b. Tenure, Qualifications, and Disqualifications

Qualifications of Directors

• Must own at least one (1) share of the capital stock of the corporation in his own name or must be a member in the case of non-stock corporations
• Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. (Sec. 22)¹
• He must not be disqualified under the RCC (Sec. 26)²
• He must possess other qualifications as may be prescribed in the by-laws of the corporation. (Gokongwei v. Securities and Exchange Commission, G.R. No. L-45911, 11 April 1979)³
• He must be of legal age

Disqualifications of Directors, Trustees, or Officers (Sec. 26)

A person shall be disqualified from being a director, trustee, or officer of any corporation if, within five (5) years prior to the election or appointment as such, the person was:

• Convicted by final judgment:
• Of an offense punishable by imprisonment for a period exceeding six (6) years;
• For violating this Code; and
• For violating “The Securities Regulation Code”⁴;
• Found administratively liable for any offense involving fraudulent acts; and
• By a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct similar to those enumerated in paragraphs (a) and (b) above.

Grounds not exclusive

The foregoing is without prejudice to qualifications or other disqualifications, which the SEC, the primary regulatory agency, or the Philippine Competition Commission may impose in its promotion of good corporate governance or as a sanction in its administrative proceedings. (Sec. 26)⁶

By-law provisions that prohibit directors who have interests in competitor corporations are reasonable in order to protect the interests of the company (Gokongwei v. Securities and Exchange Commission)⁷

Hold-Over Principle

Directors hold office for one year, while trustees hold office for a term not exceeding three years; both may continue to hold office until their successors are elected and qualified, even after their respective terms expire. (R.A. No. 11232, Sec. 22)

Remaining members of the board of directors cannot elect another director to fill in a vacancy caused by the resignation of a hold-over director. The hold-over period is not part of the term of office of a member of the board of directors. (Valle Verde Country Club, Inc. v. Africa, G.R. No. 151969, 4 September 2009)⁸

Thus, when during the holdover period, a director resigns from the board, the vacancy can only be filled-up by the stockholders, since there is no term left to fill-up pursuant to the provisions of Section 28 of R.A. No. 11232⁹ which requires an election to be held no later than the day the director’s term expires at a meeting called for that purpose. (Valle Verde Country Club, Inc. v. Africa)

A director continuing to serve after one year from his election (on a holdover capacity), cannot be considered as extending his term. This hold-over period is not part of his term, which, as declared, had already expired. (Valle Verde Country Club, Inc. v. Africa)

Elections –R.A. No. 11232, Sections 23¹⁰ and 25, 91

Election of Directors or Trustees (Sec. 23)¹¹

Alien Membership in Board of Directors

P.D. No. 715¹²: "election of aliens as members of the board of directors of governing body of corporations or associations engaging in partially nationalized activity shall be allowed in proportion to their allowable participation or share in the capital of such entities."

Non-Filipino citizens may become members of the board of directors of a bank to the extent of the foreign participation in the equity of said bank. (General Banking Law, Sec. 15)¹³

Hold-Over Principle

Directors and trustees may continue to hold office after their respective terms expire until their successors are elected and qualified.

Remaining members of the board of directors cannot elect another director to fill in a vacancy caused by the resignation of a hold-over director. The hold-over period is not part of the term of office of a member of the board of directors. (Valle Verde Country Club v. Africa, G.R. No. 151969, 2009)

Thus, when during the holdover period, a director resigns from the board, the vacancy can only be filled-up by the stockholders, since there is no term left to fill-up pursuant to the provisions of Section 28 of RA 11232¹⁴ which mandates that a vacancy occurring in the board of directors caused by the expiration of a member’s term shall be filled by the corporation’s stockholders. (Valle Verde Country Club v. Africa, G.R. No. 151969, 2009)

A director continuing to serve after one year from his election (on a holdover capacity), cannot be considered as extending his term. This hold-over period is not part of his term, which, as declared, had already expired. (Valle Verde Country Club v. Africa, G.R. No. 151969, 2009)