What is liability of the corporate secretary in connection with the violation

of the right of a stockholder for inspection.

According to the code of corporate governance, one of the duties and

responsibilities of the corporate secretary is to safe keep and preserve the integrity of
the minutes and of the board and its Committees, as well as other official records of the
corporation. In other words, they are the custodian of corporate records. Being the
custodian of the corporate books, generally, they are the ones who shall allow the
inspection of the books. The unjustified refusal of the corporate secretary to allow the
inspection of the corporate books may make the responsible corporate officer subject to
civil and criminal sanctions. Section 73 and section 161 of the revised corporation code
states that:

 Sec. 73. Books to be kept; stock transfer agent. x x x

xxxx

Any officer or agent of the corporation who shall refuse to allow the inspection and/or reproduction of
records in accordance with the provisions of this Code shall be liable to such director, trustee,
stockholder or member for damages, and in addition, shall be guilty of an offense which shall be
punishable under Section 161 of this Code: Provided, That if such refusal is made pursuant to a
resolution or order of the board of directors or trustees, the liability under this section for such action
shall be imposed upon the directors or trustees who voted for such refusal: Provided, further,That it
shall be a defense to any action under this section that the person demanding to examine and copy
excerpts from the corporation's record or minutes of such corporation or of any other corporation, or
was not acting in good faith or of any other corporation or was not acting in good faith or for a
legitimate purpose in making the demand to examine or reproduce corporate records or is a
competitor, director, officer, controlling stockholder or otherwise represents the interest of a
competitor.

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Section 161. Violation of Duty to Maintain Records, to Allow their Inspection or Reproduction;

Penalties. - The unjustified failure or refusal by the corporation, or by those responsible for keeping
and maintaining corporate records, to comply with Section s 45, 73, 92, 128, 177 and other pertinent
rules and provisions of this Code on inspection and reproduction of records shall be punished with a
fine ranging from Ten thousand pesos (₱10,000.00) to Two hundred thousand pesos (₱200,000.00),
at the discretion of the court, taking into consideration the seriousness of the violation and its
implications. When the violation of this provision is injurious or detrimental to the public, the penalty
is a fine ranging from Twenty thousand pesos (₱20,000.00) to Four hundred thousand pesos
(₱400,000.00).

The penalties impose under this section shall be without prejudice to the Commission's exercise of
its contempt powers under Section 157 hereof.

In order therefore for the penal provision under Section 144 of the Corporation Code to apply in a
case of violation of a stockholder or member’s right to inspect the corporate books/records as
provided for under Section 74 of the Corporation Code, the following elements must be present:
First. A director, trustee, stockholder or member has made a prior demand in writing for a copy of
excerpts from the corporation’s records or minutes;

Second. Any officer or agent of the concerned corporation shall refuse to allow the said director,
trustee, stockholder or member of the corporation to examine and copy said excerpts;

Third. If such refusal is made pursuant to a resolution or order of the board of directors or trustees,
the liability under this section for such action shall be imposed upon the directors or trustees who
voted for such refusal; and,

Fourth. Where the officer or agent of the corporation sets up the defense that the person demanding
to examine and copy excerpts from the corporation’s records and minutes has improperly used any
information secured through any prior examination of the records or minutes of such corporation or
of any other corporation, or was not acting in good faith or for a legitimate purpose in making his
demand, the contrary must be shown or proved.

G.R. No. 178511             December 4, 2008

MA. BELEN FLORDELIZA C. ANG-ABAYA, FRANCIS JASON A. ANG, HANNAH ZORAYDA A.

ANG, and VICENTE G. GENATO, petitioners,
vs.
EDUARDO G. ANG, respondent.

The Corporation Code has granted to all stockholders the right to inspect the corporate books and
records, and in so doing has not required any specific amount of interest for the exercise of the
right to inspect.15 Ubi lex non distinguit nec nos distinguere debemos. When the law has made
no distinction, we ought not to recognize any distinction. Neither could the petitioner arbitrarily
deny the respondent’s right to inspect the corporate books and records on the basis that her
inspection would be used for a doubtful or dubious reason. Under Section 74, third paragraph, of
the Corporation Code, the only time when the demand to examine and copy the corporation’s
records and minutes could be refused is

when the corporation puts up as a defense to any action that “the person demanding” had
“improperly used any information secured through any prior examination of the records or
minutes of such corporation or of any other corporation, or was not acting in good faith or for a
legitimate purpose in making his demand.”

The right of the shareholder to inspect the books and records of the petitioner should not be made
subject to the condition of a showing of any particular dispute or of proving any mismanagement
or other occasion rendering an examination proper, but if the right is to be denied, the burden of
proof is upon the corporation to show that the purpose of the shareholder is improper, by way of
defense

According to a recognized commentator:16 By early English decisions it was formerly held that
there must be something more than bare suspicion of mismanagement or fraud. There must be
some particular controversy or question in which the party applying was interested, and
inspection would be granted only so far as necessary for that particular occasion. By the general
rule in the United States, however, shareholders have a right to inspect the books and papers of
the corporation without first showing any particular dispute or proving any mismanagement or
other occasion rendering an examination proper. The privilege, however, is not absolute and the
corporation may show in defense that the applicant is acting from wrongful motives. In Guthrie
v. Harkness, there was involved the right of a shareholder in a national bank to inspect its books
for the purpose of ascertaining whether the business affairs of the bank had been conducted
according to law, and whether, as suspected, the bank was guilty of irregularities. The court said:
“The decisive weight of American authority recognizes the right of the shareholder, for proper
purposes and under reasonable regulations as to place and time, to inspect the books of the
corporation of which he is a member . . . In issuing the writ of mandamus the court will exercise
a sound discretion and grant the right under proper safeguards to protect the interest of all
concerned. The writ should not be granted for speculative purposes or to gratify idle curiosity or
to aid a blackmailer, but it may not be denied to the stockholder who seeks the information for
legitimate purposes.”

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In general, however, officers and directors have no legal authority to close the office doors
against shareholders for whom they are only agents, and withhold from them the right to inspect
the books which furnishes the most effective method of gaining information which the law has
provided, on mere doubt or suspicion as to the motives of the shareholder. While there is some
conflict of authority, when an inspection by a shareholder is contested, the burden is usually held
to be upon the corporation to establish a probability that the applicant is attempting to gain
inspection for a purpose not connected with his interests as a shareholder, or that his purpose is
otherwise improper. The burden is not upon the petitioner to show the propriety of his
examination or that the refusal by the officers or directors was wrongful, except under statutory
provisions

G.R. No. 160924, August 05, 2015

TERELAY INVESTMENT AND DEVELOPMENT

CORPORATION, Petitioner, v. CECILIA TERESITA J. YULO, 

2. Whether the Corporate Secretary may allow the inspection despite the disapproval of
the board to the inspection.

3. Can the corporate secretary object to a decision of the Board?

4. Does the Corporate Secretary have any discretion as to whom to allow the
inspection? 

Being the corporate officer who has the custodian to the corporate books and records, the
Corporate Secretary has the discretion whom to allow inspection. But, it must be keep in mind
that the law provides that the corporate books shall be open for inspection to the directors,
trustees, stockholders and their representatives.

Sec 73 Corporate records, regardless of the form in which they are stored, shall be open
to inspection by any director, trustee, stockholder or member of the corporation in
person or by a representative at reasonable hours on business days, and a demand in writing may
be made by such director, trustee or stockholder at their expense, for copies of such records or
excerpts from said records. The inspecting or reproducing party shall remain bound by confidentiality
rules under prevailing laws, such as the rules on trade secrets or processes under Republic Act No.
8293, otherwise known as the "Intellectual Property Code of the Philippines", as amended, Republic
Act No. 10173, otherwise known as the "Data Privacy Act of 2012" Republic Act No. 8799, otherwise
known as "The Securities Regulation Code", and the Rules of Court.

A requesting party who is not a stockholder or member of record, or is a competitor, director, officer,
controlling stockholder or otherwise represents the interests of a competitor shall have no right to
inspect or demand reproduction of corporate records.

The grant of legal personality to a corporation is conditioned on its compliance with

certain obligations. Among these are its fiduciary responsibilities to its stockholders.
Providing stockholders with access to information is a fundamental basis for their
intelligent participation in the governance of the corporation as a business organization
that they partially own. The law is agnostic with respect to the amount of shares
required. Generally, each individual stockholder should be given reasonable access so
that he or she can assess or share his or her assessment of the management of the
corporation with other stockholders. The separate legal personality of a corporation is
not so absolutely separate that it divorces itself from its responsibility to its constituent
owners
Good faith and a legitimate purpose are presumed. It is the duty of the corporation to
allege and prove with sufficient evidence the facts that give rise to a claim of bad faith
as to the existence of an illegitimate purpose.

The confidentiality of business transactions is not a magical incantation that will defeat
the request of a stockholder to inspect the records. Although it is true that the business
is entitled to the protection of its trade secrets and other intellectual property rights,
facts must be pleaded to convince the court that a specific stockholder's request for
inspection, under certain conditions, would violate the corporation's own legal right.

Furthermore, the discomfort caused to the management of a corporation when a

request for inspection is claimed is part of the regular matters that a business wanting
to ensure good governance must endure. The range between discomfort and vexation is
a broad one, which may tend to be located in the personalities of those involved.

Certainly, by themselves, these are not sufficient factual basis to conclude bad faith on
the part of the requesting stockholder. Courts must be convinced that the scope or
manner of the request and the conditions under which it was made are so frivolous that
the huge cost to the business will, in equity, be unfair to the other stockholders. There
is no iota of evidence that this happened here. chanroblesvirtuallawlibrary

G.R. No. 172948, October 05, 2016

 PHILIPPINE ASSOCIATED SMELTING AND REFINING
CORPORATION, Petitioner, v. PABLITO O. LIM, MANUEL A. AGCAOILI, AND
CONSUELO M. PADILLA, Respondents.

DECISION

Philippine Associated Smelting and Refining Corporation v. Pablito Lim, G.R No. 172948, Octover 5, 2016

The corporate officer who has in his custody the books and paper sought to be inspected, and
refuses to allow inspection. If the refusal is pursuant to a resolution or order of the board of
directors or trustees, then the directors or trustees who voted for such refusal shall be held liable

(VILLANUEVA CORPO BOOK)

May Corporate Secretary allow the inspection despite the disapproval of the board to
the inspection

Acts of an officer that are not authorized by the board of directors/trustees do not bind the
corporation unless the corporation ratifies the acts or holds the officer out as a person with authority
to transact on its behalf. If the All the more, when the board has already decided on any act thru a
board resolution or thru majority votes in a quorum, the corporate officer has no right to object and
disobey and act contrary to the decision of the board.

UNIVERSITY OF MINDANAO, INC., Petitioner,

vs.
BANGKO SENTRAL NG PILIPINAS, ET AL., Respondents.

The power of a corporation to sue and be sued is lodged in the board of directors, which exercises
its corporate powers. It necessarily follows that "an individual corporate officer cannot solely exercise
any corporate power pertaining to the corporation without authority from the board of directors."

G.R. No. 181277               July 3, 2013hru a

SWEDISH MATCH PHILIPPINES, INC., Petitioner,

vs.
THE TREASURER OF THE CITYOF MANILA,

No. Under Section 23 of the Corporation Code, the board is the main agency by which all
corporate powers and authority are exercised, and strictly speaking any other officer appointed to
represent the corporation, is a mere appointee of the board.
Under Section 23, the mind of the corporation is principally its own agent, the board. Therefore,
the determination of the board is practically and legally the determination of the principal
corporation itself.
23

In Ramirez v. The Orientalist Co., the director-treasurer of the

corporation entered into transactions for the leases of films without prior board authorization.
Although the articles of incorporation of the company authorized it to manufacture, buy, or
otherwise obtain all accessories necessary for conducting the business of maintaining and
conducting theaters, the Court nevertheless held that a treasurer has no independent authority to
bind the corporation by signing its name to the documents; and that under then Section 28 of the
Corporation Law (now Section 23 of the Corporation Code) all corporate powers shall be
exercised and all corporate business conducted by the board of directors.

21
The SEC has opined that directors and trustees can only exercise their power as a board, not individually. They
shall meet and counsel each other and any determination affecting the corporation shall be arrived at only after
consultation at a meeting of the board attended by at least a quorum. SEC Opinion, 10 March 1972, SEC FOLIO
1960-1976, at p. 526.

Can the corporate secretary object to a decision of the Board

No.

The powers of the board are original and undelegated. It has two major functions, i.e.,
monitoring and advisory. It has the power to hire and fire corporate officers, with proper mix of
discretion and accountability. It has ex ante authority to “exercise corporate power, conduct all
business, and manage the corporation.” On the other hand, the “officers shall manage the
corporation and perform such duties as may be provided in the by-laws and.or as resoved by the
board of directors.”

(Book page 98)

The corporate officers implement the decision of the board.

Business Judgment Rule

The members of the board are presumed to have sufficient knowledge and training to properly
manage the business of the corporation. Shareholders or members cannot challenge the
corporation’s action because of the board’s poor judgment. Otherwise, it may lead to
uncertainity.
It has also been held that as a rule, a corporation exercises its powers, including the power to
enter into contracts, through its board of directors; and that while a corporation may appoint
agents to enter into a contract in its behalf, the agent should not exceed his authority

Assets Privatization Trust v. Court of Appeals, 300 SCRA 579, 101 SCAD 1028 (1998).

Under Section 23 of the Corporation Code, the board is the main agency by which all corporate
powers and authority are exercised, and strictly speaking any other officer appointed to represent
the corporation, is a mere appointee of the board.

(Villanueva Book)

In Ramirez v. The Orientalist Co., the director-treasurer of the

corporation entered into transactions for the leases of films without prior board authorization.
Although the articles of incorporation of the company authorized it to manufacture, buy, or
otherwise obtain all accessories necessary for conducting the business of maintaining and
conducting theaters, the Court nevertheless held that a treasurer has no independent authority to
bind the corporation by signing its name to the documents; and that under then Section 28 of the
Corporation Law (now Section 23 of the Corporation Code) all corporate powers shall be
exercised and all corporate business conducted by the board of directors.

The authority of such individual to bind the corporation is generally derived from law, corporate
by-laws, and authorizations from the board, either expressly or impliedly by habit, custom or
acquiescence in the general course of business

People’s Aircargo and Warehousing Co., Inc. v. Court of Appeals, 297 SCRA 170, 182, 99 SCAD 482, 495
(1998).

Section 23, in relation to Sec. 25 of the Corporation Code, clearly enunciates that all corporate
powers are exercised, all business conducted, and all properties controlled by the board of directors.
A corporation has a separate and distinct personality from its directors and officers and can only
exercise its corporate powers through the board of directors. Thus, it is clear that an individual
corporate officer cannot solely exercise any corporate power pertaining to the corporation without
authority from the board of directors.  Absent the said board resolution, a petition may not be given
25

due course

G.R. No. 206617

PHILIPPINE NUMISMATIC AD ANTIQUARIAN SOCIETY v.

AQUINO, et, al
Philippine Numismatic Ad Antiquarian Society v. Aquino, et. al., G.R. No. 206617, January 30,2017

It is clear then that a criminal action based on the violation of the second or fourth paragraphs of
Section 74 can only be maintained against corporate officers or such other persons that are acting
on behalf of the corporation. Violations of the second and fourth paragraphs of Section 74
contemplates a situation wherein a corporation, acting thru one of its officers or agents, denies the
right of any of its stockholders to inspect the records, minutes and the stock and transfer book of
such corporation.

G.R. No. 180416               June 2, 2014

ADERITO Z. YUJUICO and BONIFACIO C. SUMBILLA, Petitioners,

vs.
CEZAR T. QUIAMBAO and ERIC C. PILAPIL, Respondents.

It must be noted that Yujico