Frequently Asked Questions

Registration of Articles of Incorporation and By-Laws

1. What is a Corporation?

A juridical person created by operation of law and registered with the Securities and Exchange
Commission.

2. What is a stock corporation?

A corporation with authorized capital stock dividend into shares of stock either with or without par
value. A stock corporation is engaged in income generating activities and is authorized to declare
dividends.

3. What is a non-stock corporation?

A corporation with no authorized capital stock. It is organized for charitable, religious, educational,
professional, cultural, fraternal, literary, scientific, social civil service, or similar purposes, like trade,
industry, agricultural and like chambers, or any combinations thereof.

4. When is a corporation deemed to have a juridical personality?

A corporation is deemed imbued with juridical personality from the time the Certificate of Incorporation
is issued by the Securities and Exchange Commission.

5. What are the requirements for registration of a corporation?

A. Stock Corporation

B. Non-Stock Corporation

C. Foreign Corporation

6. Where can the proposed corporate or partnership name be verified?

The proposed corporate or partnership name can be verified online via Iregister system of SEC; or thru
Name Verification Unit at G/F Secretariat Building, PICC Complex, Roxas Boulevard Pasay City; or thru
Satellite Offices and SEC Extension Offices.

7. If the proposed name is verified and reserved online, does this still need confirmation from
Name Verification Unit or SEC Satellite/Extension Offices?

Company names reserved online must be confirmed at the Name Reservation Unit, G/F Secretariat
Building, PICC Complex, Roxas Boulevard Pasay City or at any of the SEC Satellite Offices within four (4)
calendar days from date of online reservation. Non-confirmation of reservation within the specified
period will forfeit the online reservation. Confirmation is required because the Corporation Code of the
Philippines, Sec. 18 provides that No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law or is patently deceptive, confusing or
contrary to existing laws. Compliance therewith compels us to personally determine if reserve names
are not deceptively or confusingly similar or patently deceptive or confusing to other registered entities.
After confirmation, applicant must secure a Reservation Payment Confirmation. A mere Reservation
Notice is not sufficient for the acceptance of any application for registration, or change of name of a
corporation or partnership. Once the Reservation Payment Confirmation has been issued, the
reservation fee must be paid at the Cashier, SEC Main Office or at any of the designated Landbank
branches.

8. If the proposed name has been allowed for use, would there be fees required to reserve and
where shall the payment be made?

Yes.To reserve a name the SEC collects P100.00 as reservation fee for thirty days. The payment can be
thru SEC Cashier or thru on collection systems of Landbank.

9. Does SEC have online fill-out form for the AI-BL?

A. Stock Corporation

B. Non-Stock Corporation

C. Foreign Corporation

10. What are the contents of the AI?

The contents of the AI are the following:

a)The name of the corporation

b)The specific purpose or purposes for which the corporation is being incorporated

c)The place where the principal office of the corporation is to be located, which must be within the
Philippines

d)The term of which the corporation is to exist

e)The names, nationalities and residences of the incorporators

f)The number of directors or trustees, which shall not be less than five (5) nor more than fifteen (15)

g)The names, nationalities and residences of persons who shall act as directors or trustees until the first
regular directors or trustees are duly elected and qualified

h)If it be a stock corporation, the amount of its authorized capital stock in lawful money of the
Philippines, the number of shares into which it is divided, and in case the share are par value shares, the
par value of each, the names, nationalities and residences of the original subscribers, and the amount
subscribed and paid by each on his subscription, and if some or all of the shares are without par value,
such fact must be stated.

i)If it be a non-stock corporation, the amount of its capital, the names, nationalities of the contributors
and the amount contributed by each

j)The name of the treasurer-in-trust

k)Tranfer clause

l)Such other matters as are not inconsistent with law and which the incorporators may deem necessary
and convenient

11. Is there a rule on the approval of the corporate and partnership names?

Yes. The Corporation Code of the Philippines provides in Section 18 that no corporate name may be
allowed by the SEC if the proposed name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or is patently deceptive, confusing
or contrary to existing laws.

12. Does SEC have guidelines on the approval of corporate and partnership names?

Yes. In implementing Section 18 of the Corporation Code, the Commission has adopted Guidelines in the
approval of corporate and partnership names.

13. What do you mean by incorporators?

Are the individual persons originally forming the corporation and are the signatories in the Articles of
Incorporation.

14. What are the requirements on incorporators?

All incorporators must be natural persons, of legal age, their number must be at least five (5) and not
more than fifteen (15), every incorporator is subscriber of at least one share, and majority of the
incorporators are residents of the Philippines.

15. Are foreigners allowed as incorporators?

Yes provided that all requirements for incorporators are complied with and provided further that the
business activity of the corporation is not fully reserved for Filipino ownership.

16. Can all incorporators be foreigners?

Yes. Provided that all the requirements for incorporators under the Corporation Code are complied with
and this is true for registration under the Foreign Investment Act of 1991 as amended by RA 8179.

17. How many Directors/trustees may a corporation have?

For a stock corporation, the number of directors must be at least five (5) but not more than fifteen (15).
For a non-stock corporation, the number of trustees must be at least five (5) and could be more than
fifteen. For religious societies, the number of trustees must be at least five (5) but not more than fifteen
(15). For non-stock educational corporation, the number of trustees must be at least five (5) but not
more than fifteen (15) and the number of trustees must be in multiples of five (5). And, for a corporation
sole, the trustee is only one (1).

18. What are the requirements on directors/trustees?

a)Natural person and is of legal age

b)Compliant with the required number required under the Corporation Code
c)Majority of the directors are residents of the Philippines

d)Holder of at least one share or a member in case of non-stock corporations

e)Not convicted by final judgement of an offense punishable by imprisonment for a period exceeding six
years, or a violation of the Code committed within five (5) years prior to the date of his election or
appointment.

19. What is the difference between directors and trustees?

For stock corporations, the appropriate term is "director". For non-stock corporations the appropriate
term is "trustees". In a non-stock corporations however, the trustees may be called by other than
trustees (i.e. directors) provided that the term used is identified as such in the Articles of Incorporation
referring to trustees.

20. Can foreigners be elected as director?

Yes. Except in corporations whose business activities are hundred percent reserved for Filipinos.

21. Is there any limit on the number of seat for foreigners in the board?

Yes. If the business activity is partly nationalized, the number of seat for foreigners in the board of
directors is in proportion of their present foreign equity to the number of directors as stated in the
Articles of Incorporation. Also, the number of their seats should not exceed the proportion of the
allowable foreign equity to the number of the directors in the AI in accordance with Anti-Dummy Law.

22. If the corporation is registered under the Foreign Investment Act, can foreigners be all the
directors?

Yes. It is subject however to compliance with the requirements of the Corporation Code on Directors
(i.e. majority are residents of the Philippines).

23. Can foreigner sit as trustee in a non-stock corporation?

Yes. If its a non-stock corporation and is engaged in partially nationalized activities, the foreigners
number of seat in the trustees should be compliant with the provision of Anti-Dummy Law.

24. Is there any requirement of the Corporation Code on primary purpose and secondary purposes
to be indicated in the Articles of Incorporation?

Yes. Under Sec. 15 of the Code it states that if there is more than one purpose, indicate primary and
secondary purpose.

25. Is there any limit on number of secondary purposes?

None. As many secondary purposes a corporation would like to engage except if the business activities
in the primary and secondary are prohibited by existing laws to be in the Articles of Incorporation of one
and the same corporate entity.

26. What are business activities not allowed to be in the primary and secondary purposes at the
same time?
a)Business activities of overseas recruitment and travel agency cannot be in single entity pursuant ot the
implementing rules and regulations of the Labor Code of the Philippines;

b)A corporation sole or religious society and school as the school should be incorporated distinct with a
religious corporation.

27. Are there business activities that no foreign's ownership is allowed?

Yes. These business activities are fully reserved to Filipino citizens as follow:

a)Mass Media

b)Practice of professions

c)Retail trade enterprises with paid-up capital of less than US$2,500,000

d)Private Security Agencies

e)Small scale mining

f)Utilization of marine resources in archipelagic waters, territorial sea, and exclusive eonomic zone as
well as small-scale utilization of natural resources in rivers, lakes, bays and lagoons

g)Ownership, operation and management of cockpits

h)Manufacture of firecrackers and other pryrotechnic devices.

28. Are there business activities wherein up to twenty five percent (25%) foreigners ownership is
allowed?

Yes. Participation of foreigners to the extent of 25% is allowed in the following:

a)Private radio communications network

b)Private recruitment whether for local of overseas recruitment

c)Contract for the construction and repair of locally funded public works

d)Contracts for the construction of defense related structures.

29. Are there business activities wherein up to thirty percent foreigner's ownership is allowed?

Yes. It's the business activity of advertising.

30. Are there business activities wherein up to forty percent of foreigner's owenship is allowed?

Yes. These business activities are as follows:

a)Exploration, development and utilization of natural resources

b)Ownership of private lands

c)Operation of public utilities

d)Educational institutions other than those established by religious groups and mission boards
e)Culture, production, milling, processing, trading except retailing of rice and corn and acquiring, by
barter, purchase or otherwise, rice and corn and the by-products thereof

f)Contracts for the supply of materials, goods and commodities to government-owned or controlled
corporation, company, agency or municipality

g)Facility operator of an infrastructure or a development facility requiring a public utility franchise

h)Operation of deep-sea commercial fishing vessel

i)Adjustment companies

j)Ownership of condominium units

k)Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine
National Police (PNP) Clearance

l)Manufacture, repair, storage and/or distribution of products requiring Deparment of National Defense
(DND) clearance

m)Manufacture and distribution of dangerous drugs

n)Sauna and steam bathhouses, massage clinics and like other activities regulated by law because of
risks posed to public health and morals

o)Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000

p)Domestic market enterprises, which involved advanced technology or employ at least fifty direct
employees with paid-in equity capital or less than the equivalent of US$100,000

31. Are there business activities wherein foreigner's ownership could be more than forty (40)
percent up to one hundred percent?

Yes.

a)Export enterprises and

b)Domestic market enterprises with paid-in equity capital of at least the equivalent of US$200,000

c)Domestic market enterprises, which involved advanced technology or employ at least fifty direct
employees with paid-in equity capital of at least the equivalent of US$100,000

32. Are practices of professions allowed in corporate form?

The general rule is NO. However, there are practices of professions allowed now in corporate form as
follow

a)Practice of architecture

b)Practice of interior design

c)Practice of real estate services

d)Practice of customs brokerage

33. What is authorized capital stock?

This is the total amount of shares a corporation is allowed to issue if the shares have a par value. If the
shares do not have a par value, the corporation does not have an authorized capital stock but it has an
authorized number of shares it may issue.

34. What is subscribed capital stock?

It refers to the total number of shares issued or subscribed by the stockholders.

35. What do you mean by pre-incorporation subscription?

It refers to the required number of shares to be subscribed for purposes of incorporation. The pre-
incorporation subscription should be stated in the Articles of Incorporation.

36. Is there a minimum amount of subscribed capital stock?

Yes. Under the Corporation Code, at least 25% of the amount subscribed must be paid-up.

37. Is there a minimum amount of paid-up capital stock?

Yes. Under the Corporation Code, at least 25% of the amount subscribed must be paid-up and in no case
be less than Five Thousand (P5,000.00) Pesos. The foregoing amount however shall not apply, if there is
a law, rule or regulation of other regulatory agencies requiring a higher minimum paid-up capital.

38. What is paid-in capital?

It refers to the amount paid by subcribers over and above the par value of shares or the issue value in
no-par value shares.

39. What are the considerations for issuance of shares?

Under Sec. 62 of the Corporation Code, stocks shall not be issued for a consideration less than the par or
issued price thereof. Consideration for the issuance of stock may be any or a combination of any two or
more of the following:

(1)Actual cash paid to the corporation;

(2)Property, tangible or intangible, actually received by the corporation and necessary or convenient for
its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued;

(3)Labor performed for or services actually rendered to the corporation;

(4)Previously incurred indebtedness of the corporation;

(5)Amounts transferred from unrestricted retained earnings to stated capital; and

(6)Outstanding shares exchanged for stocks in the event of reclassification or conversion. Where the
consideration is other than actual cash, or consists of intangible property such as patents or copyrights,
the valuation thereof: shall intially be determined by the incorporators or the board of directors, subject
to the approval by the Securities and Exchange Commission.

40. What is contributed capital?

It refers to the amount contributed to non-stock corporations.

41. Is there a minimum amount for contributed capital in non-stock corporations?

Any amount will suffice as a general rule. However, in the case of registration of a "foundation", the
minimum contributed capital is P1,000,000.00. The amount is required to be deposited in the bank in
the name of the treasurer-in-trust. For registration, a bank certificate of deposit is required for the
P1,000,000.00.

42. If the payment is other than cash for shares, what are the additional requirements for each and
every consideration for the issuance of shares?

The additional requirements are as follow:

a.Land and/Building/Condominium unit

1. Detailed schedule of the property showing the registered owner, location area, TCT/CC No., tax
declaration No., and the basis of transfer value (appraised/market value/assessed value/zonal value)
certified by the treasurer

2. Copy of TCT/CCT and tax declaration sheet certified by Register of Deeds and Assessor's Office,
respectively

3. Latest zonal value certfied by BIR, if transfer value is based on zonal value

4. Appraisal report by authorized appraiser, if transfer value is bases on appraised value (not more than
6 month old)

5. Deed of assignment

6. If property is mortgaged, submit mortgagee/credits certification on the outstanding loan balance and
written consent to the transfer of property

7. For assignment of building where assignsor is nor owner of the land, submit lease contract on land
and consent of landowner to the transfer

8. Affidavit of Undertaking by an incorporator of the corporation to submit the proof of transfer to the
corporation within the prescribed period
a.Untitled Lands

1. Certification of the Barangay Chairman where the property is located, and at least two (2) adjoinining
property owners or possessors, attesting that the subject land had been in the possessor's open,
peaceful, continuous and uninterrupted exclusive possession in the concept of an owner for at least
thirty (30) years and the possessor had been introduced improvements thereof, if any

2. Duplicate original or certified true copies of the tax declaration sheets

3. Latest realty tax receipts

4. Affidavit by the transferor attesting continuous and open possession of the property and that the
property is not tenanted

5. Affidavit of Non-Tenancy executed by Barangay Chairman of place where the property is located

6. Duplicate original or certified true copies of any deed, conveyance, mortgage, lease or other voluntary
instrument affecting the property recorded in the Register of Deeds for the province or city where the
land is situated

7. Affidavit executed by the transferor attesting to the:

a. Existence (or non-existence) of easements over the untitled property

b. Kind/description of the easement and its location

c. Whether the transferor is the dominant estate or the servient estate, by virtue of such easements

8. Under oath undertaking of the tranferor/subscriber to answer for any liability that the corporation
might incur by virtue of the acceptance of said property as paid-up capital

9. Clearance or certification from the Department of Agrarian Reform (DAR) attesting the following:

a. There is no other claimant to the untitled land

b. It has not issued any Certificate of Land Ownership Award (CLOA) over the property to any other party
or

c. The land is exempt from the coverage of the Comprehensive Agrarian Reform Program (CARP)

10. Blue print Survey of the Plan as approved by the Bureau of Lands

11. Detailed schedule of the property showing its registered owner, location, area, tax declaration
number and the basis of tranfers value (market value/assessed value/zonal value or appraised value)

12. Latest zonal valuation certified by BIR, if transfer value is based on zonal value

13. Appraisal report by authorized appraiser, if transfer value is based on appraised value (not more
than 6 month old)

14. Deed of assignment

15. Affidavit of undertaking to submit certified true copy of the original certificate of title in the name of
tranferee-corporation within one (1) year from the date of receipt of the approval of the application

c.Inventories/Furniture/Personal Properties

1. Detailed schedule of the properties showing the description and the transfer value certified by the
treasurer

2. Deed of assignment

d.Heavy Equipment and Machinery

1. Detailed schedule of the property showing the description and transfer value certified by the
treasurer
2. Appraisal report by authorized appraiser (not more than 6 month old). If the property is imported,
valuation-report with description of the property by the Bangko Sentral ng Pilipinas.

3. Deed of assignment

e.Shares of Stock

1. Detailed schedule of the shares of stock showing the name of stockholder, stock certificate number,
number of shares and the basis of transfer value whether market or book value certified by the
treasurer

2. Audited financial statements of the investee company as of the last fiscal year stamped received by
BIR and SEC

3. Deed of Assignment

4. Certification by the Corporate Secretary of the investee company that the shares of stock are
outstanding in the name of assignor

5. Photocopy of the stock certificate (present original for verification)

6. Latest market quotation in newspaper or certification from stock exchange/broker as to latest market
price of the shares of stock (if listed in the Stock Exchange)

7. Affidavit of Undertaking by an incorporator of the corporation to submit the required proof of the
transfer within the prescribed period

f.Motor Vehicle

1. Detailed schedule of the motor vehicle showing the registered owner, make/model, plate number,
chassis number, motor number, certificate of registration number and market value certified by the
treasurer
2. Photocopy of the Certificate of Registration and latest Official Receipt of Registration (present the
original for verification)

3. Appraisal report by authorized appraiser (not more than six month old)

4. Deed of assignment

5. Affidavit of undertaking by an incorporator of the corporation to submit the required proof of transfer
within the prescribed period

g.Sea Vessel/Aircraft

1. Detailed schedule of the vessel/aircraft showing registered owner, registry number, technical
description, and appraised value certified by the treasurer

2. Certified true copy of the certificate of ownership

3. Appraisal report by authorized appraiser (not more than 6 month old)

4. Certificate of seaworthiness/airworthiness issued by appropriate government agency

5. Deed of assignment

6. Affidavit of Undertaking by an incorporator of the corporation to submit the required proof of

transfer within the prescribed period

h.Intangible
1. Photocopy of the System Purchase Agreement or any documents as proof of ownership (for a
software)

2. Copy of certificate of Registration of Intellectual Property Rights, mining permit for mining claims or
rights

3. Appraisal report by an accredited appraisal company or licensed Filipino mining engineer for mining
rights/claims (not more than 6 month old)

4. Deed of Assignment

i.Net Assets (by way of conversion of single proprietorship/partnership into corporation or by spin-off)

1. Audited Financial Statements (AFS) of single proprietorship/partnership/division of a corporation for

spin-off as of last fiscal year

2. Long-form audit report of item no. 1

3. Deed of Assignment of the assets and liabilities to the corporation

4. List of creditors showing the amount due to each creditor as of date of the AFS certified by the auditor
or certified under oath by the company accountant and written consent of creditors

5. Detailed schedule of properties with certificate of registration/title and their respective book values
certified by the company accountant

6. Photocopy of the certificate of registration of the motor vehicles (present original for verification)

7. Copy of TCT/CCT and tax declaration sheets certified by the Register of Deeds and Assessor's Office,
respectively
8. Photocopy of stock certificate (present original for verification)

9. DTI Certificate of Registration (for single proprietorship)

10. Affidavit of Undertaking by an incorporator of the corporation to submit the required proof of
transfer within the prescribed period

43. What are the classifications of shares of stock?

The shares of stock may be classified as common, founders, preferred, par or no-par value shares, voting
or non-voting shares and redeemable shares.

44. What are the features of common shares?

Common shares must always be voting shares. Common shares can be par value shares or no-par
shares.

45. What are the features of preferred shares?

Preferred shares must always be par value shares. Preferred shares can be voting or non-voting shares.
The preferred shareholders may be given preference in the distribution of the assets of the corporation
in case of liquidation and in distribution of dividends, or such other preferences as may be stated in the
articles of incorporation.

46. What are the features of founders'shares?

Founders'shares classified as such in the articles of incorporation may be given certain rights and
privileges not enjoyed by the owners of other stocks, provided that where the exclusive right to vote
and be voted for in the election of directors is granted, it must be for a limited period not to exceed five
(5) years subject to the approval of the Securities and Exchange Commission. The five-year period shall
commence from the date of the aforesaid approval by the Securities and Exchange Commission.

47. What are the features of redeemable shares?

Redeemable shares may be issued by the corporation when expressly so provided in the articles of
incorporation. They may be purchased or taken up by the corporation upon the expiration of a fixed
period, regardless of the existence of unrestricted retained earnings in the books of the corporation, and
upon such other terms and conditions as may be stated in the articles of incorporation, which terms and
conditions must also be stated in the certificate of stock representing said shares.

48. What are the features of no-par value shares?

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the
holder of such shares shall not be liable to the corporation or to its creditors in respect thereto. Shares
without par value may not be issued for a consideration less than the value of Five (5.00) pesos per
share. The entire consideration received by the corporation for its no-par value shares shall not be
available for distribution as dividends.

49. Are there corporate entities not allowed to issue no-par value shares?

Yes. They are banks, trust companies, insurance companies, public utilities, and building and loan
associations.

50. Do we allow domestic corporations as hundred percent owned by foreigners?

Yes. The registration will be under the Foreign Investment Act of 1991 (FIA), as amended by R.A. 8179.
The Foreign Investment Negative List will serve as guide to allow registration. The corporation may be
registered as export or as domestic market enterprise.

51. What is an export enterprise under FIA?

The term "export enterprise" shall mean an enterprise wherein a manufacturer, processor or service
(including tourism) enterprise exports sixty percent (60%) or more of its output, or wherein a trader
purchases products domestically and exports sixty percent (60%) or more of such purchases.

52. What is domestic market enterprise under FIA?

The term "domestic market enterprise" shall mean an enterprise, which produces goods for sale, or
renders services to the domestic market entirely or if exporting portion of its output fails to consistency
export at least sixty percent (60%) thereof.

53. What are the requirements for treasurer?

Treasurer must be Filipino citizen in corporations with fully or partly nationalized business activities in
view of the provisions of the Anti-Dummy Law. However, in non-nationalized business activities, the
foreigner is allowed as treasurer.

54. What is a transfer clause?

It is stated as follows in the articles of incorporation: No transfer of stock or interest which shall reduce
the ownership of Filipino citizens to less than the required percentage of the capital stock as provided by
existing laws shall be allowed or permitted to be recorded in the proper books of the corporation and
this restriction shall be indicted in all stock certificates issued by the corporation.

55. When is a transfer clause required in the articles of incorporation?

It is required to be set forth in the articles of incorporation of corporations which will engage in any
business or activity reserved for Filipino citizens.

56. Is there a need to have AI notarized?

Yes. Notarial Acknowledgement of the Articles of Incorporation is required under the Corporation Code.

57. What are the contents of By-laws?

A private corporation may provide in its by-laws for:

(1)The time, place and manner of calling and conducting regular or special meetings of the directors or
trustees;

(2)The time and manner of calling and conducting regular or special meeting of the stockholders or
members;

(3)The required quorum in meeting of stockholders or member and the manner of voting therein;

(4)The form for proxies of stockholders and members and the manner of voting them;

(5)The qualifications, duties and compensation of directors or trustees, officers and employees;

(6)The time for holding the annual election of directors or trustees and the mode of manner of giving
notice thereof

(7)The manner of election or appointment and the term of office of all officers other than directors or
trustees;

(8)The penalties for violation of the by-laws;

(9)In the case of stock corporation, the manner of issuing stock certificates; and

(10)Such other matters as may be necessary for the proper or convenient transactions of its corporate
business and affairs.

58. What is the requirement on annual meeting?

The annual meeting date should be a specific date (i.e. January 28).

59. What is the requirement on the fiscal year?

The fiscal year could be calendar year or a twelve-month period.

61. If the BL is filed after incorporation, what are the requirements?

Three copies of By-laws signed by stockholders representing majority of the outstanding capital stock or
majority of the members in case of non-stock corporation and the adooption was certified by majority of
the board and the corporate secretary that the by-laws was adopted by the votes required under the
Corporation Code.

60. Can BL be filled simultaneous with the Articles of Incorporation?

Yes. The By-laws must be signed by all of the incorporators.

Registration of a Partnership

1. What is a partnership?

Article 1767 of the Civil Code defines a partnership. Thus: "Article 1767. By the contract of partnership
two or more persons bind themselves to contribute money or industry to a common fund, with the
intention of dividing the profit among themselves."
A partnership exists where two or more individuals' combine their capital, property, skill or labor, or all
of these, for the transaction of a lawful business for gain, upon an understanding that profits or losses
shall be shared or borne by them in certain proportions.

2. How is partnership distinguished with corporation?

In Creation: A partnership is created by mere agreement of the parties, being a consensual contract and
governed by Articles 1767 to 1867 of the Civil Code of the Philippines

A corporation is created by operation of law, which is the Corporation Code of the Philippines. It is now
created by the mere agreement of the incorporators. It is the State, which will authorize its
incorporation to be recognized as a legal entity.

In number of persons:

Partnership may be formed by only two (2) persons.

A corporation requires at least five (5) incorporators for purposes of incorporation.

In the acquisition of juridical personality:

A partnership commences from the time of the execution of the Articles of Partnership or the contract,
unless it is otherwise stipulated, and its recording with the Securities and Exchange Commission (SEC) is
not necessary to give it juridical personality.

A corporation acquires juridical personality only from the date of issuance of the Certificate of
Incorporation by the SEC.

In management:

In a partnership, each partner can act for the partnership. The general rule is that each partner is an
agent of the partnership and his acts and contracts are binding thereon unless otherwise provided in the
articles of partnership.
In a corporation, the management of corporate affairs is vested in a board of directors or trustees.

In liability of members:

In a partnership, the partners are personally liable for the full extent of the debts of the partnership.
This is based on the rule that the acts and contracts of a partnership are those of the individual
members thereof, except that the limited partners as such are not bound by the obligations of the
partnership (Article 1843, Civil Code).

In a corporation, the stockholders cannot be made personally liable for the debts of a corporation
beyond the amount of their subscriptions. This is based on the rule that the debts of a corporation are
the debts of a legal entity and are not the debts of the individual stockholders.

In duration:

A partnership may exist indefinitely under the articles of partnership, which is known as a "partnership
at will".

A corporation can exist only for fifty (50) years and extendable to more than fifty (50) years in any one
instance.

In effect of death of a member:

In a partnership where there are only two (2) partners, the death of one partner automatically dissolves
the partnership.

In a corporation, death of a stockholder does not dissolve a corporation because one of the attributes of
a corporation is the right to succession.

In manner of dissolution:

A partnership can be dissolved at any time by the will of any or all of the partners.
In a corporation, a corporation may be dissolved only with the approval and consent of the State.

3. Does SEC register joint ventures?

Two or more corporations may enter into a joint venture through a contract or agreement if the nature
of the venture is in line with the business authorized by their charters, which contract/agreement need
not be registered with the SEC, provided the joint venture will not result in the formation of a new
partnership or corporation.

Thus, if the joint venture/consortium results in the formation of a corporation or partnership, the same
has to be registered with the Commission.

4. What are the different kinds of partnership?

We have the general partnership, limited partnership, partnership at will and general professional
partnership.

5. What is a general partnership?

General partnership: The general partners are liable for the contracts and obligations of the partnership
pro-rata with their individual private or personal property after exhaustion of partnership assets. A
general partnership will never have a limited partner.

6. What is a limited partnership?

Limited partnership: A partnership composed of one or more general partners and one or more limited
partners. The limited partner is only liable to the extent of the capital contributed by him for the
contracts and obligations of the partnership. A limited partnership should always have one or more
general partners. Its partnership name must contain the word "Limited "or "Ltd.".

Partnership at Will: A partnership whose term of existence is indefinite. It may be dissolved at will by
any partner, at any time he pleases and at a moment's notice.

7. What is a general professional partnership?

A general professional partnership is a partnership formed for the exercise of a profession, like law,
accounting, engineering, architecture.

8. What are the requirements for registration of a partnership?

Requirements for Registration of a Partnership

9. What is an Articles of Partnership?

The Articles of Partnership is the name given to an instrument in writing by which the parties enter into
a contract or agreement of partnership. The principal parts of Articles of partnership are as follows:
a. Partnership name under which the company shall transact business

b. Names, nationalities and residences of the partners. If it is a limited partnership, the kind of partner,
whether general or limited

c. Principal office of the partnership

d. Purpose or purposes of the partnership

e. Duration or term of existence of the partnership

f. Capital of the partnership

g. Transfer clause

h. Undertaking to change partnership name

i. Other provisions, conditions, terms and stipulations

j. Signatures of the partners

k. Notarial Page

10. Is there a fill-up form for Articles of Partnership?

Form for Articles of Partnership

11. Can a foreigner be a partner in a partnership?

Yes. Subject to allowable foreign partners interest under Foreign Investment Negative List

12. Are corporations allowed as partners?

The general rule is that a corporation cannot enter into a contract of partnership with an individual or
another company. A corporation has no implied power to become partner with an individual or another
corporation.

Otherwise the corporation would be bound by the acts of persons who are not its duly-appointed and
authorized agents and officers, contrary to the rule that a corporation shall manage its own affairs
through its board of directors.

However, if the Articles of Incorporation of a corporation expressly authorizes it to enter into a contract
of partnership with an entity, this can be an exception to the general rule.

13. Are foreign corporations allowed as partners?

Yes. A foreign corporation may enter into a contract of partnership, provided it is authorized to do so by
its charter or statute.

Registration of a Partnership
1. What is a partnership?

Article 1767 of the Civil Code defines a partnership. Thus: "Article 1767. By the contract of partnership
two or more persons bind themselves to contribute money or industry to a common fund, with the
intention of dividing the profit among themselves."

A partnership exists where two or more individuals' combine their capital, property, skill or labor, or all
of these, for the transaction of a lawful business for gain, upon an understanding that profits or losses
shall be shared or borne by them in certain proportions.

2. How is partnership distinguished with corporation?

In Creation: A partnership is created by mere agreement of the parties, being a consensual contract and
governed by Articles 1767 to 1867 of the Civil Code of the Philippines

A corporation is created by operation of law, which is the Corporation Code of the Philippines. It is now
created by the mere agreement of the incorporators. It is the State, which will authorize its
incorporation to be recognized as a legal entity.

In number of persons:

Partnership may be formed by only two (2) persons.

A corporation requires at least five (5) incorporators for purposes of incorporation.

In the acquisition of juridical personality:

A partnership commences from the time of the execution of the Articles of Partnership or the contract,
unless it is otherwise stipulated, and its recording with the Securities and Exchange Commission (SEC) is
not necessary to give it juridical personality.

A corporation acquires juridical personality only from the date of issuance of the Certificate of
Incorporation by the SEC.

In management:
In a partnership, each partner can act for the partnership. The general rule is that each partner is an
agent of the partnership and his acts and contracts are binding thereon unless otherwise provided in the
articles of partnership.

In a corporation, the management of corporate affairs is vested in a board of directors or trustees.

In liability of members:

In a partnership, the partners are personally liable for the full extent of the debts of the partnership.
This is based on the rule that the acts and contracts of a partnership are those of the individual
members thereof, except that the limited partners as such are not bound by the obligations of the
partnership (Article 1843, Civil Code).

In a corporation, the stockholders cannot be made personally liable for the debts of a corporation
beyond the amount of their subscriptions. This is based on the rule that the debts of a corporation are
the debts of a legal entity and are not the debts of the individual stockholders.

In duration:

A partnership may exist indefinitely under the articles of partnership, which is known as a "partnership
at will".

A corporation can exist only for fifty (50) years and extendable to more than fifty (50) years in any one
instance.

In effect of death of a member:

In a partnership where there are only two (2) partners, the death of one partner automatically dissolves
the partnership.

In a corporation, death of a stockholder does not dissolve a corporation because one of the attributes of
a corporation is the right to succession.
In manner of dissolution:

A partnership can be dissolved at any time by the will of any or all of the partners.

In a corporation, a corporation may be dissolved only with the approval and consent of the State.

3. Does SEC register joint ventures?

Two or more corporations may enter into a joint venture through a contract or agreement if the nature
of the venture is in line with the business authorized by their charters, which contract/agreement need
not be registered with the SEC, provided the joint venture will not result in the formation of a new
partnership or corporation.

Thus, if the joint venture/consortium results in the formation of a corporation or partnership, the same
has to be registered with the Commission.

4. What are the different kinds of partnership?

We have the general partnership, limited partnership, partnership at will and general professional
partnership.

5. What is a general partnership?

General partnership: The general partners are liable for the contracts and obligations of the partnership
pro-rata with their individual private or personal property after exhaustion of partnership assets. A
general partnership will never have a limited partner.

6. What is a limited partnership?

Limited partnership: A partnership composed of one or more general partners and one or more limited
partners. The limited partner is only liable to the extent of the capital contributed by him for the
contracts and obligations of the partnership. A limited partnership should always have one or more
general partners. Its partnership name must contain the word "Limited "or "Ltd.".

Partnership at Will: A partnership whose term of existence is indefinite. It may be dissolved at will by
any partner, at any time he pleases and at a moment's notice.

7. What is a general professional partnership?

A general professional partnership is a partnership formed for the exercise of a profession, like law,
accounting, engineering, architecture.

8. What are the requirements for registration of a partnership?

Requirements for Registration of a Partnership

9. What is an Articles of Partnership?

The Articles of Partnership is the name given to an instrument in writing by which the parties enter into
a contract or agreement of partnership. The principal parts of Articles of partnership are as follows:

a. Partnership name under which the company shall transact business

b. Names, nationalities and residences of the partners. If it is a limited partnership, the kind of partner,
whether general or limited

c. Principal office of the partnership

d. Purpose or purposes of the partnership

e. Duration or term of existence of the partnership

f. Capital of the partnership

g. Transfer clause

h. Undertaking to change partnership name

i. Other provisions, conditions, terms and stipulations

j. Signatures of the partners

k. Notarial Page

10. Is there a fill-up form for Articles of Partnership?

Form for Articles of Partnership

11. Can a foreigner be a partner in a partnership?

Yes. Subject to allowable foreign partners interest under Foreign Investment Negative List

12. Are corporations allowed as partners?

The general rule is that a corporation cannot enter into a contract of partnership with an individual or
another company. A corporation has no implied power to become partner with an individual or another
corporation.

Otherwise the corporation would be bound by the acts of persons who are not its duly-appointed and
authorized agents and officers, contrary to the rule that a corporation shall manage its own affairs
through its board of directors.

However, if the Articles of Incorporation of a corporation expressly authorizes it to enter into a contract
of partnership with an entity, this can be an exception to the general rule.

13. Are foreign corporations allowed as partners?

Yes. A foreign corporation may enter into a contract of partnership, provided it is authorized to do so by
its charter or statute.

Licensing of Foreign Corporations

1. What is a Foreign Corporation?

A foreign corporation is one formed, organized or existing under any laws other than those of the
Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or
state. It shall have the right to transact business in this country in accordance with this Code and a
certificate of authority from the appropriate government agency. (Section 123, CCP)

2. What are the kinds of foreign corporation?

Branch Office of a foreign company carries out the business activities of the head office and derives
income from the host country; (IRR of Republic Act No. 7042,Foreign Investment Act of 1991)

Representative or liaison office deals directly with the clients of the parent company but does not derive
income from the host country and is fully subsidized by its head office. It undertakes activities such as
but not limited to information dissemination and promotion of the company's product as well as quality
control of products. (IRR of Republic Act No. 7042, Foreign Investment Act of 1991)

Regional Operating Headquarters (ROHQ) shall mean a foreign business entity which is allowed to
derived income in the Philippines by performing qualifying services to its affiliates, subsidiaries or
branches in the Philippines, in the Asia-Pacific Region and other foreign markets. (R.A. No. 8756, Nov.
23, 1999)

Regional or Area Headquarters shall mean an office whose purpose is to act as an administrative branch
of a multinational company engaged in international trade which principally serves as a supervision,
communications and coordination center for its subsidiaries, branches or affiliates in the Asia-Pacific
Region and other foreign markets and which does not earn or derive income in the Philippines (R.A. No.
8756, Nov. 23, 1999)

3. What are the requirements for Branch and Representative Office?

Downloadable Application Forms:

Form F-103 - for Branch Office

Form F-104 - for Representative Office

Form F-108 - for Non-Stock

View Documentary Requirements

4. How much is the minimum paid-up capital for Domestic Market?

Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent
of Two hundred thousand US dollars (US$200,000.00), are reserved to Philippine nationals: Provided,
That if: (1) they involved advanced technology as determined by the Department of Science and
Technology; or (2) they employ at least (50) direct employees, then a minimum paid-in capital of One
hundred thousand US dollars (US$100,000.00) shall be allowed to non-Philippine nationals.(Sec,
8,R.A.No. 7042, Foreign Investment Act of 1991)

5. How much is the filing fee for Application of Stock Corporations? for Branch office?

The filing fee is 1% of the actual inward remittance of the corporation converted into Philippine
Currency but not less than P 3,000.00.

6. How much is the filing fee for Representative office?

The filing fee is 1/10 of 1% of the actual inward remittance of the corporation into Philippine currency
but not less than P3,000.00.

7. How much is the filing fee for non-stock foreign corporation?

The filing fee is P3,000.00, plus 1% of the filing fee (LRF).

8. How much is the filing fee for application for area or regional headquarters?

The filing fee is P5,000.00, plus 1% of the filing fee (LRF).

9. How much is the filing fee for application for Regional operating headquarters or petition for
conversion of an Area or Regional Headquarters into a Regional Operating headquarters?

The filing fee is 1% of the actual remittance but not less than 1% of peso equivalent of $200,000 at the
time of remittance.

10. How much is the filing fee for Petition for Amendment of License of license of a foreign
corporation?

The filing fee is P3,000.00, 1% of the filing fee (LRF).

11. What provisions can be subject of an amendment in the Articles of Incorporation and By-laws of
a Foreign Corporation?

Change of Corporate Name;

Change of Purpose;

Change of Resident Agent;

Change of Address;

Change of Fiscal year.

12. What are the requirements for change of Foreign Corporation's name?

Authenticated board resolution approved and signed by the Directors;

Name of Verification slip;

Undertaking to Change Name;

Authenticated Articles of Incorporation;

Petition/Letter

13. How much is the filing fee for change of name?

The filing fee is P2,020.00. However, if the parent company effected change of name abroad, there is an
additional payment amounting to P2,020.00.

14. May the Foreign Corporation add, change or modify their purpose? How?

Yes, by way of filing of an application for Amendment of purpose.

15. What are the requirements for Change of purpose?

Authenticated Board Resolution approved and signed by majority of the Directos;

Amended Articles of Incorporation;

Petition/Letter.

16. How much is the filing fee for change of purpose?

The filing fee is P2,020.00

17. What is the requirement/s for Change of resident agent?

Authenticated Board Resolution (the substituted agent must be specified);

Acceptance of New Resident Agent;

Petition/Letter for Change of Resident Agent

18. How much is the filing fee for change of resident?

The filing feee is P1,010.00.

19. What is the requirement/s for Change of address or change of fiscal year?

Change of address or change of fiscal year can be amended by filing a Notification Update Form

Anti-dummy Law Related Matters

1. What is the coverage of the Anti-dummy Law?

Section 2-A of the Anti-Dummy Law prohibits the employment by any person, corporation, or
association of an alien, who shall intervene in the management, operation, administration or control
thereof, whether as officer, employee, laborer, when the exercise or enjoyment of the property or of
the franchise, privilege, or business engaged in by such person, corporation or association “is expressly
reserved by the Constitution or the law to the citizens of the Philippines” or “corporations or
associations at least 60%of the capital of which is owned by such citizens.” Hence, the Anti-Dummy Law
comes into operation if the corporation concerned is engaged in a wholly or partially nationalized
activity.
2. If the corporation is covered by Anti-dummy Law, can a foreigner be elected as an director? or
officer?

A foreigner may elected as board of directors in proportion to their allowable participation.

However, The foreigner cannot be an officer in a corporation engaged in a nationalized or partly

nationalized activity within the coverage of Anti-dummy Law.

Filing an Appeal

1. What department do you file your appeal to en banc?

Your Appeal should be filed before the Office of General Counsel

2. What are the documentary requirements of filing an appeal?

a) A Notice of Appeal;

b) Memorandum of Appeal;

c) A Verified Pleading;

d) Secretary’s Certificate; and

e) A Certified True Copy of the Order being appealed.

3. How much is the appeal fee?

In pursuance of the MC No. 03 s.2017: Consolidated Schedule of Fees and Charges, the amount is Three
Thousand Pesos Only (Php3,000.00).

Foreign Investment Act Matter

1. How would I know if an activity is a nationalized or partly nationalized activity?

Republic Act No. 7042, also known as the “Foreign Investments Act of 1991”, as amended by R.A. 8179,
provides for the formulation of a Regular Foreign Investment Negative List, covering investment
areas/activities which are open to foreign investors and/or reserved to Filipino nationals.

The latest released, as of 2015, is Executive Order No. 184 “The Tenth Regular Foreign Investment
Negative List”.

A. What is an Intra-corporate controversy?

Under Section 5 of Presidential Decree No. 902-A, intra-corporate controversies are those controversies
arising out of intra-corporate or partnership relations, between and among stockholders, members or
associates; between any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation, partnership or
association and the State insofar as it concerns their individual franchise or right to exist as such entity.
It also includes controversies in the election or appointments of directors, trustees, officers or managers
of such corporations, partnerships or associations. (Matling Industrial and Commercial Corporation v.
Coros, G.R. No. 157802, 13 October 2010, 633 SCRA 12)

A. What Certification Seminars are offered by the Commission? What are the
requirements/fees for registration and schedules of the seminars?

1. The Commission offers the following Certification Seminars as prerequisite to the Licensure
Examination:

a) Associated Person Certification Program (APCP), PhP5,000

b) Certified Securities Representative Certification Program (CSRCP), PhP5,000

2. The SEC Economic Research and Training Department (ERTD) conducts a total of six (6) seminars
per year for APCP and two (2) per year for CSRP. Definite schedules for each seminar are announced on
the SEC website. Special sessions with a minimum of 15 participants, may be requested through a formal
letter addressed to ERTD Officer-in-Charge Lilia O. Pinzon. Such sessions may be conducted in Metro
Manila or in areas where there are SEC extension offices (Tarlac, Baguio, Cagayan de Oro, Iloilo, Davao,
Legaspi, Cebu and Zamboanga).