Scribd
Upload
37 views

Int

asfdsafafg

Uploaded by

Katrizia Abad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
37 views

Int

asfdsafafg

Uploaded by

Katrizia Abad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

SELF-DEALING DIRECTORS

Is one who deals or transacts business with his own corporation.

Generally, A contract entered into by a director with his own corporation is voidable at the latter’s
option,

Except:

• That the presence of such director or trustee in the board meeting in which the contract was approved

was not necessary to constitute a quorum for such meeting;

• That the vote of such director or trustee was nor necessary for the approval of the contract (see

amendment below);

• The approval for transactions of self-dealing directors of corporations vested with public interest,

under the Revised Corporation Code, shall require:

• At least two-thirds (2/3) of the entire membership of the board, with

• At least a majority of the independent directors

• That the contract is fair and reasonable under the circumstances; and

• That in case of an officer, the contract has been previously authorized by the board of directors.

SELF-DEALING DIRECTORS

On the other hand, where any of the first two conditions is absent, the contract becomes voidable
subject

to the ratification of the stockholders representing 2/3 of the outstanding capital stock – the
requirements

of which are: (1) there must be a meeting called for that purpose; (2) full disclosure of the adverse

interest of the director; and (3) the contract is fair and reasonable under the circumstances.

If the self-dealing director owns all or substantially all of the shares of stock, thereby making ratification

easily possible, the reasonableness of the transaction shall be determined - to which there is no
yardstick

and remains to be a question of fact depending on the circumstances.


INTERLOCKING DIRECTOR

Is a director in one corporation who deals or transacts with another

corporation of which he is also a director. In such case, there may

effectively be a dual agency, a divided allegiance where allegiance in one

corporation may be subordinated to the other.

1. The contract between corporations with interlocking director is valid

absent fraud and provided it is reasonable under the circumstances;

2. If the interest of the interlocking director in one corporation exceeds

20% and in the other merely nominal, the contract becomes voidable

at the latter corporation’s option. In effect, the director would be

treated as a self-dealing director discussed above.

3. If the interest in both companies is either both substantial or both

nominal, no. 1 would apply (i.e., valid).

You might also like