Corporation Law: The Revised Corporation Code of the Philippines - Sec 43

 THE REVISED CORPORATION CODE  OF THE PHILIPPINES

Republic Act No. 11232 

TITLE IV -  POWERS OF CORPORATIONS

Section 43. Power to Enter into Management Contract. 

No corporation shall conclude a management contract with another corporation unless such contract is approved by the board of directors and by the stockholders owning at least the majority of the outstanding capital stock, or by at least a majority of the members in the case of a nonstock corporation, or both the managing and the managed corporation, at a meeting duly called for the purpose: Provided, That (a) where a stockholder or stockholders representing the same interest of both the managing and the managed corporations own or control more than one-third (1/3) of the total outstanding capital stock entitled to vote of the managing corporation; or (b) where a majority if the members of the board of directors of the managing corporation also constitute a majority of the members of the board of directors of the managed corporation, then the management contract must be approved by the stockholders of the managed corporation owning at least two-thirds (2/3) of the total outstanding capital stock entitled to vote, or by at least two-thirds (2/3) of the members in the case of a nonstock corporation.

These shall apply to any contract whereby a corporation undertakes to manage or operate all or substantially all of the called services contracts, operating agreements or otherwise: Provided, however, That such service contracts or operating agreements which relate to the exploration, development exploitation or utilization of natural resources may entered into such periods as may be provided by the pertinent laws or regulations.

1. Management Contract. 

  • A management contract is an agreement whereby one undertakes to manage or operate all or substantially all of the business of another, whether such contracts are called service contracts, operating agreements or otherwise.
    • Management contracts may be necessary to assure not only technical competence but also continuity in management policy in the running of the corporation.
  • Section 43 of the RCCP applies to situations where the contract is between two corporations. 
    • It does not normally apply to a contract with a natural person who will be appointed as manager because the same is covered by the general powers of the corporation. 
    • The contract with the natural person is more appropriately called employment contract rather than management contract.
  • The legislators who drafted the law did not actually rule out the possibility that there might be a management contract between a partnership or a natural person and a corporation.
    • Nevertheless, since partnership and private individuals are not mentioned in Section 43, any management contract between such partnership/natural person and a corporation shall not be subject to the requirements thereof.
  • The maximum term prescribed under Section 43 of RCCP is five years. 
    • However, it was intended that this period may be subject to renewal.
    • A period is provided for to give the stockholders the opportunity to review the management contract and to decide if the contract will be continued.
    • If, on the basis of experience, there has been some abuse on the part of the managing corporation, the contract will not be renewed for another term.
  • A management contract cannot be entered into with a foreign corporation for partly or wholly nationalized activities that are covered by the Anti-Dummy Law. 
    • Intervention in management and operation is not allowed in those activities.
2. Approving Authority.
  1. The contract shall be subject to the approval of the Board of Directors and by stockholders owning at least the majority of the outstanding capital stock, or by at least a majority of the members in the case of a non-stock corporation, of both the managing and the managed corporation, at a meeting duly called for the purpose.
  2. The management contract must be approved by the stockholders of the managed corporation owning at least 2/3 of the total outstanding capital stock entitled to vote, or by at least 2/3 of the members in the case of a non-stock corporation in any of the following instances:
    1. Where a stockholder or stockholders representing the same interest of both the managing and the managed corporations own or control more than one-third of the total outstanding capital stock entitled to vote of the managing corporation; or 
    2. Where a majority of the members of the board of directors of the managing corporation also constitute a majority of the members of the board of directors of the managed corporation. 


Comments

Post a Comment

Popular posts from this blog

Equality and Human Rights: The United Nations and Human Rights System (September 16, 2023)

Sovereign Equality of States/Principle of sovereign equality UN Charter of 1945 All states are equal before international law no matter the size of their territory, population, economy or military. All states have equal rights and duties under international law, and that no state has the right to interfere in the internal affairs of another state. Positive Consequences: All states have a voice in international affairs .   All states have the opportunity to participate in international organizations and to negotiate and conclude treaties. This helps to ensure that the interests of all states are represented in the development of international law and policy. No state has the right to interfere in the internal affairs of another state.  This helps to protect the sovereignty of all states and to prevent the use of force or coercion to achieve political objectives. States have the right to develop their own political, economic, and social systems without interference from othe...
Read more

Commercial Laws 1: R.A. No. 11057 — Personal Property Security Act

  Commercial Law TITLE XVI Personal Property Security Act Micro, Small and Medium Enterprises are sources of growth and innovation. They contribute to and benefit from future growth. Their increased participation in global trade "can have significant impact in reducing poverty through employment creation, productivity improvements and economies of scale." Congress passed the Personal Property Security Act in order to provide Micro, Small and Medium Enterprises (MSMEs) more access to "credit at the least cost through the establishment of a unified and modern legal framework for securing obligations with personal property ." It was explained:  According to the 2015 Philippine Statistics Authority data, there are 896,839 micro-small and medium enterprises (MSMEs) that established in the Philippines.  These MSMEs generated a total of 4,784,870 jobs in 2015 versus 2,181,819 for the large enterprises.  This indicates that the MSMEs contributed almost 61 % o...
Read more

Land Title and Deeds: Chapter 1 — What Lands are Capable of Being Registered

Chapter I What Lands are Capable of Being Registered All lands in the Philippines are presumed to be lands of the public domain, and therefore, owned by the State. This rule finds support in Section 2, Article XII of the 1987 Constitution:  Section 2 . All lands of the public domain , waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State . With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such citizens. Such agreements may be fo...
Read more