Closed Corporations

 One whose articles of incorporation provides that:

a. All the corporations issued stock of all classes, exclusive of treasury shares, shall be held of
record by not more than a specified number of people, not exceeding 20;
b. All the issued stocks of all classes shall be subject to one or more specified restrictions on
transfers permitted by title 12 of RCCP, a preemption of shares is restricted in favor of any
stockholder or of the corporation;
c. The listing of the corporation stocks in any stock exchange or making a public offering of
those stocks is prohibited.

Difference between Close corporation and Ordinary Corporation

1. Not more than 20

2. Restriction on the transfer of shares
3. Specific Qualifications to be eligible as stockholders are usually provided for
4. Public offering is prohibited.
5. May be directly managed by the stockholders, as the AOI may provide
6. There are rules on deadlock
7. A shareholder may withdraw his shares and may ask the corporation to purchase his shares.

Who cannot be a close corporation

1. Those corporation wherein at least 2/3 of the of its voting stock is owned by a corporation which
is not a close corporation
2. Banks
3. Insurance companies
4. Mining or oil companies
5. Public utilities
6. Educational Institutions
7. Stock markets
8. Corporations declared to be vested with public utilities

Other contents of AOI

a. Classification of shares or rights and the qualifications for owning or holding the same and
restrictions on their transfers;
b. Classifications of directors into one or more classes each of whom may be voted for or elected
solely by a particular class of each stock
c. Greater quorum or voting requirements in meetings of stockholders or directors than those
provided in the RCCP;
d. That the business shall be managed by the stockholders of the corporation rather than the
directors
e. That all officers or employees shall be elected by the stockholders, not by board of directors