What is Self-Dealing According to the Philippine Corporation Code?

Self-Dealing

Self-dealing in corporations refers to transactions where a director, officer, or controlling shareholder has a personal interest that conflicts with their duty to the corporation. In the Philippines, such transactions are closely regulated under the Revised Corporation Code (Republic Act No. 11232) to ensure fairness and protect the interests of the corporation and its stakeholders.

Definition and Context

Self-dealing occurs when corporate fiduciaries, such as directors or officers, engage in transactions where they have a personal interest that might conflict with their duty to act in the best interest of the corporation. This could involve contracts or dealings where these individuals stand to benefit personally, potentially at the expense of the corporation.

Legal Framework

Republic Act No. 11232

The Revised Corporation Code of the Philippines provides a legal framework for addressing self-dealing transactions. The Code outlines specific duties and liabilities of directors and officers to prevent conflicts of interest:

1. Duty of Loyalty: Directors and officers must prioritize the corporation’s interests over their own. They are prohibited from using corporate assets for personal gain or taking corporate opportunities without full disclosure and approval[5].

2. Disclosure Requirements: Directors must disclose any conflicts of interest in transactions involving the corporation. Failure to disclose can lead to personal liability and may invalidate the transaction unless it is fair and benefits the corporation[5][8].

3. Approval Process: Self-dealing transactions are permissible only if they are fair to the corporation and approved by a majority of disinterested directors or shareholders after full disclosure of the director’s interest[8].

Specific Provisions

The Code specifies conditions under which self-dealing transactions may be considered valid:

• The presence of the interested director in board meetings where the contract is approved is not necessary for a quorum.
• The director’s vote is not required for approving the contract.
• The contract must be fair and reasonable under the circumstances[8].

Implications for Corporations

Corporate Governance

Self-dealing regulations are integral to corporate governance, ensuring that directors and officers act in good faith and with due care. They help maintain transparency and protect minority shareholders by preventing abuses of power by those in control.

Liability Concerns

Directors who engage in undisclosed self-dealing can face significant liabilities. Transactions found to be unfair or detrimental to the corporation can be voided, and directors may be held personally liable for resulting damages[5].

Corporate Opportunity Doctrine

This doctrine prohibits directors from exploiting business opportunities that should rightfully belong to the corporation for their personal benefit. Violations can result in directors being required to account for any profits derived from such opportunities[5].

Compliance and Reporting

Corporations are required to disclose all self-dealing transactions in their annual reports submitted to regulatory bodies like the Securities and Exchange Commission (SEC). This ensures ongoing transparency and accountability[4][7].

Conclusion

Self-dealing regulations under Philippine law aim to balance corporate autonomy with accountability, protecting corporations from potential abuses by those in positions of power. By enforcing stringent standards on disclosure and approval processes, these regulations help maintain trust among stakeholders and promote ethical corporate governance practices.

Sources
[1] How To Set Up One Person Corporation in the Philippines — 2024 https://philippines.incorp.asia/guides/how-to-set-up-one-person-corporation/
[2] One Person Corporation: A Unique Corporate Vehicle https://barrozolaw.com/one-person-corporation-a-unique-corporate-vehicle/
[3] Republic Act No. 11232 | BUSINESS ORGANIZATIONS https://www.respicio.ph/bar/2025/mercantile-and-taxation-laws/business-organizations/republic-act-no-11232
[4] The Essential Guide to One Person Corporations in the Philippines https://emerhub.com/philippines/one-person-corporation-philippines-guide/
[5] Duties, Liability, and Dealings of Directors in Philippine Corporate Law https://www.respicio.ph/bar/2025/mercantile-and-taxation-laws/business-organizations/corporations/directors-trustees-and-officers/duties-liability-and-dealings-of-directors
[6] Registering A One-Person Corporation in the Philippines https://philippinesbusinessregistration.com/company-registration/one-person-corporation/
[7] A Guide on One Person Corporations in the Philippines – Law Firm in Metro Manila, Philippines | Corporate, Family, IP law, and Litigation Lawyers https://ndvlaw.com/a-guide-on-one-person-corporations-in-the-philippines/
[8] The Threefold Duties of a Director of a Corporation https://ndvlaw.com/the-threefold-duties-of-a-director-of-a-corporation/