How vacancies in the Board of Directors/Trustees are filled (Section 28, Revised Corporation Code)
Summary
TLDRAttorney Chris Batan Lasko's YouTube channel simplifies the law in under 10 minutes per video. This episode focuses on filling vacancies in a board of directors or trustees under the Revised Corporation Code, Section 28. It explains the causes of vacancies, the importance of understanding them to determine the filling process, and the various scenarios including death, resignation, removal, or increase in board size. The video also covers the role of quorum, the process for emergency board filling, and the temporary measures to prevent substantial corporate damage.
Takeaways
- 📚 The video is aimed at simplifying the law, specifically discussing how to fill vacancies in the board of directors or trustees.
- 🔍 The script references Section 28 of the Revised Corporation Code, which outlines the process for filling board vacancies.
- 🚫 Vacancies can occur due to various reasons, including the expiration of a term, removal, death, resignation, or selling of shares by a director.
- 🔑 The method of filling a vacancy depends on the cause and whether the remaining board can constitute a quorum.
- 🔢 A quorum is defined as one half plus one of all the board members, which is crucial for determining who can fill a vacancy.
- 👥 If the remaining board can form a quorum, they can fill the vacancy by a majority vote of the remaining directors.
- 📉 If the board cannot form a quorum due to vacancies, the stockholders or members must elect a replacement.
- 📆 Vacancies caused by term expiration must be filled by an election held on or before the day of term expiration.
- 🔄 If a director is removed, the vacancy must be filled by the stockholders or members, reflecting their power to both remove and elect directors.
- 📈 Vacancies due to an increase in the number of directors or trustees are filled through a regular or special election by the stockholders or members.
- ⏱ In urgent situations where the remaining directors cannot form a quorum, the vacancy may be temporarily filled by a unanimous vote among the remaining directors from among the corporation's officers.
- 📝 The term of an emergency director or trustee is limited to the remaining term of the director they replaced, and the corporation must notify the commission of the emergency board's creation.
Q & A
What is the purpose of the video by Attorney Chris Batan Lasko?
-The purpose of the video is to simplify the law, specifically discussing the process of filling vacancies in the board of directors or the board of trustees under the Revised Corporation Code.
What are the common causes of vacancies in the board of directors or trustees?
-Common causes of vacancies include the expiration of a term, removal of a director or trustee, death, resignation, selling of all shares by a director, or an increase in the number of directors or trustees.
Why is it important to determine the cause of a vacancy in the board?
-Determining the cause of a vacancy is important because it dictates the method by which the vacancy should be filled, as outlined in Section 28 of the Revised Corporation Code.
How can a vacancy caused by the death or resignation of a director or trustee be filled?
-A vacancy caused by death or resignation can be filled either by the remaining members of the board, provided they still constitute a quorum, or by the stockholders or members of the corporation.
What is a quorum and how does it relate to filling a vacancy in the board?
-A quorum is one half plus one of all the members of the board of directors. It is important for filling a vacancy because if the remaining board constitutes a quorum, they can fill the vacancy themselves.
What happens if the remaining board members do not constitute a quorum after a vacancy?
-If the remaining board members do not constitute a quorum, the vacancy must be filled by an election conducted by the stockholders or members of the corporation.
How is a vacancy caused by the term expiration of a director filled?
-A vacancy due to term expiration is filled by a vote from the stakeholders or members of the corporation, following the election process previously discussed in another video.
What is the role of the stockholders or members in filling a vacancy caused by the removal of a director or trustee?
-The stockholders or members must fill a vacancy caused by the removal of a director or trustee, as they are the ones with the power to remove directors or trustees and thus should also fill the resulting vacancy.
How are vacancies caused by an increase in the number of directors or trustees filled?
-Vacancies due to an increase in the number of directors or trustees are filled through an election during a regular or special meeting, conducted by the stockholders or members.
What is the term of office for a replacement director or trustee?
-A replacement director or trustee holds office for the remaining term of the director whom they have replaced, as per Section 28 of the Revised Corporation Code.
What can be done if there is an urgent matter that requires board action but the remaining directors do not constitute a quorum?
-In such a situation, the vacancy can be temporarily filled by a unanimous vote of the remaining directors from among the officers of the corporation, limited to the emergency action necessary to prevent substantial and irreparable loss or damage to the corporation.
Outlines
📚 Introduction to Filling Vacancies in Corporate Boards
Attorney Chris Batan Lasko introduces his virtual classroom on YouTube, where he aims to simplify the law in under 10 minutes. The video focuses on the process of filling vacancies in the board of directors or trustees. He explains the various reasons for board vacancies, such as term expiration, removal, death, resignation, or selling of shares by a director. The importance of understanding the cause of a vacancy is emphasized as it determines the method of filling it, as outlined in Section 28 of the Revised Corporation Code.
🔍 Methods for Filling Vacancies in Corporate Boards
This paragraph delves into the specific methods for filling board vacancies based on the cause. If a vacancy arises from death or resignation, it can be filled by either the remaining board members or the stockholders, depending on whether a quorum remains. A quorum is defined as half plus one of the total board members. If the remaining board does not constitute a quorum, such as when more than half the directors die, the vacancy must be filled by an election by stockholders or members. The paragraph also covers the process for filling vacancies due to term expiration, removal, or an increase in the number of directors or trustees, which typically involves elections.
🚨 Emergency Measures for Board Vacancies Causing Loss to the Corporation
The final paragraph addresses a situation where a board vacancy prevents the remaining directors from constituting a quorum and an urgent matter requires immediate action to prevent significant damage to the corporation. Section 28 of the Revised Corporation Code allows for an emergency measure where the vacancy can be temporarily filled by a unanimous vote of the remaining directors from among the corporation's officers. The designated director or trustee's term is limited to the emergency action and ends when the emergency is resolved or when a replacement director or trustee is elected, whichever is earlier. The corporation must notify the commission within three days of creating an emergency board, stating the reason for its creation.
Mindmap
Keywords
💡Vacancy
💡Board of Directors
💡Board of Trustees
💡Quorum
💡Director
💡Trustee
💡Removal
💡Resignation
💡Stockholders
💡Members
💡Emergency Board
Highlights
Introduction to simplifying the law in under 10 minutes.
Discussion on filling vacancies in the board of directors or trustees.
Section 28 of the Revised Corporation Code as the reference for filling vacancies.
Causes of board vacancies, including expiration of terms, removal, death, resignation, and selling of shares.
Importance of understanding the cost of the vacancy for determining the filling process.
Filling vacancies caused by death or resignation through remaining board members or stockholders.
Determining the filling authority based on whether the remaining board constitutes a quorum.
Procedure for filling a vacancy when the remaining board has a quorum.
Election by stockholders or members for filling vacancies when the board lacks a quorum.
Filling vacancies caused by term expiration through stakeholder voting.
The process for filling vacancies due to the removal of directors or trustees by stockholders or members.
Filling vacancies caused by an increase in the number of directors or trustees through elections.
Term of office for replacement directors or trustees is the remaining term of the replaced director.
Handling urgent matters when the remaining directors do not constitute a quorum.
Temporary filling of vacancies in emergency situations as per Section 28.
Procedure for the creation of an emergency board and its term limitations.
Notification requirements to the commission for the creation of an emergency board.
Summary of the process for filling board vacancies based on the cause and remaining quorum.
Encouragement for viewers to like, subscribe, and turn on notifications for new 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 everyone welcome to mbl classroom
so for this video i want us to talk
about how to fill in vacancies
if there are such vacancies in the board
of directors or the board of trustees
now where do you see how you fill in the
vacancies where do you see that in the
right revised corporation code you see
that under section 28 of your revised
corporation code yes it's quite a long
provision so let's talk about this and
let's simplify that particular provision
of your revised corporation code so
first let's talk about what causes
a vacancy in the board
your vacancy may be due to expiration of
a term of a director or trustee or it
may be caused by removal of a director
or trustee
vacancies may also be caused by death of
a director or a trustee or by
resignation of a director or a trustee
another would be
a
a vacancy caused by a director selling
all his shares in the corporation
because as such he automatically ceases
to be uh to be a director another reason
for
when there is a vacancy is when the
corporation decides to increase the
number of directors or trustees and so
there is now a vacancy for
the increased number of directors or
trustees
so these are the reasons or causes of
vacancies in the board either board of
directors or board of trustees so why is
it important to know the cost of the
vacancy it's important to know the cost
of the vacancy because then it will
determine how you are going to fill in
the vacancy and that is what section 28
is actually about so let's talk about
the different causes of the vacancy and
how
the vacancy may be filled if such is the
cost
if the vacancy is caused by
death or
resignation of a director or trustee
how do we fill in the vacancy
if those are the the causes of the
vacancy death of a director or
resignation
there are two ways of filling in that
vacancy
it could either be filled by the
remaining members of the board or it
could be failed by the stockholders
now how do we know when it can be filled
by
the remaining board of directors or
trustees or if it should be filled by
the stockholders or the members
you have to look into whether the
remaining board of directors or board of
trustees would still constitute a quorum
what do we mean by this
if you have watched the other videos
where i discussed what a quorum is a
quorum is actually one half plus one of
all or based on all the members of the
board of directors
so for example if there are 10 directors
in the board then your quorum is one
half plus one that makes it that makes
it six members
now supposing
the there is only there is rather the
death of two directors
out of the ten
the remaining directors would then be
only eight
do they still constitute the quarrel
the answer is yes because clearly eight
is more than six which is the quorum of
ten directors
your section 28 tells you that if
the remaining board still constitutes a
quorum then they can fill in the vacancy
in our example
there are two vacancies due to death
so your remaining board can actually
fill in the
vacancy now how will the remaining board
fill in the vacancy just like any other
approval of a corporate act it has to be
at least majority of the remaining board
who will fill in the
vacancy
if however
the remaining board does not constitute
a quorum for example still ten directors
but five directors died perhaps they
went on a trip and the airplane crashed
and all five
of the directors died leaving only five
directors of the board
clearly five is less than six which is
the quorum
how then do we fill that vacancy we have
to fill it by
election and the election must be done
by your stockholders or members if it
would be your non-stop corporation
of course election will be done in the
manner that i have already discussed in
another video i will put the link up
here so you may be reminded of how an
election is done what if the vacancy is
caused by term expiration of course it
will have to be voted on by the
stakeholders or members to fill in the
vacancy again we follow the manner and
the method of election that i have
already discussed in another video again
the link i will place up there
of course if it is term expiration then
the election must be held not later than
the day of expiration of the term
now how about if the vacancy is caused
by removal of a director or a trustee
if it is due to removal of a director or
trustee
it must be filled by the stockholders or
members why because
your stakeholders or your members are
the only ones who have the power to
remove directors or trustees and so they
must also just also be the one who can
fill in such vacancy due to removal of
directors or trustees the election may
be held in that same meeting where there
is a
an election for removal of such director
or trustee now how about if the vacancy
is caused by the increase of directors
or trustees
this also will have to be filled in
by a regular or rather an election
during a regular meeting or a special
meeting called for that purpose again
who can fill such vacancy it is your
stockholders or
members
now supposing that a director or a
trustee has already been voted on to
replace
the director who was removed or the
director who died or the director who
resigned
the replacement is called the
replacement director or trustee
now what is his term of office for how
long will he
become a director or a trustee in the
corporation your section 28 says that he
will only hold office or will become a
director or trustee only for the
remaining term of the director whom he
has replaced again the director who has
been removed the director who has died
or the director who has resigned
now
how about
if
there exists a vacancy
and then it leaves
the remaining directors not constituting
a quarrel we said that that must be
filled by the stockholders or members in
an election
but supposing there is an urgent matter
that must be acted on by the board
but because they do not constitute the
quorum they could not act on such
on such matter
now what if not acting on such matter
will cause great damage or loss to the
corporation
what can the corporation do so that this
loss may be avoided again
the there is a vacancy
and it costs the remaining directors not
to constitute a quorum for example there
are ten directors and five directors die
leaving only five
not constituting a forum anymore
again as i've mentioned there is an
urgent matter that must be acted upon
because if they do not act on it it will
it will cause great loss or damage to
the corporation
but calling for an election
by your stockholders or your members
will take time
is there a remedy on the part of the
corporation where they could still act
on that particular matter to avoid loss
or damage to the corporation the answer
is yes there is a remedy and if this
provided for under section 28 of your
revised corporation code let me read
that particular
paragraph in that provision it says
however when the vacancy prevents the
remaining directors from constituting a
quorum an emergency action is required
to prevent grave substantial and
irreparable loss or damage to the
corporation
the vacancy may be temporarily filled
from among the officers of the
corporation by unanimous vote of the
remaining directors or
trustees
the action by the designated director or
trustee shall be limited to the
emergency action necessary and the term
shall cease within a reasonable time
from the termination of the emergency or
upon election of the replacement
director or trustee whichever comes
earlier the corporation must notify the
commission within three days from the
creation of the emergency board stating
they're in the reason for its creation
that particular paragraph in section 28
tells you
that the remaining board even though not
constituting a quorum can actually make
or fill the vacancy in our example five
out of ten directors have died leaving
five the five can actually fill in the
vacancy but the law requires that there
must be a unanimous vote meaning all
five must vote for the other five who
will
fill in
and we call them the emergency board
of course your your section 28 also
tells you that the term of the emergency
board will expire when the emergency
action has already been
has already been acted on
or the there is already the election um
by your stockholders or
members whichever will come
earlier
so i hope you know now how
vacancies and the board of directors
archers t or trustees are to be filled
in again
very important you have to determine
first what is the cost of the vacancy
before you can determine how the vacancy
will be filled i hope you have learned
again another thing or two in 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]
you
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