Marmol, Anna Dominique G.

TOPIC: Corporate Term (2011)

PROBLEM: T Corp. has a corporate term of 20 years under its Articles of Incorporation or from
June 1, 1980 to June 1, 2000. On June 1, 1991 it amended its Articles of Incorporation to
extend its life by 15 years from June 1, 1980 to June 1, 2015. The SEC approved this
amendment. On June 1, 2011, however, T Corp decided to shorten its term by 1 year or until
June 1, 2014. Both the 1991 and 2011 amendments were approved by majority vote of its
Board of Directors and ratified in a special meeting by its stockholders representing at least 2/3
of its outstanding capital stock. The SEC, however, disapproved the 2011 amendment on the
ground that it cannot be made earlier than 5 years prior to the expiration date of the corporate
term, which is June 1, 2014. Is this SEC disapproval correct?

A. No, since the 5-year rule on amendment of corporate term applies only to extension, not to
shortening, of term.

B. Yes, any amendment affecting corporate term cannot be made earlier than 5 years prior to
the corporation’s expiration date.

C. No, since a corporation can in fact have a corporate life of 50 years.

D. Yes, the amendment to shorten corporate term cannot be made earlier than 5 years prior to
the corporation’s expiration date.

ANSWER:

A. No, the 3-year rule on amendment of corporate term applies only to extension, not to
shortening, of term.

According to Section 11 of the Revised Corporation Code, corporations with certificates of

incorporation issued prior to the effectivity of the Revised Corporation Code and which continue
to exist shall have perpetual existence, unless the corporation, upon a vote of its stockholders
representing a majority of the outstanding capital stock notifies the Commission that it elects to
retain its specific corporate term pursuant to its articles of incorporation. 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).