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GENERAL PROVISIONS Are all shares in a corporation equal? (Sec.

6)
Title I, Sections 1-9  General rule: each share shall be equal in all respects to every
other share
What is a corporation? (Sec. 2)  Exception: if it is otherwise provided in the:
 It is an artificial being created by operation of law, having the right o Articles of incorporation and
of succession and the powers, attributes, and properties expressly o Certificate of stock
authorized by law or incidental to its existence
How may shares in a stock corporation be divided? (Sec. 6)
What are the classes of corporations? (Sec. 3)  They may be divided into classes or series of shares, or both.
 Stock corporations  Shares may further be classified for the purpose of ensuring
o Those which have capital stock divided into shares and are compliance with constitutional or legal requirements
authorized to distribute to the holders of such shares,
dividends, or allotments of the surplus profits on the basis Which shares may be deprived of voting rights? (Sec. 6)
of the shares held  Preferred
 Nonstock corporations  Redeemable
o All other corporations
May a share be deprived of voting rights? (Sec. 6)
Which provisions of law shall apply to corporations created by  General rule: no except those classified and issued as:
special laws or charters? (Sec. 4) o Preferred or
 Primarily, the provisions of the special law or charter creating them o Redeemable
or applicable to them  Exception: unless otherwise provided in the Revised Corporation
 Suppletorily, the provisions of the Revised Corporation Code, Code
insofar as they are applicable
Should there always be a class or series of shares with complete
Who are corporators? (Sec. 5) voting rights? (Sec. 6)
 Those who compose a corporation, whether as:  Yes
o stockholders or shareholders in a stock corporation
o members in a nonstock corporation Whose shares are entitled to vote in order to approve a particular
corporate act? (Sec. 6)
Who are incorporators? (Sec. 5)  Holders of stocks with voting rights
 Those stockholders or members mentioned in the articles of o Holders of nonvoting shares may only vote on matters
incorporation as originally forming and composing the specified under the Revised Corporation Code (see below)
corporation and who are signatories thereof
On which matters may holders of nonvoting shares still be entitled
Where should the classification of shares be indicated? (Sec. 6) to vote? (Sec. 6)
 The classification of shares, their corresponding rights, privileges or  Amendment of the articles of incorporation
restrictions, and their stated par value, if any, must be indicated in  Adoption and amendment of bylaws
the articles of incorporation  Sale, lease, exchange, mortgage, pledge, or other disposition of all or
substantially all of the corporate property

ADV 1
 Incurring, creating, or increasing bonded indebtedness  The entire consideration received by the corporation for such shares
 Increase or decrease of authorized capital stock shall be treated as capital and shall not be available for distribution
 Merger or consolidation of the corporation with another corporation as dividends
or other corporations
 Investment of corporate funds in another corporation or business in What are founders’ shares? (Sec. 7)
accordance with the Revised Corporation Code  They are shares which may be given certain rights and privileges not
 Dissolution of the corporation enjoyed by the owners of other stocks
 They may be given the exclusive right to vote and be voted for in the
Are shares or series of shares always required to have a par value? election of directors, which shall not be allowed if its exercise will
(Sec. 6) violate the Anti-Dummy Law, Foreign Investments Act, and other
 No, except: pertinent laws
o Shares of banks, trust, insurance, and preneed companies,
public utilities, building and loan associations and other How long may the exclusive right to vote and be voted for in the
corporations authorized to obtain or access funds from the election of directors be granted to holders of founders’ shares?
public, whether publicly listed or not (Sec. 7)
o Preferred shares of stock may be issued only with a stated  Must not exceed five (5) years from the date of incorporation
par value
May redeemable shares be issued by a corporation? (Sec. 8)
What are preferred shares of stock? (Sec. 6)  Yes, but only when expressly provided in the articles of
 They are shares which may be given preference in the distribution of incorporation
dividends and in the distribution of corporate assets in case of
liquidation, or such other preferences What are redeemable shares? (Sec. 8)
 They may be issued only with a stated par value  They are shares which may be purchased by the corporation from the
holders of such shares upon the expiration of a fixed period
Who may fix the terms and conditions of preferred shares of stock o regardless of the existence of unrestricted retained earnings
or any series thereof? (Sec. 6) in the books of the corporation, and
 The board of directors, when authorized in the articles of o upon such other terms and conditions stated in the articles
incorporation of incorporation and the certificate of stock representing
the shares, subject to rules and regulations issued by the
When shall the terms and conditions of preferred shares of stock SEC
be effective? (Sec. 6)
 It shall be effective only upon filing a certificate thereof with the What are treasury shares? (Sec. 9)
SEC  They are shares of stock which have been issued and fully paid
for, but subsequently reacquired by the issuing
What are the rules in relation to no par value shares? (Sec. 6) corporation through through purchase, redemption, donation, or
 They are deemed fully paid and non-assessable some other lawful means
 The holder of such shares shall not be liable to the corporation or its  Such shares may again be disposed of for a reasonable price fixed by
creditors in respect thereto the board of directors
 They must be issued for a consideration of at least P5.00 per share

ADV 2
RIGHTS OF STOCKHOLDERS AND MEMBERS TRANSFER OF STOCKS

What do shares of stock represent? How may a share of stock be transferred? (Sec. 62)
 They are personal properties of the stockholders.  It may be transferred by delivery of the certificate or
 They represent an aliquot part to share in the properties of the certificates indorsed by:
corporation when liquidated. o the owner,
 The registration of shares in a stockholder’s name, the issuance of o his attorney-in-fact, or
stock certificates and the right to receive dividends are all rights that o any other person legally authorized to make the transfer
flow from ownership.
What are the rules pertaining to the validity of a transfer of a share
Do all stockholders enjoy a preemptive right to subscribe to all of stock? (Sec. 62)
issues or disposition of shares of any class? (Sec. 38)  No transfer shall be valid, except as between the parties,
 Yes, in proportion to their respective shareholdings until the transfer is recorded in the books of the corporation
o Unless: the right is denied by the articles of incorporation showing:
or an amendment thereto o the names of the parties to the transaction,
Note: o the date of the transfer,
 Default rule: Stockholders have preemptive rights o the number of the certificate or certificates, and
 Exception: The right is denied by the articles or amended articles o the number of shares transferred

To which types of shares shall the preemptive right not extend to? Note: A transfer between the transferor and transferee will only bind the
(Sec. 38) corporation if the transfer is recorded in the corporate books.
 Shares issued in compliance with laws requiring:
o stock offerings or What may the SEC require corporations whose securities are
o minimum stock ownership by the public traded in trading markets and which can reasonably demonstrate
their capability to do so? (Sec. 62)
 Shares issued in good faith with the approval of the stockholders
representing 2/3 of the outstanding capital stock,  The corporations shall issue their securities or shares of stocks in
o in exchange for property needed for corporate purposes or uncertificated or scripless form in accordance with the rules of
o in payment of a previously contracted debt the SEC.

How shall the capital stock of a corporation be divided? (Sec. 62) Which shares of stock shall not be transferable in the books of the
corporation? (Sec. 62)
 The capital stock of corporations shall be divided into shares for
which certificates shall be issued in accordance with the bylaws  Shares of stock against which the corporation holds any unpaid
o signed by the president or vice president, claim
o countersigned by the secretary or assistant secretary, and
o sealed with the seal of the corporation DIVIDENDS

What type of property is a share of stock? (Sec. 62) What are the kinds of dividends that a stock corporation may
declare and distribute? (Sec. 42)
 A share of stock is personal property of the shareholder, not the
corporation.  Cash

ADV 3
 Property
 Stock VOTING RIGHTS

From where do dividends come from? (Sec. 42) Whose shares are entitled to vote in order to approve a particular
 Unrestricted retained earnings corporate act? (Sec. 6)
 Holders of stocks with voting rights
Who declares when dividends shall be distributed to the o Holders of nonvoting shares may only vote on matters
stockholders? (Sec. 42) specified under the Revised Corporation Code (see below)
 The board of directors may declare dividends to all stockholders
on the basis of outstanding stock held by them On which matters may holders of nonvoting shares still be entitled
to vote? (Sec. 6)
How should cash dividends be applied on delinquent stock? (Sec.  Amendment of the articles of incorporation
42)  Adoption and amendment of bylaws
 These shall first be applied to the unpaid balance on the  Sale, lease, exchange, mortgage, pledge, or other disposition of all or
subscription plus costs and expenses substantially all of the corporate property
 Incurring, creating, or increasing bonded indebtedness
May delinquent stockholders receive stock dividends? (Sec. 42)  Increase or decrease of authorized capital stock
 No. Stock dividends shall be withheld from such stockholders until  Merger or consolidation of the corporation with another corporation
their unpaid subscription is fully paid. or other corporations
 Investment of corporate funds in another corporation or business in
What is the pre-requisite before stock dividends may be declared? accordance with the Revised Corporation Code
(Sec. 42)  Dissolution of the corporation
 Approval of stockholders representing at 2/3 of the outstanding
capital stock at a regular or special meeting duly called for the Voting shares Non-voting shares
purpose Amendment of articles
x x
of incorporation
Are stock corporations prohibited from retaining surplus profits in Adoption and
excess of 100% of their paid-in capital stock? (Sec. 42) x x
amendment of bylaws
 Yes, except when: Election of directors x
o justified by definite corporate expansion projects or Sale, lease, exchange,
programs approved by the board of directors mortgage, pledge, or
o the corporation is prohibited under any loan agreement other disposition of all x x
with financial institutions or creditors, whether local or or substantially all of
foreign, from declaring dividends without their consent, the corporate property
and such consent has not yet been secured Incurring, creating, or
o it can be clearly shown that such retention is necessary increasing bonded x x
under special circumstances obtaining in the corporation, indebtedness
such as when there is need for special reserve for probable
contingencies

ADV 4
Increase or decrease of What is the effect on the voting rights of a stockholder if he or she
authorized capital grants security interest in his or her shares of stock? (Sec. 54)
stock  The stockholder-grantor shall have the right to attend and vote
Increase or decrease in at meetings of stockholders
authorized capital x x o Unless: the secured creditor is expressly given by the
stock stockholder-grantor such right in writing which is
Merger or recorded in the appropriate corporate books.
consolidation of the
corporation with x x Note: Before a secured creditor may exercise the voting rights of a
another corporation or stock, which serves as the security for the credit granted by him to
other corporations the stockholder, the right to vote must be:
Investment of  Expressly given
corporate funds in  In writing
another corporation or  Recorded in the appropriate corporate books
x x
business in accordance
with the Revised Do executors, administrators, receivers, and other legal
Corporation Code representatives duly appointed by the court need a written proxy
Declaration of stock before attending and voting in stockholders’ meetings? (Sec. 54)
x
dividends  No
Fixing the
consideration of no- x Do treasury shares have voting rights? (Sec. 56)
par value shares  No, as long as such shares remain in the Treasury
Dissolution of the
x x
corporation (SKIP: Sections 49-52)

How may voting be effected in case of stocks which are jointly- APPRAISAL RIGHT
owned by two or more persons? (Sec. 55) Title X
 The consent of all the co-owners shall be necessary
o Unless: there is a written proxy, signed by all the co- What are the instances when the right of appraisal may be
owners, authorizing: exercised by a stockholder i.e. right to dissent against a corporate
 one (1) or action and demand payment of the fair value of his or her shares?
 some of them or (Sec. 80)
 any other person  An amendment to the articles of incorporation which has the
 However, when the shares are owned in an “and/or” capacity by effect of:
the holders thereof, any one of the joint owners: o changing or restricting the rights of any stockholder
o can vote said shares or or class of shares
o appoint a proxy therefor o authorizing preferences in any respect superior to those
of outstanding shares of any class

ADV 5
o extending or shortening the term of corporate When is a corporation prohibited to be pay the dissenting
existence stockholder the fair value of his shares? (Sec. 81)
 Sale, lease, exchange, transfer, mortgage, pledge or other  No payment shall be made to any dissenting stockholder unless the
disposition of all or substantially all of the corporate corporation has unrestricted retained earnings in its books to cover
property and assets as provided in the Revised Corporation Code such payment
 Merger or consolidation
 Investment of corporate funds for any purpose other than What must the stockholder do upon payment by the corporation of
the primary purpose of the corporation. the agreed or awarded price? (Sec. 81)
 The stockholder shall transfer the shares to the corporation
How may the right of appraisal be exercised by the dissenting
stockholder? (Sec. 81) What happens to the rights accruing to the dissenting stockholder’s
 By making a written demand for the payment of the fair value shares from the time of demand for payment of the fair value of the
of shares held within 30 days from the date on which the vote was shares until either the abandonment of the corporate action or the
taken purchase of said shares by the corporation? (Sec. 82)
o Failure to make the demand within such period shall be  The stockholder’s rights, including voting and dividend rights,
deemed a waiver of the appraisal right shall be suspended
o Except: the right of such stockholder to receive
What will be paid to the dissenting stockholder if the proposed payment of the fair value thereof
corporate action is implemented? (Sec. 81)
FROM UNTIL
 Upon surrender of the certificate/s of stock representing the
Demand for Rights (including voting and dividend rights) are Abandonment of the
stockholder’s shares, the corporation shall pay the stockholder the payment suspended corporate action
fair value of the shares as of the day before the vote was  Except the right to receive the fair value of
the shares or
taken, excluding any appreciation or depreciation in anticipation of
such corporate action. Purchase of the shares
by the corporation

How shall the fair value of the shares be determined if the


withdrawing stockholder and the corporation cannot agree on its What happens if the dissenting stockholder is not paid the value of
value within 60 days from the approval of the corporate action by the his or her shares within thirty (30) days after the award? (Sec.
the stockholders? (Sec. 81) 82)
 It shall be determined and appraised by three (3)  His voting and dividend rights shall immediately be restored
disinterested persons,
o one of whom shall be named by the stockholder, May the demand for payment be withdrawn? (Sec. 83)
o another by the corporation, and  No, unless the corporation consents
o the third by the two (2) thus chosen.
 The findings of the majority of the appraisers shall be final, and
their award shall be paid by the corporation within thirty (30) What are the instances wherein the right of the stockholder to be
days after such award is made paid the fair value of the shares shall cease? (Sec. 83)
 The demand for payment is withdrawn with the consent of the
corporation

ADV 6
 The proposed corporate action is:
o abandoned or rescinded by the corporation What may the corporation do if the dissenting stockholder fails to
o disapproved by the SEC where such approval is necessary, submit his certificates of stock for notation? (Sec. 85)
 The SEC determines that the stockholder is not entitled to the  The corporation, at its option, may terminate the rights under Title
appraisal right X

Besides the cessation of the right to be paid the fair value of the What are the effects once the certificates bearing such notation are
shares, what else happens to the dissenting stockholder? (Sec. 83) transferred, and the certificates consequently cancelled? (Sec. 85)
 His status as a stockholder shall be restored,  The rights of the transferor as a dissenting stockholder under Title X
 All his dividend distributions which would have accrued on the shall cease
shares shall be paid to him  The transferee shall have all the rights of a regular stockholder
 All dividend distributions which would have accrued on such shares
In sum: shall be paid to the transferee
 The right of the stockholder to be paid the fair value of the shares
shall cease When may a stockholder, for any reason, compel the corporation
 His status as a stockholder shall be restored to purchase shares held at fair value? (Sec. 104)
 All his dividend distributions which would have accrued on the  Only if the corporation is a close corporation
shares shall be paid to him
CONTRACTS AND AGREEMENTS AFFECTING SHAREHOLDINGS
Who shall bear the costs and expenses of appraisal? (Sec. 84)
 In general, it is the corporation who pays RIGHTS TO INSPECT AND COPY CORPORATE RECORDS

When does the stockholder bear the costs and expenses of What shall a corporation, at the minimum, keep and carefully
appraisal? (Sec. 84) preserve as corporate records at its principal office? (Sec. 73)
 When the fair value ascertained by the appraisers is approximately  The articles of incorporation and bylaws of the corporation and all
the same as the price which the corporation may have offered to pay their amendments
the stockholder  The current ownership structure and voting rights of the corporation,
including lists of stockholders or members, group structures, intra-
Who shall bear the costs and expenses in an action to recover the group relations, ownership data, and beneficial ownership
fair value of the shares? (Sec. 84)  The names and addresses of all the members of the board of directors
 General rule: the corporation or trustees and the executive officers
 Exception: the stockholder, when his refusal to receive payment  A record of all business transactions
was unjustified  A record of the resolutions of the board of directors or trustees and
of the stockholders or members
When must a dissenting stockholder submit the certificates of  Copies of the latest reportorial requirements submitted to the
stock representing his or her shares? (Sec. 85) Commission
 Within 10 days after demanding payment,  The minutes of all meetings of stockholders or members, or of the
o In order for notation that such shares are dissenting board of directors or trustees.
shares

ADV 7
What shall the minutes of all meetings of stockholders or of the May corporate records be copied? How? (Sec. 73)
board of directors or trustees contain? (Sec. 73)  Yes. To obtain copies of records or excerpts of said records, any
 The minutes shall set forth in detail, among others: director, trustee, stockholder or member of the corporation
o the time and place of the meeting held, must:
o how it was authorized, o demand in writing and
o the notice given, o at their expense
o the agenda therefor,
o whether the meeting was regular or special, Is the inspecting or reproducing party bound by any confidentiality
o its object if special, rules? (Sec. 73)
o those present and absent, and  Yes, such as the rules on trade secrets or processes under the
o every act done or ordered done at the meeting. Intellectual Property Code of the Philippines, the Data Privacy Act of
2012, the Securities Regulation Code, and the Rules of Court
What must be noted in the minutes upon the demand of a director,
trustee, stockholder or member? (Sec. 73) What happens to a person who abuses the rights granted to him by
 the time when any director, trustee, stockholder or member entered Sec. 73? (Sec. 73)
or left the meeting  He or she shall be penalized under Section 158 of this Code,
 the yeas and nays taken on any motion or proposition, and a record o Without prejudice to the provisions of the Intellectual
thereof carefully made Property Code of the Philippines and the Data Privacy Act
 the protest (in full) by the director, trustee, stockholder or member of 2012.
on any action or proposed action
Who shall have no right to inspect or demand reproduction of
Who shall have a right to inspect or demand reproduction of corporate records? (Sec. 73)
corporate records? (Sec. 73)  A requesting party who is not a stockholder or member of
 Directors record
 Trustees  A competitor, director, officer, controlling stockholder or
 Stockholders otherwise represents the interests of a competitor
 Members
What is the consequence to any officer or agent of the corporation
May corporate records, regardless of the form in which they are who shall refuse to allow the inspection and/or reproduction of
stored, be inspected? How? When? (Sec. 73) records? (Sec. 73)
 Yes. They may be inspected by any director, trustee,  He or she shall be liable to such director, trustee, stockholder or
stockholder or member of the corporation: member for damages
o in person or  In addition, he or she shall be guilty of an offense punishable
o by a representative under Section 161 of the Revised Corporation Code
 At reasonable hours on business days

ADV 8
What if the refusal to the inspection and/or reproduction of  A statement of every alienation, sale or transfer of stock made, the
records was done in pursuant to a resolution or order of the board date thereof, by and to whom made
of directors or trustees? (Sec. 73)  Such other entries as the bylaws may prescribe
 The liability shall be imposed upon the directors or trustees who
voted for such refusal Where shall the stock and transfer book be kept? (Sec. 73)
 The principal office of the corporation or
What defense may be alleged against the liability incurred by  The office of the corporation’s stock transfer agent
refusing the inspection and/or reproduction of corporate records?
(Sec. 73) When may a director or stockholder inspect the stock and transfer
 The person demanding to examine and copy excerpts from the book? (Sec. 73)
corporation’s records and minutes:  At reasonable hours on business days
o Has improperly used any information secured
through any prior examination of the records or Who is a stock transfer agent? (Sec. 73)
minutes of such corporation or of any other  One engaged principally in the business of registering transfers of
corporation, or stocks in behalf of a stock corporation
o Was not acting in good faith or for a legitimate
purpose in making the demand to examine or reproduce When shall a stock transfer agent be allowed to operate in the
corporate records, or Philippines? (Sec. 73)
o Is a competitor, director, officer, controlling  Upon securing a license from the SEC and
stockholder or otherwise represents the interests
 The payment of a fee to be fixed by the SEC, which shall be renewable
of a competitor
annually

What must an aggrieved party do if a corporation denies or does


May a stock corporation, by itself, perform or make transfers of its
not act on his or her demand for inspection and/or reproduction of
own stocks without a stock transfer agent? (Sec. 73)
corporate records? (Sec. 73)
 Yes. Such corporation shall be bound by all the rules and regulations
 He or she may report such denial or inaction to the SEC
imposed on stock transfer agents, except the payment of a license fee
 Within 5 days from receipt of such report, the SEC shall herein provided
o conduct a summary investigation and
o issue an order directing the inspection or Which stock corporations may be required by the SEC to have an
reproduction of the requested records. independent transfer agent? (Sec. 73)
 Stock corporations which transfer and/or trade stocks in
What shall the stock and transfer book of stock corporations
secondary markets
contain? (Sec. 73)
 A record of all stocks in the names of the stockholders alphabetically Does a stockholder or member have a right to the financial
arranged statements of the corporation? (Sec. 74)
 The installments paid and unpaid on all stocks for which  Yes. Upon written request of the stockholder or member, a
subscription has been made, and the date of payment of any corporation shall furnish its most recent financial statement,
installment within ten (10) days from receipt of such request.

ADV 9
o The financial statement shall be in the form and substance When shall the reportorial requirements be submitted to the SEC?
of the financial reporting required by the SEC (Sec. 177)
 Annually and within such period as may be prescribed by the SEC
What shall the board of directors or trustees present at the regular
meeting of stockholders or members? (Sec. 74) What is the consequence to a corporation that fails to submit its
 A financial report of the operations of the corporation for the reportorial requirements? (Sec. 177)
preceding year,  The SEC may place the corporation under delinquent status in
 The financial report shall include financial statements case of failure to submit the reportorial requirements:
o Duly signed and certified in accordance with the o three (3) times, consecutively or intermittently, within a
Revised Corporation Code and the rules the SEC may period of five (5) years
prescribe or  The SEC shall give reasonable notice to and coordinate with the
o Certified under oath by the treasurer and the president, appropriate regulatory agency prior to placing on delinquent
only if the total assets or total liabilities of the corporation status companies under their special regulatory jurisdiction.
are less than P600,000, or such other amount as may be
determined appropriate by the Secretary of Finance May a person required to file a report with the SEC redact
confidential information? (Sec. 177)
What are the reportorial requirements of corporations, domestic  Yes
or foreign, doing business in the Philippines to be submitted to the  Such confidential information shall be filed in a supplemental
SEC? (Sec. 177) report prominently labelled “confidential”, together with a request
 Except as otherwise provided in the Revised Corporation Code or in for confidential treatment of the report and the specific
the rules issued by the SEC, the following shall be submitted: grounds for the grant thereof.
o Annual financial statements audited by an
independent certified public accountant What are the requisites before a derivative suit may be filed?
 But if the total assets or total liabilities of the (Interim Rules of Procedure Governing Intra-Corporate
corporation are less than P600,000.00, the Controversies)
financial statements shall be certified under oath  Relator was a stockholder/member:
by the corporation’s treasurer or chief financial o at the time the acts or transactions subject of the action
officer; and occurred and
o A general information sheet. o at the time the action was filed
 He exerted all reasonable efforts, and alleges the same with
In addition to annual financial statements and the GIS, what must particularity in the complaint, to exhaust all remedies available
corporations vested with public interest submit? (Sec. 177) under the articles of incorporation, by-laws, laws or rules governing
 A director or trustee compensation report the corporation or partnership to obtain the relief he desires
 A director or trustee appraisal or performance report and the  No appraisal rights are available for the act or acts complained of
standards or criteria used to assess each director or trustee  The suit is not a nuisance or harassment suit

ADV 10
CAPITAL STOCK;
SHARES OF STOCK Whose shares are entitled to vote in order to approve a particular
corporate act? (Sec. 6)
What is outstanding capital stock? (Sec. 173)  Holders of stocks with voting rights
 The total shares of stock issued under binding subscription contracts o Holders of nonvoting shares may only vote on matters
to subscribers or stockholders, whether fully or partially paid specified under the Revised Corporation Code (see below)
o Except treasury shares
On which matters may holders of nonvoting shares still be entitled
Where should the classification of shares be indicated? (Sec. 6) to vote? (Sec. 6)
 The classification of shares, their corresponding rights, privileges or  Amendment of the articles of incorporation
restrictions, and their stated par value, if any, must be indicated in  Adoption and amendment of bylaws
the articles of incorporation  Sale, lease, exchange, mortgage, pledge, or other disposition of all or
substantially all of the corporate property
Are all shares in a corporation equal? (Sec. 6)  Incurring, creating, or increasing bonded indebtedness
 General rule: each share shall be equal in all respects to every  Increase or decrease of authorized capital stock
other share  Merger or consolidation of the corporation with another corporation
 Exception: if it is otherwise provided in the: or other corporations
o Articles of incorporation and  Investment of corporate funds in another corporation or business in
o Certificate of stock accordance with the Revised Corporation Code
 Dissolution of the corporation
How may shares in a stock corporation be divided? (Sec. 6)
 They may be divided into classes or series of shares, or both. Are shares or series of shares always required to have a par value?
 Shares may further be classified for the purpose of ensuring (Sec. 6)
compliance with constitutional or legal requirements  No, except:
o Shares of banks, trust, insurance, and preneed companies,
Which shares may be deprived of voting rights? (Sec. 6) public utilities, building and loan associations and other
 Preferred corporations authorized to obtain or access funds from the
 Redeemable public, whether publicly listed or not
o Preferred shares of stock may be issued only with a stated
May a share be deprived of voting rights? (Sec. 6) par value
 General rule: no except those classified and issued as:
o Preferred or What are preferred shares of stock? (Sec. 6)
o Redeemable  They are shares which may be given preference in the distribution of
 Exception: unless otherwise provided in the Revised Corporation dividends and in the distribution of corporate assets in case of
Code liquidation, or such other preferences
 They may be issued only with a stated par value
Should there always be a class or series of shares with complete
voting rights? (Sec. 6)
 Yes

ADV 11
Who may fix the terms and conditions of preferred shares of stock What are redeemable shares? (Sec. 8)
or any series thereof? (Sec. 6)  They are shares which may be purchased by the corporation
 The board of directors, when authorized in the articles of from the holders of such shares upon the expiration of a fixed
incorporation period
o regardless of the existence of unrestricted retained earnings
When shall the terms and conditions of preferred shares of stock in the books of the corporation, and
be effective? (Sec. 6) o upon such other terms and conditions stated in the articles
 It shall be effective only upon filing a certificate thereof with the of incorporation and the certificate of stock representing
SEC the shares, subject to rules and regulations issued by the
SEC
What are the rules in relation to no par value shares? (Sec. 6)
 They are deemed fully paid and non-assessable What are treasury shares? (Sec. 9)
 The holder of such shares shall not be liable to the corporation or its  They are shares of stock which have been issued and fully paid
creditors in respect thereto for, but subsequently reacquired by the issuing
 They must be issued for a consideration of at least P5.00 per share corporation through through purchase, redemption, donation, or
 The entire consideration received by the corporation for such shares some other lawful means
shall be treated as capital and shall not be available for distribution  Such shares may again be disposed of for a reasonable price fixed by
as dividends the board of directors

What are founders’ shares? (Sec. 7) SKIP SECTIONS 38, 60 AND 72


 They are shares which may be given certain rights and privileges not
enjoyed by the owners of other stocks May stocks be issued for a consideration less than its par or issued
 They may be given the exclusive right to vote and be voted for in the price? (Sec. 61)
election of directors, which shall not be allowed if its exercise will  No
violate the Anti-Dummy Law, Foreign Investments Act, and other
pertinent laws What can be the consideration for the issuance of shares of stock?
(Sec. 61)
How long may the exclusive right to vote and be voted for in the  Actual cash paid to the corporation;
election of directors be granted to holders of founders’ shares?  Property, tangible or intangible, actually received by the
(Sec. 7) corporation and necessary or convenient for its use and lawful
 Must not exceed five (5) years from the date of incorporation purposes at a fair valuation equal to the par or issued value of the
stock issued;
May redeemable shares be issued by a corporation? (Sec. 8)  Labor performed for or services actually rendered to the
 Yes, but only when expressly provided in the articles of corporation;
incorporation  Previously incurred indebtedness of the corporation;
 Amounts transferred from unrestricted retained earnings
to stated capital;
 Outstanding shares exchanged for stocks in the event of
reclassification or conversion;

ADV 12
 Shares of stock in another corporation; and/or Subject to the provisions of the subscription contract, the board of directors
 Other generally accepted form of consideration. may, at any time, declare due and payable to the corporation unpaid
subscriptions and may collect the same or such percentage thereof, in either
If the consideration is other than actual cash, or consists of case, with accrued interest, if any, as it may deem necessary.
intangible property such as patents or copyrights, who shall Payment of unpaid subscription or any percentage thereof, together with any
initially determine the valuation of such consideration? (Sec. 61) interest accrued, shall be made on the date specified in the subscription
 The stockholders or the board of directors, contract or on the date stated in the call made by the board.
o subject to the approval of the Commission. Failure to pay on such date shall render the entire balance due and payable
and shall make the stockholder liable for interest at the legal rate on such
Which types of consideration shall shares of stok balance, unless a different interest rate is provided in the subscription
Shares of stock shall not be issued in exchange for promissory notes or future contract.
service. The same considerations provided in this section, insofar as . If no payment is made within thirty (30) days from the said date, all stocks
applicable, may be used for the issuance of bonds by the corporation. covered by
the subscription shall thereupon become delinquent and shall be subject to
The issued price of no-par value shares may be fixed in the articles of sale as hereinafter provided, unless the board of directors orders otherwise.
incorporation or by the board of directors pursuant to authority conferred by
the articles of incorporation or the bylaws, or if not so fixed, by the SEC. 67. Delinquency Sale. – The board of directors may, by resolution, order
stockholders representing at least a majority of the outstanding capital stock the sale of delinquent stock and shall specifically state the amount due on each
at a meeting duly called for the purpose. subscription plus all accrued interest, and the date, time and place of the sale
which shall not be less than thirty (30) days nor more than sixty (60) days
SEC. 64. Liability of Directors for Watered Stocks. – A director or officer of a from the date the stocks become delinquent.
corporation who: Notice of the sale, with a copy of the resolution, shall be sent to every
(a) consents to the issuance of stocks for a consideration less than its par or delinquent stockholder either personally, by registered mail, or through other
issued value; means provided in the bylaws. The same shall be published once a week for
(b) consents to the issuance of stocks for a consideration other than cash, two (2) consecutive weeks in a newspaper of general circulation in the
valued in excess of its fair value; or province or city where the principal office of the corporation is located.
(c) having knowledge of the insufficient consideration, does not file a written Unless the delinquent stockholder pays to the corporation, on or before the
objection with the corporate secretary, date specified for the sale of the delinquent stock, the balance due on the
shall be liable to the corporation or its creditors, solidarily with the former’s subscription, plus accrued interest, costs of advertisement and
stockholder concerned for the difference between the value received at the expenses of sale, or unless the board of directors otherwise orders, said
time of issuance of the stock and the par or issued value of the same. delinquent stock shall be sold at a public auction to such bidder who shall offer
to pay the full amount of the balance on the subscription together with accrued
SEC. 65. Interest on Unpaid Subscriptions. – interest, costs of advertisement and expenses of sale, for the smallest number
Subscribers to stocks shall be liable to the corporation for interest on all of shares or fraction of a share. The stock so purchased shall be transferred to
unpaid subscriptions from the date of subscription, if so required by and at such purchaser in the books of the corporation and a certificate for such stock
the rate of interest fixed in the subscription contract. If no rate of interest is shall be issued in the purchaser’s favor. The remaining shares, if any, shall be
fixed in the subscription contract, the prevailing legal rate shall apply. credited in favor of the delinquent stockholder who shall likewise be entitled
to the issuance of a certificate of stock covering such shares.
SEC. 66. Payment of Balance of Subscription. –

ADV 13
Should there be no bidder at the public auction who offers to pay the full (b) After verifying the affidavit and other information and evidence with the
amount of the balance on the subscription together with accrued interest, books of the corporation, the corporation shall publish a notice in a newspaper
costs of advertisement, and expenses of sale, for the smallest number of shares of general circulation in the place where the corporation has its principal
or fraction of a share, the corporation may, subject to the provisions of this office, once a week for three (3) consecutive weeks at the expense of the
Code, bid for the same, and the total amount due shall be credited as fully paid registered owner of the certificate of stock which has been lost, stolen or
in the books of the corporation. Title to all the shares of stock covered by the destroyed. The notice shall state the name of the corporation, the name of the
subscription shall be vested in the corporation as treasury shares and may be registered owner, the serial number of the certificate, the number of shares
disposed of by said corporation in accordance with the provisions of this Code. represented by such certificate, and shall state that after the expiration of one
(1) year from the date of the last publication, if no contest has been presented
SEC. 68. When Sale may be Questioned. – No action to recover delinquent to the corporation regarding the certificate of stock, the right to make such
stock sold can be sustained upon the ground of irregularity or defect in the contest shall be barred and the corporation shall cancel the lost, destroyed or
notice of sale, or in the sale itself of the delinquent stock, unless the party stolen certificate of stock in its books. In lieu thereof, the corporation shall
seeking to maintain such action first pays or tenders to the party holding the issue a new certificate of stock, unless the registered owner files a bond or
stock the sum for which the same was sold, with interest from the date of sale other security as may be required, effective for a period of one (1) year, for
at the legal rate. No such action shall be maintained unless a complaint is filed such amount and in such form and with such sureties as may be satisfactory
within six (6) months from the date of sale. to the board of directors, in which case a new certificate may be issued even
before the expiration of the one (1) year period provided herein. If a contest
SEC. 69. Court Action to Recover Unpaid Subscription. – Nothing in this Code has been presented to the corporation or if an action is pending in court
shall prevent the corporation from collecting through court action, the amount regarding the ownership of the certificate of stock which has been lost, stolen
due on any unpaid subscription, with accrued interest, costs and expenses. or destroyed, the issuance of the new certificate of stock in lieu thereof shall
be suspended until the court renders a final decision regarding the ownership
SEC. 70. Effect of Delinquency. – No delinquent stock shall be voted for, be of the certificate of stock which has been lost, stolen or destroyed.
entitled to vote, or be represented at any stockholder’s meeting, nor shall the
holder thereof be entitled to any of the rights of a stockholder except the right Except in case of fraud, bad faith, or negligence on the part of the corporation
to dividends in accordance with the provisions of this Code, until and unless and its officers, no action may be brought against any corporation which shall
payment is made by the holder of such delinquent stock for the amount due have issued certificate of stock in lieu of those lost, stolen or destroyed
on the subscription with accrued interest, and the costs and expenses of pursuant to the procedure above-described.
advertisement, if any.

SEC. 72. Lost or Destroyed Certificates. – The following procedure shall be


followed by a corporation in issuing new certificates of stock in lieu of those
which have been lost, stolen or destroyed:
(a) The registered owner of a certificate of stock in a corporation or such
person’s legal representative shall file with the corporation an affidavit in
triplicate setting forth, if possible, the circumstances as to how the certificate
was lost, stolen or destroyed, the number of shares represented by such
certificate, the serial number of the certificate and the name of the corporation
which issued the same. The owner of such certificate of stock shall also submit
such other information and evidence as may be deemed necessary;

ADV 14
MERGERS AND ACQUISITIONS Any amendment to the plan of merger or consolidation may be made:
Title IX Provided, That such amendment is approved by a majority vote of the
respective boards of directors or trustees of all the constituent corporations
SEC. 75. Plan of Merger or Consolidation. – Two (2) or more corporations may and ratified by the affirmative vote of stockholders representing at least two-
merge into a single corporation which shall be one of the constituent thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the
corporations or may consolidate into a new single corporation which shall be members of each of the constituent corporations. Such plan, together with any
the consolidated corporation. amendment, shall be considered as the agreement of merger or consolidation.

The board of directors or trustees of each corporation, party to the merger or SEC. 77. Articles of Merger or Consolidation. – After the approval by the
consolidation, shall approve a plan of merger or consolidation setting stockholders or members as required by the preceding section, articles of
forth the following: merger or articles of consolidation shall be executed by each of the
(a) The names of the corporations proposing to merge or consolidate, constituent corporations, to be signed by the president or vice president and
hereinafter referred to as the constituent corporations; certified by the secretary or assistant secretary of each corporation setting
(b) The terms of the merger or consolidation and the mode of carrying the forth:
same into effect; (a) The plan of the merger or the plan of consolidation;
(c) A statement of the changes, if any, in the articles of incorporation of the (b) As to stock corporations, the number of shares outstanding, or in the case
surviving corporation in case of merger; and, in case of consolidation, all the of nonstock corporations, the number of members;
statements required to be set forth in the articles of incorporation for (c) As to each corporation, the number of shares or members voting for or
corporations organized under this Code; and against such plan, respectively;
(d) Such other provisions with respect to the proposed merger or (d) The carrying amounts and fair values of the assets and
consolidation as are deemed necessary or desirable. liabilities of the respective companies as of the agreed cut-off
date;
SEC. 76. Stockholders’ or Members’ Approval. – Upon approval by a (e) The method to be used in the merger or consolidation
majority vote of each of the board of directors or trustees of the constituent of accounts of the companies;
corporations of the plan of merger or consolidation, the same shall be (f) The provisional or pro-forma values, as merged or
submitted for approval by the stockholders or members of each of such consolidated, using the accounting method; and
corporations at separate corporate meetings duly called for the purpose. (g) Such other information as may be prescribed by the
Commission.
The notice shall state the purpose of the meeting and include a copy or a
summary of the plan of merger or consolidation. SEC. 78. Effectivity of Merger or Consolidation. – The articles of merger or of
consolidation, signed and certified as required by this Code, shall be submitted
The affirmative vote of stockholders representing at least two-thirds (2/3) to the Commission for its approval: Provided, That in the case of merger or
of the outstanding capital stock of each corporation in the case of stock consolidation of banks or banking institutions, loan associations, trust
corporations or at least two-thirds (2/3) of the members in the case of non- companies, insurance companies, public utilities, educational institutions,
stock corporations shall be necessary for the approval of such plan. Any and other special corporations governed by special laws, the favorable
dissenting stockholder may exercise the right of appraisal in accordance with recommendation of the appropriate government agency shall first be
this Code: Provided, That if after the approval by the stockholders of such obtained. If the Commission is satisfied that the merger or consolidation of
plan, the board of directors decides to abandon the plan, the right of appraisal the corporations concerned is consistent with the provisions of this Code and
shall be extinguished. existing laws, it shall issue a certificate approving the articles and plan of

ADV 15
merger or of consolidation, at which time the merger or consolidation shall be
effective.

If, upon investigation, the Commission has reason to believe that the proposed
merger or consolidation is contrary to or inconsistent with the provisions of
this Code or existing laws, it shall set a hearing to give the corporations
concerned the opportunity to be heard. Written notice of the date, time, and
place of hearing shall be given to each constituent corporation at least two (2)
weeks before said hearing. The Commission shall thereafter proceed as
provided in this Code.

SEC. 79. Effects of Merger or Consolidation. – The merger or consolidation


shall have the following effects:
(a) The constituent corporations shall become a single corporation which, in
case of merger, shall be the surviving corporation designated in the plan of
merger; and, in case of consolidation, shall be the consolidated corporation
designated in the plan of consolidation;
(b) The separate existence of the constituent corporations shall cease, except
that of the surviving or the consolidated corporation;
(c) The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities, and powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code;
(d) The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and franchises of each constituent corporation; and all
real or personal property, all receivables due on whatever account, including
subscriptions to shares and other choses in action, and every other interest of,
belonging to, or due to each constituent corporation, shall be deemed
transferred to and vested in such surviving or consolidated corporation
without further act or deed; and
(e) The surviving or consolidated corporation shall be responsible for all the
liabilities and obligations of each constituent corporation as though such
surviving or consolidated corporation had itself incurred such liabilities or
obligations; and any pending claim, action or proceeding brought by or against
any constituent corporation may be prosecuted by or against the surviving or
consolidated corporation. The rights of creditors or liens upon the property of
such constituent corporations shall not be impaired by the merger or
consolidation.

ADV 16
ONE PERSON CORPORATIONS Does a One Person Corporation have a minimum authorized
Chapter III, Sections 115-132 capital stock? (Sec. 117)
 No, except as otherwise provided by special law
What provisions of the Revised Corporation Code apply to One
Person Corporations? (Sec. 115) Who is the nominee and alternate nominee? What is his/her role?
 Primarily, Chapter III of the Revised Corporation Code on One (Sec. 124)
Person Corporations (Sections 115-132)  The nominee and alternate nominee is designated by the single
 Suppletorily, other provisions of the Revised Corporation Code, stockholder.
except as otherwise provided in Chapter III  In the event of the single stockholder’s death or incapacity, he or she
takes the place of the single stockholder as director and shall
What is a One Person Corporation? (Sec. 116) manage the corporation’s affairs
 A corporation with a single stockholder, which must either be a:  He/she must consent to the designation, since his written consent
o Natural person must be attached to the application for incorporation.
 Except: if licensed to exercise a profession, unless o He may withdraw such consent in writing any time before
otherwise provided in special laws the death or incapacity of the single stockholder.
o Trust
o Estate How long is the term of the nominee and alternate nominee? (Sec.
125)
Which types of companies are prohibited to incorporate as One Moment of
Situation Duties
Person Corporations? (Sec. 116) termination
 Banks and quasi-banks NOMINEE
 Preneed Temporary incapacity Until the stockholder,
 Trust of the single by self-determination,
 Insurance stockholder regains the capacity to
 Public and publicly-listed companies assume such duties
 Non-chartered government-owned and –controlled corporations
Permanent incapacity Until the legal heirs of
Summary: Prohibited from incorporating as One Person or death of the single Sit as director the single stockholder
Corporations are: stockholder have been lawfully
 Natural person licensed to exercise a profession, unless otherwise Manage the affairs of determined, and the
provided in special laws the One Person heirs have designated
 Banks and quasi-banks Corporation one of them or have
 Preneed agreed that the estate
shall be the single
 Trust
stockholder of the One
 Insurance
Person Corporation*
 Public and publicly-listed companies
ALTERNATE
 Non-chartered government-owned and –controlled corporations
NOMINEE

ADV 17
The nominee’s Only for the same term Does a One Person Corporation need to submit and file corporate
inability, incapacity, and under the same bylaws? (Sec. 119)
death, or refusal to conditions applicable  No
discharge the to the nominee
functions as manager Does a One Person Corporation have to indicate in its corporate
and director name that it is a One Person Corporation? (Sec. 120)
 Yes, it shall indicate the letters “OPC” either,
* The successor of the single stockholder, in case of death or permanent o Below its corporate name or
incapacity, is: o At the end of its corporate name
 An heir
 The estate of the deceased single stockholder What is the role of the single stockholder in the One Person
Corporation? (Sec. 121)
May the single stockholder change the nominee and alternate  Sole director and
nominee? (Sec. 126)  President
 Yes, at any time, by submitting to the SEC
o the names of the new nominees and What are the relevant periods with respect to appointment of the
o their corresponding written consent officers of One Person Corporation? (Sec. 122)
Within 15 days from the issuance Officers must be appointed
Is an amendment to the articles of incorporation required when of its certificate of incorporation
changing the nominee and alternate nominee? (Sec. 126) Within 5 days from appointment SEC must be notified of such
 No appointment

What must the articles of incorporation to be filed by the One Which types of officers must the One Person Corporation appoint?
Person Corporations contain? (Sec. 118, Sec. 124) (Sec. 122)
 It shall comply with the requirements under Sec. 14 (Form of  Treasurer
Articles of Incorporation)  Corporate secretary
 If the single stockholder is a trust or an estate,  Other officers as it may deem necessary
o The name, nationality and residence of the trustee,
administrator, executor, guardian, conservator, custodian, May the single stockholder be appointed as the corporate
or other person exercising fiduciary duties secretary? (Sec. 122)
o Proof of authority of the above-mentioned persons to act on  No
behalf of the trust or estate
 Nominee and alternate nominee May the single stockholder be appointed as the treasurer? (Sec.
o Name, nationality, residence 122)
o Extent, coverage, and limitation of the authority in  Yes
managing the affairs
o Written consent of the nominee and alternate nominee What are the requirements that the single stockholder-treasurer
shall be attached must comply with? (Sec. 122)
 Give a bond to the SEC, in such sum as may be required

ADV 18
o The bond is renewed every 2 years or as often as may be  The date of recording in the minutes book is deemed to be the
required date of the meeting for all purposes under the Revised
 Undertake in writing: Corporation Code (hence, the title of Sec. 128, which is Records in
o to faithfully administer the One Person Corporation’s funds Lieu of Meetings)
to be received as treasurer and
o to disburse and invest the same according to the articles of What are the reportorial requirements that the One Person
incorporation as approved by the SEC Corporation must comply within the period prescribed by SEC?
(Sec. 129)
What are the functions of the corporate secretary of the One Person  Annual financial statements audited by an independent
Corporation? (Sec. 123) certified public accountant
 Functions designated by the One Person Corporation o Provided, that if the total assets or total liabilities of the
 Special functions under Sec. 123 corporation are less than P600,000, the financial
o Be responsible for maintaining the minutes book statements shall be certified under oath by the corporation’s
and/or records of the corporation treasurer and president
o Notify the nominee or alternate nominee of the  A report containing explanations or comments by the president on
death or incapacity of the single stockholder, which every qualification, reservation, or adverse remark or disclaimer
notice shall be given no later than 5 days from such made by the auditor in the latter’s report
occurrence  A disclosure of all self-dealings and related party
o Notify the SEC of the death of the single transactions entered into between the One Person Corporation
stockholder within 5 days from such occurrence and and the single stockholder
stating in such notice the names, residence, addresses, and  Other reports as the SEC may require
contact details of all known legal heirs
o Call the nominee or alternate nominee and the What is the fiscal year to be used for the reportorial requirements?
known legal heirs to a meeting and advise the legal (Sec. 129)
heirs with regard to, among others, the election of a new  Whatever is set forth in the articles of incorporation
director, amendment of the article of incorporation, and  In the absence of the above, the calendar year
other ancillary or consequential matters
When may a One Person Corporation be placed under delinquent
What does the minutes book maintained by the One Person status? (Sec. 129)
Corporation contain? (Sec. 127)  The SEC may place the corporation under delinquent status if it fails
 Actions, decisions, and resolutions taken by the One Person to submit the reportorial requirements three (3) times, consecutively
Corporation or intermittently, within a period of 5 years

What is the procedure conducted by the One Person Corporation What is the burden of the single stockholder claiming limited
when action is needed on any matter? (Sec. 128) liability? (Sec. 130)
 It shall be sufficient to prepare a written resolution  If he claims limited liability, he has the burden of affirmatively
o Signed and dated by the single stockholder showing that the corporation was adequately financed
o Recorded in the minutes book of the One Person
Corporation

ADV 19
When is the single stockholder jointly and severally liable for the o after compliance with all other requirements for
debts and other liabilities of the One Person Corporation? (Sec. stock corporations under the Revised Corporation Code and
130) applicable rules
 Where the single stockholder cannot prove that the property of the  The notice shall be filed with the SEC within 60 days from the
One Person Corporation is independent of the stockholder’s occurrence of the circumstances leading to the conversion into an
personal property ordinary stock corporation
 If all the requirements have been complied with, the SEC shall issue
Does the principle of piercing the corporate veil apply to One a certificate of filing of amended articles of incorporation reflecting
Person Corporations? (Sec. 130) the conversion
 Yes
What is the procedure in case of death of the single stockholder and
When may a stockholder apply for conversion into a One Person the One Person Corporation is converted into an ordinary stock
Corporation? (Sec. 131) corporation or winded up and dissolved? (Sec. 132)
 When a single stockholder acquires all the stocks of an  The nominee or alternate nominee shall transfer the shares to the
ordinary stock corporation, subject to the submission of such duly designated legal heir or estate within 7 days from receipt of
documents as the SEC may require either:
o an affidavit of heirship or self-adjudication executed by a
What happens when the conversion into a One Person Corporation sole heir or
is approved? (Sec. 131) o any other legal document declaring the legal heirs of the
 The SEC shall issue a certificate of filing of amended articles of single stockholder
incorporation reflecting the conversion  The nominee or alternate nominee shall notify the SEC of the
transfer
What are the consequences of the conversion from an ordinary  Within 60 days from the transfer of the shares, the legal heirs shall
stock corporation into a One Person Corporation? (Sec. 131) notify the SEC of their decision either to:
 The One Person Corporation succeeds the ordinary stock o Wind up and dissolve the One Person Corporation or
corporation. o Convert it into an ordinary stock corporation
 It will be legally responsible for all the latter’s outstanding
liabilities as of the date of the conversion What are the consequences of the conversion from a One Person
Corporation into an ordinary stock corporation? (Sec. 131)
May a One Person Corporation be converted into an ordinary stock  The ordinary stock corporation succeeds the One Person
corporation? (Sec. 132) Corporation.
 Yes  It will be legally responsible for all the latter’s outstanding
liabilities as of the date of the conversion
What is the procedure for the conversion of a One Person
Corporation into an ordinary stock corporation? (Sec. 132)
 It may be converted into an ordinary stock corporation after:
o due notice to the SEC of such fact and of the circumstances
leading to the conversion and

ADV 20
CLOSE CORPORATIONS o Restrictions on their transfers, subject to the
Title XII, Sections 95-104 provisions of Sec. 97
 A classification of directors into one (1) or more classes, each of
What is a close corporation? (Sec. 95) whom may be voted for and elected solely by a particular class of
 It is one whose articles of incorporation provide that: stock
o All the corporation’s issued stock of all classes, exclusive of  Greater quorum or voting requirements in meetings of
treasury shares, shall be held of record by not more than a stockholders or directors than those provided in the Revised
specified number of persons, not exceeding 20 Corporation Code
o All the issued stock of all classes shall be subject to one (1)  That the business of the corporation shall be managed by the
or more specified restrictions on transfer permitted by Title stockholders, instead of the board of directors
XII  That all officers or employees or that specified officers or
o The corporation shall not list in any stock exchange or make employees shall be elected or appointed by the stockholders,
any public offering of its stocks of any class instead of by the board of directors
 No corporation, which is not a close corporation, owns or controls at
least 2/3 of the voting stock or voting rights of the close corporation What are the consequences when the business of the corporation
is managed by the stockholders? (Sec. 96)
Which types of companies are prohibited to be incorporated as  No meeting of stockholders is needed to be called for the election
close corporations? (Sec. 95) of directors
 Mining or oil companies  The stockholders of the corporation shall be deemed to be
 Stock exchanges directors for the purpose of applying the provision of the Revised
 Banks Corporation Code, unless the context clearly requires otherwise
 Insurance companies  The stockholders of the corporation shall be subject to all liabilities
 Public utilities of the directors
 Educational institutions
 Corporations declared to be vested with public interest What are the requirements with respect to the restrictions on the
right to transfer of shares of close corporations? (Sec. 97)
What provisions of the Revised Corporation Code apply to Close  The restrictions must appear in the (1) articles of incorporation,
Corporations? (Sec. 115) (2) bylaws and (3) certificate of stock.
 Primarily, Title XII of the Revised Corporation Code on Close o Otherwise, the restrictions shall not be binding on any
Corporations (Sections 95-104) purchaser in good faith.
 Suppletorily, other provisions of the Revised Corporation Code,  The restrictions shall not be more onerous than granting the
except as otherwise provided in Title XII existing (a) stockholders or (b) the corporation the option
to purchase the shares of the transferring stockholders with such
What may the articles of incorporation of a close corporation reasonable terms, conditions or period stated.
provide? (Sec. 96)
 Shares or rights
o Classification of shares or rights,
o Qualifications for owning or holding the same, and

ADV 21
What is the consequence when the existing stockholders or If the certificate of
corporation fails to exercise the option to purchase within the stock conspicuously
period prescribed? (Sec. 97) states such number
 The transferring stockholder may sell their shares to any third
person And

What are the effects/conclusive presumptions with respect to the The issuance or
issuance or transfer of stock in breach of qualifying conditions? transfer of stock to any
(Sec. 98) person would cause
The person’s If a stock of a close The transferee is the stock to be held
ineligibility to be a corporation is issued conclusively presumed by more than such
stockholder of the or transferred to to have notice of the number of persons
corporation any person who is fact of the ineligibility The transfer If a stock certificate of The transferee is
not eligible to be a to be a stockholder violates a a close corporation conclusively presumed
holder under any restriction on conspicuously shows to have notice of the
provision of the transfer of stock a restriction on fact that the stock was
articles of transfer of the acquired in violation of
incorporation corporation’s stock the restriction

And And

If the certificate of The transferee


stock conspicuously acquires the stock in
shows the violation of such
qualifications of the restriction
persons entitled to be
holders of record  Whenever any of the conclusive presumptions arise with respect to a
The transfer of If the articles of The transferee is transferee,
stock would cause incorporation of a conclusively presumed o the corporation may, at its option, refuse to register
the stock of the close corporation to have notice such the transfer in the name of the transferee.
corporation to be states the number of fact  Section 98, however, shall not impair any right which the
held by more than persons, not transferee may have under any express or implied warranty, to
the number of exceeding 20, who either:
persons permitted are entitled to be o Rescind the transfer or
under its articles of stockholders of o Recover the stock
incorporation record

And

ADV 22
What circumstance will prevent the close corporation from having  On the ground that its effect is to make them
the option to refuse the registration of the transfer, despite the partners among themselves
breach of any qualifying condition? (Sec. 98)  Restriction/interference with the discretion or powers of
 If all the stockholders of the close corporation consent to the the board of directors
transfer or o A written agreement, among some or all of the stockholders,
 If the close corporation has amended the articles of incorporation shall not be invalidated
in accordance with Title XII  On the ground that it relates to the conduct of the
business and affairs of the corporation as to
What is transfer as used under Section 98 (Effects of Issuance or restrict or interfere with the discretion or powers
Transfer of Stock in Breach of Qualifying Conditions)? (Sec. 98) of the board of directors
 “Transfer” is not limited to a transfer for value
How many stockholders are involved in the agreement?
What happens to agreements duly signed and executed by and
among all stockholders before the formation and organization of a Restriction/interference
close corporation? (Sec. 99(a)) Corporate affairs; with the discretion or
Voting rights
 It shall survive the incorporation partners powers of the board of
 It shall continue to be valid and binding between such directors
stockholders, if such be their intent, to the extent that such
agreements are consistent with the articles of incorporation, Two (2) or more All stockholders Some or all of the
irrespective of where the provisions of such agreements are stockholders stockholders
contained,
o Except those required by Title XII to be embodied in the What is the effect of a written agreement restricting/interfering
articles of incorporation with the discretion or powers of the board of directors? (Sec.99(d))
 It shall impose on the stockholders who are parties to the agreement
What are the other rules on written agreements of stockholders in the liabilities for managerial acts imposed on directors by
close corporations? (Sec. 99(b)(c)(e)) the Revised Corporation Code.
 Voting rights
o A written agreement, signed by two (2) or more What are the consequences to stockholders actively engaged in the
stockholders, may provide that in exercising any voting management or operation of the business and affairs of a close
right, the shares held by them shall be voted: corporation? (Sec. 99(e))
 As provided, or  They are held to strict fiduciary duties to each other and among
 As agreed, or themselves
 In accordance with a procedure agreed upon by  They shall be personally liable for corporate torts, unless the
them corporation has obtained reasonably adequate liability insurance
 Corporate affairs; partners
o No provision in a written agreement signed by the What is the status of an action taken by the directors without a
stockholders relating to any phase of corporate affairs shall meeting called properly and with due notice? (Sec. 100)
be invalidated between the parties  Unless the bylaws provide otherwise, the action is nevertheless
deemed valid if:

ADV 23
o Before or after such action is taken, written consent o Of such greater proportion of shares as may be specifically
thereto is signed by all the directors, or provided in the articles of incorporation for amending,
o All the stockholders have actual or implied deleting or removing any of the aforesaid provisions
knowledge of the action and make no prompt  In a meeting duly called for such purpose
objection in writing, or
o The directors are accustomed to take informal action When may the SEC arbitrate a dispute within a close corporation?
with the express or implied acquiescence of all the (Sec. 103: Deadlocks)
stockholders, or  Notwithstanding any contrary provision in the close corporation’s (a)
o All the directors have express or implied knowledge articles of incorporation, (b) bylaws, or (c) stockholders’ agreement,
of the action in question and none of them makes a the SEC may arbitrate when:
prompt objection in writing o The directors or stockholders are so divided on the
management of the corporation’s business and affairs
* In essence, all four instances relate to ratification or estoppel on the part of o That the votes required for a corporate action cannot be
the directors or stockholders concerned. obtained
o With the consequence that the business and affairs of the
What happens to an action within the corporate powers of a close corporation can no longer be conducted to the advantage of
corporation taken at a meeting held without proper call or notice the stockholders generally
with respect to a director who failed to attend? (Sec. 100)  Upon written petition by any stockholder
 It is deemed ratified by such director, unless:
o After having knowledge thereof, the director promptly files In the exercise of its power to arbitrate a deadlock within a close
his written objection with the secretary of the corporation, what may the SEC order? (Sec. 103)
corporation  It shall have the authority to make appropriate orders, such as:
o Cancelling or altering any provision in the articles of
What is the extent of the preemptive right of stockholders in a close incorporation, bylaws, or any stockholders’ agreement
corporation? (Sec. 101) o Cancelling, altering, or enjoining a resolution or act of the
 Such right extends to all stock to be issued, including reissuance corporation or its board of directors, stockholders, or
of treasury shares, whether for money, property, personal services, officers
or in payment of corporate debts o Directing or prohibiting any act of the corporation or its
o Unless: The articles of incorporation provide otherwise board of directors, stockholders, officers, or other persons
party to the action
What are the requirements in amending the articles of o Requiring the purchase at their fair value of shares of any
incorporation, which either seeks to: (a) delete or remove any stockholder, either by the corporation regardless of
provision required by Title XII or (b) reduce a quorum or voting availability of unrestricted retained earnings in its books, or
requirement stated in said articles of incorporation? (Sec. 102) by the other stockholders
 Affirmative vote of: o Appointing a provisional director
o At least 2/3 of the outstanding capital stock, whether with o Dissolving the corporation
or without voting rights, or o Granting such other relief as the circumstances may
warrant

ADV 24
Who is the provisional director, which the SEC appoints during a  Dishonest
deadlock under Sec. 103? What is his/her role? (Sec. 103)  Oppressive
 He/she shall be an impartial person who is neither a stockholder  Unfairly prejudicial to the corporation or any
nor a creditor of the corporation or any of its subsidiaries or stockholder
affiliates o Whenever corporate assets are being misapplied or wasted
 He/she falls under any further qualifications that the SEC may  By written petition to the SEC
determine
 He/she would not be a receiver of the corporation and will not have
the title and powers of a custodian or receiver
 He/she shall have all the rights and powers of a duly elected
director, including the right to be notified of and to vote at meetings
of directors, until removed by order of the Commission or by all the
stockholders

Who shall determine the compensation of the provisional director?


(Sec. 103)
 His/her compensation shall be determined by agreement between
such director and the corporation, subject to approval by the
SEC, which may fix the compensation:
o absent an agreement or
o in event of disagreement between the provisional director
and the corporation

May the stockholder of a close corporation compel the corporation


to purchase his/her shares? (Sec. 104)
 Yes. In addition, and without prejudice to other rights and remedies
available under Title XII, any stockholder may, for any reason,
compel the corporation to purchase shares held at fair value,
which shall not be less than the par or issued value, when the
corporation has sufficient assets in its books to cover its
debts and liabilities exclusive of capital stock

When may a stockholder of a close corporation compel the


dissolution of the close corporation? (Sec. 104)
 The grounds to compel dissolution include:
o Whenever any acts of the (a) directors, (b) officers or (c)
those in control of the corporation are either of the ff.:
 Illegal
 Fraudulent

ADV 25
NON-STOCK CORPORATIONS What is the prohibition imposed on non-stock corporations with
Title XI and other relevant provisions respect to their purposes in the articles of incorporation? (Sec.
13(b))
What is a non-stock corporation? (Sec. 86)  A nonstock corporation may not include a purpose in its articles
 For purposes of the Revised Corporation Code and subject to its of incorporation which would change or contradict its nature as
provisions on dissolution, a nonstock corporation is one where no such
part of its income is distributable as dividends to its
members, trustees, or officers Can the voting rights of members be modified? (Sec. 88)
 Yes, the voting rights of any class or classes of members may be
What happens to profit obtained by a nonstock corporation limited, broadened, or denied to the extent specified in either
incidental to its operations? (Sec. 86) the:
 Whenever necessary or proper, it shall be used for the furtherance o Articles of incorporation or
of the purpose or purposes for which the corporation was o Bylaws
organized, subject to the provisions of Title XI  Unless so limited, broadened, or denied, each member, regardless of
class, shall be entitled to one (1) vote
Are the provisions on stock corporations applicable to nonstock
corporations? (Sec. 86) May a member vote by proxy? (Sec. 88)
 Yes, when pertinent  Yes, unless otherwise provided in the:
o Except as may be covered by specific provisions of Title XI o Articles of incorporation or
o Bylaws
Nonstock corporations may be formed or organized for which
purposes? (Sec. 87) May a member vote through remote communication and/or in
 Subject to the special provisions of Title XI governing particular absentia? (Sec. 88)
classes of nonstock corporations, a nonstock corporation may be  Yes, but only if authorized by the bylaws
formed or organized for:
o Charitable Is membership in a nonstock corporation and all rights arising
o Religious therefrom transferable? (Sec. 89)
o Educational  No. Membership and its corresponding rights are personal and
o Professional nontransferable, unless otherwise provided by the:
o Cultural o Articles of incorporation or
o Fraternal o Bylaws
o Literary
o Scientific How may membership in a nonstock corporation be terminated?
o Social (Sec. 90)
o Civic service  It shall be terminated (a) in the manner and (b) for the causes
o Similar purposes, like trade, industry, agricultural and like provided in the:
chambers o Articles of incorporation or
o Any combination of the above o Bylaws

ADV 26
What is effect of the termination of membership? (Sec. 90) What are the rules with respect to the notice and place of meetings
 Termination shall extinguish all rights of a member in the of nonstock corporations? (Sec. 92)
corporation or in its property, unless otherwise provided in the:  Proper notice must be sent to all members indicating the
o Articles of incorporation or meeting’s:
o Bylaws o Time
o Place
How many trustees may be elected in the board? (Sec. 91) o Date
 The number of trustees shall be fixed in the:  The bylaws may provide that the members of a nonstock
o articles of incorporation or corporation may hold their regular or special meetings at any place,
o bylaws even outside the place where the principal office of the corporation is
 The number may or may not be more than 15. located
 The place of meeting shall be within Philippine territory
How long does a trustee hold office? (Sec. 91)
 A trustee holds office for not more than three (3) years, until What are the rules on the distribution of assets of a nonstock
his/her successor is elected and qualified. corporation undergoing the process of dissolution for reasons
 Trustees elected to fill vacancies occurring before the expiration other than those set forth in Sec. 139 (Corporate Liquidation)?
of a particular term shall hold office only for the unexpired (Sec. 93)
period All liabilities and obligations of the Shall be paid, satisfied and
corporation discharged, or adequate
Who may be elected as a trustee? (Sec. 91) provision shall be made
 Only members of the nonstock corporation therefor
o Exception: Independent trustees of nonstock
corporations vested with public interest need not be Assets held by the corporation Shall be returned, transferred
members upon a condition requiring return, or conveyed in accordance with
transfer or conveyance, and which such requirements
Can members directly elect the officers of a nonstock corporation? condition occurs by reason of the
(Sec. 91) dissolution
 Yes. The members may directly elect officers of a nonstock Assets received and held by the Shall be transferred or
corporation, unless otherwise provided in the: corporation subject to limitations conveyed to one (1) or more
o Articles of incorporation or permitting their use only for corporations, societies, or
o Bylaws charitable, religious, benevolent, organizations engaged in
educational or similar purposes, activities in the Philippines
Is a nonstock corporation required to keep a list of its members and but not held upon a condition substantially similar to those of
their proxies? (Sec. 92) requiring return, transfer or conveyance the dissolving corporation,
 Yes. The nonstock corporation shall, at all times, keep a list of its by reason of the dissolution according to a plan of
members and their proxies in the form the SEC may require. distribution adopted pursuant
 The list shall be updated to reflect the members and proxies of to Chapter III of Title XI
record 20 days prior to any scheduled election. Assets other than those mentioned Shall be distributed in
in the preceding paragraph, if any accordance with the provisions

ADV 27
of the (a) articles of
incorporation or (b) the bylaws,
to the extent that the articles of
incorporation or the bylaws
determine:
 the distributive rights
of members, or
 any class or classes of
members, or
 provide for
distribution
In any other case, assets may be distributed to such persons, societies,
organizations, or corporations, whether or not organized for profit
 As may be specified in a plan of distribution adopted pursuant to
Chapter III, Title XI

What does the Revised Corporation Code say about a plan of


distribution of assets by a nonstock corporation? (Sec. 94)
 Consistent with the provisions of Title XI, a nonstock corporation
may adopt a plan providing for the distribution of assets
upon dissolution in the following manner:
o The board of trustees shall, by majority vote, adopt a
resolution recommending a plan of distribution and
directing the submission thereof to a vote at a regular or
special meeting of members having voting rights
o Each member entitled to vote shall be given a written
notice setting forth:
 the proposed plan of distribution or a summary
thereof
 the date, time and place of such meeting within the
time and in the manner provided in the Revised
Corporation Code for the giving of notice of
meetings
o Such plan of distribution shall be adopted upon
approval of at least 2/3 of the members having
voting rights present or represented by proxy at such
meeting

ADV 28
FOREIGN CORPORATIONS o The address, including the street number, of the principal
Title XV, Sections 140-153 office of the corporation in the country or state of
incorporation
What is a foreign corporation? (Sec. 140) o The name and address of its resident agent authorized to
 For the purposes of the Revised Corporation Code, it is a corporation: accept summons and process in all legal proceedings and all
o formed, organized or existing under laws other than those notices affecting the corporation, pending the
of the Philippines and establishment of a local office
o whose laws allow Filipino citizens and corporations to do o The place in the Philippines where the corporation intends
business in its own country or State to operate
o The specific purpose or purposes which the corporation
When can a foreign corporation have the right to transact business intends to pursue in the transaction of its business in the
in the Philippines? (Sec. 140) Philippines
 A foreign corporation shall have the right to transact business in the  Provided, that said purpose/s are those
Philippines after obtaining: specifically stated in the certificate of authority
o a license for that purpose in accordance with the Revised issued by the appropriate government agency
Corporation Code and o The names and addresses of the present directors and
o a certificate of authority from the appropriate officers of the corporation
government agency. o A statement of its authorized capital stock and the aggregate
number of shares which the corporation has authority to
How will the Revised Corporation Code apply to existing foreign issue, itemized by class, par value of shares, shares without
corporations? (Sec. 141) par value, and series, if any
 Every foreign corporation which, on the date of the effectivity of this o A statement of its outstanding capital stock and the
Code, is authorized to do business in the Philippines under a license aggregate number of shares which the corporation has
issued to it shall continue to have such authority under the issued, itemized by class, par value of shares, shares without
terms and conditions of its license, subject to the provisions of par value, and series, if any
this Code and other special laws. o A statement of the amount actually paid in
o Such additional information as may be necessary or
How may a foreign corporation apply for a license to transact appropriate in order to enable the SEC to determine
business in the Philippines? (Sec. 142) whether such corporation is entitled to a license to transact
 A foreign corporation shall submit to the SEC a copy of its articles business in the Philippines, and to determine and assess the
of incorporation and bylaws, fees payable
o certified in accordance with law, and  There should be attached to the application a certificate under
o their translation to an official language of the Philippines, if oath duly executed by the authorized official/s of the jurisdiction
necessary. of its incorporation, attesting to the fact that:
 The application (application for license) shall be under oath and, o the laws of the country or State of the applicant allow
unless already stated in its articles of incorporation, shall specifically Filipino citizens and corporations to business therein and
set forth the following: o the applicant is an existing corporation in good standing
o The date and term of incorporation

ADV 29
 If this certificate is in a foreign language, a When shall the SEC issue a license to transact business in the
translation thereof in English under oath of Philippines? (Sec. 143)
the translator shall be attached to the application  If the SEC is satisfied that the applicant has complied with
 There should also be attached to the application a statement under all the requirements of the Revised Corporation Code and other
oath of the president or any other person authorized by the special laws, rules and regulations, it shall issue the license to
corporation, showing to the satisfaction of the SEC and when transact business to the applicant for the purpose/s specified in such
appropriate, other governmental agencies that: license
o The applicant is solvent and in sound financial
condition, setting forth the assets and liabilities of the What may a foreign corporation do upon issuance of the license?
corporation as of the date not exceeding one (1) year (Sec. 143)
immediately prior to the filing of the application  A foreign corporation may commence to transact business in
 If the foreign corporation is a banking, financial or insurance the Philippines and continue to do so for as long as it retains the
corporation, authority to act as a corporation under the laws of the country
o It shall also comply with the provisions of existing laws or State of its incorporation,
applicable to them. o Unless: such license is sooner surrendered, revoked,
 In the case of foreign corporations other than banking, suspended, or annulled in accordance with the Revised
financial or insurance corporations, Corporation Code or other special laws
o No application for license to transact business in the
Philippines shall be accepted by the SEC without previous What should a licensee do within 60 days after the issuance of the
authority from the appropriate government license to transact business in the Philippines? (Sec. 143)
agency, whenever required by law  Except foreign banking or insurance corporations, the licensee shall,
for the benefit of its present and future creditors in the Philippines,
Summary of Sec. 142: deposit securities satisfactory to the SEC, consisting of:
 Certified copy of its articles of incorporation and bylaws (and o bonds or other evidence of indebtedness of the Government
translation, if necessary) of the Philippines, its political subdivisions and
 Application for license under oath instrumentalities, or of GOCCs and entities
 Certificate under oath executed by the authorized official/s of the o shares of stock or debt securities that are registered under
jurisdiction of incorporation (and translation, under oath of the RA 8799 (Securities Regulation Code)
translator, if necessary) o shares of stock in domestic corporations listed in the stock
 Statement under oath of the president or any other person exchange
authorized by the corporation o shares of stock of domestic insurance companies and banks
 Previous authority from the appropriate government agency, o any financial instrument determined suitable by the SEC or
whenever required by law o any combination thereof with an actual market value of at
least P500,000 or such other amount that may be set by the
 If foreign banking, financial or insurance corporation, it shall also
SEC
comply with the provisions of existing laws applicable to them

ADV 30
When does the licensee deposit additional securities to the SEC? What is one guideline in computing the securities deposit? (Sec.
(Sec. 143) 143)
 Within 6 months after each of the licensee’s fiscal year, the  For purposes of computing the securities deposit, the composition of
SEC shall require the licensee to deposit additional securities or gross income and allowable deductions therefrom shall be in
financial instruments equivalent in actual market value to 2% of the accordance with the rules of the SEC
amount by which the licensee’s gross income for that fiscal year
exceeds P10,000,000 To whom should service of summons and other legal processes be
 The SEC shall also require the deposit of additional securities or served on behalf of the foreign corporation? (Sec. 145)
financial instruments if the actual market value of the  Resident agent
(original) deposited securities or financial instruments has o Service upon such resident shall be admitted and held as
decreased by at least 10% of their actual market value at the valid as if served upon the duly authorized officers of the
time they were deposited foreign corporation at its home office
 It is the resident agent’s duty to immediately notify the SEC in
What may the SEC do with the additional deposits of the licensee? writing of any change in the resident agent’s address.
(Sec. 143)
 The SEC may, at its discretion, release part of the additional To whom should service of summons and other legal processes be
deposit if: served on behalf of the foreign corporation if it ceases to transact
o the gross income of the licensee has decreased or business in the Philippines? (Sec. 145)
o the actual market value of the total deposit has increased,  SEC
by more than 10% of their actual value at the time they were o Such service shall have the same force and effect as if made
deposited upon the duly authorized officers of the corporation at its
home office
When may the SEC allow the licensee to make substitute deposits?
(Sec. 143) What shall the SEC do whenever service of summons or other
 The SEC may, from time to time, allow the licensee to make process is made upon the SEC? (Sec. 145)
substitute deposits for those already on deposit as long as the  The SEC shall, with 10 days after service, transmit by mail a copy of
licensee is solvent such summons or other legal process to the corporation at its home
 The licensee shall be entitled to collect the interest or or principal office.
dividends on the substitute deposits  The sending of such copy by the SEC shall be a necessary part of and
shall complete such service.
What happens to the deposits if the licensee ceases to do business  All expenses incurred by the SEC for such service shall be paid in
in the Philippines? (Sec. 143) advance by the party at whose instance the service is made.
 The licensee’s deposits shall be returned, upon:
o the licensee’s application and What should a foreign corporation file with the SEC in relation to
o proof to the satisfaction of the SEC the licensee has no its resident agent? (Sec. 145)
liability to Philippine residents, including the Government  A written power of authority
of the Republic of the Philippines o Designating a person who must be a resident of the
Philippines, on whom summons and other legal processes

ADV 31
may be served in all actions or other legal proceedings  Laws of the home jurisdiction (i.e. country of incorporation) with
against such corporation regard to:
 An agreement or stipulation, executed by the proper authorities of o Creation, formation, organization, or dissolution of
said corporation, in form and substance as follows: corporations
o “The (name of foreign corporation) hereby stipulates and o Those which fix the relations, liabilities, responsibilities, or
agrees, in consideration of being granted a license to duties of stockholders, members, or officers of corporations
transact business in the Philippines, that if the corporation to each other or the corporation
shall cease to transact business in the Philippines on whom
any summons or other legal process may be served, then What is required of the foreign corporation whenever its articles of
service of any summons or other legal process may be made incorporation or bylaws are amended? (Sec. 147)
upon the Commission in any action or proceeding arising  Within 60 days from effectivity of the amendment of either
out of any business or transaction which occurred in the the articles of incorporation or bylaws, the foreign corporation shall
Philippines and such service shall have the same force and file with the SEC, and in proper cases, with the appropriate
effect as if made upon the duly authorized officers of the government agency,
corporation at its home office.” o A duly authenticated copy of the amended articles
of incorporation or bylaws, indicating clearly in capital
Is the designation of a resident agent a condition to the issuance of letters or underscoring the change or changes made, duly
a license to transact business in the Philippines? (Sec. 145) certified by the authorized official or officials of the
 Yes. country or state of incorporation
 Such filing shall not in itself enlarge or alter the purpose or purposes
Who may be a resident agent? (Sec. 144) for which such corporation is authorized to transact business in the
 A resident agent may be either: Philippines
o An individual residing in the Philippines or
o A domestic corporation lawfully transacting business in When shall a foreign corporation be required to obtain an
the Philippines amended license? (Sec. 148)
 Whenever the foreign corporation:
What are the qualifications of a resident agent? (Sec. 144) o Changes its corporate name or
 An individual resident agent must be: o Desires to pursue other or additional purposes in the
o Of good moral character and Philippines
o Of sound financial standing
 A domestic corporation must be: What should a foreign corporation do to obtain an amended
o Of sound financial standing and license? (Sec. 148)
o Show proof that it is in good standing as certified by the SEC  The foreign corporation shall submit an application with the SEC,
favorably endorsed by the appropriate government agency in the
What shall be the laws applicable to a foreign corporation lawfully proper cases
doing business in the Philippines? (Sec. 146)
 Laws of the host jurisdiction (i.e. Philippines): all laws, rules and May a foreign corporation merge or consolidate with a domestic
regulations applicable to domestic corporations of the same class corporation? (Sec. 149)
 Yes

ADV 32
o One or more foreign corporations authorized to transact Foreign With
Capacity to bring suit
business in the Philippines may merge or consolidate corporation license?
with any domestic corporation or corporations if: Doing business in With a license It can sue/be sued before the
 Permitted under Philippine laws and the Philippines Philippine courts on any
 By the law of its incorporation transaction
o Provided that: the requirements on merger or Doing business in Without a It cannot sue before the
consolidation as provided in the Revised Corporation Code the Philippines license Philippine courts
are followed  However: A Philippine
citizen or entity, which
What shall a foreign corporation do if it shall become a party to a has contracted with said
merger or consolidation in its home country or state as permitted corporation, may be
by the law authorizing its incorporation? (Sec. 149) estopped from
 Within 60 days after the effectivity of such merger or consolidation, challenging the foreign
the foreign corporation shall file with the SEC, and in proper cases, corporation’s corporate
with the appropriate government agency, personality in a suit
o A copy of the articles of merger or consolidation brought before Philippine
duly authenticated by the proper official or officials of courts
the country or state under whose laws the merger or
consolidation was effected It can be sued on any valid cause
 Provided that: if the absorbed corporation is the foreign of action
corporation doing business in the Philippines, the latter shall Not doing Without a General rule: It cannot sue
at the same time file a petition for withdrawal of its license in business in the license before Philippine courts.
accordance with Title XV Philippines
Exception: It can sue before
May a foreign corporation doing business in the Philippines Philippine courts on:
without a license maintain or intervene in a suit? (Sec. 150)  An isolated transaction or
 No.  A cause of action entirely
o A foreign corporation doing business without a license, or independent of any
its successors or assigns, shall not be permitted to business transaction
maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the It may also sue to protect its
Philippines intellectual property rights under
 However, such foreign corporation may be sued or proceeded the Intellectual Property Code.
against before Philippine courts or administrative tribunals on any
valid cause of action recognized under Philippine laws. What are the grounds to revoke or suspend the license of a foreign
corporation transact business in the Philippines? (Sec. 151)
 Without prejudice to other grounds provided under special laws, the
SEC may revoke or suspend the license under any of the following
grounds:

ADV 33
o Failure to file its annual report or pay any fees as required How may a foreign corporation licensed to transact business in the
by the Revised Corporation Code Philippines withdraw from the Philippines? (Sec. 153)
o Failure to appoint and maintain a resident agent in the  Subject to existing laws and regulations, the foreign corporation may
Philippines as required by Title XV be allowed to withdraw by filing a petition for withdrawal of
o Failure, after change of its resident agent or address, to license
submit to the SEC a statement of such change as required  No certificate of withdrawal shall be issued by the SEC unless all the
by Title XV following requirements are met:
o Failure to submit to the SEC an authenticated copy of any o All claims which have accrued in the Philippines have been
amendment to its articles of incorporation or bylaws or of paid, compromised or settled
any articles of merger or consolidation within the time o All taxes, imposts, assessments, and penalties, if any,
prescribed by Title XV lawfully due to the Philippine Government or any of its
o A misrepresentation of any material matter in any agencies or political subdivisions, have been paid and
application, report, affidavit or other document submitted o The petition for withdrawal of license has been published
by such corporation pursuant to Title XV once a week for three (3) consecutive weeks in a newspaper
o Failure to pay any and all taxes, imposts, assessments or of general circulation in the Philippines
penalties, if any, lawfully due to the Philippine Government
or any of its agencies or political subdivisions Others:
o Transacting business in the Philippines outside of the Foreign Investments Act of 1991 (RA 7042)
purpose or purposes for which such corporation is Doing business in the Not doing business in the
authorized under its license Philippines Philippines
o Transacting business in the Philippines as agent of or acting  Soliciting orders  Mere investment as a
on behalf of any foreign corporation or entity not duly
 Service contracts shareholder by a foreign
licensed to do business in the Philippines entity in domestic
 Opening offices, whether
o Any other ground as would render it unfit to transact corporations duly
called "liaison" offices or
business in the Philippines registered to do business,
branches
 Appointing and/or the exercise of
What shall the SEC issue upon the revocation of the license to rights as such investor
representatives or
transact business in the Philippines? (Sec. 152)
distributors domiciled in  Having a nominee director
 The SEC shall issue a corresponding certificate of revocation or officer to represent its
the Philippines or who in
furnishing a copy thereof to the appropriate government agency in interests in such
any calendar year stay in
the proper cases corporation
the country for a period or
 The SEC shall also mail the notice and copy of the certificate of  Appointing a
periods totalling one
revocation to the corporation, at its registered office in the representative or
hundred eighty (180) days
Philippines distributor domiciled in
or more
 Participating in the the Philippines which
management, supervision transacts business in its
or control of any domestic own name and for its own
business, firm, entity or account

ADV 34
corporation in the
Philippines
 Any other act or acts that
imply a continuity of
commercial dealings or
arrangements, and
contemplate to that extent
the performance of acts or
works, or the exercise of
some of the functions
normally incident to, and
in progressive prosecution
of, commercial gain or of
the purpose and object of
the business organization

ADV 35
DISSOLUTION What shall be filed with the SEC in relation to the voluntary
Title XIV, Sections 133-139 dissolution which does not prejudice the rights of any creditor?
(Sec. 134)
What are the methods of dissolution under the Revised  A verified request for dissolution, stating:
Corporation Code? (Sec. 133) o The reason for the dissolution
 Voluntary o The form, manner, and time when the notices were given
o Not prejudicial to creditors o Names of the stockholder and directors or members and
o Prejudicial to creditors trustees who approved the dissolution
o Shortening corporate term o The date, place and time of the meeting in which the vote
 Involuntary was made
o Details of publication
VOLUNTARY DISSOLUTION – NOT PREJUDICIAL TO THE
RIGHTS OF CREDITORS What shall be submitted with the SEC in relation to the voluntary
dissolution which does not prejudice the rights of any creditor?
How may a voluntary dissolution which does not prejudice the (Sec. 134)
rights of any creditor having a claim against the corporation be  Copy of the resolution authorizing the dissolution
effected? (Sec. 134) o Certified by a majority of the board of directors and trustees
 At a meeting held upon the call of the directors or trustees, the o Countersigned by the secretary of the corporation
dissolution may be effected by:  Proof of publication
o Majority vote of the board of directors and trustees and  Favorable recommendation from the appropriate regulatory
o A resolution adopted by the affirmative vote of the agency, when necessary
stockholders owning at least majority of the outstanding
capital stock or majority of the members What shall the SEC issue if a corporation requests for dissolution?
 At least 20 days prior to the meeting, notice shall be given: (Sec. 134)
o To each shareholder or member of record, whether or not  Within 15 days from receipt of the verified request for dissolution,
entitled to vote at the meeting and in the absence of any withdrawal within said period, the SEC
 Personally, by registered mail, or by any means shall approve the request and issue the certificate of dissolution
authorized under its bylaws
o In the manner provided under Section 50 of the Revised When shall the dissolution take effect? (Sec. 134)
Corporation Code  It shall take effect only upon the issuance by the SEC of a
o With the statement that the purpose of the meeting is to certificate of dissolution.
vote on the dissolution of the corporation
 Notice of the time, place and object of the meeting shall be
published once prior to the date of the meeting:
o in a newspaper published in the place where the principal
office of said corporation is located, or
o if no newspaper is published in such place, in a newspaper
of general circulation in the Philippines.

ADV 36
What is required from banks, banking and quasi-banking What shall be submitted with the SEC in relation to the voluntary
institutions, preneed, insurance and trust companies, nonstock dissolution which does not prejudice the rights of any creditor?
savings and loan associations, pawnshops, and other financial (Sec. 135)
intermediaries in order for the SEC to approve their application for  A copy of the resolution authorizing the dissolution
dissolution? (Sec. 134) o Certified by a majority of the board of directors and trustees
 A favorable recommendation of the appropriate o Countersigned by the secretary of the corporation
government agency must accompany their application for  A list of all its creditors
dissolution
What shall the SEC issue if it finds the petition for dissolution
VOLUNTARY DISSOLUTION – PREJUDICIAL TO THE RIGHTS sufficient in form and substance? (Sec. 135)
OF CREDITORS  The SEC shall, by an order reciting the purpose of the petition, fix
a deadline for filing objections to the petition which date shall not
What is the required vote from the stockholders or members in be less than 30 days nor more than 60 days after the entry of the
case of a dissolution that may prejudice the rights of any creditor? order. [Order fixing the deadline for filing objections]
(Sec. 135)  Before such deadline,
 Affirmative vote of the stockholders representing at least 2/3 of the o a copy of the order shall be published at least once a week
outstanding capital stock or at least 2/3 of the members for 3 consecutive weeks in a newspaper of general
circulation published in the municipality or city where the
How may a voluntary dissolution which may prejudice the rights of principal office of the corporation is situated, or if there be
any creditor having a claim against the corporation be effected? no such newspaper, then in a newspaper of general
(Sec. 135) circulation in the Philippines, and
 A verified petition for dissolution shall be filed with the SEC o a similar copy shall be posted for 3 consecutive weeks in 3
o Signed by a majority of the corporation’s board of directors public places in such municipality or city
or trustees
o Verified by its president or secretary or one of its directors What shall the SEC do after the expiry of the deadline for filing
or trustees objections? (Sec. 135)
o Sets forth all claims and demands against it  Upon five (5) days’ notice, given after the date on which the right to
o States that its dissolution was resolved upon by the file objections as fixed in the order has expired, the SEC shall proceed
affirmative vote of the stockholders representing at least to hear the petition and try any issue raised in the objections filed
2/3 of the outstanding capital stock or at least 2/3 of the  If no objection is sufficient and the material allegations of the
members at a meeting of its stockholders or members called petition are true,
for that purpose o it shall render judgment dissolving the corporation and
o The reason for the dissolution directing such disposition of its assets as justice requires,
o The form, manner, and time when the notices were given and
o The date, place, and time of the meeting in which the vote o may appoint a receiver to collect such assets and pay the
was made debts of the corporation

ADV 37
When shall the dissolution take effect? (Sec. 135)
 It shall take effect only upon the issuance by the SEC of a
certificate of dissolution. What shall the SEC do upon receipt of a withdrawal of request for
dissolution? (Sec. 137)
VOLUNTARY DISSOLUTION – SHORTENING CORPORATE  The SEC shall withhold action on the request for dissolution and
TERM shall, after investigation:
o Make a pronouncement that the request for dissolution is
May voluntary dissolution be effected by shortening corporate deemed withdrawn
term? How? (Sec. 136) o Direct a joint meeting of the board of directors or trustees
 Yes. It can be done by amending the articles of incorporation, a and the stockholders or members for the purpose of
copy of which shall be submitted to the SEC in accordance with the ascertaining whether to proceed with dissolution
Revised Corporation Code. o Issue such other orders as it may deem appropriate

What happens once the shortened term expires? (Sec. 136) May a petition for dissolution be withdrawn? How? (Sec. 137)
 Upon the expiration of the shortened term, as stated in the approved  Yes. A withdrawal of a petition for dissolution (Sec. 135 – prejudicial
amended articles of incorporation, the corporation shall be deemed to creditors) shall be:
dissolved without any further proceedings, subject to the o In the form of a motion
provisions of the Revised Corporation Code on liquidation. o Similar in substance to a withdrawal of request for
dissolution
When shall dissolution take effect? (Sec. 136) o Verified and filed prior to the publication of the order
 Dissolution shall automatically take effect on the day following setting the deadline for filing objections to the petition
the last day of the corporate term stated in the articles of
incorporation, without the need for the issuance by the SEC of a INVOLUNTARY DISSOLUTION
certificate of dissolution.
Who may initiate the involuntary dissolution of a corporation?
WITHDRAWAL OF REQUEST AND PETITION FOR (Sec. 138)
DISSOLUTION  SEC motu proprio
 Any interested party by filing a verified complaint
May a request for dissolution be withdrawn? How? (Sec. 137)
 Yes. A withdrawal of a request for dissolution (Sec. 134 – not What are the grounds for involuntary dissolution? (Sec. 138)
prejudicial to creditors) shall be:  Non-use of corporate charter as provided in Section 21 of the Revised
o Made in writing Corporation Code
o Duly verified by any incorporator, director, trustee,  Continuous inoperation of a corporation as provided in Section 21 of
shareholder, or member the Revised Corporation Code
o Signed by the same number of incorporators, directors,  Upon receipt of a lawful court order dissolving the corporation
trustees, shareholders or members necessary to request for  Upon finding by final judgment that the corporation procured its
dissolution as set forth in the foregoing sections incorporation through fraud
 The withdrawal shall be submitted no later than 15 days from receipt  Upon finding by final judgment that the corporation:
by the SEC of the request for dissolution

ADV 38
o Was created for the purpose of committing, concealing or  Dispose of and convey its property, and
aiding the commission of securities violations, smuggling,  Distribute its assets
tax evasion, money laundering, or graft and corrupt o But not for the purpose of:
practices  Continuing the business for which it was
o Committed or aided in the commission of securities established
violations, smuggling, tax evasion, money laundering, or
graft and corrupt practices, and it stockholders knew the xxx
same
o Repeatedly and knowingly tolerated the commission of
graft and corrupt practices or other fraudulent or illegal acts
by its directors, trustees, officers or employees

What happens to the assets of a corporation, which was dissolved


by final judgment pursuant to the grounds in Sec. 138 (e)? (Sec.
138)
 Its assets, after payment of its liabilities, shall, upon petition of the
SEC with the appropriate court, be forfeited in favor of the
national government
 The forfeiture shall be without prejudice:
o To the rights of innocent stockholders and employees for
services rendered, and
o To the application of other penalty or sanction under the
Revised Corporation Code or other laws

What is the duty of the SEC in relation to the involuntary


dissolution of certain companies? (Sec. 138)
 The SEC shall give reasonable notice to, and coordinate with,
the appropriate regulatory agency prior to the involuntary
dissolution of companies under their special regulatory jurisdiction

What happens upon termination of corporate existence? (Sec. 139)


 Except for banks, every corporation, whose charter expires pursuant
to its articles of incorporation, is annulled by forfeiture, or whose
corporate existence is terminated in any other manner, shall
nevertheless remain as a body corporate for three (3) years
after the effective date of dissolution:
o For the purpose of:
 Prosecuting and defending suits by or against it
 Enabling it to settle and close its affairs

ADV 39
Board of Stockholders/Members
Directors/Trustees

134: Voluntary Majority Majority


dissolution where no
creditors are affected
135: Voluntary Majority 2/3
dissolution where
creditors are affected

ADV 40