How is the election of directors or trustees conducted? (Section 23, Revised Corporation Code)
Summary
TLDRIn this video, attorney Chris Batan Lasko explains the process of electing directors and trustees in both stock and non-stock corporations. He discusses the importance of a quorum, the voting methods used, and how to determine the number of votes each shareholder or member is entitled to. Lasko also covers the different methods of casting votes, including straight voting, cumulative voting, and remote voting. The video aims to simplify the election process in corporations, making it accessible and easy to understand for viewers.
Takeaways
- 📚 The video discusses how to simplify and understand legal concepts, particularly related to corporate elections.
- 🔍 The video explains the quorum requirement for conducting elections of directors or trustees in stock and non-stock corporations.
- 📈 In a stock corporation, a quorum is the majority of the outstanding capital stock, calculated as one-half plus one based on ownership.
- 🧮 For non-stock corporations, a quorum is determined by counting the number of members, with a majority being one-half plus one.
- 🗳️ Voting in stock corporations is based on the number of shares owned, with each share providing a certain number of votes.
- 📊 The video explains the three voting methods: straight voting, cumulative voting in favor of one candidate, and cumulative voting by distribution.
- 💡 Straight voting involves distributing votes equally among selected directors, while cumulative voting allows concentrating all votes on one candidate.
- 👥 Cumulative voting by distribution permits flexible allocation of votes among chosen directors based on personal preference.
- 📜 Election winners are determined by the plurality of votes, meaning the candidates with the highest number of votes are elected.
- 📲 Remote voting or voting in absentia is allowed when authorized by bylaws or approved by the board, particularly for corporations with public interest.
Q & A
What is the main purpose of Attorney Chris Batan Lasko's YouTube channel?
-The main 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 does Section 23 of the Revised Corporation Code state about the requirements for holding elections?
-Section 23 of the Revised Corporation Code states that at all elections of directors or trustees, there must be present either in person or through a representative authorized by written proxy, the owners of the majority of the outstanding capital stock or, if there is no capital stock, a majority of the members entitled to vote.
What is the definition of a quorum in the context of elections of directors or trustees?
-A quorum is the minimum number of people required to be present to conduct legitimate business in an election of directors or trustees.
How is the majority determined for the presence of stockholders in an election in a stock corporation?
-The majority is determined by the ownership of outstanding capital stock, which means one half plus one of the total outstanding capital stock must be present for the election to be held.
Can stockholders be present in an election either in person or through a representative?
-Yes, stockholders can be present in an election either in person or through a representative who is authorized to act by written proxy.
What is the basis for determining the majority in a non-stock corporation?
-In a non-stock corporation, the majority is determined by counting the number of members, with one half plus one of the total number of members constituting the quorum required for an election.
How is the basis for voting determined in a stock corporation?
-In a stock corporation, the basis for voting is the ownership of shares, where each share entitles the shareholder to a certain number of votes, multiplied by the number of directors to be elected.
What is the difference between straight voting and cumulative voting in the context of electing directors?
-Straight voting involves equally distributing the number of votes a shareholder is entitled to cast among the directors being elected. Cumulative voting allows the shareholder to either concentrate all votes on one candidate or distribute them among chosen candidates as they see fit.
How are the winners of a director or trustee election determined?
-The winners of a director or trustee election are determined by the plurality of votes, meaning those who have garnered the highest number of votes are elected.
Is it necessary to be physically present to cast a vote in a corporation election?
-No, it is not necessary to be physically present to cast a vote. Remote voting or voting in absentia is allowed when authorized by the bylaws or approved by the majority of the board of directors, except in corporations vested with public interest where such authorization is not required.
What does the term 'cumulative voting in favor of one candidate' mean in the context of elections?
-Cumulative voting in favor of one candidate means that a shareholder can use all of their votes for just one nominee, allowing minority stockholders a chance to ensure representation on the board.
Outlines
🎓 Introduction to the Channel and Election Concepts
The speaker, Attorney Chris Batan Lasko, introduces his YouTube channel, where he aims to simplify legal concepts, particularly focusing on the election of directors and trustees in corporations. He briefly reviews previous videos on the roles and terms of office of directors and trustees, then begins to discuss how elections are conducted in stock and non-stock corporations according to Section 23 of the Revised Corporation Code.
📊 Determining a Quorum in Stock Corporations
The speaker explains that a quorum, the minimum number required to conduct business, is essential for holding elections in corporations. For stock corporations, a quorum is defined as the majority of outstanding capital stock, determined by ownership percentage rather than the number of stockholders. He provides an illustration showing how the ownership of capital stock by a few stockholders can satisfy the quorum requirement, allowing elections to proceed even if other stockholders are absent.
👥 Quorum and Voting in Non-Stock Corporations
In non-stock corporations, a quorum is determined by the number of members present, not by ownership of shares since there are none. The speaker illustrates how the majority is calculated as one-half plus one of the total members. He also explains the voting process, where each member is entitled to one vote per trustee being elected. The summary of different voting methods—straight voting, cumulative voting for one candidate, and cumulative voting by distribution—is also discussed in detail.
🗳 Voting Methods and Determining Election Results
The speaker details three voting methods: straight voting, where votes are equally distributed among chosen candidates; cumulative voting in favor of one candidate, where all votes are given to a single candidate to ensure minority representation; and cumulative voting by distribution, where votes are allocated as desired among multiple candidates. He also explains how election results are determined by the plurality of votes, with the highest vote-getters winning the election, similar to senatorial elections. Lastly, he covers remote voting and voting in absentia, noting that these methods are allowed under certain conditions and are particularly applicable in corporations with public interest.
Mindmap
Keywords
💡Quorum
💡Majority
💡Outstanding capital stock
💡Proxy
💡Stock corporation
💡Non-stock corporation
💡Cumulative voting
💡Straight voting
💡Remote voting
💡Trustees
Highlights
Introduction to the role of board of directors and trustees in stock and non-stock corporations.
Discussion on the term of office and qualifications for directors and trustees.
Explanation of the election process for directors and trustees, referencing Section 23 of the Revised Corporation Code.
Definition of a quorum and its importance in the election of directors or trustees.
Clarification that the quorum in a stock corporation is based on the majority of outstanding capital stock ownership, not the number of stockholders.
Illustration of how ownership percentage determines the quorum in stock corporations.
Explanation that in non-stock corporations, the quorum is determined by counting the number of members.
Overview of voting methods in stock corporations, including straight voting, cumulative voting in favor of one candidate, and cumulative voting by distribution.
Explanation of how voting is based on ownership in stock corporations, with examples of how votes are calculated.
Discussion of voting in non-stock corporations, where votes are based on membership.
Explanation of straight voting, where votes are equally distributed among selected directors.
Explanation of cumulative voting in favor of one candidate, allowing minority stockholders representation.
Explanation of cumulative voting by distribution, where votes are distributed as desired among selected directors.
Explanation of how winners are determined by plurality of votes, not necessarily majority.
Introduction of remote voting and voting in absentia, including the conditions under which they are allowed.
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 welcome back to mbl
classroom
now in two of my videos i have already
talked about what the role of your board
of directors and your board of trustees
are in a stock
or in a non-stop corporation in another
video also we have talked about the term
of office of the directors or the
trustees and we have also talked about
the qualifications of becoming a
director or a trustee in this video i
want us to talk about the election of
the directors and trustees how is that
conducted how is the election conduct
conducted
so let's begin
your section 23 of your revised
corporation code actually tells you what
will happen in an election
and what are the requisites before the
election can actually take place
let's read the particular paragraph of
section 23
it says
at all elections of directors or
trustees there must be present either in
person or through a representative
authorized to act by written proxy
the owners of majority of the
outstanding capital stock or if there be
no capital stock a majority of the
members entitled to vote that particular
paragraph in section 23
actually tells you of the number
that is required to be present for you
to be able to hold elections in a stock
corporation and in a non-stock
corporation
in that particular paragraph it is
important that we understand what a
quorum is and how we apply that in the
election of your directors or trustees
so in an election
of directors or trustees
there must be a quorum
what is a quorum
it is the minimum number required to be
able to conduct legitimate business
in an election of directors or trustees
it is the minimum required to be present
to be able to have an election
so what is the core room required in a
stock corporation
it is according to your section 23 of
your revised corporation code it is
majority of the outstanding capital
stock
what do we mean by majority
that is
one half
plus one
and your section 23 also tells you that
the basis is ownership
in other words you do not count the
number
of stockholders rather you look at the
ownership
what do we mean by this
let me give you an illustration
so for example
this stockholder
has 30 percent ownership or 30 percent
stake in the stock holdings of the
corporation
and then you have this stockholder
having 25 percent ownership
and then you have several other
stockholders
having minimal ownership totaling
45
ownership
now your section 23 tells you
that to determine the majority
who must be present
in the election for them to be able to
have such election it must be majority
of the outstanding capital stock
again we look at the ownership and not
the number of people to determine
majority so in that illustration
the stockholder
owning 30 percent and the stockholder
owning 25
even if they are the only two who are
present in the election the election can
actually already go on
because they are the owners of majority
of the outstanding capital staff
now do they actually need to be present
in the election
your section 23 says they can be either
in person
or they can authorize someone they can
authorize a representative
through
a written proxy who can represent them
the same as those who would want to
participate again either in person or by
written proxy
again when we determine the quorum to be
able to hold the elections we look at
the ownership
in other words
if these two having the 30
and the 25 ownership if they are not
present in the election even if the rest
are there those constituting 45
ownership
they cannot hold the elections
because they do not constitute the
majority of the outstanding capital
stock
that is how we determine the majority in
a stock corporation
how about in a non-stock corporation
how do we determine the majority
remember in a non-stock corporation
there is no share
there are however
members
you do not call them stockholders again
because they do not own shares
so supposing
look at this illustration you have 20
members in a non-stop corporation
how do we determine the majority the
same one-half plus one
but this time because there is no
outstanding capital stock and we only
have members then we count the number of
members
what is one half of 20
that is
10
but we said majority is one half plus
one
so
the majority then is 11 members out of
20.
they must be present
to constitute the quorum to be able to
have the elections
that is how we determine the majority in
a non-stock corporation
so that is how you determine a quorum
again
you have to have a quorum first before
you can proceed with the election
now
if you are in a quorum so
you proceed with an election
how do we vote
what is the basis for voting
and what are the
different methods of casting your vote
in a stock corporation because you are a
shareholder
the basis for voting is your ownership
in other words
if you have
five shares
then you are entitled to five votes
multiplied by
the number of directors to be elected
in other words
if there are let's say
10 seats
or 10 directors to be elected
and you have five shares of stock in
that corporation
then you have
five
multiplied by 10 equal to
50 votes so you are entitled 50 votes
that is the basis
for computing the number of votes that
you can cast in a
stock corporation another example let's
say you have 100 shares of stock in the
corporation and you are to
choose or elect 10 directors how many
votes are you entitled to cast again
look at the number of shares that you
have multiplied by the number of
directors to be elected so you have 100
shares
multiplied by 10
equal
1000.
so
1000 votes
you will be entitled to cast
that is how you determine the number of
votes that you are entitled to cast in
the election of directors in a stock
corporation
how about in non-stock corporations
how about election of trustees
you do not have shares of stock there is
no stock
so the basis now would be you being a
member
so you being a member you're entitled to
one
multiplied by the number of trustees to
be elected so if there are 10 trustees
to be elected then that's 1 times 10
equals
your
10 votes so you are entitled to 10
votes so that is how you compute the
votes that you may cast in a non-stock
corporation
now what are the different methods of
casting your vote
there are generally three i will just
talk about the simple
um
way by which you
you cast your vote in an electron so
there are three as i've mentioned
what are these three methods you have
straight voting
cumulative voting in favor of one
candidate and cumulative voting by
distribution so these are the three
methods let's talk about each one what
is straight voting straight voting
happens when you equally distribute
the number of votes that you are
entitled to cast to the
directors that you are voting for
so supposing you are to cast or to to
elect rather 10 directors out of 15 who
have been nominated
so
if you have 100 shares in that
corporation
and you are to elect 10 directors as we
have already mentioned earlier that's
100 times 10 that is equal to a thousand
votes that you may cast
now again you are to elect 10 directors
and in our example there are 50 nominees
so you will you will choose 10 out of
the 15.
and from those whom you were already
able to choose the 10
your 1000 votes will be equally
distributed among them
so
1 000 votes divided by
10 directors that you are choosing to
elect out of the 15 so each of the 10
that you have chosen will get
100 votes each
how about cumulative voting in favor of
one candidate again we go back to
computing how many votes you're entitled
to cast so again if you have 100 shares
and you are to elect
10 directors out of 15
if you follow cumulative voting in favor
of one candidate that means that you
will have to choose only one out of the
15 who are being nominated so again how
many votes still you go back to your
number of shares multiplied by the
number of directors that has to be
elected so you have your 100 shares
multiplied by 10
that's 1 000 votes now instead of
distributing it equally
uh among the 10 out of the 15 that you
would have chosen under straight voting
in community voting in favor of one
candidate you accumulate all the 1 000
votes that you are entitled to pass to
only one candidate so you put in all
your 1000 votes to just one now why is
this made available under your revised
corporation code
this is made available so that your
minority stockholders will have a chance
to have a representation they can put in
all their votes to one of their nominee
so that they are given a chance to be
represented in the board
now how about cumulative voting by
distribution
still the same
you first
look into how much
votes are you entitled to cast again you
have 100 shares multiplied by the number
of directors to be elected so let's say
um still 10 directors and then there are
15 vying for the position so you choose
10 out of the 15.
now
having uh how you have to compute again
your
your 100 shares multiplied by 10
directors again that gives you 1 000
votes
then community voting by distribution
would tell you that you will distribute
it in the way that you would want it to
be distributed so let's say for example
you have chosen 10 out of the 15
the
1000 votes you can distribute it in a
way
where perhaps one director will get 200
votes one director will get 50 votes
another director will get 400 400 votes
and so on and so forth so long as you
only cast
up until your 1 000 votes
so that is cumulative voting by
distribution
now how do we determine who won the
election who do we determine which
would
be considered now as the directors or
trustees after an election is over
you look at the plurality of votes in
other words
the highest number of votes it's just
like our election for senators
the senator does not need to get
majority votes
but you determine who are the winners by
looking at the highest 10 votes if you
are to elect 10 directors or 10 trustees
to the board so again you look at those
who have garnered the highest number of
votes
now we have already talked about the
methods of voting but how do you
actually cast your vote do you have to
be present when you cast your vote
not necessarily
this is a new amendment this is an
amendment to the revised corporation
code allowing remote voting or voting in
absentia for purposes of determining a
quarrel they are considered as present
voting through remote communication or
in absentia is allowed when it is
authorized by the bylaws or if it's not
in the by-laws it is approved by
majority of the board of directors
such requirement however that it must be
authorized by the bylaws or approved by
majority of the board of directors such
requirement is not necessary in
corporations vested with public interest
what do we mean then this means that
even if it's not in the bylaws even if
it's not approved by majority of the
board
your stockholders in corporations vested
with public interest can actually or
rather are entitled to remote voting
so that's it for this video i hope you
understand nowadays the general concept
of how an election is done
in the election of directors or trustees
in a stock or non-stop corporation i
hope you have learned something from
this video and 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]
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