When a Corporate President Can Act Without Board Approval

A corporation acts through its board of directors — but not always. In Colegio Medico-Farmaceutico de Filipinas, Inc. v. Lim (G.R. No. 212034, July 2, 2018), the Supreme Court clarified when a corporate president can bind the corporation without a board resolution, and why that distinction mattered in an ejectment case.

The ruling is a practical guide for corporations, officers, and anyone dealing with corporate representatives in the Philippines.

The Case: A Lease Dispute and a Demand Letter

The petitioner owned a building in Manila and leased it to a school, which later assigned its rights to respondent Lily Lim. After the lease expired, the corporation's president, Dr. Virgilio Del Castillo, sent Lim a demand letter asking her to pay back rentals and vacate the property.

Lim refused, and the corporation filed an ejectment case. The lower court dismissed the case, ruling that the demand letter was invalid because the president had no board resolution authorizing him to issue it. The Court of Appeals agreed, adding that the corporation also failed to attach a copy of the board resolution to its complaint.

The Issue: Does a President Need Board Approval for Every Act?

The central question was whether the president of a corporation needs a board resolution to issue a demand letter and to sign the verification and certification of non-forum shopping in a lawsuit.

The Supreme Court said no.

The Ruling: Presidents Have Authority in Ordinary Business Matters

The Court reversed the Court of Appeals and reinstated the ejectment order, ruling on two key points.

First, a president may sign pleadings without a board resolution. Jurisprudence has long allowed a corporate president to sign the verification and certification of non-forum shopping even without board authority, because the president is presumed to have sufficient knowledge to swear to the truth of the allegations in the complaint.

Second, a president can act within the scope of usual duties. Citing People's Aircargo and Warehousing Co., Inc. v. Court of Appeals (351 Phil. 850 [1998]), the Court explained that while Section 23 of the Corporation Code vests corporate powers in the board, the board may delegate functions to officers. The president is presumed to have authority to act within the general objectives of the business and within the scope of usual duties, absent a contrary charter or by-law provision.

In this case, issuing a demand letter to collect unpaid rentals was an ordinary business act. The corporation's by-laws expressly gave the president general supervision, control, and direction of business affairs, including executing contracts and performing duties incident to the office. Collecting receivables fell squarely within that authority.

The Court also noted that even if the president had exceeded his authority, the board's later resolution authorizing him to file the case effectively ratified his earlier act.

Practical Takeaways

• Presidents have implied authority in ordinary matters. A corporate president can bind the corporation in routine transactions without a board resolution, unless the charter or by-laws say otherwise.
• Board approval is still required for major decisions. The presumption of authority covers usual and ordinary business. Extraordinary acts — like selling substantial assets or entering major contracts outside the ordinary course — still require board authorization.
• Verification and certification can be signed by the president. A board resolution is not required for the president to sign these pleadings in a lawsuit.
• Ratification cures unauthorized acts. If an officer acts beyond authority, the board can later ratify the act, which validates it retroactively.
• Demand letters are valid if issued in the ordinary course. For ejectment cases, a demand letter from a corporate president collecting receivables is generally valid without a separate board resolution.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.