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Corporate Opportunity Doctrine Case

1. John Gokongwei, a stockholder of SMC, challenged amended by-laws that disqualified him from being elected as a director because he was an officer of a competitor company. 2. The court ruled that the corporation has the power to reasonably disqualify a competitor from being a director to prevent conflicts of interest. 3. Amending the by-laws to add qualifications for directors is allowed under the law and does not deprive stockholders of vested rights, as corporate charters and by-laws are subject to change.

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Adrian Bernardo
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240 views2 pages

Corporate Opportunity Doctrine Case

1. John Gokongwei, a stockholder of SMC, challenged amended by-laws that disqualified him from being elected as a director because he was an officer of a competitor company. 2. The court ruled that the corporation has the power to reasonably disqualify a competitor from being a director to prevent conflicts of interest. 3. Amending the by-laws to add qualifications for directors is allowed under the law and does not deprive stockholders of vested rights, as corporate charters and by-laws are subject to change.

Uploaded by

Adrian Bernardo
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Gokongwei v SEC Doctrine: o The doctrine of corporate opportunity is a recognition by the courts that the fiduciary standards could

d not be upheld where the fiduciary was acting for 2 entities with competing interests. This doctrine rests on unfairness, in particular circumstances, of an officer or director taking advantage of an opportunity for his own personal profit when the interest of the corporation unjustly calls for protection. Mini Digest: o Facts: John Gokongwei, a stockholder of SMC, filed a petition for declaration of nullity of amended by-laws, cancellation of certificate of filing of the amended-by laws, injunction and damages against the majority of the members of the Board of Directors of the SMC based on the following grounds: corporations have no inherent power to disqualify a stockholder from being elected as director depriving him of his vested right because he is an officer of a competitor company. he corporation has been investing corporate funds in other corporations and business outside of the primary purpose of the corporation o Issue: WON the corporation has the power to disqualify a competitor from being elected to the board of directors as a reasonable exercise of corporate authority? o Ratio: Yes. Any corporation may amend its articles of incorporation by a vote or written assent of the stockholders representing at least 2/3 of the subscribed capital stock of the corporation. It cannot be said that prior to this, Gokongwei has a vested right to vote and be voted for in the face of the fact that the law at the time such right as stockholder was acquired contained the prescription that the corporate charter and the by-law shall be subject to amendment, alteration and modification Every person who buys a stock with a corporation impliedly contracts that the will of the majority shall govern in all matters within the limits of the act of incorporation and lawfully enacted by-laws and not forbidden by law A director's relationship with the corporation is of a fiduciary nature. He who is in such a fiduciary position cannot serve himself first and his cestuis second. He cannot manipulate the affairs of his corporation to their detriment and disregard of the standards of common decency. It is obviously to prevent the creation of an opportunity for an officer or director of San Miguel Corporation, who is also the officer or owner of a competing corporation, from taking advantage of the information which he acquires as director to promote his individual or corporateinte rests to the prejudice of San Miguel Corporation and its stockholders Applicable Law: o Section 47: The Corporation could provide other qualifications/disqualifications in the by laws which may require more than ownership of one share.

Section 42: Corporations have power to invest corporate funds in another corporation or business or for any other purpose by majority vote of the Board and 2/3 vote of outstanding stock or members

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