Removing an Incorporator or Director in a Philippine Corporation: Complete Legal Guide

Abstract

This article explains, from first principles to practical checklists, how Philippine corporations may (a) deal with incorporators after registration and (b) remove directors (and trustees for non-stock corporations). It synthesizes statutory rules under the Revised Corporation Code of the Philippines (RCC, R.A. 11232), default corporate-law doctrines, SEC practice, and boardroom mechanics—covering causes, voting thresholds, due-process safeguards, filings, and post-removal housekeeping.

I. Incorporator vs. Director: Different Concepts

Incorporator. A natural or juridical person who signed the Articles of Incorporation and acknowledged them before a notary. Being an incorporator is a historical status recorded in the Articles; it does not by itself grant a continuing office. After registration, incorporators may or may not be: (i) shareholders (stock), (ii) members (non-stock), (iii) directors/trustees, or (iv) officers.

Director/Trustee. An elected member of the board (stock = directors; non-stock = trustees). Directors are fiduciaries who must own at least one share (unless exempted in special regimes) and serve for a term fixed in the Articles/by-laws, subject to the hold-over rule until successors are elected and qualified.

Key takeaway: You cannot “remove” someone as an incorporator the way you remove a director. What you can do is:

end their directorship (via removal, vacancy, or non-re-election);
end or transfer their shareholding or membership; and
amend the Articles to change ongoing provisions (e.g., number of directors, corporate name, primary purpose), but not the historical fact that X signed as incorporator on day one.

Practical note: Many companies stop listing incorporators in current disclosures and instead keep that list in the original Articles (and SEC file). If you “need to remove” an incorporator from public-facing papers, the usual path is to amend the Articles to a restated version without altering the historical recital, or simply avoid repeating the incorporators’ list in subsequent documents.

II. Grounds and Modes for a Director to Leave Office

A director/trustee may leave office through:

Expiration of term / non-re-election. Occurs at the next election; the director holds over until successor is elected and qualified.
Resignation. Effective upon delivery/acceptance per by-laws; creates a vacancy.
Disqualification. Permanent (e.g., conviction for offenses involving moral turpitude, SEC-prescribed bars) or temporary (e.g., non-filing of required reports in covered issuers).
Removal by stockholders/members. With or without cause, subject to voting thresholds and minority-representation protection under cumulative voting.
Vacancy by death, incapacity, or other events. Filled per RCC rules.

III. Removal of Directors (Stock Corporations)

A. Who can remove and when

Power to remove rests with the stockholders (not the board), voting at a meeting called expressly for that purpose.
The Board cannot oust a director elected by the stockholders; it may only declare a vacancy if the director is clearly disqualified under law/by-laws or has resigned/died/etc.

B. Vote required

At least two-thirds (2/3) of the outstanding capital stock must vote in favor of removal. (“Outstanding” = entitled to vote; treasury shares excluded.)
For non-stock, at least 2/3 of the members.

C. With or without cause; the cumulative-voting guardrail

With cause (e.g., breach of fiduciary duty, fraud, gross negligence, incapacity): permissible; best practice is to afford notice and opportunity to be heard to mitigate disputes.
Without cause: also legally permissible but cannot be used to deprive minority stockholders of the representation they are entitled to through cumulative voting.
- Practical effect: you may remove the entire board without cause (minority representation is re-determined at the new election using cumulative voting);
- but picking off a single minority-elected director without cause can be struck down if it undermines minority seats guaranteed by cumulative voting math.

D. Notice and agenda requirements

The meeting notice (annual or special) must state clearly that removal of director(s) is on the agenda and name the director(s) sought to be removed. Defective notice risks invalidation.
Record date rules for stockholders entitled to notice/vote apply.

E. Quorum

General quorum rules apply (often majority of outstanding capital stock), but removal still needs the 2/3 affirmative vote. Check by-laws for stricter quorum, if any.

F. Filling the vacancy

If removal occurs, elect the replacement(s) at the same meeting, unless the meeting resolves otherwise.
Vacancies other than by removal or increase in board size may be filled by the remaining directors if they still constitute a quorum; otherwise, stockholders fill them.

G. Limits and pitfalls

Staggered boards / classified terms (if provided in Articles) do not immunize directors from removal; the 2/3 rule still applies.
Proxy and remote participation are allowed if authorized; ensure proxies are valid and specific for removal.
Avoid “for-cause” labels in minutes unless the record substantiates them—defamation risk and litigation exposure.

IV. Removal of Trustees (Non-Stock Corporations)

Members (not the board) remove trustees by 2/3 vote at a meeting called for that purpose.
Cumulative voting can apply if provided; if used, the same minority-representation caveat applies.
Many non-stocks have specific qualifications (e.g., sectoral representation). Verify eligibility when electing replacements.

V. Disqualification vs. Removal: How They Interact

Disqualification (statutory or SEC-imposed) means a director cannot serve; the board or corporate secretary may record the vacancy and cease recognition of the disqualified person’s acts from the effectivity of disqualification. Stockholders may still proceed with formal removal to avoid doubt.

Common disqualifications (illustrative):

Non-ownership of a qualifying share (for stock corps).
Final conviction of offenses involving moral turpitude/fraud.
Administrative findings of fraud in covered issuers (per SEC rules).
Regulatory citizenship/ownership limits in nationalized industries.

VI. Process Map: Removing a Director (Stock)

Pre-work (legal and governance):
- Verify share ledger (who can vote), quorum math, and 2/3 threshold.
- Check cumulative voting implications; if targeting individuals without cause, confirm that minority representation is not impaired.
- Prepare evidence if removal is for cause (board records, committee reports, audit findings).
- Review by-laws for notice periods, proxy rules, remote participation, and election mechanics.
Call the meeting:
- Board calls a special stockholders’ meeting (or qualifying stockholders call it if by-laws allow/require).
- Notice states: “Removal of Director(s)” and identifies them by name; include rationale if for cause.
Conduct the meeting:
- Establish quorum and record-date compliance.
- If for cause, offer the director an opportunity to be heard.
- Take the vote; record votes per shareholder when practical.
- If removal passes, elect replacement(s) immediately (recommended), using cumulative voting if applicable.
Post-meeting corporate actions:
- Issue Secretary’s Certificate of removal and election; update Board/Officer certificates.
- Update bank signatories, BIR authorized signatories, LGU permits, SSS/PhilHealth/Pag-IBIG credentials, and contractual notice to counterparties.
- File Amended General Information Sheet (GIS) and any SEC forms required for changes in directors/officers within the regulatory deadline.
- If public/covered company, update beneficial ownership and insider list filings.
Litigation readiness:
- Keep the notice, proof of service, attendance list, proxies, and vote tabulation.
- For cause-based removals, preserve investigation files and board committee minutes.

VII. Special Situations

A. Entire board removal and reconstitution

Stockholders may remove the entire board without cause by 2/3 vote and elect a new slate, preserving minority rights through cumulative voting at the fresh election.

B. Deadlock and court intervention

In equal-ownership ventures, removal may not solve a deadlock. Parties may petition the Regional Trial Court (commercial court) for corporate deadlock remedies (e.g., appointment of a provisional director, buy-out orders).

C. Independents and public companies

In publicly listed or public/large/covered corporations, independent directors are mandated. Removal must still respect independence quotas and industry-specific rules (e.g., banks, insurance). Replacement must keep the company compliant.

D. Officers who are directors

Removing someone as director does not automatically remove them as officer (president, treasurer, etc.). The board can remove/replace officers (as they are board appointees), usually by board majority.

E. Vacancies created other than removal

Resignation, death, incapacity, or disqualification: remaining directors may fill the vacancy if they still constitute a quorum; otherwise, stockholders proceed.

F. One Person Corporation (OPC)

No “board.” The single stockholder acts as director. Changes happen by updating the SEC records for the nominee/alternate nominee; “removal” is inapplicable.

VIII. “Removing” an Incorporator—What Actually Works

You cannot retroactively erase the incorporator’s signature from history. But you can:

End their shareholding
- Transfer or redeem shares (if authorized), or forfeit unpaid subscriptions per RCC/by-laws.
- Record in the Stock and Transfer Book (STB); issue/ cancel certificates; pay any documentary stamp tax; update GIS.
End their directorship/officership
- Use removal, non-re-election, or accept resignation. File necessary SEC updates.
Restate/Amend the Articles
- You may restate the Articles (e.g., to reflect current capital structure, purposes, board size). The historical incorporators’ clause remains in the original SEC file, but your current corporate profile need not re-print them in other documents.
Disclosure management
- In public reports, list current shareholders, directors, officers; the incorporator label is typically not a required “current” status.

IX. Due-Process and Fiduciary-Duty Lens

Directors owe duty of loyalty (no self-dealing without proper approval; no usurpation of corporate opportunities) and duty of care (prudence, diligence).
Cause-based removals should be anchored on board-level findings, conflict-of-interest procedures (e.g., disinterested director approval), and, where appropriate, ratification by stockholders.
Removal does not extinguish liability for prior breaches. The corporation or shareholders may pursue derivative suits, damages, restitution, or void/voidable transaction remedies.

X. Compliance Checklists

A. Removing a Director (Stock)

Before the meeting

Compute quorum and 2/3 threshold; verify outstanding shares.
Analyze cumulative voting effects.
Prepare notice that clearly states removal and names of director(s).
Validate proxies and remote participation rights.
If “for cause,” compile documented findings.

During the meeting

Establish quorum; confirm proper notice.
Allow the director a reasonable chance to respond (if for cause).
Take the vote; record results.
Elect replacement(s) immediately (recommended).

After the meeting

Issue Secretary’s Certificate and Amended GIS / SEC updates within deadline.
Update bank/BIR/SSS/PhilHealth/Pag-IBIG/LGU signatories.
Notify contract counterparties if signature authority changes.
File or store complete minute book documentation.

B. Ending an Incorporator’s Continuing Roles

Share transfer (endorsement, deed of assignment, tax stamps, STB entry).
Resignation/Removal from board/offices; board or stockholder actions as needed.
Disclosure updates (GIS, beneficial ownership for covered entities).
Consider Articles restatement (if undertaking larger governance refresh).

XI. Common Pitfalls (and How to Avoid Them)

Defective notice (agenda didn’t specify removal or omitted names) → voidable action.
Miscounting the vote (using attendees rather than outstanding shares) → threshold not met.
Violating cumulative-voting protection when removing individuals without cause → risk of nullification.
Board-only action to remove a director elected by stockholders → ultra vires.
Labeling removal “for cause” without robust record → defamation/exposure.
Forgetting replacement and signatory changes → banking and tax disruptions.
Failure to update SEC/BIR within deadlines → penalties and compliance flags.

XII. Illustrative Scenarios

Removing a director for self-dealing.
- Audit flags undisclosed related-party deal. Board (disinterested quorum) investigates; stockholders remove for cause by 2/3 vote; corporation sues for restitution; regulator filings updated.
Clean board refresh without cause.
- 80% owner calls a special meeting, removes the entire board without cause by 2/3 vote, then elects a new slate; cumulative voting runs at the election, preserving a minority seat.
“Erase the incorporator.”
- Founder exits: shares assigned; resigns as director/officer; company files amended GIS and updates signatories. The Articles’ original incorporators remain in the SEC file; current disclosures stop featuring that list.

XIII. Key Takeaways

Incorporator status is historical—you don’t “remove” it; instead, terminate ongoing shareholder, director, or officer roles, and make proper filings.
Only stockholders/members may remove directors/trustees, generally by 2/3 vote, with cumulative-voting protections for minority representation.
Observe strict notice, agenda specificity, quorum and vote math, and post-meeting filings.
Removal does not cleanse prior liabilities; preserve evidence and consider derivative or damages actions where warranted.
For public/regulated entities, ensure independent-director quotas and beneficial-ownership disclosures remain compliant after changes.

This article provides general information on corporate governance under Philippine law. Complex situations—especially those involving public/covered companies, industry-specific rules, or shareholder disputes—call for counsel and careful coordination with the corporate secretary and compliance officers.