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DEFINITION AND ATRIBUTES OF A CORPORATION

(CC) Sec. 2. Corporation defined. - A corporation is an artificial being CLASSESS OF CORPORATIONS


created by operation of law, having the right of succession and the powers, 1. Stock Corporations
attributes and properties expressly authorized by law or incident to its (CC) Sec. 3. Classes of corporations. - Corporations formed or organized
existence. under this Code may be stock or non-stock corporations. Corporations
which have capital stock divided into shares and are authorized to
Attributes of a corporation: distribute to the holders of such shares dividends or allotments of the
a. Artificial being: a juridical persons capable of having rights as well as surplus profits on the basis of the shares held are stock corporations. All
obligations with a personality separate and distinct from its members or other corporations are non-stock corporations.
stockholders
Doctrine Of Separate Personality – stockholders are not personally liable 2. Non-stock Corporations
for corporate obligations and cannot be held liable to 3rd persons who (CC) Sec. 3. Classes of corporations. - xxx All other corporations are non-
have claims against the corporation beyond their agreed contribution to stock corporations.
the corporate capital; neither may the corporation be liable for the
personal obligation of its stockholders Sec. 87. Definition. - For the purposes of this Code, a non-stock
b. Created by operation of law: state must give its consent either in a corporation is one where no part of its income is distributable as
form of special law or general enabling act before a corporation can dividends to its members, trustees, or officers, subject to the provisions
acquire juridical personality of this Code on dissolution: Provided, That any profit which a non-stock
c. Right of succession: its continued existence during the term stated in corporation may obtain as an incident to its operations shall, whenever
the AoI cannot be affected by the change in the members/shareholders, necessary or proper, be used for the furtherance of the purpose or
nor is it affected by the transfer of shares by a shareholder to a 3rd purposes for which the corporation was organized, subject to the
person provisions of this Title.
d. Powers, attributes, and properties expressly authorized by law or
incident to its existence: a corporation can only exercise powers which The provisions governing stock corporation, when pertinent, shall be
the law expressly grants to it applicable to non-stock corporations, except as may be covered by
specific provisions of this Title. (n)
Advantages Disadvantages
Combination of funds from various Sec. 88. Purposes. - Non-stock corporations may be formed or organized
sources to raise the big capital need for charitable, religious, educational, professional, cultural, fraternal,
for large business and industrial literary, scientific, social, civic service, or similar purposes, like trade,
enterprises
industry, agricultural and like chambers, or any combination thereof,
Combination of resources
Limited liability of investor to the subject to the special provisions of this Title governing particular classes
amount of his investment of non-stock corporations. (n)

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*There are instances when NS Corps obtain profits which are incident to Sec. 107. Pre-requisites to incorporation. - Except upon favorable
their operations. But such profits are not distributed among its recommendation of the Ministry of Education and Culture, the
members but are used for the furtherance of its purposes. Securities and Exchange Commission shall not accept or approve the
articles of incorporation and by-laws of any educational institution.
3. Close Corporations
(CC) Sec. 96. Definition and applicability of Title. - A close corporation, (RA 7798) SECTION 1. Section 25, Chapter 3 of the Education Act of
within the meaning of this Code, is one whose articles of incorporation 1982 is hereby amended to read as follows:
provide that: (1) All the corporation's issued stock of all classes,
exclusive of treasury shares, shall be held of record by not more than a "Sec. 25. Establishment of Schools. — All schools shall be established in
specified number of persons, not exceeding twenty (20); (2) all the accordance with law. The establishment of new national schools and
issued stock of all classes shall be subject to one or more specified the conversion of existing schools from elementary to national
restrictions on transfer permitted by this Title; and (3) The corporation secondary schools or from secondary to national secondary or tertiary
shall not list in any stock exchange or make any public offering of any of schools shall be by law: Provided, That any private school proposed to
its stock of any class. Notwithstanding the foregoing, a corporation shall be established must incorporate as either a non-stock or a stock
not be deemed a close corporation when at least two-thirds (2/3) of its educational corporation in accordance with the provisions of the
voting stock or voting rights is owned or controlled by another Corporation Code of the Philippines. This requirement to incorporate
corporation which is not a close corporation within the meaning of this may be waived in the case of family-administered pre-school
Code. institutions.

Any corporation may be incorporated as a close corporation, except "Provided, That the minimum paid-up capital for stock educational
mining or oil companies, stock exchanges, banks, insurance companies, institutions for those engaged in elementary education shall not be less
public utilities, educational institutions and corporations declared to be than One million pesos (P1,000,000.00); not less than Two million five
vested with public interest in accordance with the provisions of this hundred thousand pesos (P2,500,000.00) for those offering both
Code. elementary and secondary education; and not less than Five million
pesos (P5,000,000.00) for those offering elementary, secondary and
The provisions of this Title shall primarily govern close corporations: tertiary and postgraduate courses, except existing educational
Provided, that the provisions of other Titles of this Code shall apply institutions organized as stock corporations which may retain their
suppletorily except insofar as this Title otherwise provides. original capitalization.

4. Educational "Existing educational institutions organized as stock corporations may


(CC) Sec. 106. Incorporation. - Educational corporations shall be automatically apply for renewal of their corporate existence when the
governed by special laws and by the general provisions of this Code. (n) original period is about to expire.

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(CC) Sec. 4. Corporations created by special laws or charters. - Corporations
"Provided, finally, That stock educational institutions may be allowed created by special laws or charters shall be governed primarily by the
only in capital-intensive courses of study as may be determined by the provisions of the special law or charter creating them or applicable to them,
Department of Education, Culture and Sports, the Commission on supplemented by the provisions of this Code, insofar as they are applicable.
Higher Education, and the Department of Science and Technology, as
the case may be. (1987 PH Consti) Article 12, Sec. 16. The Congress shall not, except by
general law, provide for the formation, organization, or regulation of private
"Any school that is established or organized as a stock corporation shall corporations. Government-owned or controlled corporations may be
be ineligible for any form of government subsidy, incentive or created or established by special charters in the interest of the common
assistance, except those given to individual students and teachers in the good and subject to the test of economic viability.
form of scholarships, student loans or other forms of subsidy as already
mandated under existing laws.Government assistance to non-stock Domestic Corporations v Foreign Corporations
schools for educational programs shall be used exclusively for that (CC) Sec. 123. Definition and rights of foreign corporations. - For the
purpose. chan robles virtual law library purposes of this Code, a foreign corporation is one formed, organized or
existing under any laws other than those of the Philippines and whose laws
"Taxes shall not be due on donations to educational corporations." allow Filipino citizens and corporations to do business in its own country or
state. It shall have the right to transact business in the Philippines after it
5. Religious; Corporation Sole shall have obtained a license to transact business in this country in
(CC) Sec. 109. Classes of religious corporations. - Religious corporations accordance with this Code and a certificate of authority from the
may be incorporated by one or more persons. Such corporations may be appropriate government agency.
classified into corporations sole and religious societies.
Nationality and Citizenship
Religious corporations shall be governed by this Chapter and by the (CC) Sec. 15. Forms of Articles of Incorporation. - Unless otherwise
general provisions on non-stock corporations insofar as they may be prescribed by special law, articles of incorporation of all domestic
applicable. (n) corporations shall comply substantially with the following form:
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Sec. 110. Corporation sole. - For the purpose of administering and ELEVENTH: (Corporations which will engage in any business or activity
managing, as trustee, the affairs, property and temporalities of any reserved for Filipino citizens shall provide the following):
religious denomination, sect or church, a corporation sole may be "No transfer of stock or interest which shall reduce the ownership
formed by the chief archbishop, bishop, priest, minister, rabbi or other of Filipino citizens to less than the required percentage of the capital stock
presiding elder of such religious denomination, sect or church. as provided by existing laws shall be allowed or permitted to recorded in the
proper books of the corporation and this restriction shall be indicated in all
Corporations created by special law or charter stock certificates issued by the corporation."

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and managing officers of such corporation or association must be citizens of
(1987 PH Consti) Article 12, Sec. 2. All lands of the public domain, waters, the Philippines.
minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other Article 14, Sec. 4. (1) The State recognizes the complementary roles of
natural resources are owned by the State. With the exception of agricultural public and private institutions in the educational system and shall exercise
lands, all other natural resources shall not be alienated. The exploration, reasonable supervision and regulation of all educational institutions.
development, and utilization of natural resources shall be under the full (2) Educational institutions, other than those established by
control and supervision of the State. The State may directly undertake such religious groups and mission boards, shall be owned solely by citizens of the
activities, or it may enter into co-production, joint venture, or production- Philippines or corporations or associations at least sixty per centum of the
sharing agreements with Filipino citizens, or corporations or associations at capital of which is owned by such citizens. The Congress may, however,
least sixty per centum of whose capital is owned by such citizens. Such require increased Filipino equity participation in all educational institutions.
agreements may be for a period not exceeding twenty-five years, renewable The control and administration of educational institutions shall be
for not more than twenty-five years, and under such terms and conditions vested in citizens of the Philippines.
as may be provided by law. In cases of water rights for irrigation, water No educational institution shall be established exclusively for aliens
supply, fisheries, or industrial uses other than the development of water and no group of aliens shall comprise more than one-third of the enrollment
power, beneficial use may be the measure and limit of the grant. in any school. The provisions of this subsection shall not apply to schools
established for foreign diplomatic personnel and their dependents and,
Article 12, Sec. 7. Save in cases of hereditary succession, no private lands unless otherwise provided by law, for other foreign temporary residents.
shall be transferred or conveyed except to individuals, corporations, or (3) All revenues and assets of non-stock, non-profit educational
associations qualified to acquire or hold lands of the public domain. institutions used actually, directly, and exclusively for educational purposes
shall be exempt from taxes and duties. Upon the dissolution or cessation of
Article 12, Sec. 11. No franchise, certificate, or any other form of the corporate existence of such institutions, their assets shall be disposed of
authorization for the operation of a public utility shall be granted except to in the manner provided by law.
citizens of the Philippines or to corporations or associations organized under Proprietary educational institutions, including those cooperatively
the laws of the Philippines at least sixty per centum of whose capital is owned, may likewise be entitled to such exemptions subject to the
owned by such citizens, nor shall such franchise, certificate, or authorization limitations provided by law including restrictions on dividends and
be exclusive in character or for a longer period than fifty years. Neither shall provisions for reinvestment.
any such franchise or right be granted except under the condition that it (4) Subject to conditions prescribed by law, all grants, endowments,
shall be subject to amendment, alteration, or repeal by the Congress when donations, or contributions used actually, directly, and exclusively for
the common good so requires. The State shall encourage equity educational purposes shall be exempt from tax.
participation in public utilities by the general public. The participation of
foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive

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Article 16, Sec. 11. (1) The ownership and management of mass media shall (RA 7042) Section 3. Definitions. - As used in this Act:
be limited to citizens of the Philippines, or to corporations, cooperatives or a) The term "Philippine national" shall mean a citizen of the Philippines or a
associations, wholly-owned and managed by such citizens. domestic partnership or association wholly owned by citizens of the
The Congress shall regulate or prohibit monopolies in commercial Philippines; or a corporation organized under the laws of the Philippines of
mass media when the public interest so requires. No combinations in which at least sixty percent (60%) of the capital stock outstanding and
restraint of trade or unfair competition therein shall be allowed. entitled to vote is owned and held by citizens of the Philippines; or a trustee
(2) The advertising industry is impressed with public interest, and of funds for pension or other employee retirement or separation benefits,
shall be regulated by law for the protection of consumers and the where the trustee is a Philippine national and at least sixty (60%) of the fund
promotion of the general welfare. will accrue to the benefit of the Philippine nationals: Provided, That where a
Only Filipino citizens or corporations or associations at least seventy corporation and its non-Filipino stockholders own stocks in a Securities and
per centum of the capital of which is owned by such citizens shall be Exchange Commission (SEC) registered enterprise, at least sixty percent
allowed to engage in the advertising industry. (60%) of the capital stocks outstanding and entitled to vote of both
The participation of foreign investors in the governing body of corporations must be owned and held by citizens of the Philippines and at
entities in such industry shall be limited to their proportionate share in the least sixty percent (60%) of the members of the Board of Directors of both
capital thereof, and all the executive and managing officers of such entities corporations must be citizens of the Philippines, in order that the
must be citizens of the Philippines. corporations shall be considered a Philippine national;
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Tests for determining Compliance to nationality rules
1. Grandfather Rule (IRR RA 7042) Rule 1, Sec. 1 (b). Philippine national shall mean a citizen of
 if the percentage of Filipino ownership in the corporation or the Philippines or a domestic partnership or association wholly owned by
partnership is less than 60%, only the number of shares citizens of the Philippines; or a corporation organized under the laws of the
corresponding to such percentage shall be counted as of Philippine Philippines of which at least sixty percent (60%) of the capital stock
nationality (Paragraph 7 of DOJ Opinion No. 020, Series of 2005) outstanding and entitled to vote is owned and held by citizens of the
 applied only when in doubt as to the nationality of the corporation Philippines; or a corporation organized abroad and registered as doing
 May be applied along with the control test business in the Philippines under the Corporation Code of which 100% of
2. Control Test the capital stock outstanding and entitled to vote is wholly owned by
 Shares belonging to corporations or partnerships at least 60% of the Filipinos; or a trustee of funds for pension or other employee retirement or
capital of which is owned by Filipino citizens shall be considered as separation benefits, where the trustee is a Philippine national and at least
of Philippine nationality (Paragraph 7 of DOJ Opinion No. 020, Series sixty percent (60%) of the fund will accrue to the benefits of Philippine
of 2005) nationals; Provided, That where a corporation and its non-Filipino
 Liberal test stockholders own stocks in a Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital stock
Corporations that are Philippine Nationals outstanding and entitled to vote of each of both corporations must be

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owned and held by citizens of the Philippines and at least sixty percent hundred (200) or more holder each holding at least one hundred (100)
(60%) of the members of the Board of Directors of each of both share of a class of its equity securities: Provided, however, That the
corporations must be citizens of the Philippines, in order that the obligation of such issuer to file report shall be terminate ninety (90) days
corporation shall be considered a Philippine national. The control test shall after notification to the Commission by the issuer that the number of its
be applied for this purpose. holders holding at least one hundred (100) share reduced to less than one
Compliance with the required Filipino ownership of a corporation shall hundred (100).
be determined on the basis of outstanding capital stock whether fully paid
or not, but only such stocks which are generally entitled to vote are Section 3.1. "Securities" are shares, participation or interests in a
considered. corporation or in a commercial enterprise or profit-making venture and
For stocks to be deemed owned and held by Philippine citizens or evidenced by a certificate, contract, instruments, whether written or
Philippine nationals, mere legal title is not enough to meet the required electronic in character. It includes:
Filipino equity. Full beneficial ownership of the stocks, coupled with (a) Shares of stocks, bonds, debentures, notes evidences of
appropriate voting rights is essential. Thus, stocks, the voting rights of which indebtedness, asset-backed securities;
have been assigned or transferred to aliens cannot be considered held by (b) Investment contracts, certificates of interest or participation in a
Philippine citizens or Philippine nationals. profit sharing agreement, certifies of deposit for a future subscription;
Individuals or juridical entities not meeting the aforementioned (c) Fractional undivided interests in oil, gas or other mineral rights;
qualifications are considered as non-Philippine nationals. (d) Derivatives like option and warrants;
(e) Certificates of assignments, certificates of participation, trust
(SRC) Section 17.2. 17.2. The reportorial requirements of Subsection 17.1 certificates, voting trust certificates or similar instruments
shall apply to the following: (f) Proprietary or nonproprietary membership certificates in
corporations; and
(a) An issuer which has sold a class of its securities pursuant to a registration (g) Other instruments as may in the future be determined by the
under section 12 hereof: Provided however, That the obligation of such Commission.
issuer to file reports shall be suspended for any fiscal year after the year
such registration became effective if such issuer, as of the first day of any  Outstanding Capital Stock (OCS) – total number of shares covered by a
such fiscal year, has less than one hundred (100) holder of such class valid subscription contract less treasury shares
securities or such other number as the Commission shall prescribe and it  Authorized Capital Stock (ACS)
notifies the Commission of such;  Subscribed – commit to take up a particular number of shares
 Paid-up
(b) An issuer with a class of securities listed for trading on an Exchange; and  Authorized but unissued

(c) An issuer with assets of at least Fifty million pesos (50,000,000.00) or FORMATION AND ORGANIZATION OF CORPORATIONS
such other amount as the Commission shall prescribe, and having two a. Who may form

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(CC) Sec. 5. Corporators and incorporators, stockholders and members. purposes: Provided, That a non-stock corporation may not include a
- Corporators are those who compose a corporation, whether as purpose which would change or contradict its nature as such;
stockholders or as members. Incorporators are those stockholders or 3. The place where the principal office of the corporation is to
members mentioned in the articles of incorporation as originally be located, which must be within the Philippines;
forming and composing the corporation and who are signatories 4. The term for which the corporation is to exist;
thereof. 5. The names, nationalities and residences of the incorporators;
Corporators in a stock corporation are called stockholders or 6. The number of directors or trustees, which shall not be less
shareholders. Corporators in a non-stock corporation are called than five (5) nor more than fifteen (15);
members. 7. The names, nationalities and residences of persons who shall
act as directors or trustees until the first regular directors or
Sec. 10. Number and qualifications of incorporators. - Any number of trustees are duly elected and qualified in accordance with this Code;
natural persons not less than five (5) but not more than fifteen (15), all 8. If it be a stock corporation, the amount of its authorized
of legal age and a majority of whom are residents of the Philippines, capital stock in lawful money of the Philippines, the number of
may form a private corporation for any lawful purpose or purposes. shares into which it is divided, and in case the share are par value
Each of the incorporators of s stock corporation must own or be a shares, the par value of each, the names, nationalities and
subscriber to at least one (1) share of the capital stock of the residences of the original subscribers, and the amount subscribed
corporation. and paid by each on his subscription, and if some or all of the shares
are without par value, such fact must be stated;
b. Steps in Formation 9. If it be a non-stock corporation, the amount of its capital, the
1. Promotion names, nationalities and residences of the contributors and the
2. Articles of Incorporation amount contributed by each; and
(CC) Sec. 14. Contents of the articles of incorporation. - All 10. Such other matters as are not inconsistent with law and
corporations organized under this code shall file with the Securities which the incorporators may deem necessary and convenient.
and Exchange Commission articles of incorporation in any of the The Securities and Exchange Commission shall not accept
official languages duly signed and acknowledged by all of the the articles of incorporation of any stock corporation unless
incorporators, containing substantially the following matters, except accompanied by a sworn statement of the Treasurer elected by the
as otherwise prescribed by this Code or by special law: subscribers showing that at least twenty-five (25%) percent of the
1. The name of the corporation; authorized capital stock of the corporation has been subscribed,
2. The specific purpose or purposes for which the corporation is and at least twenty-five (25%) of the total subscription has been
being incorporated. Where a corporation has more than one stated fully paid to him in actual cash and/or in property the fair valuation
purpose, the articles of incorporation shall state which is the of which is equal to at least twenty-five (25%) percent of the said
primary purpose and which is/are the secondary purpose or subscription, such paid-up capital being not less than five thousand
(P5,000.00) pesos.

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Partnership the (1) specific address of their principal office
(see Sec. 15 for form) which shall include, if feasible, the street number, street name,
barangay, city or municipality; and (2) specific residence address
a) NAME (Sec. 14 (1)) of each incorporator, stockholder, director, trustee or partner.
Sec. 18. Corporate name. - No corporate name may be allowed Metro Manila shall no longer be allowed as address of the
by the Securities and Exchange Commission if the proposed principal office.
name is identical or deceptively or confusingly similar to that of Additionally, all corporations are required to state in the
any existing corporation or to any other name already protected General Information sheet the specific address of each
by law or is patently deceptive, confusing or contrary to existing stockholder, officer, director or trustee.
laws. When a change in the corporate name is approved, the
Commission shall issue an amended certificate of incorporation SEC MC No. 6 s. 2014
under the amended name. Sec. 1. Existing corporations and partnerships whose articles of
incorporation or articles of partnership indicate only a general
b) PURPOSE (Sec. 14(2)) address as their principal office address, such that it refers only
Sec. 17. Grounds when articles of incorporation or amendment to a city, town or municipality, or Metro Manila, are directed to
may be rejected or disapproved. – xxx file an amended articles of incorporation or amended articles of
2. That the purpose or purposes of the corporation are patently partnership in order to specify their complete address, such
unconstitutional, illegal, immoral, or contrary to government that, if feasible, it has a street number, street name, barangay,
rules and regulations; city or municipality, and if applicable, the name of the building,
the number of the building, and name or number of the room
Sec. 88. Purposes. - Non-stock corporations may be formed or or unit.
organized for charitable, religious, educational, professional,
cultural, fraternal, literary, scientific, social, civic service, or SEC MC No. 16 s. 2014
similar purposes, like trade, industry, agricultural and like In the event that a corporation whose principal office
chambers, or any combination thereof, subject to the special address as indicated in its articles is already specific and
provisions of this Title governing particular classes of non-stock complete or fully compliant with the aforementioned circulars,
corporations. has moved or moves to another location within the same city or
municipality, the corporation is not required to file an amended
c) PRINCIPAL OFFICE (Sec. 14 (3)) articles of incorporation. However, it must declare its new or
SEC MC No. 3 s. 2006 current specific address in its GIS within 15 days from transfer
In line with the full disclosure requirement of existing laws, all to its new location or effectivity of this circular. Metro Manila
corporations and partnerships applying for registration with the shall not be considered a city or municipality for this purpose.
SEC should state in their Articles of Incorporation or Articles of

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d) TERM f) DIRECTORS (Sec. 14 (6-7))
(CC) Sec. 11. Corporate term. - A corporation shall exist for a
period not exceeding fifty (50) years from the date of g) CAPITAL STOCK
incorporation unless sooner dissolved or unless said period is (CC) Sec. 12. Minimum capital stock required of stock
extended. The corporate term as originally stated in the articles corporations. - Stock corporations incorporated under this Code
of incorporation may be extended for periods not exceeding shall not be required to have any minimum authorized capital
fifty (50) years in any single instance by an amendment of the stock except as otherwise specifically provided for by special
articles of incorporation, in accordance with this Code; law, and subject to the provisions of the following section.
Provided, That no extension can be made earlier than five (5)
years prior to the original or subsequent expiry date(s) unless Sec. 13. Amount of capital stock to be subscribed and paid for
there are justifiable reasons for an earlier extension as may be the purposes of incorporation. - At least twenty-five percent
determined by the Securities and Exchange Commission. (25%) of the authorized capital stock as stated in the articles of
incorporation must be subscribed at the time of incorporation,
e) INCORPORATORS (Sec. 14 (5)) and at least twenty-five (25%) per cent of the total subscription
(CC) Sec. 5. Corporators and incorporators, stockholders and must be paid upon subscription, the balance to be payable on a
members. - Corporators are those who compose a corporation, date or dates fixed in the contract of subscription without need
whether as stockholders or as members. Incorporators are of call, or in the absence of a fixed date or dates, upon call for
those stockholders or members mentioned in the articles of payment by the board of directors: Provided, however, That in
incorporation as originally forming and composing the no case shall the paid-up capital be less than five Thousand
corporation and who are signatories thereof. (P5,000.00) pesos.

Corporators in a stock corporation are called stockholders or Sec. 137. Outstanding capital stock defined. - The term
shareholders. Corporators in a non-stock corporation are called "outstanding capital stock", as used in this Code, means the
members. total shares of stock issued under binding subscription
agreements to subscribers or stockholders, whether or not fully
Sec. 10. Number and qualifications of incorporators. - Any or partially paid, except treasury shares.
number of natural persons not less than five (5) but not more
than fifteen (15), all of legal age and a majority of whom are h) CLASSESS OF SHARES OF STOCK
residents of the Philippines, may form a private corporation for (CC) Sec. 6. Classification of shares. - The shares of stock of
any lawful purpose or purposes. Each of the incorporators of s stock corporations may be divided into classes or series of
stock corporation must own or be a subscriber to at least one shares, or both, any of which classes or series of shares may
(1) share of the capital stock of the corporation. have such rights, privileges or restrictions as may be stated in
the articles of incorporation: Provided, That no share may be

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deprived of voting rights except those classified and issued as A corporation may, furthermore, classify its shares for the
"preferred" or "redeemable" shares, unless otherwise provided purpose of insuring compliance with constitutional or legal
in this Code: Provided, further, That there shall always be a class requirements.
or series of shares which have complete voting rights. Any or all Except as otherwise provided in the articles of incorporation
of the shares or series of shares may have a par value or have and stated in the certificate of stock, each share shall be equal
no par value as may be provided for in the articles of in all respects to every other share.
incorporation: Provided, however, That banks, trust companies, Where the articles of incorporation provide for non-voting
insurance companies, public utilities, and building and loan shares in the cases allowed by this Code, the holders of such
associations shall not be permitted to issue no-par value shares shares shall nevertheless be entitled to vote on the following
of stock. matters:
Preferred shares of stock issued by any corporation may be
given preference in the distribution of the assets of the 1. Amendment of the articles of incorporation;
corporation in case of liquidation and in the distribution of 2. Adoption and amendment of by-laws;
dividends, or such other preferences as may be stated in the 3. Sale, lease, exchange, mortgage, pledge or other
articles of incorporation which are not violative of the disposition of all or substantially all of the corporate property;
provisions of this Code: Provided, That preferred shares of stock 4. Incurring, creating or increasing bonded indebtedness;
may be issued only with a stated par value. The board of 5. Increase or decrease of capital stock;
directors, where authorized in the articles of incorporation, may 6. Merger or consolidation of the corporation with another
fix the terms and conditions of preferred shares of stock or any corporation or other corporations;
series thereof: Provided, That such terms and conditions shall 7. Investment of corporate funds in another corporation or
be effective upon the filing of a certificate thereof with the business in accordance with this Code; and
Securities and Exchange Commission. 8. Dissolution of the corporation.
Shares of capital stock issued without par value shall be
deemed fully paid and non-assessable and the holder of such Except as provided in the immediately preceding paragraph, the
shares shall not be liable to the corporation or to its creditors in vote necessary to approve a particular corporate act as
respect thereto: Provided; That shares without par value may provided in this Code shall be deemed to refer only to stocks
not be issued for a consideration less than the value of five with voting rights.
(P5.00) pesos per share: Provided, further, That the entire
consideration received by the corporation for its no-par value Sec. 7. Founders' shares. - Founders' shares classified as such in
shares shall be treated as capital and shall not be available for the articles of incorporation may be given certain rights and
distribution as dividends. privileges not enjoyed by the owners of other stocks, provided
that where the exclusive right to vote and be voted for in the
election of directors is granted, it must be for a limited period

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not to exceed five (5) years subject to the approval of the 3. For a greater quorum or voting requirements in meetings of
Securities and Exchange Commission. The five-year period shall stockholders or directors than those provided in this Code.
commence from the date of the aforesaid approval by the
Securities and Exchange Commission. The articles of incorporation of a close corporation may provide that
the business of the corporation shall be managed by the
Sec. 8. Redeemable shares. - Redeemable shares may be issued stockholders of the corporation rather than by a board of directors.
by the corporation when expressly so provided in the articles of So long as this provision continues in effect:
incorporation. They may be purchased or taken up by the 1. No meeting of stockholders need be called to elect directors;
corporation upon the expiration of a fixed period, regardless of 2. Unless the context clearly requires otherwise, the
the existence of unrestricted retained earnings in the books of stockholders of the corporation shall be deemed to be directors for
the corporation, and upon such other terms and conditions as the purpose of applying the provisions of this Code; and
may be stated in the articles of incorporation, which terms and 3. The stockholders of the corporation shall be subject to all
conditions must also be stated in the certificate of stock liabilities of directors.
representing said shares.
The articles of incorporation may likewise provide that all officers or
Sec. 9. Treasury shares. - Treasury shares are shares of stock employees or that specified officers or employees shall be elected
which have been issued and fully paid for, but subsequently or appointed by the stockholders, instead of by the board of
reacquired by the issuing corporation by purchase, redemption, directors.
donation or through some other lawful means. Such shares may
again be disposed of for a reasonable price fixed by the board of 4. Articles of Special Corporation
directors. (CC) Sec. 106. Incorporation. - Educational corporations shall be
governed by special laws and by the general provisions of this Code.
3. Articles of Close Corporation (n)
(CC) Sec. 97. Articles of incorporation. - The articles of
incorporation of a close corporation may provide: Sec. 107. Pre-requisites to incorporation. - Except upon favorable
1. For a classification of shares or rights and the qualifications recommendation of the Ministry of Education and Culture, the
for owning or holding the same and restrictions on their transfers as Securities and Exchange Commission shall not accept or approve the
may be stated therein, subject to the provisions of the following articles of incorporation and by-laws of any educational institution.
section; (168a)
2. For a classification of directors into one or more classes, each
of whom may be voted for and elected solely by a particular class of Sec. 108. Board of trustees. - Trustees of educational institutions
stock; and organized as non-stock corporations shall not be less than five (5)

11
nor more than fifteen (15): Provided, however, That the number of building and loan associations, trust companies and other
trustees shall be in multiples of five (5). financial intermediaries, insurance companies, public utilities,
Unless otherwise provided in the articles of incorporation educational institutions, and other corporations governed by
on the by-laws, the board of trustees of incorporated schools, special laws shall be accepted or approved by the Commission
colleges, or other institutions of learning shall, as soon as organized, unless accompanied by a favorable recommendation of the
so classify themselves that the term of office of one-fifth (1/5) of appropriate government agency to the effect that such articles
their number shall expire every year. Trustees thereafter elected to or amendment is in accordance with law.
fill vacancies, occurring before the expiration of a particular term, c) SEC Rules on Documentary Requirements for Registration of
shall hold office only for the unexpired period. Trustees elected Corporations and Partnerships (23 June 2013)
thereafter to fill vacancies caused by expiration of term shall hold
office for five (5) years. A majority of the trustees shall constitute a 7. Filing of Articles and Payment Fees
quorum for the transaction of business. The powers and authority
of trustees shall be defined in the by-laws. 8. Examination by SEC; Grounds for disapproval
For institutions organized as stock corporations, the number (CC) Sec. 17. Grounds when articles of incorporation or
and term of directors shall be governed by the provisions on stock amendment may be rejected or disapproved. - The Securities and
corporations. (169a) Exchange Commission may reject the articles of incorporation or
disapprove any amendment thereto if the same is not in compliance
Sec. 109. Classes of religious corporations. - Religious corporations with the requirements of this Code: Provided, That the Commission
may be incorporated by one or more persons. Such corporations shall give the incorporators a reasonable time within which to
may be classified into corporations sole and religious societies. correct or modify the objectionable portions of the articles or
Religious corporations shall be governed by this Chapter amendment. The following are grounds for such rejection or
and by the general provisions on non-stock corporations insofar as disapproval:
they may be applicable. 1. That the articles of incorporation or any amendment thereto
is not substantially in accordance with the form prescribed herein;
5. Form of Articles (Sec. 15) 2. That the purpose or purposes of the corporation are patently
unconstitutional, illegal, immoral, or contrary to government rules
6. Accompanying Documents and regulations;
a) Treasurer’s Affidavit (see Sec. 15) 3. That the Treasurer's Affidavit concerning the amount of
b) Recommendation from Government Agency capital stock subscribed and/or paid if false;
(CC) Sec. 17. Grounds when articles of incorporation or 4. That the percentage of ownership of the capital stock to be
amendment may be rejected or disapproved. – xxx owned by citizens of the Philippines has not been complied with as
No articles of incorporation or amendment to articles of required by existing laws or the Constitution.
incorporation of banks, banking and quasi-banking institutions,

12
No articles of incorporation or amendment to articles of liable as general partners for all debts, liabilities and damages incurred
incorporation of banks, banking and quasi-banking institutions, or arising as a result thereof: Provided, however, That when any such
building and loan associations, trust companies and other financial ostensible corporation is sued on any transaction entered by it as a
intermediaries, insurance companies, public utilities, educational corporation or on any tort committed by it as such, it shall not be
institutions, and other corporations governed by special laws shall allowed to use as a defense its lack of corporate personality.
be accepted or approved by the Commission unless accompanied by On who assumes an obligation to an ostensible corporation as such,
a favorable recommendation of the appropriate government agency cannot resist performance thereof on the ground that there was in fact
to the effect that such articles or amendment is in accordance with no corporation.
law.
e. Non-use of corporate charter; continuous inoperation
9. Certificate of Registration (CC) Sec. 22. Effects on non-use of corporate charter and continuous
(CC) Sec. 19. Commencement of corporate existence. - A private inoperation of a corporation.- If a corporation does not formally
corporation formed or organized under this Code commences to organize and commence the transaction of its business or the
have corporate existence and juridical personality and is deemed construction of its works within two (2) years from the date of its
incorporated from the date the Securities and Exchange incorporation, its corporate powers cease and the corporation shall be
Commission issues a certificate of incorporation under its official deemed dissolved. However, if a corporation has commenced the
seal; and thereupon the incorporators, stockholders/members and transaction of its business but subsequently becomes continuously
their successors shall constitute a body politic and corporate under inoperative for a period of at least five (5) years, the same shall be a
the name stated in the articles of incorporation for the period of ground for the suspension or revocation of its corporate franchise or
time mentioned therein, unless said period is extended or the certificate of incorporation.
corporation is sooner dissolved in accordance with law. This provision shall not apply if the failure to organize, commence the
transaction of its businesses or the construction of its works, or to
c. De Facto Corporations continuously operate is due to causes beyond the control of the
(CC) Sec. 20. De facto corporations. - The due incorporation of any corporation as may be determined by the Securities and Exchange
corporation claiming in good faith to be a corporation under this Code, Commission.
and its right to exercise corporate powers, shall not be inquired into
collaterally in any private suit to which such corporation may be a party. f. Internal Organization of Corporations
Such inquiry may be made by the Solicitor General in a quo warranto 1. BY LAWS
proceeding. a) ADOPTION
(CC) Sec. 36. Corporate powers and capacity. - Every
d. Corporation by Estoppel corporation incorporated under this Code has the power and
(CC) Sec. 21. Corporation by estoppel. - All persons who assume to act capacity:
as a corporation knowing it to be without authority to do so shall be

13
5. To adopt by-laws, not contrary to law, morals, or public The Securities and Exchange Commission shall not accept for
policy, and to amend or repeal the same in accordance with this filing the by-laws or any amendment thereto of any bank,
Code banking institution, building and loan association, trust
company, insurance company, public utility, educational
Sec. 46. Adoption of by-laws. - Every corporation formed under institution or other special corporations governed by special
this Code must, within one (1) month after receipt of official laws, unless accompanied by a certificate of the appropriate
notice of the issuance of its certificate of incorporation by the government agency to the effect that such by-laws or
Securities and Exchange Commission, adopt a code of by-laws amendments are in accordance with law. (20a)
for its government not inconsistent with this Code. For the
adoption of by-laws by the corporation the affirmative vote of b) CONTENTS
the stockholders representing at least a majority of the Sec. 47. Contents of by-laws. - Subject to the provisions of the
outstanding capital stock, or of at least a majority of the Constitution, this Code, other special laws, and the articles of
members in case of non-stock corporations, shall be necessary. incorporation, a private corporation may provide in its by-laws
The by-laws shall be signed by the stockholders or members for:
voting for them and shall be kept in the principal office of the 1. The time, place and manner of calling and conducting
corporation, subject to the inspection of the stockholders or regular or special meetings of the directors or trustees;
members during office hours. A copy thereof, duly certified to 2. The time and manner of calling and conducting regular or
by a majority of the directors or trustees countersigned by the special meetings of the stockholders or members;
secretary of the corporation, shall be filed with the Securities 3. The required quorum in meetings of stockholders or
and Exchange Commission which shall be attached to the members and the manner of voting therein;
original articles of incorporation. 4. The form for proxies of stockholders and members and
the manner of voting them;
Notwithstanding the provisions of the preceding paragraph, by- 5. The qualifications, duties and compensation of directors
laws may be adopted and filed prior to incorporation; in such or trustees, officers and employees;
case, such by-laws shall be approved and signed by all the 6. The time for holding the annual election of directors of
incorporators and submitted to the Securities and Exchange trustees and the mode or manner of giving notice thereof;
Commission, together with the articles of incorporation. 7. The manner of election or appointment and the term of
office of all officers other than directors or trustees;
In all cases, by-laws shall be effective only upon the issuance by 8. The penalties for violation of the by-laws;
the Securities and Exchange Commission of a certification that 9. In the case of stock corporations, the manner of issuing
the by-laws are not inconsistent with this Code. stock certificates; and

14
10. Such other matters as may be necessary for the proper d) SEC APPROVAL
or convenient transaction of its corporate business and affairs. Sec. 46. Adoption of by-laws. – xxx
(21a) The Securities and Exchange Commission shall not accept
for filing the by-laws or any amendment thereto of any bank,
c) AMENDMENT banking institution, building and loan association, trust
Sec. 48. Amendments to by-laws. - The board of directors or company, insurance company, public utility, educational
trustees, by a majority vote thereof, and the owners of at least institution or other special corporations governed by special
a majority of the outstanding capital stock, or at least a majority laws, unless accompanied by a certificate of the appropriate
of the members of a non-stock corporation, at a regular or government agency to the effect that such by-laws or
special meeting duly called for the purpose, may amend or amendments are in accordance with law. (20a)
repeal any by-laws or adopt new by-laws. The owners of two-
thirds (2/3) of the outstanding capital stock or two-thirds (2/3) 2. Election of directors
of the members in a non-stock corporation may delegate to the Sec. 24. Election of directors or trustees. - At all elections of
board of directors or trustees the power to amend or repeal any directors or trustees, there must be present, either in person or by
by-laws or adopt new by-laws: Provided, That any power representative authorized to act by written proxy, the owners of a
delegated to the board of directors or trustees to amend or majority of the outstanding capital stock, or if there be no capital
repeal any by-laws or adopt new by-laws shall be considered as stock, a majority of the members entitled to vote. The election must
revoked whenever stockholders owning or representing a be by ballot if requested by any voting stockholder or member. In
majority of the outstanding capital stock or a majority of the stock corporations, every stockholder entitled to vote shall have the
members in non-stock corporations, shall so vote at a regular or right to vote in person or by proxy the number of shares of stock
special meeting. standing, at the time fixed in the by-laws, in his own name on the
Whenever any amendment or new by-laws are adopted, such stock books of the corporation, or where the by-laws are silent, at
amendment or new by-laws shall be attached to the original by- the time of the election; and said stockholder may vote such
laws in the office of the corporation, and a copy thereof, duly number of shares for as many persons as there are directors to be
certified under oath by the corporate secretary and a majority elected or he may cumulate said shares and give one candidate as
of the directors or trustees, shall be filed with the Securities and many votes as the number of directors to be elected multiplied by
Exchange Commission the same to be attached to the original the number of his shares shall equal, or he may distribute them on
articles of incorporation and original by-laws. the same principle among as many candidates as he shall see fit:
The amended or new by-laws shall only be effective upon the Provided, That the total number of votes cast by him shall not
issuance by the Securities and Exchange Commission of a exceed the number of shares owned by him as shown in the books
certification that the same are not inconsistent with this Code. of the corporation multiplied by the whole number of directors to
(22a and 23a) be elected: Provided, however, That no delinquent stock shall be
voted. Unless otherwise provided in the articles of incorporation or

15
in the by-laws, members of corporations which have no capital
stock may cast as many votes as there are trustees to be elected but 4. Report of election of directors, officers, trustees
may not cast more than one vote for one candidate. Candidates Sec. 26. Report of election of directors, trustees and officers. -
receiving the highest number of votes shall be declared elected. Any Within thirty (30) days after the election of the directors, trustees
meeting of the stockholders or members called for an election may and officers of the corporation, the secretary, or any other officer of
adjourn from day to day or from time to time but not sine die or the corporation, shall submit to the Securities and Exchange
indefinitely if, for any reason, no election is held, or if there not Commission, the names, nationalities and residences of the
present or represented by proxy, at the meeting, the owners of a directors, trustees, and officers elected. Should a director, trustee
majority of the outstanding capital stock, or if there be no capital or officer die, resign or in any manner cease to hold office, his heirs
stock, a majority of the member entitled to vote. in case of his death, the secretary, or any other officer of the
corporation, or the director, trustee or officer himself, shall
3. Election of officers immediately report such fact to the Securities and Exchange
Sec. 25. Corporate officers, quorum. - Immediately after their Commission
election, the directors of a corporation must formally organize by
the election of a president, who shall be a director, a treasurer who THE CORPORATE ENTITY
may or may not be a director, a secretary who shall be a resident 1. Separate Corporate Personality
and citizen of the Philippines, and such other officers as may be 2. Disregarding Corporate Entity
provided for in the by-laws. Any two (2) or more positions may be 3. Entitlement of Corporation to moral damages
held concurrently by the same person, except that no one shall act 4. Entitlement to constitutional guarantees; criminal liability; civil
as president and secretary or as president and treasurer at the same liability for tort
time.
The directors or trustees and officers to be elected shall PROMOTERS CONTRACTS PRIOR INCORPORATION
perform the duties enjoined on them by law and the by-laws of the 1. Liability of corporation for promoter’s contracts
2. Corporate rights under promoter’s contracts
corporation. Unless the articles of incorporation or the by-laws
provide for a greater majority, a majority of the number of directors 3. Personal liability of promoter on pre-incorporation contracts
or trustees as fixed in the articles of incorporation shall constitute a 4. Fiduciary relationship between corporation and promoter
quorum for the transaction of corporate business, and every
decision of at least a majority of the directors or trustees present at CORPORATE POWERS
a meeting at which there is a quorum shall be valid as a corporate 1. Corporate Powers
act, except for the election of officers which shall require the vote a. General
of a majority of all the members of the board. (CC) Sec. 36. Corporate powers and capacity. - Every corporation
Directors or trustees cannot attend or vote by proxy at incorporated under this Code has the power and capacity:
board meetings. 1. To sue and be sued in its corporate name;

16
2. Of succession by its corporate name for the period of time
stated in the articles of incorporation and the certificate of c. Ultra vires acts
incorporation; Sec. 45. Ultra vires acts of corporations. - No corporation under this
3. To adopt and use a corporate seal; Code shall possess or exercise any corporate powers except those
4. To amend its articles of incorporation in accordance with the conferred by this Code or by its articles of incorporation and except
provisions of this Code; such as are necessary or incidental to the exercise of the powers so
5. To adopt by-laws, not contrary to law, morals, or public conferred.
policy, and to amend or repeal the same in accordance with this
Code; 2. Specific Powers
6. In case of stock corporations, to issue or sell stocks to a. Extend or shorten corporate life
subscribers and to sell stocks to subscribers and to sell treasury Sec. 37. Power to extend or shorten corporate term. - A private
stocks in accordance with the provisions of this Code; and to admit corporation may extend or shorten its term as stated in the articles
members to the corporation if it be a non-stock corporation; of incorporation when approved by a majority vote of the board of
7. To purchase, receive, take or grant, hold, convey, sell, lease, directors or trustees and ratified at a meeting by the stockholders
pledge, mortgage and otherwise deal with such real and personal representing at least two-thirds (2/3) of the outstanding capital
property, including securities and bonds of other corporations, as stock or by at least two-thirds (2/3) of the members in case of non-
the transaction of the lawful business of the corporation may stock corporations. Written notice of the proposed action and of
reasonably and necessarily require, subject to the limitations the time and place of the meeting shall be addressed to each
prescribed by law and the Constitution; stockholder or member at his place of residence as shown on the
8. To enter into merger or consolidation with other books of the corporation and deposited to the addressee in the post
corporations as provided in this Code; office with postage prepaid, or served personally: Provided, That in
9. To make reasonable donations, including those for the public case of extension of corporate term, any dissenting stockholder may
welfare or for hospital, charitable, cultural, scientific, civic, or similar exercise his appraisal right under the conditions provided in this
purposes: Provided, That no corporation, domestic or foreign, shall code.
give donations in aid of any political party or candidate or for
purposes of partisan political activity; b. Increase or decrease capital stock; incur, create or increase
10. To establish pension, retirement, and other plans for the bonded indebtedness
benefit of its directors, trustees, officers and employees; and Sec. 38. Power to increase or decrease capital stock; incur, create
11. To exercise such other powers as may be essential or or increase bonded indebtedness. - No corporation shall increase or
necessary to carry out its purpose or purposes as stated in the decrease its capital stock or incur, create or increase any bonded
articles of incorporation. indebtedness unless approved by a majority vote of the board of
directors and, at a stockholder's meeting duly called for the
b. Express, Implied, Incidental purpose, two-thirds (2/3) of the outstanding capital stock shall favor

17
the increase or diminution of the capital stock, or the incurring, (7) The vote authorizing the increase or diminution of the
creating or increasing of any bonded indebtedness. Written notice capital stock, or the incurring, creating or increasing of any bonded
of the proposed increase or diminution of the capital stock or of the indebtedness.
incurring, creating, or increasing of any bonded indebtedness and of
the time and place of the stockholder's meeting at which the Any increase or decrease in the capital stock or the incurring,
proposed increase or diminution of the capital stock or the incurring creating or increasing of any bonded indebtedness shall require
or increasing of any bonded indebtedness is to be considered, must prior approval of the Securities and Exchange Commission.
be addressed to each stockholder at his place of residence as shown One of the duplicate certificates shall be kept on file in the
on the books of the corporation and deposited to the addressee in office of the corporation and the other shall be filed with the
the post office with postage prepaid, or served personally. Securities and Exchange Commission and attached to the original
A certificate in duplicate must be signed by a majority of the articles of incorporation. From and after approval by the Securities
directors of the corporation and countersigned by the chairman and and Exchange Commission and the issuance by the Commission of
the secretary of the stockholders' meeting, setting forth: its certificate of filing, the capital stock shall stand increased or
(1) That the requirements of this section have been complied decreased and the incurring, creating or increasing of any bonded
with; indebtedness authorized, as the certificate of filing may declare:
(2) The amount of the increase or diminution of the capital Provided, That the Securities and Exchange Commission shall not
stock; accept for filing any certificate of increase of capital stock unless
(3) If an increase of the capital stock, the amount of capital accompanied by the sworn statement of the treasurer of the
stock or number of shares of no-par stock thereof actually corporation lawfully holding office at the time of the filing of the
subscribed, the names, nationalities and residences of the persons certificate, showing that at least twenty-five (25%) percent of such
subscribing, the amount of capital stock or number of no-par stock increased capital stock has been subscribed and that at least
subscribed by each, and the amount paid by each on his twenty-five (25%) percent of the amount subscribed has been paid
subscription in cash or property, or the amount of capital stock or either in actual cash to the corporation or that there has been
number of shares of no-par stock allotted to each stock-holder if transferred to the corporation property the valuation of which is
such increase is for the purpose of making effective stock dividend equal to twenty-five (25%) percent of the subscription: Provided,
therefor authorized; further, That no decrease of the capital stock shall be approved by
(4) Any bonded indebtedness to be incurred, created or the Commission if its effect shall prejudice the rights of corporate
increased; creditors.
(5) The actual indebtedness of the corporation on the day of Non-stock corporations may incur or create bonded
the meeting; indebtedness, or increase the same, with the approval by a majority
(6) The amount of stock represented at the meeting; and vote of the board of trustees and of at least two-thirds (2/3) of the
members in a meeting duly called for the purpose.

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Bonds issued by a corporation shall be registered with the to each stockholder or member at his place of residence as shown
Securities and Exchange Commission, which shall have the authority on the books of the corporation and deposited to the addressee in
to determine the sufficiency of the terms thereof. (17a) the post office with postage prepaid, or served personally: Provided,
That any dissenting stockholder may exercise his appraisal right
c. Denial of pre-emptive right under the conditions provided in this Code.
Sec. 39. Power to deny pre-emptive right. - All stockholders of a A sale or other disposition shall be deemed to cover
stock corporation shall enjoy pre-emptive right to subscribe to all substantially all the corporate property and assets if thereby the
issues or disposition of shares of any class, in proportion to their corporation would be rendered incapable of continuing the business
respective shareholdings, unless such right is denied by the articles or accomplishing the purpose for which it was incorporated.
of incorporation or an amendment thereto: Provided, That such After such authorization or approval by the stockholders or
pre-emptive right shall not extend to shares to be issued in members, the board of directors or trustees may, nevertheless, in
compliance with laws requiring stock offerings or minimum stock its discretion, abandon such sale, lease, exchange, mortgage, pledge
ownership by the public; or to shares to be issued in good faith with or other disposition of property and assets, subject to the rights of
the approval of the stockholders representing two-thirds (2/3) of third parties under any contract relating thereto, without further
the outstanding capital stock, in exchange for property needed for action or approval by the stockholders or members.
corporate purposes or in payment of a previously contracted debt. Nothing in this section is intended to restrict the power of
any corporation, without the authorization by the stockholders or
d. Sale or other disposition of assets (all or substantially all) members, to sell, lease, exchange, mortgage, pledge or otherwise
Sec. 40. Sale or other disposition of assets. - Subject to the dispose of any of its property and assets if the same is necessary in
provisions of existing laws on illegal combinations and monopolies, the usual and regular course of business of said corporation or if the
a corporation may, by a majority vote of its board of directors or proceeds of the sale or other disposition of such property and
trustees, sell, lease, exchange, mortgage, pledge or otherwise assets be appropriated for the conduct of its remaining business.
dispose of all or substantially all of its property and assets, including In non-stock corporations where there are no members
its goodwill, upon such terms and conditions and for such with voting rights, the vote of at least a majority of the trustees in
consideration, which may be money, stocks, bonds or other office will be sufficient authorization for the corporation to enter
instruments for the payment of money or other property or into any transaction authorized by this section. (28 1/2a)
consideration, as its board of directors or trustees may deem
expedient, when authorized by the vote of the stockholders Sec. 81. Instances of appraisal right.- Any stockholder of a
representing at least two-thirds (2/3) of the outstanding capital corporation shall have the right to dissent and demand payment of
stock, or in case of non-stock corporation, by the vote of at least to the fair value of his shares in the following instances:
two-thirds (2/3) of the members, in a stockholder's or member's 1. In case any amendment to the articles of incorporation has
meeting duly called for the purpose. Written notice of the proposed the effect of changing or restricting the rights of any stockholder or
action and of the time and place of the meeting shall be addressed class of shares, or of authorizing preferences in any respect superior

19
to those of outstanding shares of any class, or of extending or and transfers to capital stock or other accounts, and which is: (1)
shortening the term of corporate existence; Not appropriated by its Board of Directors for corporate expansion
2. In case of sale, lease, exchange, transfer, mortgage, pledge or projects or programs; (2) not covered by a restriction for dividend
other disposition of all or substantially all of the corporate property declaration under a loan agreement; and (3) not required to be
and assets as provided in the Code; and retained under special circumstances obtaining in the corporation
3. In case of merger or consolidation. such as when there is a need for a special reserve for probable
contingencies.
e. Acquisition of its own shares
Sec. 41. Power to acquire own shares. - A stock corporation shall f. Investment or corporate funds in another corporation or business
have the power to purchase or acquire its own shares for a or other purpose
legitimate corporate purpose or purposes, including but not limited (CC) Sec. 42. Power to invest corporate funds in another
to the following cases: Provided, That the corporation has corporation or business or for any other purpose. - Subject to the
unrestricted retained earnings in its books to cover the shares to be provisions of this Code, a private corporation may invest its funds in
purchased or acquired: any other corporation or business or for any purpose other than the
1. To eliminate fractional shares arising out of stock dividends; primary purpose for which it was organized when approved by a
2. To collect or compromise an indebtedness to the majority of the board of directors or trustees and ratified by the
corporation, arising out of unpaid subscription, in a delinquency stockholders representing at least two-thirds (2/3) of the
sale, and to purchase delinquent shares sold during said sale; and outstanding capital stock, or by at least two thirds (2/3) of the
3. To pay dissenting or withdrawing stockholders entitled to members in the case of non-stock corporations, at a stockholder's
payment for their shares under the provisions of this Code. or member's meeting duly called for the purpose. Written notice of
the proposed investment and the time and place of the meeting
(SEC MEMO NO.11, s. 2008) Sec. 2. Definition of terms – shall be addressed to each stockholder or member at his place of
Retained Earnings – the accumulated profits realized out of normal residence as shown on the books of the corporation and deposited
and continuous operations of the business after deducting to the addressee in the post office with postage prepaid, or served
distributions to stockholders and transfers to capital stock or other personally: Provided, That any dissenting stockholder shall have
accounts. The retained earnings shall be the amount as shown in the appraisal right as provided in this Code: Provided, however, That
financial statements audited by the company’s independent auditor. where the investment by the corporation is reasonably necessary to
If applicable, such amount shall refer to the retained earnings of the accomplish its primary purpose as stated in the articles of
parent company but not the consolidated financial statements. incorporation, the approval of the stockholders or members shall
not be necessary.
Unrestricted Retained Earnings – the amount of accumulated profits
and gains realized out of the normal and continuous operations of g. Power to declare dividends
the company after deducting therefrom distributions to stockholders

20
Sec. 43. Power to declare dividends. - The board of directors of a managing and the managed corporation, at a meeting duly called
stock corporation may declare dividends out of the unrestricted for the purpose: Provided, That (1) where a stockholder or
retained earnings which shall be payable in cash, in property, or in stockholders representing the same interest of both the managing
stock to all stockholders on the basis of outstanding stock held by and the managed corporations own or control more than one-third
them: Provided, That any cash dividends due on delinquent stock (1/3) of the total outstanding capital stock entitled to vote of the
shall first be applied to the unpaid balance on the subscription plus managing corporation; or (2) where a majority of the members of
costs and expenses, while stock dividends shall be withheld from the board of directors of the managing corporation also constitute a
the delinquent stockholder until his unpaid subscription is fully paid: majority of the members of the board of directors of the managed
Provided, further, That no stock dividend shall be issued without the corporation, then the management contract must be approved by
approval of stockholders representing not less than two-thirds (2/3) the stockholders of the managed corporation owning at least two-
of the outstanding capital stock at a regular or special meeting duly thirds (2/3) of the total outstanding capital stock entitled to vote, or
called for the purpose. (16a) by at least two-thirds (2/3) of the members in the case of a non-
Stock corporations are prohibited from retaining surplus stock corporation. No management contract shall be entered into
profits in excess of one hundred (100%) percent of their paid-in for a period longer than five years for any one term.
capital stock, except: (1) when justified by definite corporate
expansion projects or programs approved by the board of directors; The provisions of the next preceding paragraph shall apply to any
or (2) when the corporation is prohibited under any loan agreement contract whereby a corporation undertakes to manage or operate
with any financial institution or creditor, whether local or foreign, all or substantially all of the business of another corporation,
from declaring dividends without its/his consent, and such consent whether such contracts are called service contracts, operating
has not yet been secured; or (3) when it can be clearly shown that agreements or otherwise: Provided, however, That such service
such retention is necessary under special circumstances obtaining in contracts or operating agreements which relate to the exploration,
the corporation, such as when there is need for special reserve for development, exploitation or utilization of natural resources may be
probable contingencies. entered into for such periods as may be provided by the pertinent
laws or regulations. (n)
(see SEC MEMO NO.11, s. 2008)
CONTROL AND MANAGEMENT OF THE CORPORATION
h. Power to enter into management contracts 1. Corporate Hierarchy
Sec. 44. Power to enter into management contract. - No 2. Board of Directors or trustees
corporation shall conclude a management contract with another a. Corporate Powers exercised by the board
corporation unless such contract shall have been approved by the Sec. 23. The board of directors or trustees. - Unless otherwise
board of directors and by stockholders owning at least the majority provided in this Code, the corporate powers of all corporations
of the outstanding capital stock, or by at least a majority of the formed under this Code shall be exercised, all business conducted
members in the case of a non-stock corporation, of both the and all property of such corporations controlled and held by the

21
board of directors or trustees to be elected from among the holders be elected: Provided, however, That no delinquent stock shall be
of stocks, or where there is no stock, from among the members of voted. Unless otherwise provided in the articles of incorporation or
the corporation, who shall hold office for one (1) year until their in the by-laws, members of corporations which have no capital
successors are elected and qualified. stock may cast as many votes as there are trustees to be elected but
Every director must own at least one (1) share of the capital may not cast more than one vote for one candidate. Candidates
stock of the corporation of which he is a director, which share shall receiving the highest number of votes shall be declared elected. Any
stand in his name on the books of the corporation. Any director who meeting of the stockholders or members called for an election may
ceases to be the owner of at least one (1) share of the capital stock adjourn from day to day or from time to time but not sine die or
of the corporation of which he is a director shall thereby cease to be indefinitely if, for any reason, no election is held, or if there not
a director. Trustees of non-stock corporations must be members present or represented by proxy, at the meeting, the owners of a
thereof. a majority of the directors or trustees of all corporations majority of the outstanding capital stock, or if there be no capital
organized under this Code must be residents of the Philippines. stock, a majority of the member entitled to vote.

b. Election of Directors a) QUALIFICATIONS/DISQUALIFICATIONS


Sec. 24. Election of directors or trustees. - At all elections of Sec. 25. Corporate officers, quorum. - Immediately after their
directors or trustees, there must be present, either in person or by election, the directors of a corporation must formally organize
representative authorized to act by written proxy, the owners of a by the election of a president, who shall be a director, a
majority of the outstanding capital stock, or if there be no capital treasurer who may or may not be a director, a secretary who
stock, a majority of the members entitled to vote. The election must shall be a resident and citizen of the Philippines, and such other
be by ballot if requested by any voting stockholder or member. In officers as may be provided for in the by-laws. Any two (2) or
stock corporations, every stockholder entitled to vote shall have the more positions may be held concurrently by the same person,
right to vote in person or by proxy the number of shares of stock except that no one shall act as president and secretary or as
standing, at the time fixed in the by-laws, in his own name on the president and treasurer at the same time.
stock books of the corporation, or where the by-laws are silent, at The directors or trustees and officers to be elected shall
the time of the election; and said stockholder may vote such perform the duties enjoined on them by law and the by-laws of
number of shares for as many persons as there are directors to be the corporation. Unless the articles of incorporation or the by-
elected or he may cumulate said shares and give one candidate as laws provide for a greater majority, a majority of the number of
many votes as the number of directors to be elected multiplied by directors or trustees as fixed in the articles of incorporation
the number of his shares shall equal, or he may distribute them on shall constitute a quorum for the transaction of corporate
the same principle among as many candidates as he shall see fit: business, and every decision of at least a majority of the
Provided, That the total number of votes cast by him shall not directors or trustees present at a meeting at which there is a
exceed the number of shares owned by him as shown in the books quorum shall be valid as a corporate act, except for the election
of the corporation multiplied by the whole number of directors to

22
of officers which shall require the vote of a majority of all the principle among as many candidates as he shall see fit:
members of the board. Provided, That the total number of votes cast by him shall not
Directors or trustees cannot attend or vote by proxy at exceed the number of shares owned by him as shown in the
board meetings. books of the corporation multiplied by the whole number of
directors to be elected: Provided, however, That no delinquent
Sec. 27. Disqualification of directors, trustees or officers. - No stock shall be voted. Unless otherwise provided in the articles of
person convicted by final judgment of an offense punishable by incorporation or in the by-laws, members of corporations which
imprisonment for a period exceeding six (6) years, or a violation have no capital stock may cast as many votes as there are
of this Code committed within five (5) years prior to the date of trustees to be elected but may not cast more than one vote for
his election or appointment, shall qualify as a director, trustee one candidate.
or officer of any corporation. xxx

b) WHEN ELECTED; QUORUM REQUIRED FOR ELECTION d) WHO CAN VOTE


(see Sec. 24) Sec. 24. Election of directors or trustees. – xxx
Sec. 47. Contents of by-laws. - Subject to the provisions of the there must be present, either in person or by representative
Constitution, this Code, other special laws, and the articles of authorized to act by written proxy, the owners of a majority of
incorporation, a private corporation may provide in its by-laws the outstanding capital stock, or if there be no capital stock, a
for: majority of the members entitled to vote.
3. The required quorum in meetings of stockholders or xxx
members and the manner of voting therein
6. The time for holding the annual election of directors of Sec. 57. Voting right for treasury shares. - Treasury shares shall
trustees and the mode or manner of giving notice thereof; have no voting right as long as such shares remain in the
7. The manner of election or appointment and the term of Treasury.
office of all officers other than directors or trustees;
xxx c. Term of Office
Sec. 23. The board of directors or trustees. - Unless otherwise
c) CUMULATIVE VOTING IN STOCK CORP/NON-STOCK CORP provided in this Code, the corporate powers of all corporations
Sec. 24. Election of directors or trustees. – xxx formed under this Code shall be exercised, all business conducted
said stockholder may vote such number of shares for as many and all property of such corporations controlled and held by the
persons as there are directors to be elected or he may cumulate board of directors or trustees to be elected from among the holders
said shares and give one candidate as many votes as the of stocks, or where there is no stock, from among the members of
number of directors to be elected multiplied by the number of the corporation, who shall hold office for one (1) year until their
his shares shall equal, or he may distribute them on the same successors are elected and qualified.

23
xxx the stockholders representing or holding at least a majority of the
outstanding capital stock, or, if it be a non-stock corporation, on the
Sec. 92. Election and term of trustees. - Unless otherwise provided written demand of a majority of the members entitled to vote.
in the articles of incorporation or the by-laws, the board of trustees Should the secretary fail or refuse to call the special meeting upon
of non-stock corporations, which may be more than fifteen (15) in such demand or fail or refuse to give the notice, or if there is no
number as may be fixed in their articles of incorporation or by-laws, secretary, the call for the meeting may be addressed directly to the
shall, as soon as organized, so classify themselves that the term of stockholders or members by any stockholder or member of the
office of one-third (1/3) of their number shall expire every year; and corporation signing the demand. Notice of the time and place of
subsequent elections of trustees comprising one-third (1/3) of the such meeting, as well as of the intention to propose such removal,
board of trustees shall be held annually and trustees so elected shall must be given by publication or by written notice prescribed in this
have a term of three (3) years. Trustees thereafter elected to fill Code. Removal may be with or without cause: Provided, That
vacancies occurring before the expiration of a particular term shall removal without cause may not be used to deprive minority
hold office only for the unexpired period. stockholders or members of the right of representation to which
No person shall be elected as trustee unless he is a member they may be entitled under Section 24 of this Code.
of the corporation.
Unless otherwise provided in the articles of incorporation or e. Vacancies
the by-laws, officers of a non-stock corporation may be directly Sec. 29. Vacancies in the office of director or trustee. - Any vacancy
elected by the members. occurring in the board of directors or trustees other than by
removal by the stockholders or members or by expiration of term,
d. Removal of Directors may be filled by the vote of at least a majority of the remaining
Sec. 28. Removal of directors or trustees. - Any director or trustee directors or trustees, if still constituting a quorum; otherwise, said
of a corporation may be removed from office by a vote of the vacancies must be filled by the stockholders in a regular or special
stockholders holding or representing at least two-thirds (2/3) of the meeting called for that purpose. A director or trustee so elected to
outstanding capital stock, or if the corporation be a non-stock fill a vacancy shall be elected only or the unexpired term of his
corporation, by a vote of at least two-thirds (2/3) of the members predecessor in office.
entitled to vote: Provided, That such removal shall take place either A directorship or trusteeship to be filled by reason of an
at a regular meeting of the corporation or at a special meeting increase in the number of directors or trustees shall be filled only by
called for the purpose, and in either case, after previous notice to an election at a regular or at a special meeting of stockholders or
stockholders or members of the corporation of the intention to members duly called for the purpose, or in the same meeting
propose such removal at the meeting. A special meeting of the authorizing the increase of directors or trustees if so stated in the
stockholders or members of a corporation for the purpose of notice of the meeting.
removal of directors or trustees, or any of them, must be called by
the secretary on order of the president or on the written demand of f. Meetings of the Board

24
a) BOARD MUST ACT AS A BODY (COLLEGIAL) shall be sent to all stockholders or members, unless otherwise
b) KINDS OF MEETINGS; QUORUM provided in the by-laws.
Sec. 25. Corporate officers, quorum. – xxx
The directors or trustees and officers to be elected shall Notice of any meeting may be waived, expressly or impliedly, by
perform the duties enjoined on them by law and the by-laws of any stockholder or member.
the corporation. Unless the articles of incorporation or the by-
laws provide for a greater majority, a majority of the number of Whenever, for any cause, there is no person authorized to call a
directors or trustees as fixed in the articles of incorporation meeting, the Secretaries and Exchange Commission, upon
shall constitute a quorum for the transaction of corporate petition of a stockholder or member on a showing of good
business, and every decision of at least a majority of the cause therefor, may issue an order to the petitioning
directors or trustees present at a meeting at which there is a stockholder or member directing him to call a meeting of the
quorum shall be valid as a corporate act, except for the election corporation by giving proper notice required by this Code or by
of officers which shall require the vote of a majority of all the the by-laws. The petitioning stockholder or member shall
members of the board. preside thereat until at least a majority of the stockholders or
Directors or trustees cannot attend or vote by proxy at members present have been chosen one of their number as
board meetings. presiding officer.

Sec. 49. Kinds of meetings. - Meetings of directors, trustees, c) WHEN AND WHERE; WHO PRESIDES
stockholders, or members may be regular or special. Sec. 53. Regular and special meetings of directors or trustees. –
xxx
Sec. 50. Regular and special meetings of stockholders or Meetings of directors or trustees of corporations may be held
members. - Regular meetings of stockholders or members shall anywhere in or outside of the Philippines, unless the by-laws
be held annually on a date fixed in the by-laws, or if not so provide otherwise.
fixed, on any date in April of every year as determined by the xxx
board of directors or trustees: Provided, That written notice of
regular meetings shall be sent to all stockholders or members of Sec. 54. Who shall preside at meetings. - The president shall
record at least two (2) weeks prior to the meeting, unless a preside at all meetings of the directors or trustee as well as of
different period is required by the by-laws. the stockholders or members, unless the by-laws provide
otherwise.
Special meetings of stockholders or members shall be held at
any time deemed necessary or as provided in the by-laws: d) NOTICE
Provided, however, That at least one (1) week written notice Sec. 53. Regular and special meetings of directors or trustees. –
xxx

25
Notice of regular or special meetings stating the date, time and 2. For a classification of directors into one or more classes,
place of the meeting must be sent to every director or trustee each of whom may be voted for and elected solely by a
at least one (1) day prior to the scheduled meeting, unless particular class of stock; and
otherwise provided by the by-laws. A director or trustee may 3. For a greater quorum or voting requirements in meetings
waive this requirement, either expressly or impliedly. of stockholders or directors than those provided in this Code.

The articles of incorporation of a close corporation may provide


e) QUORUM that the business of the corporation shall be managed by the
Sec. 25. Corporate officers, quorum. – xxx stockholders of the corporation rather than by a board of
a majority of the number of directors or trustees as fixed in the directors. So long as this provision continues in effect:
articles of incorporation shall constitute a quorum for the 1. No meeting of stockholders need be called to elect
transaction of corporate business, and every decision of at least directors;
a majority of the directors or trustees present at a meeting at 2. Unless the context clearly requires otherwise, the
which there is a quorum shall be valid as a corporate act, except stockholders of the corporation shall be deemed to be directors
for the election of officers which shall require the vote of a for the purpose of applying the provisions of this Code; and
majority of all the members of the board. 3. The stockholders of the corporation shall be subject to all
xxx liabilities of directors.

Sec. 52. Quorum in meetings. - Unless otherwise provided for in The articles of incorporation may likewise provide that all
this Code or in the by-laws, a quorum shall consist of the officers or employees or that specified officers or employees
stockholders representing a majority of the outstanding capital shall be elected or appointed by the stockholders, instead of by
stock or a majority of the members in the case of non-stock the board of directors.
corporations.
g. Compensation
f) CLOSE CORPORATIONS Sec. 30. Compensation of directors. - In the absence of any
Sec. 97. Articles of incorporation. - The articles of incorporation provision in the by-laws fixing their compensation, the directors
of a close corporation may provide: shall not receive any compensation, as such directors, except for
1. For a classification of shares or rights and the reasonable pre diems: Provided, however, That any such
qualifications for owning or holding the same and restrictions compensation other than per diems may be granted to directors by
on their transfers as may be stated therein, subject to the the vote of the stockholders representing at least a majority of the
provisions of the following section; outstanding capital stock at a regular or special stockholders'
meeting. In no case shall the total yearly compensation of directors,

26
as such directors, exceed ten (10%) percent of the net income b. Qualifications and disqualifications
before income tax of the corporation during the preceding year. Sec. 25. Corporate officers, quorum. - Immediately after their
election, the directors of a corporation must formally organize by
h. Executive Committee the election of a president, who shall be a director, a treasurer who
Sec. 35. Executive committee. - The by-laws of a corporation may may or may not be a director, a secretary who shall be a resident
create an executive committee, composed of not less than three and citizen of the Philippines, and such other officers as may be
members of the board, to be appointed by the board. Said provided for in the by-laws. Any two (2) or more positions may be
committee may act, by majority vote of all its members, on such held concurrently by the same person, except that no one shall act
specific matters within the competence of the board, as may be as president and secretary or as president and treasurer at the same
delegated to it in the by-laws or on a majority vote of the board, time.
except with respect to: (1) approval of any action for which The directors or trustees and officers to be elected shall
shareholders' approval is also required; (2) the filing of vacancies in perform the duties enjoined on them by law and the by-laws of the
the board; (3) the amendment or repeal of by-laws or the adoption corporation. Unless the articles of incorporation or the by-laws
of new by-laws; (4) the amendment or repeal of any resolution of provide for a greater majority, a majority of the number of directors
the board which by its express terms is not so amendable or or trustees as fixed in the articles of incorporation shall constitute a
repealable; and (5) a distribution of cash dividends to the quorum for the transaction of corporate business, and every
shareholders. decision of at least a majority of the directors or trustees present at
a meeting at which there is a quorum shall be valid as a corporate
i. Board Committees act, except for the election of officers which shall require the vote
of a majority of all the members of the board.
3. Corporate Officers and agents Directors or trustees cannot attend or vote by proxy at
a. Minimum set of officers board meetings.
Sec. 25. Corporate officers, quorum. - Immediately after their
election, the directors of a corporation must formally organize by Sec. 27. Disqualification of directors, trustees or officers. - No
the election of a president, who shall be a director, a treasurer who person convicted by final judgment of an offense punishable by
may or may not be a director, a secretary who shall be a resident imprisonment for a period exceeding six (6) years, or a violation of
and citizen of the Philippines, and such other officers as may be this Code committed within five (5) years prior to the date of his
provided for in the by-laws. Any two (2) or more positions may be election or appointment, shall qualify as a director, trustee or
held concurrently by the same person, except that no one shall act officer of any corporation.
as president and secretary or as president and treasurer at the same
time. c. When elected; report of election
xxx Sec. 25. Corporate officers, quorum. - Immediately after their
election, the directors of a corporation must formally organize by

27
the election of a president, who shall be a director, a treasurer who Sec. 31. Liability of directors, trustees or officers. - Directors or
may or may not be a director, a secretary who shall be a resident trustees who willfully and knowingly vote for or assent to patently
and citizen of the Philippines, and such other officers as may be unlawful acts of the corporation or who are guilty of gross
provided for in the by-laws. Any two (2) or more positions may be negligence or bad faith in directing the affairs of the corporation or
held concurrently by the same person, except that no one shall act acquire any personal or pecuniary interest in conflict with their duty
as president and secretary or as president and treasurer at the same as such directors or trustees shall be liable jointly and severally for
time. all damages resulting therefrom suffered by the corporation, its
The directors or trustees and officers to be elected shall stockholders or members and other persons.
perform the duties enjoined on them by law and the by-laws of the When a director, trustee or officer attempts to acquire or
corporation. Unless the articles of incorporation or the by-laws acquires, in violation of his duty, any interest adverse to the
provide for a greater majority, a majority of the number of directors corporation in respect of any matter which has been reposed in him
or trustees as fixed in the articles of incorporation shall constitute a in confidence, as to which equity imposes a disability upon him to
quorum for the transaction of corporate business, and every deal in his own behalf, he shall be liable as a trustee for the
decision of at least a majority of the directors or trustees present at corporation and must account for the profits which otherwise
a meeting at which there is a quorum shall be valid as a corporate would have accrued to the corporation.
act, except for the election of officers which shall require the vote
of a majority of all the members of the board. 4. Stockholders or members
Directors or trustees cannot attend or vote by proxy at a. Right to vote
board meetings. Sec. 6. Classification of shares. - The shares of stock of stock
corporations may be divided into classes or series of shares, or both,
Sec. 26. Report of election of directors, trustees and officers. - any of which classes or series of shares may have such rights,
Within thirty (30) days after the election of the directors, trustees privileges or restrictions as may be stated in the articles of
and officers of the corporation, the secretary, or any other officer of incorporation: Provided, That no share may be deprived of voting
the corporation, shall submit to the Securities and Exchange rights except those classified and issued as "preferred" or
Commission, the names, nationalities and residences of the "redeemable" shares, unless otherwise provided in this Code:
directors, trustees, and officers elected. Should a director, trustee Provided, further, That there shall always be a class or series of
or officer die, resign or in any manner cease to hold office, his heirs shares which have complete voting rights.
in case of his death, the secretary, or any other officer of the xxx
corporation, or the director, trustee or officer himself, shall Where the articles of incorporation provide for non-voting shares in
immediately report such fact to the Securities and Exchange the cases allowed by this Code, the holders of such shares shall
Commission. nevertheless be entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
d. Authority ; liability of corporate officers 2. Adoption and amendment of by-laws;

28
3. Sale, lease, exchange, mortgage, pledge or other disposition xxx
of all or substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness; Sec. 51. Place and time of meetings of stockholders or members. -
5. Increase or decrease of capital stock; Stockholders' or members' meetings, whether regular or special,
6. Merger or consolidation of the corporation with another shall be held in the city or municipality where the principal office of
corporation or other corporations; the corporation is located, and if practicable in the principal office
7. Investment of corporate funds in another corporation or of the corporation: Provided, That Metro Manila shall, for purposes
business in accordance with this Code; and of this section, be considered a city or municipality.
8. Dissolution of the corporation. Notice of meetings shall be in writing, and the time and
place thereof stated therein.
Except as provided in the immediately preceding paragraph, the All proceedings had and any business transacted at any
vote necessary to approve a particular corporate act as provided in meeting of the stockholders or members, if within the powers or
this Code shall be deemed to refer only to stocks with voting rights. authority of the corporation, shall be valid even if the meeting be
improperly held or called, provided all the stockholders or members
Sec. 24. Election of directors or trustees. – xxx of the corporation are present or duly represented at the meeting.
In stock corporations, every stockholder entitled to vote shall have
the right to vote in person or by proxy the number of shares of Sec. 55. Right to vote of pledgors, mortgagors, and administrators.
stock standing, at the time fixed in the by-laws, in his own name on - In case of pledged or mortgaged shares in stock corporations, the
the stock books of the corporation, or where the by-laws are silent, pledgor or mortgagor shall have the right to attend and vote at
at the time of the election; and said stockholder may vote such meetings of stockholders, unless the pledgee or mortgagee is
number of shares for as many persons as there are directors to be expressly given by the pledgor or mortgagor such right in writing
elected or he may cumulate said shares and give one candidate as which is recorded on the appropriate corporate books. (n)
many votes as the number of directors to be elected multiplied by
the number of his shares shall equal, or he may distribute them on Executors, administrators, receivers, and other legal representatives
the same principle among as many candidates as he shall see fit: duly appointed by the court may attend and vote in behalf of the
Provided, That the total number of votes cast by him shall not stockholders or members without need of any written proxy. (27a)
exceed the number of shares owned by him as shown in the books
of the corporation multiplied by the whole number of directors to Sec. 56. Voting in case of joint ownership of stock. - In case of
be elected: Provided, however, That no delinquent stock shall be shares of stock owned jointly by two or more persons, in order to
voted. Unless otherwise provided in the articles of incorporation or vote the same, the consent of all the co-owners shall be necessary,
in the by-laws, members of corporations which have no capital unless there is a written proxy, signed by all the co-owners,
stock may cast as many votes as there are trustees to be elected but authorizing one or some of them or any other person to vote such
may not cast more than one vote for one candidate. share or shares: Provided, That when the shares are owned in an

29
"and/or" capacity by the holders thereof, any one of the joint
owners can vote said shares or appoint a proxy therefor. (n)

Sec. 57. Voting right for treasury shares. - Treasury shares shall
have no voting right as long as such shares remain in the Treasury.
(n)

Sec. 58. Proxies. - Stockholders and members may vote in person or


by proxy in all meetings of stockholders or members. Proxies shall in
writing, signed by the stockholder or member and filed before the
scheduled meeting with the corporate secretary. Unless otherwise
provided in the proxy, it shall be valid only for the meeting for which
it is intended. No proxy shall be valid and effective for a period
longer than five (5) years at any one time.

Sec. 89. Right to vote. - The right of the members of any class or
classes to vote may be limited, broadened or denied to the extent
specified in the articles of incorporation or the by-laws. Unless so
limited, broadened or denied, each member, regardless of class,
shall be entitled to one vote.
Unless otherwise provided in the articles of incorporation or
the by-laws, a member may vote by proxy in accordance with the
provisions of this Code. (n)
Voting by mail or other similar means by members of non-
stock corporations may be authorized by the by-laws of non-stock
corporations with the approval of, and under such conditions which
may be prescribed by, the Securities and Exchange Commission.

30