i. Liability of Directors

Liability of Directors and Stockholders Acting as Directors

Under Section 17 of the Revised Corporation Code (Republic Act No. 11232), the Securities and Exchange Commission may summarily order a corporation to immediately cease and desist from using a corporate name that is not distinguishable from an already reserved or registered name, protected by law, or contrary to law, rules, and regulations, and require it to register a new one¹. If the corporation fails to comply with this order, the Commission may hold both the corporation and its responsible directors or officers in contempt¹.

In close corporations, stockholders who are parties to a qualifying agreement are also subject to the liabilities for managerial acts imposed on directors by the Revised Corporation Code². A written agreement among some or all stockholders in a close corporation is not invalidated on the ground that it relates to the conduct of the business and affairs of the corporation as to restrict or interfere with the discretion or powers of the board of directors². Under Section 99(d), stockholders who are parties to such an agreement are subject to the liabilities for managerial acts imposed on directors by the Code².

To maintain corporate records and establish accountability for board decisions, corporations must keep and preserve minutes of all meetings of the board of directors setting forth every act done or ordered done, and must note, upon demand of any director, the exact time when a director entered or left the meeting³. In reporting corporate affairs, failure to disclose issued shares and corporate assets accurately in financial statement disclosures improperly understates assets and equity, constituting sanctionable material deficiencies and misstatements under Securities Regulation Code Rule 68 (Abacus Coal Exploration and Development Corporation v. Securities and Exchange Commission, G.R. No. 262484, 22 October 2025)⁴.