Election of Directors and Trustees
Directors of a stock corporation are elected by the stockholders from among holders of shares registered in the corporate books, while trustees of a nonstock corporation are elected by the members from among the membership, unless a special law or valid charter provision supplies a different qualification.
A director must continuously own at least one qualifying share in his own name, and a trustee must continuously possess the required membership status; loss of the qualifying share or membership ends the office by operation of law and creates a vacancy if the term has not expired.
Directors generally serve for one year and until their successors are elected and qualified, while trustees serve for a term not exceeding three years and until their successors are elected and qualified.
The holdover phrase preserves continuity of corporate management, but it does not authorize the incumbents to postpone elections indefinitely or convert an expired term into a new full term.
The election of directors or trustees is a constituency act, not a board act; the board may call and prepare the meeting, but the voting power belongs to stockholders or members entitled to vote.
The regular election is ordinarily held at the annual stockholders' or members' meeting fixed in the bylaws, and a special meeting may be called when an election must be held outside the regular schedule.
At the election meeting, stockholders representing a majority of the outstanding capital stock entitled to vote, or members representing a majority of the members entitled to vote, must be present in person, by proxy, or through a valid mode of remote communication, in absentia voting, or representative voting allowed by law, the bylaws, or board authorization.
The required majority for the meeting is a quorum requirement for a valid election, while the candidates elected are those receiving the highest number of votes for the available seats once the meeting is validly convened.
Voting by ballot is required when demanded by a stockholder or member entitled to vote, because the demand protects the secrecy, accuracy, and verifiability of the election count.
Only shares or memberships entitled to vote are counted for election purposes; treasury shares, shares without voting rights on director elections, and shares legally suspended from voting do not supply voting power for the election.
Where the articles of incorporation validly reserve to a class or series of shares, or to founders' shares within the lawful period, the exclusive right to vote or be voted for particular board seats, the election must respect that allocation.
Corporate nationality, public utility restrictions, foreign equity limitations, independent director requirements, and statutory disqualifications affect who may validly sit in the board when the corporation is engaged in a regulated or partly nationalized activity.
Election of directors or trustees should be distinguished from election or appointment of corporate officers; stockholders and members elect the board, while the board ordinarily elects officers after the board itself has been constituted.
Cumulative Voting and Plurality Election
In stock corporations, each voting share gives the stockholder as many votes as there are directors to be elected, and the stockholder may distribute the votes among candidates or cumulate all votes in favor of one candidate.
Cumulative voting is a statutory incident of stockholder voting in director elections and may not be eliminated by the bylaws, because it protects minority stockholders from being completely excluded by straight-ticket majority voting.
The total votes cast by a stockholder may not exceed the number of voting shares owned multiplied by the number of directors to be elected, even if the stockholder concentrates all votes on one nominee.
In nonstock corporations, each voting member generally casts as many votes as there are trustees to be elected, but the member may not cast more than one vote for the same candidate unless cumulative voting is authorized by the articles of incorporation or bylaws.
The winning candidates are determined by plurality, meaning the nominees receiving the highest number of votes fill the available seats; a nominee need not receive a majority of all voting shares or members if a quorum exists and the election is otherwise valid.
The right to nominate belongs to stockholders or members entitled to vote, subject to lawful nomination procedures, qualification rules, class voting provisions, and regulatory requirements applicable to the corporation.
Management may prescribe reasonable procedures for nominations, proxies, ballots, remote voting, inspectors, tabulation, and challenges, but procedure cannot be used to defeat the substantive voting rights granted by law, the articles, or the bylaws.
| Point of comparison | Stock corporation | Nonstock corporation |
|---|---|---|
| Constituency | Stockholders entitled to vote | Members entitled to vote |
| Office filled | Directorships | Trusteeships |
| Term | One year, with holdover until successor is elected and qualified | Not more than three years, with holdover until successor is elected and qualified |
| Cumulative voting | Available as a statutory right in director elections | Unavailable unless authorized by the articles or bylaws |
| Election result | Candidates with the highest votes fill the seats | Candidates with the highest votes fill the seats |
Failure to Hold the Election
If no election is held on the date fixed by the bylaws or by a proper call, the corporation must report the failure to the Securities and Exchange Commission within the statutory period and state the reasons for the non-holding of the election.
The corporation must also set a new election date within the period allowed by the Revised Corporation Code, because the law treats postponed elections as exceptional and temporary.
If the corporation unjustifiably fails or refuses to conduct the election, the Commission may, upon proper application, summarily order that the election be held and may issue orders necessary to enforce stockholder or member voting rights.
During the interval before the postponed election, incumbent directors or trustees ordinarily continue in a holdover capacity if they remain qualified, but their authority remains fiduciary and temporary rather than a fresh mandate from the constituency.
A failed election does not dissolve the corporation, cancel the board's continuing duties, or validate self-perpetuation by incumbents who control the meeting machinery.
Removal of Directors and Trustees
A director or trustee may be removed by the stockholders or members through the vote of stockholders representing at least two-thirds of the outstanding capital stock entitled to vote, or at least two-thirds of the members entitled to vote.
The removal vote is measured against the statutory voting base, not merely against those present at the meeting, because removal withdraws a constituency mandate already given in a prior election.
Removal may be acted upon at a regular meeting or at a special meeting called for that purpose, but prior notice must state the intention to propose removal so that voting holders or members can decide whether to attend, oppose, support, or give proxies.
A special meeting for removal may be called by the corporate secretary upon order of the president or upon written demand of stockholders representing a majority of the outstanding capital stock, or members representing a majority of the members entitled to vote.
If the secretary refuses or fails to call the demanded special meeting, or if there is no secretary, the stockholders or members signing the demand may directly issue the call in the manner required by the Code and bylaws.
Removal may be with cause or without cause, but removal without cause cannot be used to deprive minority stockholders or members of the board representation to which they became entitled through cumulative voting or an equivalent voting protection.
The restriction on removal without cause prevents the majority from first allowing a minority-backed nominee to win a seat and then immediately ousting that nominee solely to replace the seat with a majority nominee.
Where removal is based on cause, the notice and meeting process should fairly identify the ground for removal because the validity of the action depends on both the required vote and the integrity of the constituency decision.
Removal is different from disqualification, resignation, death, loss of qualifying share or membership, expiration of term, or automatic cessation under special law; each event may produce a vacancy, but the voting body and timing for replacement may differ.
Special laws or regulatory charters may impose additional requirements for removing independent directors, sectoral representatives, employee representatives, or directors of regulated entities, and those rules operate together with the general corporation rule unless inconsistent.
Filling Vacancies in the Board
A vacancy exists when an authorized board seat is unoccupied before or after the end of a term, whether because of death, resignation, removal, disqualification, loss of qualification, expiration of term, abandonment, or an increase in the number of directors or trustees.
The method for filling a vacancy depends on the cause of the vacancy because the law separates vacancies that the remaining board may fill from vacancies that must be returned to the stockholders or members.
A vacancy caused by a reason other than removal, expiration of term, or increase in board seats may be filled by at least a majority vote of the remaining directors or trustees, but only if the remaining directors or trustees still constitute a quorum.
The quorum condition prevents a small remnant of the board from perpetuating itself when the remaining directors or trustees no longer satisfy the ordinary quorum requirement for board action.
If the remaining directors or trustees do not constitute a quorum, the vacancy must be filled by the stockholders or members in a regular or special meeting called for that purpose.
A vacancy caused by expiration of term must be filled by election of the stockholders or members no later than the day the term expires, because a term expiration is not an unexpected vacancy but the ordinary endpoint of the constituency mandate.
A vacancy caused by removal may be filled by the stockholders or members at the same meeting that authorized the removal if the agenda and notice state that a replacement election will also be held.
A vacancy created by an increase in the number of directors or trustees must be filled by election of the stockholders or members at a regular or special meeting called for that purpose, or at the same meeting approving the increase if the notice properly includes the election.
When the increase requires an amendment of the articles of incorporation, the new seat should be treated as effective only when the increase has been validly approved and has become effective under the Code.
A director or trustee elected to fill a vacancy is a replacement director or replacement trustee and serves only the unexpired portion of the predecessor's term, not a new full term, unless the vacancy itself is the start of a newly authorized seat with its own lawful term.
The replacement takes office only upon valid election or appointment and qualification, so acceptance, continued eligibility, and compliance with applicable regulatory qualifications remain necessary.
| Cause of vacancy | Who fills the vacancy | Controlling effect |
|---|---|---|
| Death, resignation, disqualification, or loss of qualification before term end | Remaining board, if still constituting a quorum and acting by at least majority vote of those remaining | Replacement serves the unexpired term |
| Same causes, but remaining board lacks quorum | Stockholders or members at a regular or special meeting | Constituency restores the board's composition |
| Expiration of term | Stockholders or members | Election must be held by the expiration date |
| Removal | Stockholders or members | Replacement may be elected in the same meeting if notice and agenda say so |
| Increase in board seats | Stockholders or members | Election must be tied to a validly approved increase |
Emergency Temporary Vacancy Rule
If vacancies prevent the board from constituting a quorum and emergency action is required to prevent grave, substantial, and irreparable loss or damage to the corporation, the remaining directors or trustees may temporarily fill the vacancy from among the corporate officers.
The emergency designation requires the unanimous vote of the remaining directors or trustees, because the power is exceptional and operates when ordinary board action is structurally impossible.
The temporary director or trustee may act only on matters necessary to address the emergency, and the authority ends within a reasonable time after the emergency ceases or upon election of a replacement, whichever occurs earlier.
The corporation must notify the Securities and Exchange Commission within the period required by the Code, stating the creation of the emergency board and the reason for the temporary designation.
The emergency rule does not allow the remaining directors to avoid a stockholder or member election, cure an ordinary governance deadlock, or permanently alter the composition of the board.
Consequences of Invalid Election, Removal, or Vacancy Action
An election held without the required quorum, voting base, notice, or voting rights may be challenged as an intra-corporate controversy, and acts of directors whose title is successfully questioned may be vulnerable where third-party reliance and de facto officer principles do not protect the transaction.
A removal that lacks the two-thirds vote, omits prior notice of the intention to remove, or defeats protected minority representation without cause is legally defective and may leave the challenged director or trustee with a claim to continued office.
A vacancy filled by the board when the law requires a stockholder or member election is not cured by subsequent board recognition, because the defect concerns the source of authority to choose the occupant of the seat.
A board that knowingly refuses to call required elections, report failed elections, or submit election information to the Commission exposes the corporation and responsible officers to administrative sanctions and judicial or regulatory orders compelling compliance.
The practical organizing principle is that ordinary unexpected vacancies may be handled by a quorum of the remaining board for continuity, while vacancies involving removal, expired mandates, increased seats, loss of quorum, or emergency incapacity require the specific constituency or emergency procedure provided by law.