Atty. Jun De Zuñiga
The board of directors is the body which exercises the corporate powers of a corporation and is comprised of directors who are elected for a term of one-year from among the holders of stock and they are required to hold office until their successors are elected and qualified (Sec. 22, Revised Corporation Code). This provision means that directors have a one-year term which may possibly be extended on a hold-over basis until their successors are elected and qualified.
Such hold-over situation may arise, for example, where there is a failure of quorum in a stockholders’ meeting meant to elect the incoming set of directors. The consequence is that the incumbent directors will continue to exercise their powers as bona fide directors, even past their term, until their successors are elected and qualified. The failure to elect the new set of directors did not terminate the terms of the incumbent directors and the law thereby averts the creation of a vacuum in the operation of the corporation by directing the latter to continue with their functions.
The foregoing rule does not apply, however, where a director decides to resign from his post prior to the expiration of his term. The fact that the law requires directors to continue in office until their successors are elected and qualified does not prevent a director from resigning at any time (De Leon, The Corporation Code, p. 282). It is also not necessary that someone be elected to take his place in order to make the resignation effective (Martin, The Corporation Code, p. 457).
A director may want to resign from his position for several reasons such as conflict of interest, disagreements with the other directors, or for health reasons. However, the resigning director should consider also whether his exit will unduly harm the company. There are authorities to the effect that directors cannot resign in order to effectuate fraud or if the corporation would thereby be left without proper care and protection (Martin, ibid., citing US jurisprudence).
The resignation need not be in a particular form, but there must be an action clearly showing an intent to resign. The resignation becomes complete and the office becomes vacant the moment the resignation is made to the proper officer or body and it is not necessary that the resignation be accepted (De Leon, ibid.). No formal acceptance is necessary and neither is it necessary to make an entry thereof in the minutes of the board. It must appear, however, that the director positively and affirmatively manifested that it was his intention to resign. If there was the slightest condition attached to his statement relating to his resignation, then it is not a resignation. A mere statement by a member that he withdraws from a meeting or that he will have nothing more to do with the office is not sufficient upon which to predicate an absolute resignation (Lopez, The Corporation Code, p. 143, citing Brias vs. Hord, 24 Phil. 286).
In case of resignation, the secretary, or the director, trustee or officer of the corporation, shall within seven (7) days from knowledge thereof report in writing such fact to the Securities and Exchange Commission (Sec. 25, Revised Corporation Code). In order to assure compliance with this responsibility, it may be advisable for the resigning director to send such report himself to the SEC, rather than leave to the secretary or to any other officer the performance of such requirement.
The above comments are the personal views of the writer. His email address is jzuniga@bsp.gov.ph