What Is The Effect Of Disloyalty Of A Director In A Corporation?

What is the effect of the disloyalty of a director in a corporation?

In SEC. 34 of Batas Pambansa Blg. 68 "The Corporation Code of the Philippines" refers to the Disloyalty of a director with details as follows:

SEC. 34. Disloyalty of a director. - Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture.

Availability Of The Update Of Exemption Of Employees (UEE) Data Entry Module In Filing Of The BIR Form No. 2305 and 2305 Batch File Validation Module

The CIR of the bureau has issued Revenue Memorandum Circular No. 59-2015 in relation to RR 7-2012 to circularize the availability of Updated of Exemption Of Employees (UEE) (BIR Form No. 2305) Data Entry Module and 2305 Batch File Validation Module which shall be used for the following:

 

1. Updating of Employee's Additional Exemption for Dependents;

2. Change of Status; and

3. Execution of the "Waiver to Claim the Additional Exemption" by the husband; or revocation of the previously executed "Waiver to Claim the Additional Exemption by the Husband". 

 

The filing of BIR Form No. 2305 shall be coursed through the employer and shall be electronically filed containing all the required information in the prescribed electronic format using any of the following:

 

Option 1 Microsoft Excel CSV format;

Option 2 Taxpayer's own extract program; or

Option 3 BIR's UEE Data Entry Module.

 

For those who will be using Option 1 or Option 2 are required to use the 2305 Batch File Validation Module. The UEE Data Entry Module and 2305 Batch File Validation Module are available at http://www.bir.gov.ph/index.php/downloadables.html

 

For the Submission of Report, Submission of Supporting Documents, Venue of Submission and Other Concerns, please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMC%20No%2059-2015_copy.pdf of the full text of RMC No. 59-2015.

 

 

 

BIR Audit Program: Audit/Investigation Of Taxpayers of Mandatory Cases and Priority Taxpayers/Industries

The CIR of the BIR just recently issued Revenue Memorandum Order (RMO) No. 19-2015 of the BIR Audit Program that prescribes the policies, guidelines and procedures to be observed in the audit/investigation of tax returns to enhance taxpayers' voluntary compliance by encouraging the correct payment of internal revenue taxes through the exercise of the enforcement function of the Bureau.

 

It is stated in the RMC that in general, all taxpayers are considered as possible candidates for audit. To cover such audit/investigation of taxpayers, electronic Letters of Authority (eLAs) shall be issued. The said audit/investigation shall include, but not limited to, the following cases:

 

1. Mandatory Cases

 

1.1 Taxpayers with claims for income tax refund or issuance of tax credit certificate (Selection Code: ITR for income tax refund and ITC for tax credit certificate)

 

1.2 Taxpayers with claims for Value-Added Tax (VAT) refund/credit (Selection Code: VTR for VAT refund and VTC for VAT credit certificate)

 

1.3 Claims for tax refund/credit of excise tax under Title VI of the Tax Code, as amended, regardless of amount (election Code: ETRS for excise tax refund and ETCS for Excise tax credit certificate)

 

1.4 Claims for tax refund/credit on erroneously/double payment of taxes regardless of amount (Selection Code: ERTR claims for tax refund and ERTC for claims for tax credit certificate)

 

1.5 Request for tax clearance of taxpayers due to retirement/cessation of business with gross sales/receipts exceeding P1,000,000.00 or gross assets exceeding P3,000,000.00 (Selection Code: TRC)

 

1.6 Request for tax clearance of taxpayers undergoing merger/consolidation/split-up/spin-off and other types of corporate reorganizations (Selection Code: TMC)

 

1.7 Cases with unresolved Letter Notices (LNs) (Selection Code: LNA)

 

1.8 Estate tax returns with other tax liabilities (Selection Code: EOT)

 

1.9 Policy cases covered by written directive of the Commissioner (Selection Code: CIR)

 

2. Priority Taxpayers/Industries - Unless revised through the issuance of a Revenue Memorandum Order (RMO), the tax returns to be audited shall be based on the following criteria.

 

Please refer the link:  http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202015/RMO%20No%20%2019-2015.pdf of the Priority Taxpayers/Industries, policies & procedures and full text of RMO No. 19-2015

Use of Non-Thermal Paper For All Cash Register Machines (CRMs) / Point-Of-Sales (POS) Machines And Other Invoice/Receipt Generating Machine/Software

The CIR of the BIR just recently issued Revenue Regulations (RR) No. 10-2015 to inform all Business Establishments, Internal Revenue Officials and Employers and Others Concerned about SECTION 1 of the Regulations that pursuant to the provisions of section 244, in relation to Sections 203, 222 and 235 of the National Internal Revenue Code of 1997 (NIRC, as amended, these Regulations is hereby promulgated to mandate the use of Non-thermal paper for all CRM/POS and other invoice/receipt-generating machine/software.

 

For Retention Periods of books of account, including subsidiary book and other accounting records; information and other concerns please refer http://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202015/RR%20No.%2010-2015.pdf of the full text of Revenue Regulations No. 10-2015

Contracts Between Corporations With Interlocking Directors

Contracts Between Corporations With Interlocking Directors is stated in SEC. 33 of Batas Pambansa Blg. 68 "The Corporation Code of the Philippines" with details as follows:

SEC. 33. Contracts between corporations with interlocking directors. - Except in cases of fraud, and provided the contract is fair and reasonable under the circumstances, a contract is fair and reasonable under the circumstances, a contract between two or more corporations having interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking director in one corporation is substantial and his interest in the other corporation or corporations is merely nominal, he shall be subject to the provisions of the preceding section insofar as the latter corporation or corporations are concerned.

Stockholdings exceeding twenty (20%) percent of the outstanding capital stock shall be considered substantial for purposes of interlocking directors.

Dealings Of Directors, Trustees Or Officers With The Corporation

Dealings of directors, trustees or officers with the corporation is stated SEC. 32 of Batas Pambansa Blg. 68 "The Corporation Code of the Philippines" refers to the dealings of directors, trustees or officers with the corporation as follows:

SEC. 32. Dealings of directors, trustees or officers with the corporation. - A contract of the corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present:

1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;

2. That the vote of such director or trustee was not necessary for the approval of the contract;

3. That the contract is fair and reasonable under the circumstances; and

4. That in the case of an officer, the contract has been previously authorized by the board of directors.

Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at least two thirds (2/3) of the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, That the contract is fair and reasonable under the circumstances.

Submission Of Inventory List And Other Reporting Requirements

Revenue Memorandum Circular No. 57-2015 was recently issued by the BIR with the purpose to consistently apply the data requirements across different sectors with the peculiarity of the industry where the taxpayers belong directing the volume of reporting.

 

With this, the additional reports or schedules to be submitted and filed with the annual inventory list shall cover companies maintaining inventory of stock-in-trade, raw material, goods in process, supplies and other goods such as manufacturing, wholesaling, distributing/retailing sectors including real estate dealers/developers, service companies, e.g., construction companies, building contractors, etc. It bears stressing that the data/information contained in the said schedules/lists should be reconciled with the amount declared in the financial statements and annual income tax returns. 

 

In Section 2 of the Circular, refers to the prescribed format and deadline for submission. All taxpayers with tangible asset-rich balance sheets, often with at least half of their total assets in working capital assets, e.g., accounts receivable and inventory, shall submit, in addition to the annual inventory list, schedules/lists prescribed herein, in hard and soft copies, using the format as shown in Annex "A" (for manufacturing / merchandising or retail company); Annexes "B" and "B-1" (for real estate company) and Annex "C" (for construction industry). Taxpayers not belonging to the above-described industries shall adopt the herein prescribed format that is applicable to their existing inventory.

 

The soft copies of the inventory list including other applicable schedules shall be stored/saved in Digital Versatile Disk-Recordable (VD-R) properly labeled and submitted, together with a notarized certification, as shown in Annex "D" hereof, duly signed by the authorized representative of the taxpayer certifying that the data/information contained in the DVD-R are true and correct.

 

For initial filing using the herein prescribed format, the schedules and inventory list shall be submitted on or before September 30, 2015 covering ending inventory as of December 31, 2014, and thereafter every 30th day following the close of the taxable year (depending on the accounting period adopted by the taxpayer) as enunciated under Section 13 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations, which provides for the filing of an  annual inventory of stocks-in-trade, raw materials, goods in process, supplies and other goods not later than thirty (30) days following the close of the taxable year.

 

The inventory lists as well as other applicable schedules are to be submitted with the concerned Revenue District Office (RDO) where the non-large taxpayers are registered and with the Large Taxpayers Assistance Division (LTAD), Excise Large Taxpayers Regulatory Division (ELTRD), Large Taxpayers Division (LTD) Makati and Cebu, for taxpayers classified as large under the Large Taxpayers Service.

 

Please refer http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMC%20No%2057-2015.pdf of the penalties and other concerns and full text of RMC No. 57-2015.

Liability Of Directors, Trustees Or Officers

SEC. 31 of Batas Pambansa Blg. 68 "The Corporation Code of the Philippines" refer to the Liability of directors, trustees or officers with the details as follows:

 

SEC. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.

 

When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.

Compensation Of Directors

Compensation of directors is referred in SEC. 30 of Batas Pambansa Blg. 68 "The Corporation Code of the Philippines" with details as follows:

 

SEC. 30. Compensation of directors. - In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation, as such directors, except for reasonable per diems: Provided, however, That any such compensation other than per diems may be granted to directors by the vote of the stockholders representing at least a majority of the outstanding capital stock at a regular or special stockholders' meeting. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year.

Vacancies In The Office Of Director Or Trustee

What if there will be vacancies in the office of director or trustee in a corporation?

 

SEC. 29 of Batas Pambansa Blg. 68 "The Corporation Code of the Philippines" refers to the vacancies in the office of director or trustee with details as follows:

 

SEC. 29. Vacancies in the office of director or trustee. - Any vacancy occurring in the board of directors or trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must be filled by the stockholders in a regular or special meeting called for that purpose. A directors or trustee so elected to fill a vacancy shall be elected only for the unexpired term of his predecessor in office.

 

Any directorship or trusteeship to be filled by reason of an increase in the number of directors or trustees shall be filled only by an election at a regular or at a special meeting of stockholders or members duly called for the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated in the notice of the meeting.