Question:
What will happen if the directors of the corporation died? Is it legal if the heirs of the directors wanted to sell the property/corporation? What will happen to the employees?
Answer:
Death of Corporate Directors
The death of a corporate director or directors has specific implications for the corporation. The Corporation Code of the Philippines lays out the framework for governance and functioning of corporations, including the process to fill the vacancy caused by the death of a director. Usually, the by-laws of the corporation specify the method for filling such vacancies. If the by-laws do not contain such a provision, a special stockholders' meeting may be called to elect a new director.
Authority of Heirs
Heirs of deceased directors do not automatically acquire the authority to manage or make decisions for the corporation. The ownership of shares may be transferred to the heirs, making them stockholders, but they would not automatically become directors. They can become directors only if they are elected as such by the stockholders.
Selling Corporate Property
The sale of corporate property is generally a decision that must be approved by the board of directors and may require ratification by the stockholders depending on the extent and nature of the property in question. Heirs who have inherited shares can exercise their rights as stockholders, including voting on matters like the sale of property, but they do not have the unilateral authority to sell corporate property.
Impact on Employees
The death of directors does not directly impact the employment status of the corporation's employees unless the directors were also engaged in the day-to-day management of the corporation. Typically, operations would continue under the management team, and any changes would likely be decided by the new board of directors.
Legal Safeguards and Corporate Continuity
Corporations often implement key man insurance policies and have succession plans in place to ensure smooth transition and minimal disruption in case of the sudden death of key personnel, including directors. Such proactive measures can mitigate the impact on the corporation and its employees.
Conclusion
The death of corporate directors triggers a specific set of corporate governance actions, as per the Corporation Code and the corporation's by-laws. Heirs may inherit shares and may become stockholders with voting rights, but they do not automatically gain the authority to manage or sell corporate property. Employees generally remain unaffected in their employment status, although a change in the board may lead to changes in corporate strategy and management.