Under Section 168 of the Revised Corporation Code (RCC), a director, trustee, or officer shall be punished with a fine ranging from P500,000 to P1 million, who knowingly:
a.) Fails to sanction, report, or file the appropriate action with the proper agencies; or,
b.) Allows or tolerates the graft and corrupt practices or fraudulent acts committed by a corporation’s directors, trustees, ofcers, or employees.
Section 168 properly limits its application only to directors, trustees, or ofcers liable for the offense defined therein. There is therefore no legal basis to hold employees and consultants of the corporation liable for participating in the offense defined therein.
In consonance with principles of corporate governance, Section 168 sends a clear message that it is not enough for directors, trustees, and officers to not directly engage in fraudulent acts or graft and corrupt practices, but they are obliged, under pain of criminal penalty, to not tolerate it or turn a blind eye when such acts are committed by their colleagues in the name of the corporation, and even go to the extent of reporting the same to the proper authorities.
THE ‘PREJUDICIAL QUESTION’ RELATING TO SECTION 167
Section 168 of the RCC, as it seeks to penalize directors, trustees, or officers criminally liable for their acts of tolerance, should be treated as the counterpart to Sections 165 to 167 that penalize directly the corporation as the medium by which fraudulent acts are committed, and graft and...
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