Can a Majority Shareholder Be Removed as President?

A deep dive into Philippine corporate law and SEC rules

Short answer: Yes—being a majority shareholder does not immunize someone from removal as President (a corporate officer). The Board of Directors can reorganize and elect a new president at any time, subject to law, the corporation’s articles and by-laws, and any valid contracts. What a majority shareholder can often protect is their board seat (and therefore practical influence), not the officer post itself.

1) Ownership vs. Control vs. Office

Shareholder status (ownership): A “majority shareholder” owns more than 50% of the outstanding voting shares. Ownership confers economic rights (dividends, liquidation proceeds) and political rights (vote at stockholders’ meetings, elect directors, etc.).
Directorship (control): Directors are elected by the stockholders and collectively exercise corporate powers. In Philippine practice, the President must be a director under the Revised Corporation Code (RCC).
Corporate office (management): The President is a corporate officer elected by the Board (not by the stockholders), usually serving at the pleasure of the Board unless constrained by the by-laws or a valid contract.

Implication: You can remove a president through board action even if that person owns a majority of shares—provided the board majority does not support them. The political reality is that a true majority owner usually controls who sits on the board, but that is a separate question from the legal power to remove an officer.

2) Who has the power to remove the President?

A. The Board of Directors

Default rule: The Board may elect and remove officers, including the President, at any time.
Limits:
- By-laws may set procedures (e.g., notice, vote threshold, cause/no cause).
- Contracts (e.g., a fixed-term management or employment agreement) can create breach consequences (damages), but do not freeze the Board’s statutory power to reorganize officers.
- Fiduciary duties: Directors must act in good faith, with due care, and in the corporation’s best interest.

B. Securities and Exchange Commission (SEC)

The SEC does not ordinarily appoint or remove your corporate officers.
But SEC can:
- Disqualify or bar directors/officers in specific circumstances provided by law (e.g., certain convictions, administrative violations).
- Sanction corporations and their officers for violations of the RCC, the Securities Regulation Code (SRC), and SEC rules, which can indirectly lead to leadership changes.
- Impose corporate governance requirements and monitor compliance (especially for public companies and those with secondary licenses).

3) Can the majority shareholder be removed as director?

This matters because the President must be a director. If the person loses their board seat, they automatically become ineligible to remain President.

Removal of directors: Stockholders holding the required supermajority (commonly two-thirds (2/3) of the outstanding capital stock) may remove a director with or without cause (subject to statutory carve-outs such as the special protection for independent directors and cumulative voting/minority representation rules).
Key caveats:
- Cumulative voting protects minority representation—stockholders cannot use removal to eliminate seats to which the minority is entitled.
- Process is strict: special meeting, proper notice stating removal as the agenda, and prescribed voting thresholds.
- Vacancy created by removal is typically filled by the stockholders, not by the board.

Practical take: If the majority shareholder owns ≥ 2/3, they are exceedingly hard to remove as director. If they own >50% but <2 data-preserve-html-node="true"/3, a coalition of other shareholders might reach the 2/3 threshold to remove them as director.

4) Typical Paths to Removing a Majority Shareholder as President

Path 1: Board Reorganization (no director removal)

Count votes in the Board. If a majority of directors favor change, place “election of officers” on the board agenda.
Board meeting & vote. Elect a new President (and officers as needed).
File updates with the SEC (General Information Sheet and, where applicable, officer disclosures).
Expect challenges: The ousted President may contest for alleged by-law violations, lack of notice, or bad faith—plan process rigor.

Obstacle: If the majority shareholder controls the board, this path may be blocked.

Path 2: Stockholder Action to Recast the Board

Call a special stockholders’ meeting (per by-laws/RCC; stockholders with a requisite percentage—often ≥20%—can demand a meeting).
Elect a new slate of directors favorable to a leadership change.
New Board reorganizes officers and elects a new President.

Obstacle: If the majority shareholder can still elect most directors (via plain majority or cumulative voting math), this may fail.

Path 3: Remove the Director (2/3 vote)

Convene a special meeting with proper notice explicitly stating the removal of the named director.
Secure 2/3 vote to remove the director.
Stockholders fill the vacancy.
New Board elects a new President.

Obstacle: Hard to achieve if the majority shareholder has ≥2/3 or can block coalition building.

Path 4: Regulatory/Legal Disqualification or Court Relief

Director/officer disqualification (statutory grounds—e.g., certain criminal convictions, administrative violations).
Derivative suits or intra-corporate cases for breach of fiduciary duty, self-dealing, oppression, or fraud that may lead to injunctions, damages, or changes in governance.
Close-corporation deadlock remedies (judicial dissolution, appointment of a provisional director/receiver, buy-out orders, etc.), where applicable.

5) Close Corporations: Special Considerations

In a close corporation, stockholders often directly manage or have enhanced veto rights.
Deadlock provisions allow a court (in practice, Special Commercial Courts) to impose solutions: appoint a provisional director, order a buy-out, or even dissolve the corporation.
By-laws and shareholders’ agreements commonly contain transfer restrictions, supermajority vetoes, or buy-sell mechanisms that can decide control fights without public contests.

6) Employment vs. Corporate Office

The President is a corporate officer (an office created by law/by-laws and filled by board election).
Philippine jurisprudence draws a line: removal from a corporate office is a corporate act, typically outside the usual Labor Code illegal dismissal framework.
However, if the President also has a separate employment/management contract, termination may expose the corporation to contract damages—but does not strip the Board of its authority to replace officers.

7) Process Checklist (Board-Level Removal/Reorganization)

Review by-laws & prior board/stockholders’ resolutions. Identify notice periods, quorum/vote rules, and officer-tenure clauses.
Secure quorum and votes. Confirm director count and voting alignments.
Prepare board notice & agenda (e.g., “Election of Officers,” “Reorganization”).
Hold the meeting properly: minutes, attendance, disclosures of conflicts, and recorded votes.
Elect the new President and other officers as needed.
Regulatory filings: Update the General Information Sheet (GIS) and, if applicable, report under relevant SEC governance rules (public companies/issuers).
Housekeeping: bank signatories, authorities, contracts, internal communications, and counterparties.

8) Process Checklist (Stockholders’ Removal of a Director)

Call a special stockholders’ meeting expressly stating removal on the agenda.
Confirm record date & notice compliance (content, timing, delivery method).
Check cumulative voting/minority representation constraints.
Secure the supermajority vote (commonly 2/3 of outstanding capital stock).
Elect replacement director(s) at the same meeting (if allowed) or at a follow-up meeting as required.
Board reorganizes officers—including the presidency.
File changes with the SEC via updated GIS and other required forms.

9) Common Pitfalls and How to Avoid Them

Insufficient notice or defective agenda wording. Election and removal items must be explicit.
Quorum/vote miscounts (mixing outstanding vs. present shares; forgetting non-voting shares).
Ignoring cumulative voting math—you may inadvertently disenfranchise protected minority seats.
By-law inconsistencies (e.g., higher vote thresholds or special officer-tenure clauses).
Side agreements (e.g., shareholders’ agreements with vetoes, drag/tag, or standstill provisions).
Regulatory blind spots for public/regulated entities (e.g., independent directors, committee compositions, corporate governance codes).
Conflating labor and corporate remedies for officer removal.

10) Strategy Map: Picking the Right Route

Scenario	Likely Effective Route	Why
Majority shareholder is President but does not control a majority of the Board	Board reorganization	Simple board vote can elect a new President.
Majority shareholder controls Board but owns <2 data-preserve-html-node="true"/3 of stock	Recast Board via stockholders or remove director (2/3)	Build a coalition to change or remove directors, then reorganize officers.
Majority shareholder owns ≥2/3	Negotiated solution; consider deadlock/oppression suits only if legal grounds	Legal removal as director is impractical; focus on governance commitments, buy-outs, or litigation if there’s breach.
Misconduct, disqualification grounds	Regulatory action or court relief	Disqualification/injunction may force leadership change even against control.

11) Frequently Asked Questions

Q1: Can we remove the President “for cause” only? Usually no—officers serve at the board’s pleasure unless the by-laws or a contract require cause. Even then, boards retain the power to reorganize; the “cause” limitation typically shifts the dispute to damages.

Q2: If the majority shareholder remains a director, can we still replace them as President? Yes. The Board can elect another director as President.

Q3: Does the SEC have to approve the change? Not to effect the change. But you must update filings (e.g., GIS) and comply with any disclosure rules (especially for public companies and regulated entities).

Q4: Can the removed President sue for illegal dismissal? As a corporate officer, disputes are typically intra-corporate, not standard labor cases—though contract claims may still be available.

Q5: What if the majority shareholder blocks meetings? Stockholders meeting can be demanded by holders of the requisite percentage under the RCC; failure of the secretary to call may allow stockholders to call it themselves, subject to rigid compliance with notice and formalities.

12) Governance Hygiene: Preventing Future Flashpoints

Tighten by-laws: clear officer terms, removal language, notice rules, meeting mechanics (including hybrid/virtual).
Shareholders’ agreements: voting arrangements, buy-sell mechanisms, deadlock resolution, standstills, and information rights.
Board architecture: independent directors (where required), committees, evaluation, and clear delegations of authority.
Documentation discipline: board packs, minutes, conflict disclosures, and annual training on fiduciary duties.
Succession planning: named alternates for key roles and signature authorities to avoid operational paralysis.

13) Bottom Line

A majority shareholder can be removed as President through proper Board action; their ownership does not entrench the officer role.
To remove them as director, you’ll generally need stockholders holding around 2/3 of the outstanding capital stock (subject to statutory protections and by-laws).
Success turns on process, paper, and power math: comply meticulously with the RCC, your by-laws, notice requirements, vote thresholds, and filing obligations—and plan for litigation risks if the contest is heated.

This article provides general information on Philippine corporate law principles. It is not legal advice. For a live situation, consult Philippine counsel, review your articles/by-laws/shareholders’ agreements, and map the precise voting math and procedures before acting.