The Revised Corporation Code

Republic Act No. 11232

Submitted by: Dhenzel M. Antonio

Submitted to: Atty. Thaddeus Venturanza
Section: BSA 2-2

Previously, we have discussed the different kinds of meeting of stockholders and

members ranging from directors, trustees, and stockholders or members that can either be regular
or special meeting. It manifested such statutory requirements for the board of board of directors
or trustees on every meeting to be held. Afterwards, due to the pandemic circulating the nation
vigorously, the government imposed an enhanced community quarantine or ECQ that led
numerous class suspension that barred several classroom discussion and made it hard for student-
professor relationship to push through with their requirements ahead. So, for today I will be
having my report on the remaining provisions, re: revised corporation code, that were neglected
but are crucial on knowing the organization and operation of a corporation.

Title VII
Stocks and Stockholder

To start off, section 59 establishes the definition for the contract that is formed whenever
there is a purchase transaction of unissued shares, hence called as subscription contract.
Consequently, those person/s subscribing to a share/s in a corporation that is still under the stage
of promotion or pre-incorporation are binding for a period of six months from the date of
subscription, not unless all of the other subscriber’s consents to the revocation, or the corporate
failed to incorporate its association within the same period of time. Likewise, no pre-
incorporation subscription may be revoked after the corporation passed its articles of
incorporation to the Commission.

For the benefit of the corporation and the party subscribing thereon, section 60
establishes several considerations for the stocks prior to its issuance. Generally, stocks are not to
be issued for a consideration less than its par value or issued price, this was designed to protect
shareholders from being punched down below or undercut by a company selling its own stock at
lower and lower prices since it will represent its claim on the company’s assets. Exemption to the
rule given by this section is (1) When the consideration in exchange of shares is not in the form
of cash, or consists of intangible property, the valuation will be determined by the stockholders
or the board of director’s subject to the approval of the Commission. (2) Shares of stocks are not
to be issued in exchange of promissory notes or future service, this is because compensation to
be given for future services cannot be determined, being a problem to the valuation of shares of
the company. Lastly, (3) Issued price of no-par value shares may be fixed in the articles of
incorporation or by board of directors with respect to the authority written on the articles of
incorporation or the bylaws, or if not fixed, by the majority of stockholders at a meeting.

Art. 1233 under extinguishment of obligations states that “A debt is not understood to
have been paid unless the thing in which the obligation consists has been completely paid”
supplements section 63 of the code since it expounds that no certificate of stock shall be issued
to a subscriber until the full amount of his subscription together with its interest (section 65) and
expenses (in case of delinquent stocks) has been paid. This is to ensure that that the subscriber
will fully comply to his payments before being formed as a part of the association, otherwise, its
unpaid subscription shall be delinquent and will be offered to the public less the payments made
by the latter prior to delinquency. In case on unpaid subscription, in addition, section 66 states
that board of directors may declare the unpaid subscription due and payable as it may deem
necessary. Failure to pay on the date suggested by the board shall make the stockholder liable for
interest at the legal rate on such balance, unless other interest is stipulated on the subscription
contract. Likewise, if no payment is still made within thirty days from the said date, all stocks on
the subscription shall become delinquent and no stocks will remain to the delinquent stockholder,
thus the delinquent shares shall be subject to sale, unless board of directors provides orders
otherwise.

As the characteristic of a delinquent stock is harsh as it can be (e.g. no delinquent stock

shall be voted for, right to vote at any stockholders’ meeting, nor be entitled to any rights of an
ordinary shareholder except dividends as per section 70 states), its sale is likewise a complicated
system. Section 67 impose that the board of directors may order the sale of delinquent shares and
shall state the amount due on each subscription plus the accrued interest, incurred expense, the
date, time, and place of sale which should not be less than thirty days nor more than sixty days
from the date of delinquency. With regard to legality of a corporation recovering unpaid
subscription, section 69 states that nothing shall prevent the corporation from doing it so. After
such, the said delinquent share
is offered to the public auction and are sold to a bidder who are willing to pay the full amount for
a small number of shares or a fraction of a share. Likewise, the purchased shares will be recorded
on the books of corporation in favor of the purchases with the remaining shares, if any, is
credited to the delinquent shareholder who is likewise entitled for a stock certificate.
Furthermore, two scenarios may occur before the sale of delinquent share on a public auction. (1)
The delinquent stockholder may pay to the corporation its unpaid subscription on or before the
date of sale of the said delinquent shares, or unless the board otherwise orders. (2) No bidder at
the auction is willing to pay the full amount of the subscription balance for the smallest number
of share or fraction of a share. In such cases, the corporation may bid or purchase the same
shares covered as treasury shares and may be disposed by the corporation with the provision of
the code.

In events where uncertainty is present, stock certificates may be lost or worse is

destroyed to such unfortunate events. In such cases, section 72 provides guidelines and
procedures to be followed by a corporation in case the shareholder requests for a new certificate
in lieu of those lost or destroyed. (1) The registered owner of the shares, on its legal sense, shall
file an affidavit in triplicate on circumstances on how the certificates were lost, stolen or
destroyed, its number of shares owned represented on the certificate, the serial number of the
certificate and the name of the corporation which issued the certificate. The owner of the
certificate shall also submit several information and evidences as it may be deemed necessary.
(2) After verification for the affidavit, other information and evidences on the books of the
corporation, the corporation shall publish a notice in a newspaper of general circulation in the
place where the corporation has its principal office, once a week for three consecutive weeks at
the expense of the registered owner of the certificate of stock which has been lost, stolen or
destroyed. The notice shall state the information given by the person acquiring new certificate
and shall state that after the expiration of one year from the date of the last publication, if no
contest occurred, the right to make such contest shall be prohibited and the corporation shall
cancel the lost, destroyed or stolen certificate of stock in its books. Therefore, the corporation
shall issue a new certificate of stock, unless the registered owner files a bond or other security as
may be required effective for one year. In case of protest, the issuance of new certificate shall be
suspended until the court gives its verdict regarding the ownership of the certificate of stock
which has been lost or destroyed.
 Title VIII
Corporate Books and Records

Just like the other form of businesses i.e. sole proprietorship and partnership, every
corporation shall likewise keep and preserve its corporate records like journal and ledgers for
communicating to other who in the future seeks to need them, be it the public or the board of
directors, trustees or stockholders and members itself. It includes, but not limited to, the articles
of incorporation and bylaws, list of stockholders or members and ownership data, names
addresses of the shareholders and board, a record of its business transactions, resolutions of the
board, and minute of all meetings held.

Corporate records, either in conventional paper or electronically in which they are stored,
shall be open for viewing and inspection by any stakeholders of the corporation in person or by
proxy at any reasonable hours on business days, but to avail themselves a copy they must answer
the expenses for themselves such copy or corporate records. Consequently, for the protection of
the corporate and stakeholders, R.A. 8293 or the Intellectual Property Code, R.A. 10173 or the
Data Privacy Act, lastly the R.A. 8799 or the Securities Regulation code, all supplements this
title of the code to prevent mass publication of the internal corporate records and shall be binding
by the confidentiality rules mentioned above to the stakeholder demanding for such copy of
corporate records. On the other hand, those requesting party that are not a registered shareholder
or member of the corporation or even a competitor shall have no demanding rights to reproduce a
copy of the corporate records to ensure competitiveness among its industry.

Time may come that a demanding party will be rejected on having its copy of the
corporates record. Therefore, if the corporation denies on the demand for inspection and/or
reproduction, the aggrieved party may report it to the Commission. So, any officer or agent
related to the corporation and denies the valid party to inspect and/or reproduce such records
shall be liable for such damages and will be guilty plus punishable with a fine ranging to P10,000
up to P200,000, and if its detrimental to the public, P20,000 to P400,000, with accordance to
section 131, depending to the decision of the court, imposed to the directors or trustees who
ought for the refusal. With the said refusal and penalties aforementioned, it should be noted that
the refusal to produce such copy to a party is an act of defense, provided that the person
demanding such is in good faith.

Financial statements are best defined as the communication of every business established
within such industry. It’s what aids and assist every stakeholder, be it the public or internal body
of the corporate, with their daily economic decision. With that being said, every corporate
registered owner shall have their right to financial statements of the corporation. The corporation
shall likewise furnish their shareholder or member, within ten days from their written demand, its
most recent financial statements, as required by the Commission. Likewise, on every regular
meeting of stockholders or members, the board of directors or trustees shall present to
stockholders or members a last year’s financial report of the corporates operations. Provided, that
total assets or total liabilities of the corporation is more than P600,000, otherwise it should be
certified under oath by the corporates treasurer and the president.

Title IX
 Merger and Consolidation

Growth in inevitable, launching a business is like planting a tree waiting for it to grow, a
big business always starts small. Robust management takes place every single day delivering
their vision and mission on its utmost intention. Hence, happy employees lead to happy
customers, which leads to more profits. With more profits, in most content, leads the
management to expand their business to such ventures like merging it with the others to have
more capital in supporting their plans for the future. Section 75 of this code set foots the
requirements for two or more corporation merging themselves in to one corporation, it includes
(1) Names of the corporations planning to merge or consolidate, referred as constituent
corporations, (2) Terms of the merger or consolidation and its mode of making it happen, (3)
Statement of Changes, and (4) Such other provisions as may be deemed necessary.

Consequently, the plan to merge or consolidate lies on the decision of the board of
directors or trustees of the constituents, but it also involve other stockholders or members of the
constituent corporation subject to their approval by their major votes at a separate corporate
meeting conditional on section 49 of this code. Furthermore, any amendments that will happen to
the merger or consolidation plan may be done if such amendments are likewise approved by the
majority of the board of directors or trustees, and shall be supplemented by majority votes of the
stockholders or members, at least 2/3 of the outstanding capital or 2/3 of members, each
constituent corporations. Such plan, with the succeeding amendments, shall be considered as the
agreement of the constituents, as stated in section 76.
Afterwards, as the constituent corporations are done with their merging or consolidation,
Articles of Merger or Articles of Consolidation shall be executed by each of the constituent
corporations and shall be signed by each corporates president or vice president and likewise
certified by the secretary or assistant secretary. It includes such items like the plan of the
constituent corporations, number of shares outstanding, arranging the fair values of the assets
and liabilities, method of keeping its corporate records, and such other as may be prescribed by
the Commission provided in section 77.

Section 79 sets the effects of such merger or consolidation of the corporations. In the case
of the merging or consolidation 2 or more corporations, they shall become a single corporation,
integrating their business assets and liabilities into one. The question is, who will be retained and
excluded after the merger or consolidation? Well, after its integration, their separate existence
shall cease to exists, thus the surviving or the consolidated corporation will remain to exist as
sole for the constituents. The surviving corporation shall then possess all the rights, privileges
and immunities of each constituent corporation, all the subscription, real or personal property, all
receivables, and other interests shall be vested upon the surviving company. The surviving
corporation shall likewise then be responsible for all the liabilities and obligations of each
constituent corporations, any pending claims, actions or legal proceedings brought by the
constituent corporation shall be answered and prosecuted by the surviving corporation. Lastly,
the rights of the creditors or liens upon the constituent corporation shall not be impaired due to
the merger or consolidation and will remain existing to the survival corporation.

Title XI
Nonstock Corporations
 Not all of the ambitious and capable individuals construct corporations for the sake of
yielding profits. Some forms them not for profit, but organized and operated for charitable,
religious, educational, professional, fraternities, literary, scientific, social and civic service, or
other similar purpose stated in section 87. One thing for sure is to prevent themselves from the
burden of income taxes since one of the constitutional limitation of the sovereign power of a
state to tax is its prohibition to tax religious, charitable, and educational institution which is
favorable upon them in executing their vision and mission. Section 86 elucidates nonstock
corporations as one where no part of its income is distributable as dividends to its member,
trustees, or officers. This is to suffice the requirements for being a tax exempt non-stock
corporation (it should be nonstock, nonprofit, organized and operated for charity, and no assets
benefit any one on the association). Likewise, charitable does not mean that the private
corporations exist for giving everything for free, they’ll be needing profits incidental to its
operations to sustain themselves, but for the only purpose of maintaining their association and
for the furtherance of their corporation’s purpose/s.

Similar to a stock corporation, nonstock corporation’s members also have functional

equivalent of a stockholders in a stock corporation, in this case the right to vote. Unless provided
in the articles on incorporation or bylaws, a member shall be entitled only with one vote and may
vote by a proxy and/or in absentia. Unlike in a stock corporation where shareholder ownership is
transferrable, the same is barred on a nonstock corporation. Members in a nonstock corporation
and all their rights arising therefrom are personal and non-transferrable in accordance with
section 89 of the revised corporation code, unless its articles of incorporation or bylaws provide
so. Likewise, its termination of member’s membership shall be terminated in the manner and
causes stated on its articles of incorporation or bylaws. Consequently, the termination of
membership shall extinguish all rights of a member in the corporation or in its property, unless
otherwise provided in the articles of incorporation or bylaws.

Even a different classification of a corporation shall have its higher body to control and
officers and trustees to help them with its operation. Chapter II of Title XI sets foot the election
and terms of the trustees, providing that the number of trustees shall be fixed in the articles of
incorporation or bylaws which may or may not be more than fifteen (15). Furthermore, until
succession and election, the delegated trustees shall hold its office for not more than three years.
Those elected to fill their vacancies before the expiration of the original three years shall only
hold the office only for the unexpired period. So, to give an example if a trustee is elected on
year 2020, hence expiring on 2023, and decided to leave its position on 2022 electing its
qualified successor, the successor shall only hold its power and office with respect to the
unexpired term of the original trustee which is one year.

When time comes and the purpose/s of a nonstock corporation is settled, its corporate
body will tend to dissolute and eventually liquidate and Chapter 3 of Title XI furnishes the rules
in distributing the asset of a nonstock corporation. Section 93 sets forth the rules in distributing
the assets of a dissolving corporation with the supplement of section 139 “Corporate
Liquidation” and shall be applied and distributed as follows: (1) Liabilities and obligations are to
be paid and satisfied first, (2) Assets that are in the condition of requiring return, transfer or
conveyance shall then be returned, transferred and conveyed under such requirement, (3) Assets
received and held that are subject only for charitable, religious, benevolent, educational, and
other similar purposes, but not held under conditions to return or transfer shall be transferred to
one or more corporations, societies or organizations engaged in activities similar to the
dissolving nonstock corporations purposes, (4) Remaining assets not mentioned above shall be
distributed in accordance with the provisions written on the articles of incorporation or the
bylaws, and last is (5) Where asset may be distributed to such person, societies, organizations, or
even corporations, whether or not organized for profit shall be distributed to members in
accordance with the plan of distribution adopted in articles of incorporation. Consequently, with
regards to distribution of the corporates assets, section 94 provides the guidelines for providing a
plan on distributing the assets.

Title XII
Close Corporations

According to the BIR Ruling 025-02, the ownership of a corporation for the purpose of
determining whether it is a closely held corporation or a publicly held corporation is ultimately
traced to the individual shareholders of the parent company. Where at least 50% of the
outstanding capital stock or at least 50% of the total combined voting power of all classes of
stock entitled to vote is owned directly or indirectly by or for not more than 21 or more
individuals, the corporation is publicly held corporation. Corporations not falling under the
aforementioned definition are considered as closely-held corporations, clearly defined by section
95 of this code. Likewise, any corporation may be incorporated as closely held corporations
except for those who are engaged in mining or oil companies, those who are publicly held and is
traded on the local stock exchange, banks, insurance companies, public utilities, educational
institutions and corporations vested with public interest.

Furthermore, equivalent to a corporation incorporated as a stock association, section 96

lay outs the articles of incorporation of a corporation formed as closely held corporation, the only
difference is that the articles of incorporation of a close corporation may provide that the
business of the corporation shall be managed by the stockholders of the corporation rather than
by board of directors. Provided only that the stockholders of the corporation are deemed to be
elected as the directors for the purpose of applying the provisions on the corporation code and
shall be subject to all liabilities of a director as if they were. Likewise, the articles of
incorporation may provide that all of the officers or employees or otherwise provided shall be
elected or appointed by the stockholders, instead of by the board of directors, a full sudden shift
of corporate powers if agreed upon.

A deadlock may occur when a state in which each member of a group is waiting (due to
lost or corrupt signals rather than resource contention) for another member, including itself, to
take action, such as sending message or more commonly releasing a lock. Notwithstanding any
contrary provision in the articles of incorporation or the bylaws, if the directors or stockholders
are so divided on management of the corporations and business affairs that the votes required for
a corporate action cannot be obtained, hence a deadlock, generally the Commission upon written
petition by any stockholder, shall have the power to arbitrate the dispute that occurred. In
executing its power, the Commission shall have the authority to make appropriate orders such as
(1) cancellation or alteration of any items in articles of incorporation, bylaws, or stockholders
agreement, (2) cancellation or alteration a resolution act of the corporation of its board of
directors, stockholders, or officers, (3) directing or prohibiting any act of the corporation, (4)
requiring the purchase at fair value of shares of any stockholder, either by the corporation
regardless of its unrestricted retained earnings or by other stockholders, (5) appointing a
provisional director, (6) dissolving the corporation, and lastly (7) granting other reliefs as the
circumstances may warrant. In addition, a provisional director on number 5 shall be an impartial
person who is neither a stockholder nor a creditor of the corporation or any of its subsidiaries of
affiliates, and any further qualifications that are imposed by the Commission. A provisional
director also has the rights as if he is an elected director, hence the compensation given upon him
shall be determined by the agreement between such director and the corporation subject to the
approval of the Commission, which may fix the compensation to be given if an event of dissent
between the corporation and the provisional director occurs.

Section 104 of Title XII states the withdrawal of a stockholder or a dissolution of a

stockholder, more like a contingent plan. Because, in the event of such event, without detriment
to the rights of any stockholders, the stockholders of a close corporation may compel the
corporation to purchase shares held at fair value, which shall not be lower than the par or issued
value, when and only when the corporation has excess assets over its liabilities or a good
working capital exclusive of capital stock. However, it is to be provided that any stockholder of a
close corporation may, by a written petition to the Commission, compel dissolution of such
corporation whenever the acts of the corporates directors, officers, or those in control of the
corporation is illegal, fraudulent, dishonest, bad faith, oppressive, or unfair to any of the
stockholders or even to the corporates operation, or even when the asset are misused, disinvest,
misapplied, or wasted.

Title XIII
Special Corporations

Under the Tax Code, certain corporations are subject to lower tax rates on their regular
income instead of the normal or regular corporate tax of 30% based on their taxable income.
These corporations are classified as special corporations. Special corporations are given their
own title on this code for the purpose of distinguishing them from the others. For instance, with
the Philippines adopting a global tax system for corporations where corporate classifications are
grouped together and applying a uniformed fix rate for the easement of computing taxable
income for tax practitioners.

Chapter 1: Educational Corporations

Since an educational corporation under the category of special corporation is organized

and formed as proprietary or private corporation, they have the right to elect such Board of
Trustees. Trusteed of an educational institution organized as nonstock shall not be less than five
nor more than fifteen persons on a condition that the number of said trustees shall be in multiples
of five (5, 10, 15). Unless otherwise provided on the articles of incorporation or the bylaws, the
board of trustees of educational institutions shall classify themselves that the term of the office of
one-fifth of their number shall expire every year and in the case of the duly elected trustee
withdrawing and getting filled by another elected trustee shall only hold the office for the
unexpired period. A majority of trustees shall constitute a quorum for the transaction of business.
In addition, the powers and authority of the trustees are defined in the bylaws. In contrast, for the
educational corporations that are formed as stock corporations, organized and operates for the
purpose of profit, the number and term of the elected board of directors shall be governed by the
provision of the aforementioned corporation as a stock corporation.

Chapter 2: Religious Corporations

Uncanny as it may look, a religious institution can likewise be formed as a corporation.

But, not for the purpose of raising profits and incomes, not to be mistaken, but for the purpose of
civic and promotion of social welfare exclusively. It may be incorporated by one or more persons
classified as sole and religious societies respectively (sec. 107).

For the purpose of forming a corporation sole, instead of electing a trustee for
administering and managing the corporation’s business affairs, property and temporalities of any
religious denominations, sect or church, a corporation sole may form it by the chief archbishop,
bishop, priest, minister, or rabbi, or other presiding elder or such religious denomination, sect, or
church. Afterwards, the so-called “trustee” mentioned above shall file with the Commission the
articles of incorporation containing the following: (1) The applicant chief bishop, etc. which
desires to become a corporate sole, (2) Rules, regulations, and discipline of the religious
denomination, sect, or church should be consistent with becoming a corporate sole and must not
forbid it, (3) That such chief archbishop, bishop, priest, etc. is charged with the administration
and management set forth in the articles of incorporation, (4) The manner by which any filling
of vacancy occurring in the office of the chief archbishop, bishop, priest, etc. is required to be
filled, accordingly with number 2, (5) The place where the principal office of the corporation
sole is established and located, and must be within the territorial domains of the Philippines.
Furthermore, in cases where the so-called trustee decides to withdraw and needs for a filling of
vacancy, the successor of the office shall provide a copy of their commission, certificate of
election, or letters of appointments, duly certifies by any notary public with the Commission.

Being formed as a corporation, a religious corporate sole has the right to perform such
business transactions just like a regular corporation not under a special law treatment, with the
supervision of a chief archbishop, bishop, priest, minister, rabbi, or presiding elder. It may
purchase and hold real estate and personal properties for its church, charitable, benevolent, or
education purposes, and may receive bequests or gives with the similar purposes. It may also sell
or mortgage such real properties held by it only by obtaining an order from the Regional Trial
Court (RTC) of the province where the property is located for the similar purpose duly verified
by the chief archbishop, bishop, priest, minister, rabbi, or presiding elder acting as corporation
sole, and may be opposed by any member of the religious denomination, sect or church
represented by the corporation sole. But in cases where rules, regulations, and discipline set forth
in articles of incorporation represents such regulation on the method of acquiring, holding, and
selling, and mortgaging real and personal property, such rules, regulations, and disciplines shall
prevail and the intervention of the court is not compulsory. Eventually, a religious corporate sole
may dissolve its corporation and its affairs. In such the event, the corporate sole must submit to
the Commission a verified declaration of dissolution that contains, as per sec. 113: (1) The name
of the corporation, (2) Reason for winding up its affairs, (3) The authorization for such
dissolution by the particular denomination, sect, or church, and lastly (4) Names and addresses of
the persons who are supervise with the winding up affairs of the corporation. Upon the approval
of the Commission, the corporation must cease to exist and carry on its operations for purpose of
winding up its affairs.

Chapter 3: One Person Corporations

With the advent of Republic Act. 11232, or known as the Revised Corporation Code of
the Philippines (RCC), one of its unique newest feature is that one need not assemble a group of
at least five individuals in order to establish a domestic corporation in the Philippines.

The RCC, under section 116, defines a one-person corporation (OPC) as a corporation
with a single stockholder on a condition that only a natural person, trust, or an estate are eligible
to form one-person corporation. Conversely, banks and quasi-banks, pre-need, trust, insurance,
public and utility listed companies, and non-chartered government owned and controlled
corporations (GOCCs) may not, however, incorporate as a one-person corporation.

Furthermore, regarding to incorporation of a one-person corporation, it shall not be

required to have minimum authorized capital stock, except otherwise provided by special law.
Besides, unless otherwise required by applicable laws or regulations, no portion of the authorized
capital of a one-person corporation is required to be paid-up at the time of incorporation.
Likewise, further provisions are given as a guideline of forming a one-person corporation like, a
one-person corporation is not required to submit and file corporate laws, in its corporate name it
must indicate the letters “OPC” either below or at the end of its corporate name to be
distinguished with other types of business and corporations, and that single stockholder of the
one-person corporation shall be the sole director and president of the one-person corporation.

This chapter of the code provided no guidelines regarding the term or the life of a one-
person corporation. But, as per Securities and Exchange Commission (SEC) Memorandum
Circular No.7, Series of 2019, entitled as “Guidelines on the Establishment of a One Person
Corporation”, presented that the term of existence of a one-person corporation shall be
perpetual. However, in such cases that the one-person corporation is formed as a trust or estate,
its term of existence shall be coterminous with the existence of the trust or estate. In other terms,
the existence of the one-person corporation is in relation with the maturity date that is the same
with the estate or trust, when the estate or trusts primary purpose is resolved and done, the term
of its one-person corporation is likewise terminated.

When the one-person corporation has received its certificate of incorporation by the SEC,
within fifteen days, the corporation must appoint its key persons, the treasurer, corporate
secretary, and other officers as may be deemed necessary, and shall notify the Commission
thereof within five days from such appointment. Moreover, the single stockholder of a one-
person corporation may not be appointed as the corporate secretary of the one-person
corporation, but may assume the role of its treasurer. Provided, that the self-appointed treasurer
of the corporation is required to give a bond to the SEC in such sum renewable every two years
and must undertake in writing to faithfully administer the OPC’s fund to be received as the
treasurer, and to use and apply the same according to its articles of incorporation as approved by
the Commission.

In such case or event of the single stockholder’s death or incapacity takes place, the
single stockholder must designate a nominee and alternate nominee who shall take the position
of the single stockholder as director and shall override or continue the management of the
preceding corporate affairs. Provided, that it is included in the articles of incorporation of the
one-person corporation the following: names, addresses, contact details, extent and limitations of
their authority in managing the affairs of the corporation of the aforementioned nominee and
alternate nominee. Correspondingly, the written consent of the nominee and alternate nominee
shall be attached to the articles of incorporation, and on the same token may be withdrawn any
time before the death or incapacitation of the existing single stockholder.

Similar to a stock corporation, a one-person corporation shall maintain its minute book
which shall contain all the actions, decisions, and resolutions taken by the one-person
corporation. Consequently, when action is needed on any matter, it is sufficient that the single
stockholder shall prepare a written resolution signed and dated by him, and should be recorded
on the aforementioned minute book of the one-person corporation. In lieu of meetings, the
recorded minute on the minute book shall be deemed to be the date of the meeting for all
purposes. Question is, who keeps those records? It is granted upon, as a special function of the
Corporate Secretary. Hence, it shall: (1) Be accountable to maintaining the minute book and/or
the corporate records, (2) Notify the nominee or the alternate nominee for the death or incapacity
of the single stockholder, wherein such notice is given to them in no later than five days from
such even, (3) Notifies the Commission for the death or incapacity of the single stockholder of
the one-person corporation, likewise the name, residence address, and contact details of all
known legal heir of the single stockholder, and lastly (4) Call the nominee or alternate nominee
and the known legal heirs for a meeting and advise the legal heirs for the election of a new
director, amendments to articles of incorporation, and other ancillary and/ or consequential
maters.

Similar to Title VIII of this code, even an incorporated one-person corporation shall
maintain its corporate records and submit the same requirements within such period to the
Commission, this prescription includes: (1) Annual financial statements audited by an
independent certified public accountant. However, if the corporate total assets or liabilities is less
than P600,000, the financial statements must be certified under the oath of the corporation’s
treasurer and president, (2) Explanations and comments by the president with regards to the
independent auditor’s adverse remark, reservation, or a disclaimer, (3) A disclosure of all self-
dealings and related transactions between the single stockholder and the one-person corporation,
and lastly (4) Other requirements by the Commission ay it may deem necessary. In such case
where the one-person corporation fails to submit the reportorial requirements to the Commission
three times, in consecutive or intermittently, within a period of five years, the OPC may be taken
under delinquent status.
 Under any circumstances, events like stock corporation turning into one-person
corporation or a one-person corporation will reverse to a stock corporation will happen any time.
In such case, when an ordinary corporation converts into a one-person corporation, section 131
of this code shall apply giving the statutory guidelines that when a single stockholder acquires all
the shares of an ordinary stock corporation, the latter may apply for a conversion into one-person
corporation subject to required documents to be submitted to the Commission. Consequently, if
the application for conversion is approved by the Commission, it shall issue a certificate of filing
of amended articles of incorporation reflecting the conversion. Likewise, the converted one-
person corporation will assume and be legally responsible for the former ordinary stock
corporation’s outstanding liabilities. Furthermore, in such case where a one-person corporation
converts in to an ordinary stock corporation, section 132 of this code shall apply giving the same
statutory guidelines from the aforementioned conversion above. Provided, that such notice shall
be filed to the Commission within sixty days from the occurrence of the circumstances leading to
the conversion into an ordinary stock corporation. Afterwards, if the conversion is certified, the
Commission shall issue the same certificate of filing of certificate of amended articles of
incorporation reflecting such conversion. Contingent to this plan of converting the corporation,
in the event when the single stockholder died or becomes incapacitated, the nominee or alternate
nominee shall transfer the shares to the duly designated legal heir or estate within seven days
from such occurrence. After, within sixty days from the transfer of shares, the legal heir must
notify the Commission of their decision to either wind up and dissolve the one-person
corporation or convert it into an ordinary stock corporation. Likewise, the converted ordinary
stock corporation from a recent one-person corporation shall succeed the existential and be
legally responsible for the recent one-person corporations outstanding liabilities.

Title XIV
Dissolution

Even a form of business granted with a perpetual term also meet its means to an end,
hence, terminating its existence. Title XIV of the revised corporation code provides the different
types and methods of corporate dissolution, either voluntarily or involuntarily, and how the
corporation would handle its corporate assets with respect to its creditors and stockholders.

Voluntary dissolution takes place when shareholders, incorporators or initial directors

decides to dissolve corporation, supplemented by the provision of section 134. Two scenarios
may occur: (1) Voluntary dissolution where no creditors are affected, the dissolution may be
effected by a majority vote of the board of directors or trustees, and by the support of the
shareholders by their majority votes at least majority of the outstanding capital or majority of the
members, in case on non-stock corporation, of a meeting to be held upon the call of the directors
or trustees. Provided, that twenty days prior to the meeting, the shareholders or the members are
given such notice personally, by registered mail, or by any means authorized under its bylaws
whether or not entitled to vote at the meeting. Consequently, the corporation should publish the
time, place, and objective of the meeting to a newspaper where the principal location of the
corporation is located, otherwise in a general circulation in the Philippines. Moreover, the
corporation should submit a verified request for dissolution with the Commission. Then, within
fifteen days from the receipt of verified request for dissolution, in the absence of withdrawing it,
the Commission shall approve the request and issue the certificate of dissolution, then and only
then the issuance of the certificate of dissolution the dissolution takes place.

On the other hand, (2) Voluntary dissolution where creditors are affected, takes a much
more procedural system than the first one. The corporation shall verify a petition stating the: (a)
Reason for the dissolution, (b) Form, manner, and time when notices are given, and the (c) Date,
place, and time of the meeting in which vote was made. This petition should be signed by a
majority of the corporation’s board of directors or trustees, verified by the president or vice
president, and accompanied with the affirmative vote of the stockholders representing at least 2/3
of the outstanding capital stock or at least 2/3 of the members called for that purpose. Together
with the petition, the corporation is likewise obligated to submit it to the Commission with (a)
copy of resolution authorizing the dissolution, and (b) a list of all its creditors. Afterwards, when
the petition submitted is sufficient in form and substance, the Commission shall fix a deadline for
filing of objection to the petition for not less than thirty days and not more than sixty days after
the entry of order. Before such date, a copy of the order shall be published at least once a week
for three consecutive weeks in a newspaper of general circulation published in the municipality
or city where the principal office of the corporation is situated, or if there be no such newspaper,
then in a newspaper of general circulation in the Philippines, and a similar copy shall be posted
for three consecutive weeks in three public places in such municipality or city. Furthermore, if
no file of objections was executed, the Commission shall render judgment dissolving the
corporation and directing such disposition of assets as the justice requires, and may even appoint
others to collect such assets and likewise pay the debts of the corporation. Then and only then the
dissolution will take place after the issuance of certificate of dissolution by the Commission.

A dissolution might proceed but not to be succeeded with liquidation. As stated in section
136, a voluntary dissolution may be effected by amending the articles of incorporation to shorten
the corporate term pursuant to the provisions of this code. A copy of the revised articles of
incorporation should be passed afterwards to the Commission in accordance with this code.
What’s different with this method of dissolution is that unlike with the procedural and timely,
upon the expiration of the shortened term as stated in the amended articles of incorporation is the
corporation will be deemed dissolved without any further proceedings, subject to the provisions
of corporate liquidation. Thus, rather than waiting for the issuance of the Commission of the
certificate of dissolution, when the expiration of the corporation shortened term takes place,
dissolution shall automatically take effect on the day following the last day of the corporate term
stated on its amended articles of incorporation.

Contrary to voluntary dissolution of a corporation, section 138 provides the guidelines for
an involuntary corporate dissolution. This leads us to thinking that, how can a corporate dissolve
without the management’s decision and the affirmation of the stockholders. For one, a
corporation may be dissolved by the Securities and Exchange Commission upon a filing of a
verified complaint and after a proper notice and hearing on grounds such as: (a) Non-use of
corporate charter as provided in section 21, (b) Continuous inoperation of corporation as
provided in section 21, (c) Upon receipt of lawful court order dissolving the corporation, (d)
Upon finding final judgment that the corporation procured its incorporation through fraudulent
activities, and (e) Upon a final judgment that the corporation was committing violations,
smuggling, tax evasion, money laundering, graft, corrupt practices, and other acts in violation of
the public order and policy. Furthermore, if the corporation is ordered as dissolved in pursuant of
the grounds set forth in (e), its assets, after payment of liabilities, shall be forfeited in favor of the
national government.

Lastly, section 139 discusses the effects after the corporate dissolution, it does not
necessarily conclude that when the Commission issues a certificate of dissolution to a
corporation does it literally eradicate its existence. Except for the banks, covered by the New
Central Bank Act (R.A. 7653) and by Philippine Deposit Insurance Corporation Charter (R.A.
3591) as amended, every corporation that whose charter expires with regards to its articles of
incorporation, is annulled by forfeiture, or whose corporate existence is terminated in any other
manner, shall still and all remains as a body corporate for three years after the effectivity of the
corporate dissolution, not for the purpose of operating one last time, but for the purpose of, on its
literal sense, liquidate. This includes, defending and prosecuting suits by or against it, disposal
and conveyance of its property, and distribution of its assets.

Title XV
Foreign Corporations

One way for a country’s economy to survive is maintaining the competition in every
industry in the light of globalization. Encouraging foreign investors, multi-national companies,
and transnational companies rises the household and business sector income for a much more
desirable growth on a span of time. This idea takes much of a hold on why foreign corporations
exist in the Philippine context, hence, subject with a rigid rules and regulations abide in order to
outsource and make profits in our territorial domains.

Section 140, Title XV of the Revised Corporation Code clearly defines what a foreign
corporation is; one formed, organized, or existing under 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 the Philippines after obtaining such license
and a certificate of authority from the appropriate government agency. How does one get such
license and certificate? If a foreign corporation wants to do business inside the Philippines, it
shall submit to the Commission a copy of its articles of incorporation, in accordance with the
law, and their translation to an official language of the Philippines if necessary. It shall include:
(a) Date and term of incorporation, (b) Address of the principal office of the corporation, (c)
Name and address of its resident agent authorized to accept summons and legal proceedings, (d)
Place in Philippines where it intends to operate, (e) Specific purpose/s of the corporation it
intends to pursue, (f) Names and address of the present directors and officers, (g) Statement of
authorized capital stock and aggregate number of shares authorized to issue, itemized by class,
par value, without value, and series, (h) Statement of outstanding capital stock, (i) Statement of
paid-in capital, and (j) Other information that may be deemed necessary by the Commission in
determination to entitlement of such license and certificate.

Subsequently, if the Commission is contented that the foreign applicant has complied
with all the requirements imposed to it of this code and other special laws, rules and regulations,
the Commission shall issue them a license to transact business here in the Philippines for the
purpose or purposes specified in the license. Afterwards, such foreign corporation may start to
operate its business in the Philippines for as long as it retains its authority to act as a corporation
under the laws of the country or State of its incorporation, unless the corporation in act of its
license surrendered, revoked, suspended, or annulled in accordance with this code and other
special laws. Moreover, after the issuance of certificate to transact business in the Philippines to
the foreign corporation, it shall have sixty days, except foreign banking or insurance, to deposit
such securities in bonds in satisfactory of the Commission for the benefit of the present and
future creditors, it may be in the form of government bonds, or other evidence of indebtedness of
the Government of the Philippines, its political subdivisions and instrumentalities, or of
government-owned and controlled corporations, shares of stock of debt securities, shares of stock
in domestic corporations listed in stock exchange, shares of stock in domestic insurance
companies and banks, any financial instrument determined suitable by the Commission, or any
combination that has a combined fair market value of at least P500,000 or other amount provided
by the Commission. However, within six months after the end of each fiscal year of the licensee
(foreign corporation), the Commission shall require the licensee to deposit additional securities
or financial instruments equivalent in actual market value to two percent of the amount by which
the licensee’s gross income for that fiscal year exceeds Ten million pesos. The Commission shall
also require the deposit of additional securities or financial instruments if the actual market value
of the deposited securities or financial instruments has decreased by at least ten percent of their
actual market value at the time they were deposited. The Commission may, at its discretion,
release part of the additional deposit if the gross income of the licensee has decreased, or if the
actual market value of the total deposit has increased, by more than ten percent of their actual
market value at the time they were deposited. The Commission may, from time to time, allow the
foreign corporation to make substitute deposits for those already in deposit so long as the
licensee is solvent. The foreign corporations are allowed to collect the corresponding interest or
dividends on such financial instrument, and in the event where the corporation ceases to operate,
the same deposit shall be returned provided that they have no obligations left to the Philippine
Government. This deposit serves like a marginal deposit in order to be leveraged and operate and
transact business inside the Philippines.

But what law will govern and be applicable to a foreign corporation? According to
section 146 of The Revised Corporation Code, a foreign corporation lawfully operating its
business in the Philippines shall likewise be bound by all laws, rules and regulations applicable
to a domestic corporation of the same class, except those which provide for the creation,
formation, organization or dissolution of corporations or those which fix the relations, liabilities,
responsibilities, or duties of stockholders, members, or officers of corporations to each other or
to the corporation.

In such case or event when a foreign corporation is doing business and entering into
contracts without a license given by the Commission, such corporation is allowed to maintain
and intervene any action, suit or proceeding in any court or administrative agency of the
Philippines. But, such unlicensed foreign corporations may be sued or proceed against before
Philippine court or administrative tribunals on any valid cause of action recognized under
Philippine laws.

Likewise, in such cases or events when a foreign corporation on the following grounds:
(1) Failed to file its annual report or pay any fees required by the RCC, (2) Failed to appoint and
maintain a resident agent in the Philippines as required, (3) Failed, after change of its resident
agent or address, to submit to the Commission a statement of change, (4) Misrepresented any
material manner in any application, report, affidavit, or other document, (5) Failed to pay any
and all taxes, imposts, assessments, and penalties due to the Government, (6) Transacted
business outside the Philippines, and (7) Any other ground as it would render it unfit to transact
business in the Philippines. Representation on one of the aforementioned grounds may revoke or
suspend, by the Commission, the license of a foreign corporation to transact business in the
Philippines.

Lastly, a foreign corporation licensed to do and transact business in the Philippines,

subject to existing laws and regulations, are eligible to withdraw from the Philippines by filing a
petition for withdrawal of license to the Commission. However, no certification of the said
petition will be issued by the Commission unless all of the following requirements are met: (1)
ALL claims that has accrued in the Philippines must be paid, compromised, or settled, (2) ALL
taxes, imposts, assessments, and penalties that are due to the Philippine Government or any of its
agencies must be paid, (3) The petition for withdrawal of license must be published once a week
for three consecutive weeks in a newspaper of general circulation in the Philippines. Afterwards,
the licensed foreign corporation, after the issuance of certificate to the petition by the
Commission, will cease to exist and can no longer transact and do business in the Philippines.

Title XVI
Investigations, Offenses, and Penalties

Before I report Title XVI of the Revised Corporation Code, I will report first on what I
think is the mass psychology of every individual as well as corporation that is somewhat related
with this topic. No corporation formed itself without taking into perspective the profits that it can
attain. What does it do? It projects cash flows and expects it to be attained in the light of the
future operations. The potential damage caused by holding unrealistic expectations comes from
how it affects the way we perceive information. Expectations are mental representations of what
some future moment will look, sound, taste, smell, or feel like. Expectations come from what we
know. This makes sense, because we can’t expect something that we have no knowledge or
awareness of. When we expect something, we are projecting out into the future what we believe
to be true. When things happen exactly as what we ought to expect, our general response is
wonderful (like happiness, joy, and satisfaction). Conversely, how do you feel when your
expectations are not fulfilled? The universal response is emotional pain. We experience some
degree of anger, resentment, despair, regret, disappointment, dissatisfaction, or betrayal when it
doesn’t turn out to be exactly as we expected it to be. Here’s where corporations run into
problems. Because the management’s expectation comes from what they know, when they
decided to believe in it, they expect it to be right. The force of the belief behind the expectation
to their corporate operation will cause them to perceive market information in a way that
confirms in what they expect. Therefore, greed will manifest their mind and will take unjust,
unlawful, and fraudulent actions that are prejudicial to the public just to conform their existing
beliefs and expectations.
 With all that said, Title XVI of the Revised Corporation Code will supplement and
provide such guidelines and powers to the Commission (like issuance of subpoena and subpoena
duces tecum, and such) to investigate an alleged violation to the code, or of rule, regulation, or
order of the Commission (section 154). Whenever the Commission has a valid basis that a person
has violate or just about to violate this code, a rule, regulation, or order of the Commission, upon
a legal complaint or motu proprio, it may instruct such individual to desist from committing the
act of constituting the violation, a cease and desist order. Section 157 up until section 172
presents the possible violations, as the case may be, ranging from its business transactions, to its
employees and other stakeholders, up to the board of directors or trustees, and penalties or fees
imposed to such violation. As I have noticed with the further sections, the penalty and the fees
imposed are harsh and obstructing as it can be. It may be as low as ten thousand pesos P10,000
or it can be high as five million pesos P5,000,000 or worse is the revocation of the corporation’s
license to do business in the Philippines. This is to prevent all type of corporation, as much as
possible, to do such violation, and for the protection of the public and other stakeholders.

That concludes my report to the R.A. 11232 or known as “The Revised Corporation Code”.