In the corporate world, decisions are made and actions are taken through formal processes to ensure transparency and legality. A corporation operates through its board of directors or trustees, which exercises corporate powers and controls all its business and properties.
When dealing with corporations, parties often request corporate representatives to present either a board resolution or a secretary’s certificate to demonstrate their authorization to act on behalf of the company. However, there has been a debate about whether these documents are always necessary and whether a corporation can be held accountable for actions taken without them.
A board resolution is an official written document, signed by the members of the board of directors, that details decisions or actions taken by the board of a corporation during their meeting.
On the other hand, a secretary’s certificate is a document issued and signed by the corporate secretary of a corporation, who is the person responsible under the law for maintaining the company’s records, that serves as an official attestation of the accuracy and authenticity of corporate records, resolutions (including board resolutions) and other documents.
Notably, when a Secretary’s Certificate appears to show no irregularity, third parties may rely on the facts and contents stated in the document without having to further investigate.
The rule is, it is always good practice to require the presentation of board resolutions and secretary’s certificates when transacting with representatives of corporations, to ensure that the representative is properly authorized.
Notwithstanding the same, there are instances when the board resolution or secretary’s certificate, for various reasons, are not provided. This article explores various scenarios where such documents may not be strictly required and delves into recognized exceptions and practices.
1. Specific corporate officers have been recognized to be authorized
In filing certain complaints and petitions with the Courts, the rules require the submission of a Verification and/or Certification against forum shopping executed by a duly authorized representative when the party is a corporation.
The Supreme Court has recognized the authority of some corporate officers to sign this verification and certification for the corporation even in the absence of the submission of a board resolution or secretary’s certificate evidencing the authority of the signatory.
The following have been found to have the authority to sign for the corporation without need of a board resolution:
(a) the chairperson of the board of directors
(b) the president of a corporation
(c) the general manager or acting general manager,
(d) personnel officer
(5) an employment specialist in a labor case
The Supreme Court clarified that the determination of the sufficiency of the authority of the concerned officers was done on a case to case basis. The rationale in justifying the authority of corporate officers or representatives of the corporation to sign the verification or certificate against forum shopping is that they are in the best position to verify the truthfulness and correctness of the allegations in the petition. (Swedish Match Philippines, Inc. v. The Treasurer of the City of Manila, G.R. No. 181277, July 3, 2013)
However, with the amendments to the 1997 Rules of Civil Procedure which now provides that for pleadings filed with the courts that are required to be verified or under oath, the authorization of the signatory to act on behalf of a party, whether in the form of a secretary’s certificate or a special power of attorney, should already be attached to the pleading. Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case. (Rule 7, Sections 4 and 5, Rules of Court)
This requirement that the Secretary’s Certificate or proof of authority was not previously expressly stated to be required under the previous Rules of Court.
2. Ratification by the corporation
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. (University of Mindanao, Inc. v. Bangko Sentral ng Pilipinas, et al., G.R. No. 194964 – 65, Jan 11, 2016)
There are two kinds of unauthorized acts, the first are those that are void and, the second are those that are merely ultra vires.
Corporate acts or contracts which are void from the beginning and may not be ratified are those illegal acts which are contrary to law, morals, or public order, or contravene some rules of public policy or public duty.
Ultra vires acts are those acts that are merely beyond the powers of the corporation or done without the proper authorization. Since these acts are not illegal and void they are merely voidable and may become binding and enforceable when ratified by the corporation. Notably, when ratified by the corporation, the approval relates back to the time of the act or contract ratified, and is equivalent to original authority.
3. Apparent Authority
The Supreme Court has also recognized presumed or apparent authority which have been considered to bind corporate representatives in instances when the corporation, through its silence or other acts of recognition, allowed others to believe that persons, through their usual exercise of corporate powers, were conferred with authority to deal on the corporation’s behalf.
The doctrine of apparent authority does not go into the question of the corporation’s competence or power to do a particular act. It involves the question of whether the officer has the power or is clothed with the appearance of having the power to act for the corporation. A finding that there is apparent authority is not the same as a finding that the corporate act in question is within the corporation’s limited powers.
The rule on apparent authority is based on the principle of estoppel. (Art. 1431 and 1869, Civil Code)
Accordingly, a corporation is estopped by its silence and acts of recognition.
4. The corporation’s bylaws already grants the authority
In a case decided by the Supreme Court, it was declared that a Corporation can be held responsible for a loan contracted by its President who acted without a board resolution. In that case, the By-Laws of the corporation provided that the company’s President shall have the following powers:
a. Borrow money for the company by any legal means whatsoever, including the arrangement of letters of credit and overdrafts with any and all banking institutions
b. Execute on behalf of the company all contracts and agreements which the said company may enter into
c. Sign, indorse, and deliver all checks, drafts, bill of exchange, promissory notes and orders of payment of sum of money in the name and on behalf of the corporation
Since the by-laws had expressly given the president the power to borrow money, execute contracts, and sign and indorse checks and promissory notes, in the name and on behalf of the Corporation, the president need not anymore secure a resolution from the company’s board of directors. (Cebu Mactan Members Center Inc. v. Masahiro Tsukahara, G.R. No. 159624, July 17, 2009)
(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at jcs@tiongcosiaobellolaw.com. The views expressed in this article belong to the author alone.)