Under Philippine law, the rules governing vacancies in the Board of Directors or Trustees of corporations are primarily contained in the Revised Corporation Code of the Philippines (Republic Act No. 11232). The Code provides for the composition, powers, duties, and qualifications of directors, trustees, and officers, as well as the procedures for addressing vacancies within these roles. Here’s a comprehensive breakdown of all critical points on the topic:

1. Definition and Applicability of a Vacancy

A vacancy on the Board of Directors or Trustees may arise from a variety of causes, such as death, resignation, disqualification, removal, or expiration of the term, among other reasons.
Vacancies are generally classified into two main types:
- Temporary Vacancies: Occur when the absence is temporary and the director or trustee intends to return to service (e.g., temporary inability to fulfill duties).
- Permanent Vacancies: Arise from resignation, removal, disqualification, death, or end of the term without re-election.

2. General Rule for Filling Vacancies (Section 28, Revised Corporation Code)

Board Action on Vacancies: Generally, if a vacancy arises and it does not reduce the board’s composition below the quorum, the remaining directors may elect a replacement to serve for the unexpired term.
Stockholder Approval for Certain Vacancies:
- If a vacancy reduces the board below a quorum, a special election must be held to fill the vacancies. Stockholders are required to vote on the newly appointed directors or trustees in this situation.
- Additionally, any vacancy arising from the removal of a director by the stockholders requires that stockholders elect a replacement in a meeting expressly called for that purpose.
Vacancies by Expiration of Term: Directors or trustees serve until their successors are duly elected and qualified. If a term expires and no successor is elected, the director holds over in a “holdover” capacity until a successor is appointed.

3. Vacancy Due to Increase in Number of Directors or Trustees

When the board’s size is increased, this creates new vacancies. These must be filled by stockholder election, either at a regular or special stockholders' meeting called specifically for this purpose.
In cases where the corporation bylaws allow, the stockholders may authorize the board itself to fill the new seats resulting from an increase.

4. Eligibility and Qualifications of Replacement Directors or Trustees

Any replacement for a director or trustee must satisfy the standard qualifications specified by the Corporation Code and the corporation’s bylaws, such as age, shareholding (for corporations requiring directors to hold shares), and residency requirements.
Replacements are required to comply with the fit-and-proper rules prescribed by regulatory bodies for certain regulated industries (e.g., banks, insurance).

5. Limitations on the Power to Fill Vacancies

Bylaws Restrictions: Corporate bylaws may impose further restrictions on filling vacancies beyond what is provided in the Corporation Code. These restrictions must, however, align with mandatory corporate governance principles.
Corporate Governance Policies: Publicly listed companies must also comply with additional requirements set forth by the Securities and Exchange Commission (SEC) under the Code of Corporate Governance, which emphasizes transparency and the need to avoid conflicts of interest in board replacements.
Nomination Committee Oversight: Many corporations delegate the task of vetting replacements to the Nomination Committee, especially for publicly listed or regulated companies.

6. Special Case: Resignation and Mandatory Waiting Period

When a director resigns, the resignation becomes effective upon acceptance by the board, which can take place immediately or at a future date as designated by the board.
The board has discretion over accepting resignations and often waits until a replacement is ready to maintain continuity and prevent operational disruption.

7. Removal of Directors and Its Impact on Vacancy Filling

Directors may be removed for cause (in cases involving misconduct or breach of fiduciary duty) or without cause (if allowed by the corporate bylaws), but any removal must comply with procedural requirements, including notice and quorum.
Only stockholders can remove a director, and any vacancy created by a removal must be filled by stockholder election.

8. Effect of Quorum Loss on Decision-Making in Board Vacancies

A vacancy that reduces the number of directors below the quorum specified in the bylaws or the Corporation Code triggers a requirement for stockholders to elect replacements.
Until the vacancy is filled and the quorum restored, the board may be restricted in its ability to act, as quorum is required for binding corporate decisions.

9. Election of Successor as a Corporate Right of Stockholders

The stockholders’ right to elect successors is a fundamental corporate right. This principle ensures transparency and accountability by giving shareholders a direct role in selecting who represents their interests in the corporation.
This right also prevents existing directors from unilaterally controlling board composition indefinitely, thereby upholding democratic governance principles within corporate structures.

10. Documentation and Compliance Requirements

All appointments to fill vacancies must be documented in board resolutions and recorded in the corporation’s minutes.
Corporations must submit notifications of board changes to the SEC within the prescribed period, typically within 30 days, to ensure compliance and transparency.
Special disclosure requirements apply to publicly listed companies, where corporations are mandated to report any board changes to the SEC and Philippine Stock Exchange (PSE) immediately or within the specified disclosure period.

11. Succession Planning and Vacancies

Sound corporate governance encourages corporations to establish succession plans for directors and officers to ensure that vacancies are promptly filled with qualified candidates without disrupting operations.
The Revised Corporation Code and corporate governance principles promote preemptive measures, such as staggered terms for directors and executive development programs, to facilitate seamless transitions.

12. Summary of Procedures in Filling Vacancies

If by resignation: Remaining board members or stockholders (if the bylaws or Code require) may appoint a replacement.
If by removal: Stockholders must elect the replacement.
If by disqualification or death: The remaining directors, if the vacancy does not reduce the board below a quorum, may appoint a replacement; otherwise, a special election is required.
If by increase in board size: Stockholders must generally elect the additional directors unless authorized otherwise in the bylaws.

13. Penalties for Non-compliance

The SEC has the authority to impose sanctions for violations of the Revised Corporation Code, including failure to properly address board vacancies.
Penalties range from fines to suspension or revocation of corporate registration, depending on the severity and frequency of the violation.

In conclusion, Philippine corporate law sets forth a structured and transparent approach to managing vacancies within corporate boards, underscoring shareholder rights, regulatory compliance, and good governance practices. The aim is to promote stability and accountability in board transitions, while ensuring that corporate operations remain uninterrupted and fiduciary duties are upheld.