trustees in different types of corporations.

05:02

👔 Qualifications and Term Limits for Directors and Trustees

This paragraph delves into the qualifications required to become a director or trustee in a corporation. For directors, one must hold at least one share of stock, be the registered owner of that share, and maintain ownership for the duration of their term. The term limit for a director is one year, while a trustee in a non-stock corporation can serve for up to three years. The paragraph also discusses the rationale behind stock ownership requirements, the importance of being a registered owner, and the possibility for corporations to add additional qualifications for directors through their bylaws. It clarifies that only natural persons can be directors and not juridical persons, such as corporations or partnerships.

10:03

🏛 The Role of Independent Directors in Public Interest Corporations

The final paragraph explains the concept of independent directors, who are shareholders with no other connections to the corporation, and do not participate in its management. The purpose of having independent directors in corporations vested with public interest is to ensure they act as watchdogs, protecting the corporation and its stakeholders. The paragraph outlines the types of corporations required to have independent directors, which include those listed on stock exchanges, banks, quasi-banks, and other financial intermediaries, among others. At least 20% of the board must be composed of independent directors, as mandated by the revised corporation code.

Keywords

💡Board of Directors

The board of directors is the governing body of a corporation, responsible for overseeing the company's management and making strategic decisions. In the video, the role of the board of directors in a stock corporation is discussed, emphasizing their importance in exercising the corporation's powers and representing the interests of the shareholders.

💡Stock Corporation

A stock corporation is a type of business entity where ownership is represented by shares of stock that can be publicly traded. The video script mentions the role of the board of directors in a stock corporation, highlighting the significance of this entity in corporate governance.

💡Board of Trustees

In contrast to a stock corporation, a non-stock corporation operates without the issuance of stocks and is governed by a board of trustees. The video explains the role and term limits of trustees, which differ from those of directors in a stock corporation.

💡Business Judgment Rule

The business judgment rule is a legal principle that protects directors from personal liability for actions taken in good faith on behalf of the corporation. It is mentioned in the script as a concept previously discussed, indicating its relevance to the responsibilities and protections of directors.

💡Term of Office

The term of office refers to the length of time an individual holds a position. The video script specifies that directors in a stock corporation serve for one year, while trustees in a non-stock corporation can serve for a term not exceeding three years, as per the revised corporation code.

💡Qualification

Qualification, in the context of the video, pertains to the requirements an individual must meet to become a director or trustee. For directors, this includes being a stockholder, being the registered owner of the shares, and maintaining share ownership throughout their term.

💡Stock Ownership Requirement

The stock ownership requirement is a condition for becoming a director in a stock corporation, as it ensures that the director has a vested interest in the company's success. The script explains that directors must hold at least one share of stock and continue to do so during their term.

💡Registered Owner

A registered owner is the person listed in the corporation's records as the owner of the shares. The video emphasizes the importance of being the registered owner, rather than just the actual owner, to qualify as a director.

💡Juridical Person

A juridical person, such as a corporation or partnership, is an entity that has rights and duties apart from its members. The script clarifies that while juridical persons can be incorporators, they cannot serve as directors, as only natural persons can fulfill this role.

💡Independent Director

An independent director is a member of the board who does not have any other connection with the corporation except for being a shareholder. The video script discusses the role of independent directors in corporations vested with public interest, where they act as watchdogs to protect the corporation and its stakeholders.

💡Corporations Vested with Public Interest

Corporations vested with public interest are those that have a significant impact on the public, such as banks, insurance companies, and other financial institutions. The script explains that these corporations are required to have independent directors, who make up at least 20% of the board, to ensure proper oversight and accountability.

Highlights

Introduction to the role of the board of directors and trustees in corporations.

Explanation of the term limits for directors and trustees according to the revised corporation code.

Directors are elected for a one-year term, while trustees can serve for up to three years.

Qualifications required to become a director, including being a stockholder and registered owner of shares.

The rationale behind the stock ownership requirement for directors to ensure they look out for the corporation's best interest.

Clarification on the difference between being an owner and a registered owner of shares in the context of director qualifications.

Requirement for directors to continue holding shares during their term to maintain their position.

The possibility for corporations to add more qualifications for directors beyond those mandated by law.

Discussion on whether juridical persons can become directors, concluding that only natural persons are eligible.

The process for a corporation or partnership to have representation on the board by appointing a qualifying individual.

Absence of citizenship or residence requirements for directors under the revised corporation code.

Introduction to the concept of independent directors and their role in corporations vested with public interest.

The purpose of independent directors as watchdogs to protect the corporation and its stakeholders.

Types of corporations required to have independent directors, including those listed on an exchange or with large assets and shareholding.

Qualification to become a trustee, which is being a member in good standing of a non-stock corporation.

Summary of the key points discussed in the video about the terms and qualifications of directors and trustees.

Encouragement for viewers to like, subscribe, and enable notifications for new video uploads.

Transcripts

foreign

[Music]

hi i am attorney chris batan lasko

this is my virtual classroom welcome to

my youtube channel

in this channel i shall aim to simplify

the law i will discuss concepts and

principles of law in under 10 minutes

hello again everyone welcome back to my

channel

in my other video i talked about the

role of your board of directors in a

stock corporation what is the role that

your board of

trustees actually play in a non-stop

corporation

i also discussed in that video i will

put the link down below or the link up

there

i also

talked about the business judgment rule

now

in this video i want us to talk about

the composition of your board of

directors or trustees how do you qualify

to become a director or a trustee how

long can you become a director or a

trustee and how many directors or

trustees do we actually have for certain

types of corporations

now let's talk about the term of

directors or trustees

for how long can they hold such position

as a director as a director in a stock

operation or as a trustee in a non-stop

corporation

your revised corporation code tells us

that if you are elected as a director

then you shall hold a term of one year

if you're elected as a trustee in an

unstopped corporation

you can hold a term for not more than

three years

that is section 22 of your revised

corporation code particularly

the second paragraph where it says

directors shall be elected for a term of

one year from among the holders of

stocks registered in the corporation's

books while trustees shall be elected

for a term not exceeding three years

from among the members of the

corporation so that is one year for a

director and not exceeding a three-year

term for a trustee in a non-stop

corporation

now

how do you qualify or how can you become

qualified to become a director or

trustee in a corporation let's talk

about qualifying as a director first

for you to become a director you must be

a holder of at least one share of stock

the second requirement is that you must

be the registered owner of such share or

shares of stocks that you own in the

corporation

and lastly you must continue to be the

holder of those share

those shares rather of stocks if there

is more than one for the entire

period that you are a director

let's talk about that one by one

the first requisite is that for you to

become a director in a stock corporation

you must at least be a holder of at

least one share of stock

now why is there a stock ownership

requirement for you to become a director

remember that the board of directors the

role of such is that they are the

governing body of the corporation

the powers of the corporation are being

exercised through them

and therefore it is important important

rather that the directors in the board

actually look into the interest of the

corporation

if you are a shareholder if you have a

stake in the corporation then clearly

you will look out for the best interest

of the corporation

that is the rationale that is the reason

behind the stock ownership requirement

the second requirement is that you must

be the registered owner of the shares of

stock in the corporation why is there a

time that you are actually the owner but

you are not the registered owner yes in

a voting trust agreement so it's like a

buying the shares of stock in a

corporation but

those that purchase rather was

registered in the name of x by virtue of

an agreement between them

so here while a is really the owner as

he purchased those shares

x is the registered owner so who can

qualify as a director is it a or is it x

your revised corporation code tells you

that you must be the registered owner

and so in that scenario it should be x

who is the one registered in the books

of the corporation as owner who may be

elected as a director and not a and then

we have the third requisite or

requirement

that the

director

to continue as such during the during

his term

he must be a holder of the stock for the

entire duration or period of his term of

office as a director

this means then that once you're elected

as a director you being a holder of at

least a share of stock you must not sell

your shares

during the

the period that you are a director you

may sell some but you must not sell all

your shares why because if you sell all

your shares then automatically you cease

to become a director even if you will

buy it a week after because the law is

clear that you must continue to be a

holder of such

during your

term as director now these three

requirements are actually those that are

provided for by your revised corporation

code

can the corporation add more

qualifications for you to become a

director the answer is yes so long as

that is provided for in the bylaws of

the corporation which is considered the

fundamental law of the corporation

now question

can a juridical person become a director

in a corporation

considering that a juridical person can

actually now become an incorporator

in a corporation under section 10 of

your revised corporation code we have

discussed and i have discussed that in

another video i will put the link here

or i'll put the link down below we have

said that under the revised corporation

code section 10

you can have incorporators

you can have rather partnerships and

corporations to become incorporators in

a corporation this was not allowed prior

to the revised corporation code

does that mean also that you can also

have corporations or partnerships as

directors in a corporation the answer is

no it is deducible from section 22 that

only natural persons can be directors

if you were to allow corporations or

partnerships to become directors then

what would happen now to your board of

directors it could happen that there is

no one sitting actually as a director

because these are all juridical persons

now

what then would be the remedy of a

corporation or a registered partnership

who is a stockholder in a corporation

who would want to have someone

in their corporation or in their

partnership to to have a seat in the

board of directors

they can actually appoint someone

however

they must give that person whom they

have chosen to elect as their as a

member of the board of directors they

must give him a qualifying share

why why is there a need for that because

again we said that a director for him to

be qualified as such must be a

registered owner of such share so at

least he has one share

that is registered in the books of the

corporation so that he may be elected as

one of the

directors of the

board

is there a citizenship or or residence

requirement to become a director the

answer is no your revised corporation

code does not require directors to have

to be filipino citizens or to be a

resident of the philippines

now when you go over section 22 of your

revised corporation food you will see

there

the term independent directors

and the requirement of such independent

directors to be in corporations vested

with public interest

now what is an independent director an

independent director

is of course a shareholder in the

corporation

and he is elected as such now how is he

different from the other directors

the independent director has no other

connection with a corporation except for

his being a shareholder he also does not

take active part in the management of

the corporation what is the purpose of

having an independent director what is

the reason behind the law requiring that

there must be such independent director

in corporations vested with public

interest

the reason for that is your independent

director is supposed to be a watchdog

in the corporation considering that the

corporation is vested with public

interest so he

he sees to it or they see to it that

everything is in order that everything

is done to

to protect the corporation and its

stakeholders now there are other reasons

that there are other reasons where an

independent

a particular person rather is being

elected as an independent director it

could be by virtue of his expertise and

he could lend some advice to the other

on the other directors in the

corporation who are taking active part

in the management of the business

because they're also corporate officers

or for reputational purposes as when uh

a stockholder may be a known

philanthropist and so to give a good

reputation for the corporation he could

be elected as one of the directors

making him an

independent director now what

corporations are covered um that are

required to have independent directors

let's read that particular portion of

section 22 of your revised corporation

code it says the board of the following

corporations vested with public interest

shall have independent directors

constituting at least 20 percent of such

board

a corporations covered by section 17.2

of republic act number 879 otherwise

known as the securities regulation code

namely those whose securities are

registered with a commission

corporations listed with an exchange or

with assets of at least 50 million pesos

and having 200 or more holders of shares

each holding at least 100 shares of a

class of its equity shares

b

banks and quasi banks

nsslas

pawn shops corporations engaged in money

service business pre-need trust and

insurance companies and other financial

intermediaries

and

other corporations engaged in business

vested with public interest similar to

the above as may be determined by the

commission after taking into account

relevant factors which are germane to

the objective and purpose of requiring

the election of an independent director

such as the extent of minority ownership

type of financial products or securities

issued or offered to investors public

interest involved in the nature of

business operations and app and other

analogous factors so those are the

covered corporations the corporations

that are vested with public interest

that are required to have independent

directors constituting at least 20

of the board

now let's move on to the qualification

to become a trustee

what are

the qualifications there is actually

just only one qualification to become a

trustee

that you are a member in good standing

of such

non-stop corporation so that ends our

video discussion

on the term of your directors or

trustees and also the qualifications to

become a director or trustee i hope that

you have learned something from this

video and

as i always say i will see you in the

next

so if you find this video helpful please

click like subscribe and that

notification bell so that you will be

notified of new video uploads thank you

for watching see you next time in mbl

classroom

[Music]

you