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    Gokongwei vs. SEC Digest

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    Aldin Lucena Aparecio
    The Supreme Court upheld the validity of amended bylaws passed by San Miguel Corporation that disqualified competitors from being nominated or elected to its board of directors. The Court ruled that preventing officers or directors of competing companies from gaining access to a company's trade secrets and confidential information through their position on the board of that company is a reasonable exercise of the board's authority. Allowing competitors to serve on the board could enable them to take advantage of that access for their own benefit or to the detriment of the company and its shareholders.

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    Gokongwei vs. SEC Digest

    Uploaded by

    Aldin Lucena Aparecio
    3K views1 page
    The Supreme Court upheld the validity of amended bylaws passed by San Miguel Corporation that disqualified competitors from being nominated or elected to its board of directors. The Court ruled that preventing officers or directors of competing companies from gaining access to a company's trade secrets and confidential information through their position on the board of that company is a reasonable exercise of the board's authority. Allowing competitors to serve on the board could enable them to take advantage of that access for their own benefit or to the detriment of the company and its shareholders.

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    digest

    Original Title

    3. Gokongwei vs. SEC digest

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    The Supreme Court upheld the validity of amended bylaws passed by San Miguel Corporation that disqualified competitors from being nominated or elected to its board of directors. The Court ruled that preventing officers or directors of competing companies from gaining access to a company's trade secrets and confidential information through their position on the board of that company is a reasonable exercise of the board's authority. Allowing competitors to serve on the board could enable them to take advantage of that access for their own benefit or to the detriment of the company and its shareholders.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    3K views1 page

    Gokongwei vs. SEC Digest

    Uploaded by

    Aldin Lucena Aparecio
    The Supreme Court upheld the validity of amended bylaws passed by San Miguel Corporation that disqualified competitors from being nominated or elected to its board of directors. The Court ruled that preventing officers or directors of competing companies from gaining access to a company's trade secrets and confidential information through their position on the board of that company is a reasonable exercise of the board's authority. Allowing competitors to serve on the board could enable them to take advantage of that access for their own benefit or to the detriment of the company and its shareholders.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    Gokongwei v. Securities and Exchange Commission, G.R. No.

    L-45911, 11 April 1979

    FACTS:
    Petitioner, as stockholder of respondent San Miguel Corporation, filed with the Securities and
    Exchange Commission (SEC) a petition for “declaration of nullity of amended by-laws, cancellation of
    certificate of filing of amended by- laws, injunction and damages with prayer for a preliminary
    injunction” against the majority of the members of the Board of Directors and San Miguel Corporation
    as an unwilling petitioner.
    Respondents filed their answer to the petition, denying the substantial allegations therein and
    stating by way of affirmative defenses that “the action taken by the BODS resulting in the amendments
    is valid and legal because the power to amend, modify, repeal or adopt new By-Laws delegated to said
    Board and long prior thereto has never been revoked, withdrawn or otherwise nullified by the
    stockholders of SMC. It also said that the power of the Board to amend the by-laws is broad, subject
    only to existing laws.
    August 1972, the URC began acquiring shares. The CFC likewise began acquiring shares in
    respondent-corporation. Petitioner who is president both in URC and CFC purchased shares of stock of
    respondent-corporation, and thereafter, in behalf of himself, CFC and URC, “conducted malevolent and
    malicious publicity campaign against SMC” to generate support from the stockholder “in his effort to
    secure for himself and in representation of URC and CFC interests, a seat in the BODs of SMC.” Petitioner
    was rejected by the stockholders in his bid to secure a seat in the BODs on the basic issue that petitioner
    was engaged in a competitive business and his securing a seat would have subjected respondent-
    corporation to grave disadvantages.
    Respondents’ reason out that petitioner is engaged in businesses competitive and antagonistic
    to that of respondent SMC and that the Board realized the clear and present danger in competitors
    being directors because they would have easy and direct access to SMCs business and trade secrets.

    ISSUE: Whether the amended by-laws of SMC disqualifying a competitor from nomination or election to
    the BODs of SMC are valid and reasonable.

    RULING: Yes.
    The doctrine of “corporate opportunity” is precisely, a recognition by the courts that the
    fiduciary standards could not be upheld where the fiduciary was acting for two entities with
    competing interests. This doctrine rests fundamentally on the 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 justly calls for protection. You cannot serve two masters.
    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 corporate interests to the
    prejudice of San Miguel Corporation and its stockholders, that the questioned amendment of the by-
    laws was made. Certainly, where two corporations are competitive in a substantial sense, it would seem
    improbable, if not impossible, for the director, if he were to discharge effectively his duty, to satisfy his
    loyalty to both corporations and place the performance of his corporation duties above his personal
    concerns. It is a good business sense on the part of SMC to amend its by-laws.

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