revised CORP.

THEORY Aug…
REVISED CORPORATION CODE

Corporation
an artificial being created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence.

Attributes of a Corporation:
1. It is an artificial being
•Doctrine of piercing the veil of corporate entity or corporate fiction
This is the doctrine to the effect that the separate personality of a corporation may be
disregarded if such entity is used to defeat public convenience, justify wrong, protect fraud, or defend
crime
2. It is created by operation of law.
3. It has the right of succession.
4. It has the powers, attributes and properties expressly authorized by law or incident to its
existence.
•Doctrine of limited capacity
A corporation can exercise only the powers expressly conferred upon it by law and its articles
of incorporation, those implied from such powers expressly granted, and those that are
incident to its existence.

Classification of corporations
1. As to whether shares of stock are issued or not
a. Stock corporation
b. Non-stock corporation
2. As to the state or country under whose laws it was created
a. Domestic corporation
b. Foreign corporation
3. As to number of persons composing them
a. Corporation aggregate
b. Corporation sole
4. As to whether its purpose is public or private
a. Public corporation
b. Private corporation
5. As to whether its purpose is religious or not
a. Ecclesiastical or religious corporation
b. Lay Corporation
6. As to whether its purpose is charitable or not
a. Eleemosynary corporation
b. Civil corporation
7. As to their legal right to corporate existence
a. De jure corporation
 a. De jure corporation
b. De facto corporation
8. As to their relation to another corporation or other corporations
a. Parent or holding corporation
One which owns the shares of another corporation and having power, directly or
indirectly, over the latter including the election of the directors thereof.
b. Subsidiary corporation
One whose shares of stock are owned by another corporation, called the parent
corporation, which has the power to elect its directors.
9. As to whether its shares may be held by the public or not
a. Close corporation
b. Open corporation
10. Other classifications
•Corporation by prescription
•Corporation by estoppels

Components of a corporation
1. Corporators – stockholders or members.
2. Incorporators – those stockholders or members mentioned in the articles of incorporation
as originally forming and composing the corporation and who are signatories of such
document.

Number and Qualifications of Incorporators

a. Any person, partnership, association or corporation, singly or jointly with others but not
more than 15 in number, may organize a corporation for any lawful purpose or purposes:
b. Incorporators who are natural persons must be of legal age.

● Each incorporator of a stock corporation must own or be a subscriber to at least one

(1) share of the capital stock.
3. Stockholders
4. Members

Share of stock
A share of stock is one of the units into which the capital stock of the corporation is divided.
Stock certificate
A stock certificate is the written acknowledgment by the corporation of the stockholder’s
interest in the corporation and its property.
Rules on redeemable shares
a. They may be issued by the corporation only if expressly provided in the articles of
incorporation.
b. They may be deprived of voting rights.
c. 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.
d. The terms and conditions for their redemption must be stated in the articles of
incorporation and the stock certificate representing the said shares.
Rules on founders’ shares
Rules on founders’ shares
a. Founders’ shares must be classified as such in the articles of incorporation.
b. They may be given rights and privileges not enjoyed by other shares subject to the
following limitations:
1) If the exlusive right to vote and be voted for in the election of directors is
granted, it must be for a limited period not to exceed 5 years from the date of
incorporation.
2) Such exclusive right shall not be allowed if its exercise will violate the “Anti-
Dummy Law”; the “Foreign Investments Act of 1991”; and other pertinent laws.
Rules on treasury shares
a. They shall have no voting rights as long as they remain in the Treasury.
b. Although they are part of the subscribed stock, they are not considered outstanding
shares.
c. Being owned by the corporation, they are not entitled to dividends.
d. They may again be disposed of for a reasonable price fixed by the board of directors.

Watered stock – those issued without consideration or with no adequate consideration.

Voting shares – those entitled to vote in the meetings of the corporation.
Non-voting shares – those without voting rights, except in certain cases.

Non-voting shares may nevertheless vote in the following matters:

1. Amendment of the articles of incorporation.
2. Adoption and amendment of by-laws.
3. Sale, lease, exchange, mortgage pledge or other disposition of all or substantially
all of the corporate property.
4. Incurring, creating or increasing bonded indebtedness.
5. Increase or decrease of capital stock.
6. Merger or consolidation of the corporation with another corporation or other
corporations.
7. Investments of corporate funds in another corporation or in business.
8. Dissolution of the corporation.

Corporate Term
A corporation shall have perpetual existence unless its articles of incorporation provides
otherwise.
Note:
Corporations with certificates of incorporation issued prior to the effectivity of this Code, and
which continue to exist, shall have perpetual existence, unless the corporation, upon a vote of its
stockholders representing a majority of its outstanding capital stock, notifies the Commission that it
elects to retain its specific corporate term pursuant to its articles of incorporation: Provided, that any
change in the corporate term is without prejudice to the appraisal right of dissenting stockholders.
A corporate term for a specific period may be extended or shortened by amending the articles
of incorporation: Provided, That no extension may be made earlier than three (3) years prior to the
original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as
may be determined by the Commission: Provided, further, That such extension of the corporate term
shall take effect only on the day following the original or subsequent expiry date(s).
A corporation whose term has expired may apply for a revival of its corporate existence,
together with all the rights and privileges under its certificate of incorporation and subject to all of its
together with all the rights and privileges under its certificate of incorporation and subject to all of its
duties, debts and liabilities existing prior to its revival. Upon approval by the Commission, the
corporation shall be deemed revived and a certificate of revival of corporate existence shall be
issued, giving it perpetual existence, unless its application for revival provides otherwise.

No application for revival of certificate of incorporation of banks, banking and quasi-banking

institutions, preneed, insurance and trust companies, nonstock savings and loan associations,
pawnshops, corporations engaged in money service business, and other financial intermediaries shall
be approved by the Commission unless accompanied by a favorable recommendation of the
appropriate government agency.

Contents of the articles of Incorporation

¤The name of the corporation.
¤The purpose or purposes of the corporation.
•The purposes must be lawful.
•The purposes must be definitely stated.
¤The place of the principal office which must be in the Philippines.
¤The term of existence.
¤Names, nationalities and residencies of the incorporators
¤Number and qualifications of incorporators
•They must be natural persons.
•Of legal age.
•Majority of whom must be residents of the Philippines.
•Numbering not less than 5 or more than 15.
•Must own or be a subscriber to at least one (1) share of stock.
¤Number, names, nationalities and residences of the directors or trustees.
•The number of directors shall not be less than 5 or more than 15.
•The nationalities of the directors must be indicated to determine if the number of alien
directors does not exceed the number allowed based on the ratio of the foreign stock
ownership to the total number of shares.
•Majority of the directors must be residents of the Philippines.
¤The amount of authorized capital stock in lawful money of the Philippines, if the number of
shares are without par value, the number of authorized shares and the fact that they
are without par value must be stated.
¤The names of the subscribers, nationalities, number of shares subscribed, amount subscribed,
amount subscribed, and amount paid-in.
¤Other matters not inconsistent with law and which the incorporators may deem
necessary or convenient.
¤The name of the temporary treasurer elected (treasurer-in-trust).
¤Notarial acknowledgment.
¤Treasurer’s affidavit.

An arbitration agreement may be provided in the articles of incorporation.

The articles of incorporation and applications for amendments thereto may be filed with the
Commission in the form of an electronic document
 Commission in the form of an electronic document

Amendment of the articles of incorporation

1. Purpose
It must be for a legitimate purpose or purposes.
2. Vote required
a. Majority vote of the Directors, and
b. The vote or written assent of 2/3 of the outstanding capital stock (for stock
corporations); 2/3 of the members (for non-stock corporation)
3. Requirements of amendments
a. The original and the amended articles shall be indicated by underscoring the
change or changes made.
4. Effectivity
Upon approval; by the SEC or from the date of filling with the Commission if not it not
acted upon within 6 months from the date of filling for a cause not a
attributable to the corporation.

Effects of Non-Use of Corporate Charter and Continuous Inoperation

● If a corporation does not formally organize and commence its business within 5 years from
the date of its incorporation, its certificate of incorporation shall be deemed revoked.
● if a corporation has commenced its business but subsequently becomes inoperative for a
period of at least 5 consecutive years, the SEC may, after due notice and hearing, place the
corporation under delinquent status.

Board of Directors, Trustees and Officers

→is the governing body of a corporation

● Directors shall be elected for a term of 1 year from among the holders of stocks registered
in the corporation’s books, while trustees shall be elected for a term not exceeding three (3)
years from among the members of the corporation.
Qualifications of a director or trustee
1. He must be the owner of at least 1 share of stock which shall stand in his name on the
books of the corporation.
• In case a non-stock corporation, a trustee is required to be a member of the corporation.
2. Majority of the directors or trustees must be residents of the Philippines.
3. The number must not be less than 5 nor more than 15.

Independent directors
The board of the following corporations vested with public interest shall have independent
directors constituting at least twenty percent (20%) of such board.

Independent Director
An independent director is a person who, apart from shareholdings and fees received from the
corporation, is independent of management and free from any business or other relationship which
could, or could reasonably be perceived to materially interfere with the exercise of independent
judgment in carrying out the responsibilities as a director.

Corporate officers
Corporate officers
Immediately after their election, the directors must formally organize by the election of the
following officers:
President – who must be a director
Treasurer – must be a resident.
Secretary – must be a resident and citizen of the Philippines.
Other officers as may be provided in the by-laws.
Note: If the corporation is vested with public interest, the board shall also elect a compliance
officer.

Meeting of directors or trustees

1. Quorum
→is the number of directors or trustees sufficient to transact
business.
•Quorum in meeting of directors or trustees
General rule: Majority of the number of directors or trustees
fixed in the articles of incorporation.
Exception: If the articles of incorporation or by-laws provide for a
for a greater number
2. Vote required to have a valid corporate act
Majority of those present provided there is a quorum except in the
election of officers which requires a majority vote or all members of the board.
3. Directors or trustees cannot attend or vote by proxy at board meetings.

SEC. 25. Report of Election of Directors, Trustees and Officers, Non-holding of Election and
Cessation from Office.
Within 30 days after the election of the directors, trustees and officers of the corporation, the
secretary, or any other officer of the corporation, shall submit to the SEC, the names,
nationalities, shareholdings, and residence addresses of the directors, trustees and officers elected.
The non-holding of elections and the reasons therefor shall be reported to the SEC within 30
days from the date of the scheduled election. The report shall specify a new date for the election,
which shall not be later than 60 days from the scheduled date.
If no new date has been designated, or if the rescheduled election is likewise not held, the
SEC may, upon the application of a stockholder, member, director or trustee, and after verification of
the unjustified non-holding of the election, summarily order that an election be held. The SEC shall
have the power to issue such orders as may be appropriate, including orders directing the issuance of
a notice stating the time and place of the election, designated presiding officer, and the record date or
dates for the determination of stockholders or members entitled to vote.
Notwithstanding any provision of the articles of incorporation or bylaws to the contrary, the
shares of stock or membership represented at such meeting and entitled to vote shall constitute a
quorum for purposes of conducting an election under this section.
Should a director, trustee or officer die, resign or in any manner cease to hold office, the secretary, or
the director, trustee or officer of the corporation, shall, within 7 days from knowledge thereof, report
in writing such fact to the SEC.

Executive committee
→is a small group within a corporation composed of not less than 3 members of the board the
creation of which is provided in the by-laws. Its purpose is to take immediate action on important
creation of which is provided in the by-laws. Its purpose is to take immediate action on important
matters without the need of a board meeting particularly when it is difficult to muster a quorum.
2. Functions
To act, by a majority vote of all its members, on such specific matters within the
competence of the board as may be delegated to it in the by-laws or on a majority vote of the board.

However, the following may not be delegated to the executive committee:

a. Approval of any action for which shareholders approval is also required.
b. The filling of vacancies in the board.
c. The amendment or repeal of by-laws or the adoption of new by-laws.
d. The amendment or repeal of any resolution of the board which by its express terms is not
so amendable or repealable.
e. The distribution of cash dividends to the shareholders.

● The board of directors may create special committees of temporary or permanent nature and
determine the members’ term, composition, compensation, powers, and responsibilities.

Removal of directors of trustees

1. Requisites
a. The removal must take place in a regular meeting of the corporation or in a
special meeting called for the purpose.
b. Previous notice of the intention to propose such removal must have been
given to the stockholders or members.
c. The following vote must been obtained to effect the removal:
1) Stock corporation- by the stockholders representing at least 2/3 of the
outstanding at least 2/3 of the outstanding capital stock entitled to vote.
2) Non-stock corporation- 2/3 of the members entitled to vote.

Vacancies in the office of director or trustee

Removal
Expiration of term
Increase in the number of directors
Resignation
Death
Abandonment
Disqualification

2. Filling of vacancy
A vacancy in the office of the board of directors or trustees may be filled
as follows:
By the stockholders or members
1) If the cause of vacancy is any of the following:
a) Removal
b) Expiration of term
c) Increase in the number of directors.
2) If the cause of vacancy is other than removal, expiration of term or increase in
the number of directors or trustees and they do not constitute a quorum for the
purpose of filling the vacancy.
 purpose of filling the vacancy.
By the board of directors or trustees
1) If the cause of vacancy is other than removal, expiration of term or increase in
the number of directors, and
2) The remaining directors or trustees still constitute a quorum.

Compensation of directors
1. Rule and Exceptions
General rule: Directors are not entitled to compensation as such as directors.
Exception: Directors are entitled to compensation in the following cases:
When fixed in the by-laws.
When the giving of compensation is approved by the stockholders representing at
least a majority of the outstanding capital stock.
When the compensation refers to reasonable per diems

Rule on self-dealing directors, trustees or officers

A contact of the corporation with one or more of its directors, trustees or officers is
voidable at the option of the corporation, unless all the following requisites are present:

Liability of directors or trustees for damages

a. By willingly and knowingly voting for or assenting to patently unlawful acts of the
corporation.
b. Nature of liability
-solidary.
c. To whom liable
To the corporation, its stockholder or members
Doctrine of corporate opportunity
This is the doctrine to the effect that when a director attempts or acquire, in violation of his
duty, any interest adverse to the corporation in respect of any matter which has been reposed in him
in confidence, or when by virtue of his office, he acquires for himself a business opportunity which
should belong to the corporation, he must account for all such profits derived by him from the said
business opportunity by refunding the profits to the corporation.
Powers of Corporation

Kinds of powers
1. Express powers- powers expressly granted to a corporation by its charter.
2. Implied powers- necessary to carry into effect powers which are expressly granted
3.Incidental or inherent powers-by reason of its very
existence as a corporation.

Power to extend or shorten corporate term

Requisites:
a. Vote required – the act must be approved by a:
1) Majority vote of the board of directors or trustees, and
2) 2/3 of the outstanding capital stock; or 2/3 of the members in a meeting called for the
purpose.
b. The articles of incorporation are amended to effect such extension or shortening of corporate
b. The articles of incorporation are amended to effect such extension or shortening of corporate
term.

Power to increase or decrease capital stock

a. Vote required – the act must be approved by a:
1. Majority vote of the board of directors and
2. 2/3 of the outstanding capital stock in a meeting called for the purpose.
b. The increase or decrease of capital stock must be certified to in a certificate duly signed by a
majority of the directors and countersigned by the chairman and the secretary of the stockholders’
meeting and setting forth, among other information, the increase or decrease in capital stock, and in
case of increase, the names of subscribers, nationalities, residences, etc., the vote obtained.
c. Subscription and paid-in capital requirements in case of increase
The Treasurer must execute a sworn statement attesting to the fact that at least 25% of the
increase in capital stock has been subscribed and that at least 25% of such subscription has been paid.
d. In case of decrease, the same should not prejudice the rights of corporate creditors
••Trust Fund Doctrine
Under this doctrine, the capital stock and assets of the corporation are held in trust for
creditors. Accordingly, there shall be no distribution of assets to shareholders until the claims of
creditors have been paid or appropriations of such assets have been made for the payment of such
claims.
e. The increase or decrease of the capital stock must be approved by the SEC.

Power to incur, create or increase bonded indebtedness

Vote required – the act must be approved by a:
a. Majority vote of the board of directors or trustees, and
b. 2/3 of the outstanding capital stock or 2/3 of the members in a meeting called
for the purpose.
1. The incurring, creating or increasing of bonded indebtedness must be certified to in a
certificate duly signed by a majority of the directors and countersigned by the chairman
and the secretary of the stockholders’ meeting and setting forth, among other
information, the bonded indebtedness incurred, created or increased, the actual
indebtedness of the corporation on the day of the meeting, the vote obtained, etc.
2. The incurring, creating or increasing bonded indebtedness must be approved by the
SEC.
3. The bonds so issued must be registered with the SEC which shall have the authority
to determine the sufficiency of the terms thereof.

Power to deny pre-emptive right

••Pre-emptive right
This refers to the right of existing stockholders to purchase or subscribe to all issuances or
disposition of shares of any class, in proportion to their respective stockholdings, before such shares
are offered to the public.

Power to sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all
of corporate property including goodwill
1. Vote required – the act must be approved by a:
c. Majority vote of the board of directors or trustees, and
d. 2/3 of the outstanding capital stock or 2/3 of the members in a meeting called
 d. 2/3 of the outstanding capital stock or 2/3 of the members in a meeting called
for the purpose.
Power to acquire own shares
1. The acquisition must be for a legitimate purpose or purposes
2. The corporation must have unrestricted retained earnings

Power to invest corporate funds in another corporation or business or for any other purpose
1. Vote required
a. Majority vote of the board of directors or trustees, and
b. 2/3 of the outstanding capital stock or 2/3 of the members in a meeting called for
the purpose.
2. Exercise of appraisal right
Any stockholder who dissents from the act may exercise his appraisal right.
Power to declare dividends
1. Stock dividends – the declaration thereof must be approved by a:

a. Majority vote of the directors present provided there is a

quorum, and
b. 2/3 of the outstanding capital stock entitled to vote in a
meeting called for the purpose.
2. Cash dividends – the declaration thereof requires only the majority
vote of the directors present provided there is a quorum.

Power to enter into management contract

Management contract
→It is a contract whereby a corporation, delegates the management or operation of its
business to another corporation.
Voting requirement
a. Majority vote of the board of directors or trustees present provided there is a
quorum, and
b. Majority of the outstanding capital stock or majority of the members entitled to
vote in a meeting called for the purpose.

Ultra-vires acts
>Acts which a corporation may not perform because they are not within their express,
incidental or implied powers.

By-Laws
>are the rules of action adopted by a corporation for its own government and for the government
of its stockholders or members and those having the direction, management and control of its affairs.
When by-laws are adopted and file; by whom adopted
1. Prior to incorporation
a. Submitted together with the articles of incorporation, to the SEC and
b. Approved and signed by all the incorporators.
2. After incorporation
a. Submitted within 1 month after the receipt of the official notice of the issuance
of certificate of the incorporation, and.
b. Approved by the stockholders representing at least a majority of the outstanding
capital stock, or by a majority of the members.
 capital stock, or by a majority of the members.

When by-laws effective

Upon the issuance of the SEC of certification that the by-laws are not inconsistent with the
Corporation Code.

Amendment, repeal, or adoption of new by-laws

1. Vote required
a. Majority vote of the board of directors or trustees, and
b. Majority of the outstanding capital stock or majority of the members in a meeting
called for the purpose.
2. When amendment or new by-laws effective
Upon the issuance by the SEC of a certification that the amended or new by-laws are
not inconsistent with the Corporation Code.

Meetings of BOD,BOT, Stockholders or Members

Meetings of directors or trustees
1. Kinds of meeting
a. Regular meeting
1) Date meeting
→This is held monthly, unless the by-laws provide otherwise.
2) Notice and contents
→at least 2 days prior to the scheduled meeting.
b. Special meeting
1) Date of meeting
→This may be held at any time
2) Notice and contents
→ at least 2 days prior to the scheduled meeting.
A director or trustee may waive this requirement, expressly or
impliedly.
2. Place of meeting, whether regular or special
Meetings may be held anywhere in or outside the Philippines, unless the by-laws provide
otherwise.
3. Quorum in meetings
Majority of the number of directors or trustees stated in the articles of incorporation,
unless such articles or the by-laws provide for a greater majority.
4. Presiding officer
The president shall preside at all meetings of the directors or trustees, unless the by-laws
provide otherwise.
5. Manner of voting
Directors or trustees vote during meetings per head. Directors or trustees cannot attend or
vote by proxy at board meetings.

Note:
● Directors or trustees who cannot physically attend or vote at board meetings can participate
and vote through remote communication such as videoconferencing, teleconferencing, or
other alternative modes of communication that allow them reasonable opportunities to
 other alternative modes of communication that allow them reasonable opportunities to
participate.

Meetings of stockholders or members

1. Kinds of meetings
a. Regular meeting
1) Date meeting
Held annually on a date fixed in the bylaws, or if not so fixed, on any
date after April 15 of every year as determined by the board of directors or
trustees.
2) Notice and contents
→ Written notice of regular meetings shall be sent to all stockholders or
members of record at least twenty-one (21) days prior to the meeting, unless a
different period is required in the bylaws, law, or regulation.
> Written notice of regular meetings may be sent to all stockholders or
members of record through electronic mail or such other manner as the SEC shall
allow under its guidelines.

b. Special meeting
1) Date of meeting
→at any time deemed necessary or as provided in the by-laws.
2) Notice and contents
→at least 1 week prior to the meeting, unless a different period is
required by the by-laws
2. Place of meetings, whether regular or special
They shall be held in the city or municipality where the principal office of the
corporation is located, and if practicable in the principal office of the corporation.
● any city or municipality in Metro Manila, Metro Cebu, Metro Davao, and other
Metropolitan areas shall, for purposes of this section, be considered a city or
municipality.
3. Quorum in meetings
Majority of the outstanding capital stock or majority of the members unless a greater
majority is provided for in the Corporation Code or in the by-laws.
4. Presiding Officer
The chairman or, in his absence, the president shall preside at all meetings of the directors or
trustees as well as of the stockholders or members, unless the bylaws provide otherwise.
Manner of voting
a. Stockholders vote by shares. Members vote on the per head basis unless the
by-laws provide otherwise.
b. Right to vote
1) Directly or personally by the stockholders or member
2) Through representative voting
a) By means of proxy

b) By means of a voting trust agreement

The trustee under the voting trust agreement shall exercise
 The trustee under the voting trust agreement shall exercise
the voting right.
c) Through legal representatives
Executors administrators, receivers and other legal representatives duly
appointed by the court may-attend and vote in behalf of the stockholder or
members without need of any written proxy.

Voting trusts
>is an agreement in writing whereby one or more stockholders of a corporation transfer their share
to a trustee or trustees, for the purpose of conferring in the latter, voting and other rights pertaining to
such shares.

Certificate of stock
→It is the written acknowledgement by the corporation of the stockholders interest in the
management, profits and assets of the corporation .
→No certificate of stock shall be issued to a subscriber until the following is paid:
a. The full amount of the subscription.
b. The interest and expenses ( in case of delinquent shares)

Merger and Consolidation

Concept of merger
It is the union of two or more corporations whereby one or more but not all of the constituent
corporations are absorbed by one which continues in existence and retains its name and
corporate identity, called surviving corporation.
Concept of consolidation
It is the union of two or more corporations whereby the existence of the constituent
corporations are terminated and a new one, called the consolidated corporation, is
create

APPRAISAL RIGHT
>Appraisal right is the right given to dissenting stockholders to demand payment of the fair value of
his shares in the following cases: (ASMI)
1. In case any amendment to the articles of incorporation has the effect of: (CPE)
a. changing or restricting the rights of any stockholders or class of shares;
b. authorizing preferences in any respect superior to those of outstanding
shares of any class; or
c. extending or shortening the term of corporate existence
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property.
3. In case or merger or consolidation.
4. In case of investment of corporate funds for any purpose other than the primary purpose of
the corporation.

Non-Stock Corporations
→It is one more no part of its income is distributes as dividends to its members, trustees or
officers. Any profit it may obtain as an incident to its operation shall, whenever necessary, be used
for the furtherance of the purpose or purposes for which it was organized.
for the furtherance of the purpose or purposes for which it was organized.

Members and membership

1. Right to vote
a. Each number is entitled to one vote
b. Members may vote:
1) In person
2) By proxy
3) Remote communication and/or in absentia

Trustees and officers

1. Number of trustees
It may be more than 15 in number as may be fixed in the articles of incorporation or the by-
laws. However, the number should not be less than 5.
2. Qualifications of trustees
a. Trustees must be members of the corporation
b. majority of them must be residents of the Philippines
3. Term of office of trustees- unless otherwise provided in the articles of incorporation or by-
laws, the term of office shall be as follows:
● The term of office of trustees shall be 3 years.

CLOSE CORPORATIONS
>is a corporation whose articles of incorporation provide the following:
1. All of the corporations issued stock of all classes, excluding treasury shares, shall be held of
record by not more than a specified number of persons, not exceeding 20.
2. All of the issued stock of all classes shall be subject to one or more restrictions on transfer.
3. The corporation shall not list in any stock exchange or make any public offering of any of its
stock of any class.

What may not be incorporated as a close corporation

1. Mining corporations
2. Oil companies
3. Stock exchanges
4. Banks
5. Insurance companies
6. Public utilities
7. Educational Institutions
8. Corporations vested with public interest

Pre-emptive right in close corporations

It extends to all stock to be issued, including reissuance of treasury shares, whether for money,
property or personal services, or in payment of corporate debts, unless otherwise provided by the
articles of incorporation.

Amendment of the articles of incorporation

Any amendment seeking to delete or remove any provision required for close corporation or
reduce the quorum or voting requirement must be approved by the affirmative vote of at least 2/3 of
reduce the quorum or voting requirement must be approved by the affirmative vote of at least 2/3 of
the outstanding capital stock

Deadlocks in management
the SEC, on a written petition by any stockholder, shall have the power to arbitrate. In the
exercise of such power, the Commission may make an order:
1. Cancelling or altering any provisions in the articles or incorporation, by-laws or stockholders
agreement.
2. Cancelling, altering or enjoining any resolution or other act of the corporation or its board of
directors, stockholders, or officers.
3. Directing or prohibiting any act of the corporation, its board of directors, stockholders,
officers, or other persons party to the action.
4. Requiring the purchase at their fair value of shares of any stockholder, either by the
corporation regardless of the availability of unrestricted retained earnings in its books, or by the other
stockholders.
5. Appointing a provisional director.
6. Dissolving the corporation.
7. Granting such other relief as the circumstances may warrant

Special Corporations
Educational Corporations
1. Laws applicable
a. Special laws governing them
b. General provisions of the Corporation Code
2. Indorsement from the Department of Education (DepEd) or Commision on Higher Education

3. Board of Trustees
a. Number and term of office
1) Stock educational corporation
The number and term of directors shall be governed by the provision
on stock corporations.
2) Non-stock educational corporations
a) The number shall not be less than 5 nor more than 15 but the
number should be in multiples of 5 (i.e., 5, 10, 15 ).
b) Unless provided in the articles or by-laws, the trustees shall
so classify themselves so that the term of office of 1/5 of their
number shall expire every year.
1) Quorom
A majority of the trustees shall constitute a quorum.

Religious corporations
1. Corporation sole
→It is incorporated by one person and consists of one member such as the chief archbishop,
bishop, priest, minister or rabbi or other presiding elder.
Purpose
To administer and manage as trustee the affairs, property and temporalities of any
religious denomination, sect or church.
 religious denomination, sect or church.
2. Religious Society
It is incorporated by an aggregate of persons consisting district organization of any
religious denomination the purpose of which is to administer or manage its
temporalities, affairs and property.
It must file verified articles of incorporation with the SEC.

ONE PERSON CORPORATIONS

One Person Corporation
A One Person Corporation is a corporation with a single stockholder: Provided, That only a
natural person, trust, or an estate may form a One Person Corporation.
Articles of Incorporation
It shall likewise substantially contain the following:
(a) If the single stockholder is a trust or an estate, the name, nationality, and residence of the
trustee, administrator, executor, guardian, conservator, custodian, or other person exercising
fiduciary duties together with the proof of such authority to act on behalf of the trust or estate;
and
(b) Name, nationality, residence of the nominee and alternate nominee, and the extent,
coverage and limitation of the authority.

Display of Corporate Name

A One Person Corporation shall indicate the letters “OPC” either below or at the end of its corporate
name.
Treasurer, Corporate Secretary, and Other Officers
Within fifteen (15) days from the issuance of its certificate of incorporation, the One Person
Corporation shall appoint a treasurer, corporate secretary, and other officers as it may deem
necessary, and notify the Commission thereof within five (5) days from appointment.
● The single stockholder may not be appointed as the corporate secretary.

● A single stockholder who is likewise the self-appointed treasurer of the corporation shall
give a bond to the Commission in such a sum as may be required.
● The bond shall be renewed every two (2) years or as often as may be required.

Special Functions of the Corporate Secretary

(a) Be responsible for maintaining the minutes book and/or records of the corporation;
(b) Notify the nominee or alternate nominee of the death or incapacity of the single
stockholder, which notice shall be given no later than five (5) days from such occurrence;
(c) Notify the Commission of the death of the single stockholder within five (5) days from
such occurrence and stating in such notice the names, residence addresses, and contact details
of all known legal heirs; and
(d) Call the nominee or alternate nominee and the known legal heirs to a meeting and advise
the legal heirs with regard to, among others, the election of a new director, amendment of the
articles of incorporation, and other ancillary and/or consequential matters.
Nominee and Alternate Nominee
 Nominee and Alternate Nominee
The single stockholder shall designate a nominee and an alternate nominee who shall, in the event
of the single stockholder’s death or incapacity, take the place of the single stockholder as director
and shall manage the corporation’s affairs.

Term of Nominee and Alternate Nominee

● When the incapacity of the single stockholder is temporary, the nominee shall sit as
director and manage the affairs of the One Person Corporation until the stockholder, by
self determination, regains the capacity to assume such duties.
● In case of death or permanent incapacity of the single stockholder, the nominee shall sit
as director and manage the affairs of the One Person Corporation until the legal heirs of
the single stockholder have been lawfully determined, and the heirs have designated one of
them or have agreed that the estate shall be the single stockholder of the One Person
Corporation.
● The alternate nominee shall sit as director and manage the One Person Corporation in
case of the nominee’s inability, incapacity, death, or refusal to discharge the functions as
director and manager of the corporation, and only for the same term and under the same
conditions applicable to the nominee.
Change of Nominee or Alternate Nominee
The single stockholder may, at any time, change its nominee and alternate nominee by submitting to
the Commission the names of the new nominees and their corresponding written consent. For this
purpose, the articles of incorporation need not be amended.
Minutes Book
A One Person Corporation shall maintain a minutes book which shall contain all actions, decisions,
and resolutions taken by the One Person Corporation.
Reportorial Requirements
(a) Annual financial statements audited by an independent certified public accountant:
Provided, That if the total assets or total liabilities of the corporation are less than Six
Hundred Thousand Pesos (P600,000.00), the financial statements shall be certified under
oath by the corporation’s treasurer and president;
(b) A report containing explanations or comments by the president on every qualification,
reservation, or adverse remark or disclaimer made by the auditor in the latter’s report;
(c) A disclosure of all self-dealings and related party transactions entered into between the
One Person Corporation and the single stockholder; and
(d) Other reports as the Commission may require.

Liability of Single Shareholder

● A sole shareholder claiming limited liability has the burden of affirmatively showing that
the corporation was adequately financed.
● Where the single stockholder cannot prove that the property of the One Person Corporation
is independent of the stockholder’s personal property, the stockholder shall be jointly and
severally liable for the debts and other liabilities of the One Person Corporation.
● The principles of piercing the corporate veil applies with equal force to One Person
Corporations as with other corporations.

Dissolution
 →is the termination of the existence of a corporation.
Kinds of dissolution
1. Voluntary dissolution
a. Voluntary dissolution where no creditors are affected.
b. Voluntary dissolution where creditors are affected
c. Amending the articles of incorporation to shorten the corporate term.
d. In the case of a corporation sole, by submitting to the SEC a verified declaration of
dissolution.
2. Involuntary dissolution
a. Non-use of corporate charter
b. Continuous inoperation of a corporation
c. Upon receipt of a lawful court order dissolving the corporation
d. Upon finding by final judgment that the corporation procured its incorporation
through fraud
e. Upon finding by final judgment that the corporation
(1) Was created for the purpose of committing, concealing or aiding the
commission of securities violations, smuggling, tax evasion, money laundering,
or graft and corrupt practices;
(2) Committed or aided in the commission of securities violations, smuggling,
tax evasion, money laundering, or graft and corrupt practices, and its
stockholders knew of the same; and
(3) Repeatedly and knowingly tolerated the commission of graft and corrupt
practices or other fraudulent or illegal acts by its directors, trustees, officers, or
employees.

Corporate liquidation
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, for the purpose of
prosecuting and defending suits by or against it and enabling it to settle and close its affairs, dispose
of and convey its property, and distribute its assets, but not for the purpose of continuing the business
for which it was established.