Corporation- it is an artificial being created
by operation of law, having the right of
succession and the powers, attributes and
properties expressly authorized by law or
incidental to its existence.
Dissolution- it signifies the extinguishment of
its franchise to be a corporation and the
termination of its corporate existence.
Liquidation- it means winding up of the
affairs of the corporation, by reducing its
asset into money, settling with creditors and
debtors and apportioning the amount of profit
and loss.
Foreign Corporation- 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.
Resident agent- is necessarily a resident of
the Philippines, may be natural or juridical
person, and must be sound and has a good
moral character
Attributes of a Corporation
1 Artificial being- A corporation in
considered as an artificial being because it is
considered as person in law. the fundamental
principle of corporation law means that a
corporation is an entity separate and distinct
from its stockholders and from other
corporation to which it may be connected.
Even if the corporation is not a natural person
or human being, a corporation is given rights
and duties. A corporation may only act
through its board, officers, and agents of
person authorized to act on the corporation’s
behalf.
2. created by operation of law- corporation
is created and existence by the operation of
law, specifically by comply with legal
requirements. The corporation will begin to
exist only from the time the Securities and
Exchange Commission (SEC) issues a
certificate of incorporporaton. Corporation
cannot exist or exercise corporate powers by
mere contractS or agreement among
stockholders and without the SEC issuance of
a certificate of incorporation. Except if it is
created and operation under aspecial law or
charter, which do not have to register with the
SEC in order to acquire a legal -personality.
3. Right of succession- the corporations has
right to continue existing even if the
corporation shares or stocks change ownership
and its personality does not affected by the
change in ownership or the change int eh
personality of its shareholders.
4. powers and attributes expressed by law
or incident to its existence- A corporation
has creation of law, that’s why the law has also
provided what powers and characteristics it
would have, A corporation has no power
except hose expressly conferred on it by the
Revised Code and those that are implied from
or incidental to their express powers, and also
those that are inherent to the corporation’s
existence.
Stock corporation- Are those corporations
which have a capital stock divided into shares
and are authorized to distribute to the holders
of such shares, dividends, or allotments of the
surplus profits on the basis of the shares held.
A stock corporation may issue different kinds
of shares of stock, depending on to purposes
and as authorized by its articles of
incoproation, which also determines the
respective rights of the shares, including
voting rights.
Non stock corporation- This corporation does
not have capital stock, but what they have is
capital. Non stock corporation are organized
mainly for non-profit purposes, they are
legally allowed to earn income but no part of
their income may be distributed as dividends
to their members.
Private corporation- these are corporations Publicly listed corporation- This corporation
formed mainly by complying with the are listed in the Philippine Stock Exchange
provisions of the Revised Code. and they can (PSE) as they offer their shares to the public.
be either stock or non-stock corporations. But not all corporation that are open can be
publicly listed in the PSE because there are
Public Corporation- This corporation is
certain criteria to be complied with for listing
formed or organized for the government of a
such as track record, minimum capital
portion of the state and have for their purpose
requirements, minimum number of
the general good and welfare.
stockholders, among others.
Government- Owned or Controlled
Preferred shares stock- is one which entitles
Corporation (GOCC)- It refers to any
the holder thereof to a certain preference over
agency organized as a stock or non-stock
the holders of common stock. They may be
corporation, vested with function related to
give preference in the distribution of
public needs whether governmental or
dividends, in the distribution of the assets of
proprietary in nature and owned by the
the corporation in case of liquidation, and such
Government of the Republic of the
other preference as may be stated in the
Philippines directly or through its
articles of incorporation that are not contrary
instrumentalities. Example of GOCC are
to the privisions of the Revised Code.
Government Service Insurance System
(GSIS), Land Bank of the Philippines.
Corporators- this refers to those who Voted granted on the preferred shares:
compose a corporation, whether as
(a) Amendment of the articles of
stockholders or shareholders in a stock
corporation or as members in a non-stock incorporation;
corporation. And a corporator is not (b) Adoption and amendment of bylaws;
necessarily an incorporator.
(c) Sale, lease, exchange, mortgage, pledge, or
Incorporator- this refer to those stockholders
other disposition of all or substantially all of
or members mentioned in the articles of
incorporation as originally forming and the corporate property;
composing the corporation and who are (d) Incurring, creating, or increasing bonded
signatories thereof.
indebtedness;
Close corporation- This corporation whose
(e) Increase or decrease of authorized capital
stock is owned by at most 20 persons. The
transfer of its share of stuck is subject to stock;
restriction that should appear in the articles of (f) Merger or consolidation of the corporation
incorporation, in the bylaws, as well as in the
certificate of stock in order to bind purchasers with another corporation or other corporations;
in good faith. This corporation cannot be (g) Investment of corporate funds in another
listed in the stock exchange and they cannot
corporation or business in accordance with this
offer their shares into the public. And this
corporation may be formed by family Code; and
members or group of friends or associates (h) Dissolution of the corporation.
who wish to engage in a venture that they
themselves will manage.
Common shares- this share does not get any
preference in the distribution of dividends or
in the distribution of assets in case of
liquidation. A common share entitles the
owner to pro-rated dividends after dividends
are paid first to preferred shareholders. Since
common shares always have voting rights, the
shareholders thereof have the capability of
controlling or determining the direction of the
corporation to a certain degree.
Par value- this value represents the minimum
price that these shares can be issued by the
corporation, they cannot be issued by the
corporation for a value less than the par value
stated in the articles of incorporation or on the
stock certificate.
No par value- do not have issue price. Shares
without par value may not be issued for a
consideration less than 5 pesos per share and
are deemed fully paid and non-assessable.
The no par value shares shall be treated as
capital and cannot be distributed as dividends.
Founders share- has been define as “shares
issued to the organizers and promoters of a
corporation in consideration of some
supposed right or property”. the one who are
given certain rights and privileges not enjoyed
by the other stockholders. where the exclusive
right to vote and be voted for in election of
directors is granted and it must be for a
limited period not to exceed 5 years from the
date of incorporation.
Redeemable shares- This shares can be
redeemed or brought back by the corporation
under certain conditions, It may be issued by
a corporation when the articles of
incorporation so provide, This share can be
brough back by the corporation from the
stockholder after the expiration of a fixed
period, even if the corporation does not have
unrestricted retained earnings and upon such
condition that are stated in both the articles of
incorporation and in the certificate of stock
representing said shares.
Treasury shares- this share which have been
issued and fully paid for, but later on they are
reacquired by the corporation for one reason or
another, either by purchase redemption,
donation for future or other lawful means.
Treasury shares are therefore issued shares, but
being in the treasury they do not have the
status of outstanding shares.
Outstanding capital stock- the total shares of
stock issued to subscribers or stockholders,
wheter or not fully or partially paid except
treasury shares.
Fiction of corporate entity- The corporation’s
separate and distinct personality, the legal
fiction, was created by law for convenience
and to promote justice. A consequence of the
legal fiction is the corporation’s business being
unaffected by or separated from the personal
rights, obligations and transactions of its
stockholders.
Capital stock- is the amount fixed in the
articles of incorporation to be subscribed and
paid in by the shareholders of a corporation,
either money, property, labor or services. It
represents the equity of the stockholders in the
corporate assets. more particularly it is a trust
fund for the security of creditors of the
corporation, who presumably deal with it on
the credit of it capital stock, so that it cannot
be withdrawn or diverted to their prejudice.
Promoters- It is a firm or person who does the
preliminary work related to the formation of
a corporation, including its promotion,
incorporation, and flotation, and solicits people
to invest money in the corporation, usually
when it is being formed.
Articles of Incorporation- It is the basic
document for incorporation the charter and its
non-submission prevents the SEC from issuing
a certificate of incorporation that gives rise to
the corporation’s juridical personality, it also
contains the matters requires by the
corporation code
Dejure Corporation- is one organized in full
compliance with the Revised Code
requirements. The Sec, through its legal
officers, examines the incorporation papers
submitted to it, and if these are in order, the
SEC will approve the incorporation papers
and shall issue the corporation’s certificate of
incorporation. The certificate of incorporation
will serve as a legal existence of incorporation
with its own juridical necessity.
De facto corporation-is one which actually
exist for all practical purposes as a
corporation as a corporation but which has no
legal right to corporate existence as against
the State. This corporation had not complied
with all the requirements necessary to be a de
jure corporation but has complied sufficiently
to be accorded corporate status as against
third parties although not against the state.
Meaning there is a defect in their
incorporation.
Corporation by estoppel- this corporation
has no real existence in law, it is neither de
jure nor de facto corporation, but is a mere
fiction existing for the particular case, where
the element of estoppel in present. it only
exists only between the person who
misrepresented their status as a real
corporation.
Collateral attack- is one whereby corporate
existence is questioned in some incidental
proceeding not provided by law for the
express purpose of attacking the corporate
existence.
Implied powers- are those powers which are
reasonably necessary to exercise the express
powers and to accomplish or carry out the
purposes for which the corporation was
formed.
Incidental or inherent power- powers which
a corporation can exercise by the mere fact of
its being a corporation or powers which are
necessary to corporate existence and are4
therefore, implied granted. as powers inherent
in the corporation as a legal entity, they exist
independently of the express powers.
Right of pre-emption- pre emptive right
ensures that stockholder’s proportional control
over the corporation will remain intact
whenever new shares are issued or disposed of
by the corporation. all stockholders possess
such pre emptive right unless the right is
denied by the articles of incorporation.
Term-the time during which the officer may
claim to hold the office as of right and fixes
the interval after which the several incumbents
shall succeed one another.
Tenure- represent the term during which the
incumbent actually holds office. the tenure
may be shorter than the term for reasons
within or beyond the power of the incumbent.
Independent director- a person who, apart
from shareholdings and fees received from the
corporation, is independent or management
and free form any business or other
relationship which could or could reasonably
be perceived to materially interfere with the
exercise if independent judgement in carrying
out the responsibilities as a director.
Call- is a declaration officially made by a
corporation usually expressed in the form of a
resolution of the board of directors requiring
the payment of all or a certain prescribed
portion of a subscriber’s stock subscription.
Highest bidder- is the person offering at the
sale to pay the full amount of the balance on
the subscription together with accrued interest,
cost of advertisement and expenses of sale for
the smallest number of shares or fraction of a
share.
Certificate of stock- it is a paper Distinction between a corporation and a
representative or tangible evidence of the partnership

stock itself and other various interest therein. Partner Corporation

ship
the certificate is not stock in the corporation Manner created created by law
but is merely evidence of the holder’s interest Creation by mere or by operation
agreeme of law
status in the corporation, his ownership of the nt of the
share represented thereby, but is not in law parties
Number of Organiz requires at least
the equivalent of such ownership. It is a incorporators ed by five
contract between the corporation and the only incorporators
two
stockholder. persons
Commenceme commen corporation
Educational Corporation- It Is a stock or nt of juridical ces to begins to have
personality. acquire juridical
non-stock corporation organized to provide juridical personality
facilities for teaching or instruction. This personal only from
ity from the date of
corporation normally maintain a regular the issuance of the
faculty and curriculum and normally have a moment certificate of
of the incorporation
regular organized body of pupils or students executio by the
or attendance at the place where the n of the Securities and
contract Exchange
educational activities are regularly carried on. of Commission
partners
Religious corporation- it is a corporation hip
composed entirely of spiritual persons and Powers may can exercise
exercise only the
which is erected for the furtherance of a any powers
religion or for perpetuating the rights of the power expressly
authoriz granted by law
church or for administration of the church or ed by or implied
religious work or property. the from those
partners granted or
One-person corporation- is a corporation provide incident to its
d it is existence
with a single stock holder, who can only be a not
natural person, trust or estate. contrary
to law,
morals,
good
customs
, public
order, or
public
policy
Management. when the power to do
 the business and Transferabilita a stockholder
manage manage its y of interest.partner has generally
ment affairs is vested cannot the right to
is not in the board of transfer transfer his
agreed directors or his shares without
upon, trustees interest the prior
every in the consent of the
partner partners other
is an hip so stockholders
agent of as to because a
the make corporation is
partners the not based on
hip transfer this principle
Effect of A the suit against ee a
mismanageme partner a member of partner
nt. as such the board of without
can sue directors or the
a co- trustees who consent
partner mismanages of all
who must be in the the
misman name of the other
ages corporation existing
Right of A while a partners
succession partners corporation has because
hip has such right the
no right partners
of hip is
successi based
on on the
Extent of In a The principl
liability to partners stockholders e of
third persons hip, the are liable only delectus
partners to the extent of persona
(except the shares rum
limited subscribed by Term of partners while a
partners them existence hip may corporation
) are be may not be
liable establis formed for a
personal hed for term fixed or
ly and any perpetual.
subsidia period
rily of time
(someti stipulate
mes d by the
solidaril partners
y) for Firm name. A While a
partners limited corporation
hip partners may adopt any
debts to hip is fi rm name
third required provided it is
persons by the not the same as
 law to or similar to The Capital stock of the corporation
add the any registered represent the amount of money or property
word fi rm name contributed by shareholders to be sued as the
“Ltd.” financial foundation from which the business
to its of the corporation is to be carried on. Capital
name is used broadly to refer to all assets of a
Dissolution. A while a corporation that are used for the purpose of
partners corporation can
deriving profit in the conduct of its business,
hip may only be
be dissolved with Advantage of no-par value
dissolve the consent of
d at any the State 1. no par value shares are issued as fully paid
time by and non-assessable
the will 2. their price is flexible
of any 3. low priced stock enjoys wider distribution
or all of 4. they tell no untruth concerning the value of
the the stock holders contribution
partners 5. stock dividends are more easily issued
Governing partners while a thereby simplifying accounting procedure
law. hip is corporation is
governe governed by
d by the the
Civil Corporation Disadvantage of no-par value shares
Code, Code 1. they legalize large issues of tock for
property
2. they conceal the money of property
represented by the shares
3. they promote issuance of watered stock
4. there is lesser protection to creditors

Advantages of business corporation

Distinguished of capital stock and share of
stock distinguished
As distinguished from capital stock,
the term “stock” or “share of stock” is
commonly used in a distributive sense to refer
to the stock in the hands of the stockholders.
therefore, it belongs to the, on the other hand,
the former is used in a collective sense to
signify the whole body of the shares of stock
in the corporation.
Differentiating capital stock from capital
1. the corporation has a legal capacity to act
as a legal unit
2. it has continuity or existence because of its
non-dependence on the lives of those who
compose it
3. its credit is strengthened by such continuity
of existence
4. it management is centralized in the board
of directors
5. its creation, organization, management and
dissolution are standardized as they are
governed under one general incorporation
6. it makes feasible gigantic financial
enterprises since if enable many
individuals to invest their separate funds in
the enterprise
7. the shareholder have limited liability
8. they re not general agents of the business
9. the share of stocks are transferred without
the consent of the other stockholders.
Disadvantages of a business corporation
1. the corporation is relatively complicated
in formation and management
2. it entails relatively high cost of formation
and operations
3. its credit is weakened by the limited
liability if the stockholders
4. there is ordinarily lack of personal
element in view of the transferability of
shares
5. there is greater degree of governmental
control and supervision than in any other
forms of business organization
6. the stockholders voting rights have
become theoretical particularly in large
corporations because of the use of proxies
and widespread ownership
7. the stockholders have little voice in the
conduct of the business
8. in large corporation, management and
control are separate from ownership.
4 classes of persons composing a more than fifteen (15) or the number of
corporation
1. Corporators- who compose the
corporation, whether stockholders or
members. Hence, the term includes
incorporators, stockholders or members
2. Incorporators- those corporators
mentioned in the articles of incorporation
as originally forming and composing the
corporation and who executed and signed
the articles of incorporation as such.
3. stockholders- the owners of shares of
stock in a stock corporation. they are the
owners of the corporation and also called
shareholders.
4. members- corporators of a corporation
which has no capital stock.
.
The articles of incorporation constitute a
contract between 3 sets of parties:
1. the state and the corporation to which the
certificate of incorporation is granted
2. the stockholders and the state
3. the corporation and its stockholders.
The articles of incorporation contain the
following:
(a) The name of the corporation;
(b) The specific purpose or purposes for which
the corporation is being formed. Where a
corporation has more than one stated purpose,
the articles of incorporation shall indicate the
primary purpose and the secondary purpose or
purposes: Provided, That a nonstock
corporation may not include a purpose which
would change or contradict its nature as such;
(c) The place where the principal office of the
corporation is to be located, which must be
within the Philippines;
(d) The term for which the corporation is to
exist, if the corporation has not elected
perpetual existence;
(e) The names, nationalities, and residence
addresses of the incorporators;
(f) The number of directors, which shall not be
trustees which may be more than fifteen (15);
(g) The names, nationalities, and residence
addresses of persons who shall act as directors
or trustees until the first regular directors or
trustees are duly elected and qualified in
accordance with this Code;
(h) If it be a stock corporation, the amount of
its authorized capital stock, number of shares
into which it is divided, the par value of each,
names, nationalities, and residence addresses
of the original subscribers, amount subscribed
and paid by each on the subscription, and a
statement that some or all of the shares are
without par value, if applicable;
(i) If it be a nonstock corporation, the amount
of its capital, the names, nationalities, and
residence addresses of the contributors, and
amount contributed by each; and
(j)Such other matters consistent with law and
which the incorporators may deem necessary
and convenient.
Grounds when articles of incorporation or
amendment be disapproved
(a) The articles of incorporation or any
amendment thereto is not substantially in
accordance with the form prescribed herein;
(b) The purpose or purposes of the
corporation are patently unconstitutional,
illegal, immoral or contrary to government
rules and regulations;
(c) The certification concerning the amount of
capital stock subscribed and/or paid is false;
and
(d) The required percentage of Filipino
ownership of the capital stock under existing
laws or the Constitution has not been
complied with.
Requisites in the statement of the purpose
or purposes for which a corporation is
formed
(1) Purpose or purposes must be lawful. - The
acts of the corporation must not contrary to
law, morals, public policy or god customs.
(2) Purpose or purposes must be stated with
sufficient clarity.
(3) Primary purpose must be stated.
(4) Purpose must be capable of being
lawfully combined.
Purposes
The purpose clause in the IA indicates what
acts the corporation may or may not legally do.
Therefore, in phrasing the purpose clause, it is
prudent that all the corporation’s business
ventures be expressed in the purpose clause.
the purpose clause may also help apprise
potential investors and help them decide
whether or not to invest money in corporation.
the board of director must be fully aware of the
purpose clause so that it will stay within the
limits of its business sphere. third parties who
wish to enter into transactions with the
corporation may also take a look at the
corporation purposes to help in their decision-
making.
A corporation may only be formed for a
legitimate business concern or any purposes
not contrary to law, morals, public policy, or
good customs. thus, an illegal purpose may not
be included in the purpose clause; although
the non-inclusion of an illegal purpose int eh
clause is not guarantee that the corporation
will not be used for illegal or immoral
purposes such as money laundering and others.
Importance of corporate name
A corporate name identifies the corporation
and it is through its name that a corporation
may do legal acts, sue, and be sued. The name
of a corporation is a necessary element for its
existence and "designates the corporation in
the same manner as the name of an individual
designates the person." It must not be identical
or deceptively or confusingly similar to that of
any existing corporation or to any other name
protected by law. and not patently deceptive,
confusing or contrary to existing law.
Under this section, the SEC will not allow
the use of a corporate name
that is:
a. not distinguishable from that already
reserved or registered for the use of another
corporation, or if such name is alr protected
by law, or or protected by law.
b. when its use is contrary to existing law,
rules, and regulation
The same Section also provides that a name
is not consider
Distinguishable even if it contains one or
more of the following:  words for purposes of differentiating a
a. The word "corporation", "company",
"incorporated”, “limited "limited
liability", or an abbreviation of one of
such words; and
b. Punctuations, articles, conjunctions,
contractions, preposi
tions, abbreviations, different tenses, spacing,
or number of the same word or phrase.
Prior to the Revised Code's enactment, the
SEC also issued Memorandum Circular
No. 14, series of 2017, on the use of
corporate and partnership names. This
SEC issuance provides that:
a. The corporate name shall have the word
“Corporation" or "Incorporated" or their
respective abbreviations (Corp. and Inc.)
attached to it, e.g., JG Summit Holdings, Inc.;
b. The corporate name of a foundation shall
use the word
“Foundation", e.g., Jesuit Volunteers
Philippines Foundation, Inc.;
C. A term that describes the business of a
corporation in its name should refer to its
primary purpose; and if there are two such
terms, the first should refer to its primary
purpose, and the second to the secondary
purpose, e.g, OMG! Upholstery a Trading,
Inc.;
d. The name shall not be identical,
misleading, or confusingly similar to a
corporate name registered with the SEC or
with the Department of Industry (DTI), which
regulates sole
proprietorships;
E. If the name applied for is similar to that of a
registered corporation, one or more distinctive
words should be added to the proposed name
to remove the similarity or differentiate it from
the registered name; but punctuation marks,
spaces, signs, symbols, and other similar
characters are not acceptable as distinguishing
proposed name, e.g., Jollibee Foods
Corporation!!!;
f. A name that consists solely of special
symbols, punctuation
marks, or specially designed characters will
not be accepted for registration, e.g., !@#?
@!!!, Corp.;
g. Business or trade name that is different from
the corporate name shall be included in the
articles of incorporation;
h. A trade name or trademark registered with
the Intellectual
Property Office may be used as part of a
corporate name of a party other than its owner
if the latter gives consent to its use;
i. The full name or surname of a person may
be used as a corporate name if:
i. he/she is a stockholder or member of
the corporation, and
ii. has consented to such use; and if the
person concerned is deceased, the consent
shall be given by his/her estate
iii. the name of an internationally
known foreign corporation, or something
similar to it, cannot be used by a domestic
corporation unless: a) it is its subsidiary; and
b) the parent corporation has consented to such
use;
j. A name written in foreign language, even if
registered in another country shall not be
registered if the name violates good morals,
public policy, or has an offensive or
indecorous meaning in any of the Philippines
languages or major dialects.
k. the name of local geographical unit, site or
location cannot be used as a corporate name
unless accompanied by a descriptive word or
phrase, e.g., Manila, Manila! Corp.
Essential for the existence of a de facto
corporation
1. The existence of a valid law that allows
the formation of corporation- to be a de
facto corporation it must have a valid law
to incorporate the corporation and that is
the Revised Corporation Code.
2. good faith compliance with the legal
requirements for the formation of a
corporation- The corporation must comply
all the legal requirements with the SEC,
but it has a defect. they have a certificate
of incorporation though it has a defect on
it. And when it comes to a 3rd person they
recognized them as a corporation, but
when it comes to the government they
considered as de facto corporation.
3. exercise of corporate powers by the de
facto corporation- they act as a
corporation
A corporation was continuously
inoperative for 3 years. is the corporation
deemed dissolve?
- No, the corporation that is continuously
inoperative for 3 years is not deemed to
dissolve. Because based on the Revised
Code if the corporation is inoperative for a
period of at least 5 consecutive years, the
corporation may under the delinquent
status and not to be dissolve. Since it is
just 3 years it is not may under the
delinquent status nor dissolution.
Qualification of directors (Stock
corporation)
1. must be a natural person of legal age
2. must be a stockholder of record, owning at
least one share in her own name, legal title
over the share of stock
3. Must be residents of the Philippines.
Disqualification of directors
1. if the director ceases to eb an owner of a
share of stock in the corporation, she shall
be disqualified as a director.
Hindi magiging director or officer ang isang
person within 5 years prior to the election or
appointment as if the person was:
1. Convicted by final judgment
a, of an offense punishable by
imprisonment for a period exceeding 6
years
b, fro violating this code
2. Found administratively liable for any
offense involving fraudulent acts
3. declared liable by a foriegb court or
equivalent foreign regulatorty authority
for acts, violation or misconduct
the board of the directors shall hold the office
for 1 year or until their successor are elected or
qualified in non-stock corporation, the trustee
may have a term of up to 3 years.
Qualification of Trustee (NON-Stock
corporation)
- trustees of non-stock corporation must be
members in good standing thereof and like
in stock corporation, a majority of them
must be resident of the Philippines.
Corporation should have independent
directors
1. those whose securities are registered with
the commission
2. corporation listed with an exchange
3. corporation with assets of at least 50
million and having 200 or more holders of
shares, each holding at least 100 shares of
class of its equity shares
4. Financial intermediaries
5. corporation engaged in business vested
with public interest
Methods of voting
1. Straight voting- the votes are distributed
equally among the candidates without
preference.
2. Cumulative voting- it is a method of
concentrating or giving votes to 1
candidate, devised to give the minority the
opportunity to secure representation in the
board. A stockholder can give a number
of votes to 1 or more or some of
candidates at the stockholder’s discretion
without any limitation except that the total
votes cast by said stockholder shall
exceed the number of shares owned by her
multiplied by the number of directors to
be elected.
3. Mixed Voting- in mix voting the
stockholder concerned can distribute the
votes among her candidates of choice in
any manner she pleases.
Quo waranto- it is a process in which
you are questioning the authority of an
entity when it comes to exercising their
powers. The state may directly attack or
question the existence of the corporation.
the officers of a corporation are as follows
1. president- the president of a corporation
must be a director of the corporation, but
he cannot act as president and secretary or
as president and treasurer at the same time.
2. treasurer- the treasurer of the corporation is
the proper officer entrusted with the
authority to receive and keep the money of
the corporation and to disburse theme as he
may be authorized.
3. secretary- the secretary must be a resident
and a citizen of the Philippines. he is not
allowed to act as president and secretary at
the same time.
4. compliance of officer (if the corporation is
vested with public interest)
5. such other officers as stated in the by law.
Removal of Director/ trustee
- The removal may be made in a regular
meeting or in special meeting. if removal is
through a special meeting, the president of
the corporation must order the secretary to
call such a meeting to remove the director
or trustee. During the meeting, the vote of
the shareholders holding or representing at
least 2/3 of the outstanding capital stock
shall be sufficient to remove a director
from office. for non-stock corporation, the
vote of at least 2/3 of the members entitled
to vote is sufficient to remove a trustee.
Corporate Opportunity Doctrine
- it is precisely a recognition by the court
that the fiduciary standards could not be
upheld where the fiduciary was acting for 2
entities with competing interest. the
doctrine rest fundamentally on the
unfairness, in particular circumstances, of
an officer or director taking advantage of
an opportunity for his own personal profit
when the interest of the corporation justly
calls for protection.
A vacancy in the office of director or trustee
may be filled as follows:
(1) if the vacancy results from the removal
by the stockholders of members or the
expiration of the term. If the director or
trustee removed by the expiration of
term, the vacancy must be filled by the
stockholders or members and the
replacement must be elected by the
stockholder or members and also the
election shall be held no later than the
day of such expiration at a meeting called
for that purpose;
(2) if the vacancy is created by reason of
an increase in the number of directors
or trustees. There is an amendment of
the articles to increase the numbers of
directors or trustees. The vacancies
should be filled up by the stockholders by
an election at a regular or special meeting
of stockholders or members duly called
for the purpose, or in the same meeting
authorizing the increase of directors or
trustees if so, stated in the notice of the
meeting;
(3) if the vacancy occurs other than by
removal or by expiration of terms such
as death, resignation, abandonment, or
disqualification, if the remaining
directors or trustees do not constitute a
quorum for the purpose of filling the
vacancy. The vacancies must be filled by
the stockholders or members at a regular
or special meeting called for that purpose
and the election must be filled no later
than 45 days from the time the vacancy
arose
(4) if the vacancy may be filled by the
remaining directors or trustees but the
board refers the matter to the
stockholders or members; if still
constituting a quorum, at least a majority
of them are empowered to fill any
vacancy occurring in the board other than
by removal by the stockholders or
members or by expiration of the term.
The emergency board- means that, the
remaining directors or trustee they do not
constitute a quorum but there is a need for
emergency action to prevent grave,
substantial and irreparable loss or damage to
the corporation. The vacancy is temporarily
filled by the officers by the unanimous voting
of the remaining directors or trustees, their
tenure is for a limited period and their purpose
is also limited and that is only for necessary
emergency action.
Quorum-It is a minimum level of interest or
attendance required before an official meeting
or action can take place. Companies often
stipulate the quorum required among
shareholders in order to make decisions,
spelled out in the corporate charter.
Corporate powers and capacity
(a) To sue and be sued in its corporate name;
(b) To have perpetual existence unless the
certificate of incorporation provides otherwise;
(c) To adopt and use a corporate seal;
(d) To amend its articles of incorporation in
accordance with the provisions of this Code;
(e) To adopt bylaws, not contrary to law,
morals or public policy, and to amend or
repeal the same in accordance with this Code;
(f) In case of stock corporations, to issue or
sell stocks to subscribers and to sell treasury
stocks in accordance with the provisions of
this Code; and to admit members to the
corporation if it be a nonstock corporation;
(g) To purchase, receive, take or grant, hold,
convey, sell, lease, pledge, mortgage, and
otherwise deal with such real and personal
property, including securities and bonds of
other corporations, as the transaction of the
lawful business of the corporation may
reasonably and necessarily require, subject to
the limitations prescribed by law and the
Constitution;
(h) To enter into a partnership, joint venture,
merger, consolidation, or any other
commercial agreement with natural and
juridical persons;
(i) To make reasonable donations, including
those for the public welfare or for hospital,
charitable, cultural, scientific, civic, or similar
purposes: Provided, that no foreign
corporation shall give donations in aid of any
political party or candidate or for purposes of
partisan political activity;
(j) To establish pension, retirement, and other
plans for the benefit of its directors, trustees,
officers, and employees; and
(k) To exercise such other powers as may be
essential or necessary to carry out its purpose
or purposes as stated in the articles of
incorporation.
Ways of increasing or decreasing the
authorized capital stock
- To exercise the increasing or decreasing
the authorized stock it requires the
approval of the majority of the Board and
that of the stockholders in meeting where
in the stockholders represent 2/3 of the
outstanding capital stock. The secretary’s
certificate of increase capital stock must
be accompanied by the sworn statement of
the treasurer of the corporation showing
that at least 25% of the increase in capital
stock has been subscribed and that at least
25% of the amount subscribed has been
paid in actual cash to the corporation or
that property the valuation of which is
equal to 25% of subscription. In increasing
or decreasing in the capital stock it must
have the SEC approval and also to the
Philippine Completion Commission when
applicable. The SEC will not approve any
decrease of the capital stock if the decrease
has prejudicial effects to corporate
creditor’s right. to increase capital stock
must also be exercised in good faith and
not fraudulently or in violation of the rights
of particular stockholders.
Corporation may invest their funds
1. another corporation or business
2. for any other purpose other than its
primary purpose when it is approved by eh
majority of the board and ratified by
stockholders representing at least 2/3 of the
outstanding stock or by at least 2/3 of its
members in case of a non-stock
corporation in a meeting duly called for
such a purpose.
When stockholder or members approval is
not necessary?
- the approval of stockholder or members is
not necessary if the investment is
reasonably necessary to accomplish the
corporation’s primary purpose or
incidental to its primary purpose.
Instances where pre emptive right cannot
be exercised.
1. issue of shares in compliance with laws
requiring stock offerings or minimum
stock ownership by the public
 2. issue of shares in good faith and duly
approved by stockholders representing
2/3 of the outstanding capital stock in
exchange for property needed from
corporate purposes
3. issue of shares in payment of a
previously contracted debt.
Dividends- it is a portion of profits and
surplus finds of a corporation that has been
actually set apart by the board of directors for
distribution among the stockholders in
proportion to their respective shareholdings.
Dividends are the returns to the stockholder’s
investment in the corporation and the right
thereto arises from stock ownership.
Retained Earnings- it is the difference
between the total present value of its asset
after deducting losses and liabilities and the
amount of its capital stock.
Ultra vires act- it is an act which is beyond
the conferred powers of a corporation or the
purposes for which it is created. The ultra
vires is not necessarily illegal.
An illegal corporate act, on the other hand is
an act which in contrary to law, morals, good
custom, public order, or public policy.
Effect of declaration of cash dividend-
When a corporation issues cash dividend, the
assets of the corporation diminish by just so
much the amount the paid out and
correspondingly, the property of the
individual stockholders increases.
effect of declaration of stock dividend- A
stock dividend converts the surplus or profits
of the corporation covered by such dividend
into the permanent account thereby placing it
beyond the power of the board of directors to
withdraw from corporate use and to distribute
to the stockholders.
By laws- is a private contract among the
corporation, its shareholders, directors and
officers and the prevailing rule is that the
provision of the articles of incorporation and
the bylaws must be strictly complied with and
applied to the letter. The by laws should not be
contrary to the general policy of the law and
reasonable and calculated to carry in effect the
objects of the corporation.
Elements of valid by laws
1. Consistent with the revised code- The by
laws must be based on the revised code
2. in accord with the law, morals, and public
policy- it must be not contrary to the law,
morals and public policy
3. consistent with the articles of
incorporation.
Contents of by laws
(a) The time, place and manner of calling and
conducting regular or special meetings of the
directors or trustees;
(b) The time and manner of calling and
conducting regular or special meetings and
mode of notifying the stockholders or
members thereof;
(c) The required quorum in meetings of
stockholders or members and the manner of
voting therein;
(d) The modes by which a stockholder,
member, director, or trustee may attend
meetings and cast their votes;
(e) The form for proxies of stockholders and
members and the manner of voting them;
(f) The directors’ or trustees’ qualifications,
duties and responsibilities, the guidelines for
setting the compensation of directors or
trustees and officers, and the maximum
number of other board representations that an
independent director or trustee may have
which shall, in no case, be more than the
number prescribed by the Commission;
(g) The time for holding the annual election
of directors or trustees and the mode or
manner of giving notice thereof;
(h) The manner of election or appointment
and the term of office of all officers other than
directors or trustees;
(i) The penalties for violation of the bylaws;
(j) In the case of stock corporations, the
manner of issuing stock certificates; and
(k) Such other matters as may be necessary
for the proper or convenient transaction of its
corporate affairs for the promotion of good
governance and anti-graft and corruption
measures.
Articles of incorporation and bylaws
distinguished
1. The former constitutes the charter or
fundamental law of the corporation, while
the latter are merely rules and regulations
adopted by the corporation
2. The former is executed before
incorporation by the incorporators, while
the latter, usually after incorporation by
the stockholders or members.
3. the filing of the former is a condition
precedent to corporate existence, while
the filing of the latter is a condition
subsequent.
Why it is necessary that every corporation
adopt a code of bylaws
- Because the adoption of Bylaws indicates
that your corporation takes its corporate
responsibilities seriously.  bylaws are also
necessary to maintain consistency in the
running of the business. and They
use bylaws to communicate organizational
rules so internal disputes and conflict can
be avoided.
Regular meetings- the regular meeting of
stockholders or members are held annually on
the date stated in the bylaws of the
corporation. If there is no stated in the bylaws,
then the board of directors or trustees should
call for a meeting of the stockholder or
members on any date after April 15, which is
also the deadline for the filing of income tax
return of individuals.
the revised code has also introduced the
following changes with respect to
stockholders or members regular meeting
1. there should be atleast 21 day notice prior
to a regular stockholders meeting, of no
specific period is required in the bylaws,
law or regulation.
2. if the stockholders or members regular
meeting is postponed, written notice of
scuch postponement and the reason
therefor shall be sent to all stockholders or
members of record at least 2 weeks orior to
the scheduled date of the meertoign, unless
the bylaws, law or regulation require a
different period.
3. written notice of regular meeting may be
sent to all stockholders orm members of
record through electronic mail or suh other
manner allowd by the SEC.
4. stickholders or members right to vote may
be exercisefd in person, through a orixy, or
 by remote communication or in absentia
when so authorized by the by laws.
5. the board should endeavor to present a
stockholders or members the following:
a) The minutes of the most recent
regular meeting which shall include,
among others:
(1) A description of the voting and vote
tabulation procedures used in the previous
meeting;
2) A description of the opportunity given
to stockholders or members to ask
questions and a record of the questions
asked and answers given;
(3) The matters discussed and resolutions
reached;
(4) A record of the voting results for each
agenda item;
(5) A list of the directors or trustees,
officers and stockholders or members who
attended the meeting; and
(6) Such other items that the Commission
may require in the interest of good
corporate governance and the protection
of minority stockholders.
b) A members’ list for nonstock
corporations and, for stock corporations,
material information on the
stockholders, and their voting rights;
c) A detailed, descriptive, balanced and
comprehensible assessment of
corporation’s performance, which
include information on any material change in
the corporation’s business, strategy, and other
affairs;
d) A financial report for the preceding year,
which shall include financial statements duly
signed and certified in accordance with this
Code and the rules the Commission may
prescribe, a statement on the adequacy of the
corporation’s internal controls or risk
management systems, and a statement of all
external audit and non-audit fees;
e) An explanation of the dividend policy and
the fact of payment of dividends or the reasons
for nonpayment thereof;
f) Director or trustee profiles which shall
include, among others, their qualifications and
relevant experience, length of service in the
corporation, trainings and continuing
education attended, and their board
representations in other corporations;
g) A director or trustee attendance report,
indicating the attendance of each director or
trustee at each of the meetings of the board and
its committees and in regular or special
stockholder meetings;
h) Appraisals and performance reports for the
board and the criteria and procedure for
assessment;
current i) A director or trustee compensation report
prepared in accordance with this Code and the
rules the Commission may prescribe;
j) Director disclosures on self-dealings and
the
related party transactions; and/or
shall
k) The profiles of directors nominated or Code upon the terms and conditions stated in
seeking election or reelection. the agreement.

Quorum in meetings- quorum in a stock Requirement of a voting trust agreement

corporation shall be the stockholders as 1. a certified copy of the voting trust
representing a majority of the outstanding agreement must be filed with the
capital stock while in a non-stock corporation corporation and with the SEC, otherwise
it shall be the majority of the members, unless said agreement is ineffective and
otherwise provided for in the Revised Code or unenforceable.
in the bylaws. 2. The certificate of stock covered by the
voting trust agreement shall be cancelled
Requisites of a proxy and new ones shall be issued in the name
1. it must be in writing and signed by the of trustees stating that they issued pursuant
stockholder or members in any form to said agreement.
authorized by the by laws; 3. the voting trust agreement shall be for a
2. it must be filed with and received by the period not exceeding 5 years at any one
corporate secretary within a reasonable time. unless expressly renewed, all rights
time before the scheduled meeting granted in a voting trust agreement shall
3. it shall be valid only for the meeting for automatically expire at the end of the
which it is intended unless otherwise agreed period.
provided in the proxy form, but in no case 4. no voting trust agreement shall be entered
shall the proxy be valid and effective for a into for purposes of circumventing the
period longer than 5 years at any one time. laws against anti- competitive agreements,
abuse of dominant position, anti-
Voting trust agreement- it is an agreement competitive mergers and acquisitions,
in writing whereby 1 or more stockholders of violation of nationality and capital
a stock corporation transfer his shares to any requirements or the perpetual of fraud.
person/ person or to a corporation having
authority to act as trustee for the purpose of Requisites of a valid meeting
vesting in such person or persons or 1. it must be held at the proper place
corporation as trustee or trustees voting or 2. it must be held at the stated date and at the
other rights pertaining to the shares for a appointed time or at a reasonable time
certain period not exceeding that fixed by the thereafter
3. it must be called by the proper person
4. there must be a previous notice agreement, if validly executed, is
5. there must be a quorum irrevocable.
3. A proxy can only act at the specified
Each notice of meeting shall further be stockholders or members, meeting while
accompanied by the following:
a trustee is not limited to any particular
(a) The agenda for the meeting;
meeting
(b) A proxy form which shall be submitted to
4. a proxy votes only in the absence of the
the corporate secretary within a reasonable
owner of the stock, while a trustee can
time prior to the meeting;
vote and exercise all the rights of the
(c) When attendance, participation, and voting
transferring stockholder even when the
are allowed by remote communication or in
latter is present.
absentia, the requirements and procedures to
5. a proxy is usually of shorter duration than
be followed when a stockholder or member
a voting trust agreement, although under
elects either option; and
the law the maximum duration of both
(d) When the meeting is for the election of
cannot exceed 5 years at any one time,
directors or trustees, the requirements and
6. A proxy need no be notarized nor a copy
procedure for nomination and election.
filed with the SEC, while voting trust
must be notarized and certified copy filed
Proxy- it is designated the formal written
with the Commission.
authority given by the owner or holder of
7. A proxy does not have a right of
shares, who has a right to vote it, or by
inspection of corporate books, while a
member, as a principal, to another person, as
trustee has such right.
agent, to exercise the voting rights of the
former. It also apply to the holder of the
Watered stock- it is a stock that has been
authority or the person authorized by an
issued by a corporation as fully paid up when
absent stockholder or members to vote for
in fact it is not because it has been issued as
him at a stockholders or members meeting.
bonus or otherwise without any consideration
at all, or for less than par, or for overvalued
Proxy and voting trust distinguished
property, labor, services.
1. the proxy has no legal title to the shares
of the stockholder giving the agency,
The liabilities that may be incurred by a
while then trustee acquires legal title tot
stockholder.
eh shares of the transferring stockholder
2. a proxy, unless coupled with interest it is 1. liability to the corporation for unpaid
revocable at any time, while voting trust subscription
2. liability to the corporation for interest on
unpaid subscription
3. liability to creditors of the corporation
on unpaid subscription
4. liability for watered stock
5. liability for dividends unlawfully paid
6. liability for failure to create corporation.
if the corporation wrongfully refuses to
issue a certificate of stock, the stockholder
may avail of any of the following
remedies:
1. irregularity or defect in the notice of sale
2. irregularity or defect in the sale itself of
the delinquent stock
Every corporation shall keep and carefully
preserve at its principal office all
information relating to the corporation
including, but not limited to:
(a) The articles of incorporation and
bylaws of the corporation and all their
amendments;
(b) The current ownership structure and

1. a suit for specific performance of an voting rights of the corporation, including

express or implied contract
lists of stockholders or members, group
2. an alternative relief by way of damages
structures, intra-group relations,
in cases where specific performance
cannot be granted ownership data, and beneficial
3. petition for mandamus to compel the
ownership;
issuance of a certificate where the
(c) The names and addresses of all the
conditions, facts and circumstances of
the particular case bring it within legal members of the board of directors or
rules which govern the granting of that
trustees and the executive officers;
writ
(d) A record of all business transactions;
4. recession of the subscription contract if
the corporation wrongfully refuses to (e) A record of the resolutions of the
deliver a certificate, and recovery of
board of directors or trustees and of the
what the subscriber has paid, and in
stockholders or members;
addition, demand for damages if the
stockholders so desires. (f) Copies of the latest reportorial

requirements submitted to the

Recovery of stock unlawfully sold.
Commission; and
The grounds for the recovery of stock
unlawfully sold for delinquency are;
 (g) The minutes of all meetings of
stockholders or members, or of the board
of directors or trustees.
In connection with the right of inspection
of corporate books accorded to
stockholder, what is meant by the term
“reasonable hours”
- the reasonable hours means, reasonable
hours on business days throughout the
year and not merely during some arbitrary
period of a few days chosen by the
directors.
Merger- it means 2 or more corporation may
merge into a single corporation which shall be
one of the constituent corporation or may
consolidate into a new single corporation
which shall be the consolidated corporation.
Consolidation- 2 or more corporation unite,
giving rise to a new corporate body and
dissolving the constituent corporation as
separate corporation.
Reason for merging
- the reason why the corporation enters into
merge and consolidation is to combine
their resources as part of their business
strategy and in some instances to comply
with legal requirements.
Appraisal right of a stockholder- it refers to
a his right to demand payment of the fair value
of his shares, after dissenting from a proposed
corporate action involving a fundamental
change in the charter or articles of
incorporation in the cases provided by law.
Instances when the appraisal right is
available to a stockholder
(a) In case an amendment to the articles of
incorporation has the effect of
changing or restricting the rights of any
stockholder or class of shares, or of
authorizing preferences in any respect
superior to those of outstanding shares
of any class, or of extending or
shortening the term of corporate
existence;
(b) In case of sale, lease, exchange,
transfer, mortgage, pledge or other
disposition of all or substantially all of
the corporate property and assets as
provided in this Code;
(c) In case of merger or consolidation; and
(d) In case of investment of corporate
funds for any purpose other than the
primary purpose of the corporation.
Roles applicable only to non-stock-
corporation
1. No part of its income is distributable as
dividends to its members
2. it cannot engage in business with the
object of making profits
3. the right to vote of members may be
limited, broadened or even denied int eh
articles of incorporation or the by laws
4. unless otherwise provided by the articles
of incorporation or the by-laws, ammeber
may vote by proxy in accordance with the
provision of the code
5. Trustees subsequently elected shall have a
term of 3 years
Rules of Distribution Non stock.
(1) All of the corporation's liabilities and
obligations must be paid, satisfied, and
discharged, or adequate provision shall be
made therefore;
(2) Assets held by the corporation upon a
condition requiring return, transfer
conveyance, and which condition occurs by
reason of the dissolution, shall be returned,
transferred or conveyed in accordance with
such requirements;
(c) Assets received and held by the corporation
subject to limitations permitting their use only
for charitable, religious, benevolent,
educational or similar purposes, but not held
upon a condition requiring return, transfer or
conveyance by reason of the dissolution, shall
be transferred or conveyed to one (1) or more
corporations, societies or organizations
engaged in activities in the Philippines
substantially similar to those of the dissolving
corporation according to a plan of distribution
adopted pursuant to this Chapter;
(d) Assets other than those mentioned in the
preceding paragraphs, if any, shall be
distributed in accordance with the provisions
of the articles of incorporation or the bylaws,
to the extent that the articles of incorporation
or the bylaws determine the distributive rights
of members, or any class or classes of
members, or provide for distribution; and
(e) In any other case, assets may be distributed
to such persons, societies, organizations or
corporations, whether or not organized for
profit, as may be specified in a plan of
distribution adopted pursuant to this Chapter.
Rules applicable only for non-stock
educational corporations
1. the number of trustees shall not be less
or than 5 nor more than 15
2. it shall be in multiples of 5 their number
shall be in 5,10,15
3. trustees subsequently elected shall have a
term of 5 years
4. a majority if the trustees shall constitute a
quorum for the transaction of business
5. the powers and authority of trustee shall
be defined in the bylaws.
Attributes of a corporation
- Artificial being- means that the
corporation is a separate being from
the stock holders and has its own
juridical personality.
- Created by operations of law- by
complying with the legal requirements
a corporation can be created.
- Right of succession- has a right to
exist continuously even the stock
holder’s changes.
- Powers and attributes expressed by
law- a corporation has no power except
those expressed by the revised code for the
corporation specifically in section 35-44
classes of corporation
- Stock corporation- has capital stock
divided to shares and authorized to
distribute dividends and surplus to its
stock holders
- Non stock- are organized for non-profit
purposes , their income cannot be
distributed as dividends to its members
Private corporation- formed by complying to
the provisions of the revised corporation code,
can be stock or nonstock
Public corporation- organized for the
government portion of the state and for the
general good and welfare of the public
GOCC- Government owned controlled
corporation- stock or nonstock agency
organized to functions relating public needs
Section 5
Close corporation- stock is owned by at most 20
persons, it cannot be listed to the stock exchange
and cannot offer shares to public, at least 2/3
must be voted for it to be closed.
Public listed corporation- listed in
Philippines stock exchange, and offer shares
in public.
Par shares- minimum price that the shares can
be issued
No par shares- do not have issue price,
directors and stock holders decides and fixes
the issue price.
Founder shares- holder of this share is given
certain rights and previlages, to vote and be
voted but will expire after 5 years and must be
approved by SEC.
Redeemable shares- shares that can be
bought back upon the expiration of fixed
period. Can only be issued if stated in the
articles of incorporation.
Treasury shares- issued and fully paid but
subsequently reacquired by the corporation.
Corporate term- perpetual to existence unless
stated in the articles of corporation on how
long is its existence.
Amendment of articles of incorporation- if the
amendment is legitimate purpose and 2/3 of
the members of the corporation voted it can
be filed. The amendments must be highlighted
and shall take effect upon the approval of the
commission
Grounds for disapproval of amendments
- The articles or amendments is not
substantially in accordance with
the form prescribed in section 13
and 14
- The purpose of the corporation is
unconstitutional, illegal, immoral,
or contrary with the government
laws
- False amount of capital
stock subscribed and paid
- The required percentage of Filipino
ownership of the capital stock under
existing laws or the constitution has
not been complied with
- The articles or amendments of Banks,
banking, quasi banking institution,
preneed, insurance and trust
companies, non-stock and savings and
loan associations, pawnshops,
corporations engaged in money services
business and other financial
intermediaries is not allowed. Unless
there a favorable recommendation of
the appropriate government agency.
Corporate name- must be distinguishable
from already reserved or registered or
protected by existing law.
De jure corporation- with compliance
with the revised code requirements.
De facto corporation- claimed to be
a corporation but there is a
defect in their incorporation
Corporation by estoppel- there is no
literal corporation but a group of
persons who pretend to act as one
knowing fully well that they do not
have corporate existence, they are
prevented from denying the liability
that arise from the transaction entered
by the corporation. And shall be
deemed personal liability.
Inoperative corporation- if a corporation is
inactive for at least 5 years from its
incorporation, its incorporation shall be
revoked following the day after the 5
years, if ever the corporation is active in
the first years then subsequently
becomes inoperative for at least 5 years
the corporation is under delinquent
status
Delinquent status- has 2 years to comply to
the requirements of the provision and
be lifted, if not the certificate of
incorporation shall be revoked
Qualifications of a director
- -natural person at legal age, must be
a stock holder at least 1 share,
Disqualification as a director 5 years prior to
the election.
- Offense punishable by imprisonment
for a period exceeding 6 years
- Violating this code
- Violating republic act 8799 or securities
regulation code
- Administratively liable in any offense
involving fraudulent acts
- Liable to foreign court or regulatory for
acts of violation, misconduct and similar
offense as stated above.
Independent director- is a director who is
independent of management and free from any
business or other relationship which could or
could reasonably be perceived to interfere with
the exercise of independent judgement in
carrying responsibilities.
Methods of voting-
 - Straight voting- the votes are
distributed equally among
candidates without preference
- Cumulative voting- this is a method of
concentrating or giving the votes to
one candidate.
- Mixed voting- can distribute the
Cause or reason creating vacancy
votes among candidates in any
manner
Corporate officers
- President- cannot be secretary
be filled 45 days upon vacancy arose. If
no longer quorum must be filled with
members or stockholder with special or
regular meeting no later than 45 days
from vacancy
- Expiration of directors term, a election
shall be held no later than day of such
expiration
- Result of removal by the stockholders
members, an election may be held after
the day of removal
and treasurer at the same time
- Treasurer
- Secretary
- Compliance officer- if vested with public
interest
- Other officer stated bylaws
- Arising from director’s death or
resignation may be filed and voted at
least majority of remaining directors
that still constitute a quorum. And must
- The presence of the director/trustee in
the board meeting is not necessary to
constitute a quorum
- The vote of that director is not
necessary
- The contract is fair and reasonable
- The contract has been previously
authorized by the board

Emergency board- when vacancy prevents the

remaining directors from constituting a quorum
and emergency action is required to prevent
grave, substantial loss or damage, the vacancy
may be filled from among the officers of the
corporation by unanimous vote of the
remaining.

Per diem- any grant of compensation that are

reasonable and entitled to the director

Instances of personal liability

- He assents to a patently unlawful act of

the corporation or bad faith, conflicting
interest resulting damage to the
corporation
- Consents to the issuance of watered
stocks
- Agrees to hold himself personally and
solidarity liable with the corporation
- A specific provision in law to personally
answer for his corporate action

Condition for exception in a contract with

one person
Executive committee may formed except
- Approval of any action
requires stockholders
approval
- Filling up vacancies in the board
- Amendment, repeal, adoption of
new bylaws
- Amendment or repeal of any
board resolution by its express
terms
- Distribution of cash dividends
to shareholders
Pre-emptive right cannot be exercised
- Issue of shares in compliance with
laws requiring stock offerings or
minimum stock ownership by the
public
- Issue of shares in good faith and duly
approved by stock holders
representing 2/3 of outstanding
capital in exchange for property
needed for corporate purposes
- Consistent with the revised code
- Accord with the law, morals, public
policy
- Consistent with the articles of
incorporation
Bylaw provision that is not allowed
- Restricting stock transfers, can only be
imposed by the code
- Allowing non-stock holder to become a
member of the board
- Imposing a certain amount of
shareholding in the corporation as a
pre-condition for eligibility to the board
of directors
Kinds of Meetings
- Regular – 21 day notice prior to a
regular meeting , if postponed a notice
must be sent and reason for postpone
at least 2 weeks prior to scheduled date
unless bylaws and regulation require
different, written notice of regular
meeting through electronic mail or
- Issue of shares in payment of previously
contracted debt
Dividends- portion of profits and surplus funds
of a corporation that has been actually set apart
by the board of directors for distribution. Can
be in form of cash, stock and property
Rights to dividends- who owns shares of
stock at the time dividends are declared have
the rights for dividends
Instances when dividends need not to
be declared
- Justified by corporate expansion
projects or programs approved by the
board
- Prohibited under load agreement with
financial institution or creditor from
declaring
- Need for retention in case of probable
contingencies.
Bylaws of corporation and any
amendments made thereon should be
other allowed by SEC,
- Special- this meetings are called when
the need arises or as provided in the
bylaws or as proposed by a stockholder
or member. 1 week prior written notice
should be sent to the stockholders
unless different period provided in
bylaws or regulations.
- SEC intervention- a petitioning stock
holder showing good cause may issue to
SEC an order directing the petitioning
stockholder or member to call a meeting
for the corporation.
Place- meetings whether regular or special shall
be held at the principal office of the corporation
indicated in the articles of incorporation
Required attachment on the notice
- Agenda
 - Proxy form that shall be submitted
to the corporate secretary within a
reasonable time prior to the
meeting
- Requirements and procedures to
be followed if they attend or
participate using absentia if such
modes are allowed
- Requirement and procedures for
nominating and election if the
meeting is for the election.
Attendance in meeting- directors or trustees
cannot attend or vote by proxy at board
meeting but If cannot physically attend can
vote through remote communication.
Conflict of interest- director or trustee who
has a potential interest in any related party
transaction must recuse or abstain from
voting on the approval of said transaction
without prejudice.
Requisites of Proxy
renewed and shall expire at the end of
the agreed period.
- No entering for the purpose of
circumventing the laws against anti-
competitive agreements abuse of
dominant position
Requirements of transfer of stocks
- Must be delivery of the stock certificate
- Certificate must be endorsed by the
owner or his attorney
- Valid against third parties and must be
recorded in the books of corporation
Grounds for the corporation to refuse
recording transfer
- Absence of the certificate authorizing
registration
- Breach of a restriction as stated in the
articles of incorporation
- Conflict in title or doubt as to the rights
of the parties
- Violation of constitutional and statutory
limitations on foreign ownership
Delinquent stocks – unpaid stocks within
- Must be in writing and signed by the
stock holder or member in any form
authorized bylaws
- Filed with and received by the
corporate secretary within reasonable
time before scheduled meeting
- Shall be valid only for the meeting for
which it is intended unless stated in the
proxy form, maximum of 5 years of a
proxy can be valid.
Requirement of voting trust agreement
- Certified copy of the voting agreement
is filed with the corporation and SEC
otherwise its ineffective
- The voting trust covered are canceled
and new ones shall be issued. Stating
that issued by the pursuant of the
agreement
- The voting trust shall be for a period at
least 5 years at any one time unless
30 days from the date when payment for
subscription is due and payable
Procedure for lost or destroyed certificate
- Filing of affidavit of loss in triplicate,
includes circumstances on loss, theft,
destruction of certificate of stocks,
number of shares covered by the
certificate, serial number of stock
certificate, name of the corporation
issued, other information an evidence
- The corporation shall check the
adequacy and verification
- The corporation shall publicize a proper
notice in a newspaper once a week in 3
weeks, it should state the name of
corporation, owner, serial numbers,
 number of shares, expiration of one
year from the date of last
publication
- If no contest or opposition is
presented after the lapse of the last
publish. The corporation will cancel
the lost and shall publish new
certificates
Information to be kept in the
corporation principal office
- Articles of incorporation and
bylaws and all amendments
- Current ownership structure and
voting rights of the corporation with
list of members and stock holders
- Name and address of members of the
board or trustees and executive
officers
- Record of resolutions of the board of
directors or trustees and stock
holders
- latest reportorial
requirements submitted to
Right to inspect and reproduce- any director,
trustee stockholder or member has the right to
inspect corporate records regardless of the
form in which they are stored it may be
exercised at reasonable hour on business days
but the cost of reproducing are burdened by
the one demanded
Reasonable grounds for inspection of books
- Valuation of shares
- Solicitation of proxies, election
- Desire to learn the reasons for lack of
dividends
Stock transfer agent- engaged principally in the
business of registering transfers of stocks in
behalf of a stock corporation with license issued
by SEC
Offence punishable by special laws-
mala prohibit and grounds
- No malicious intent as permission to
check records was granted although it is
not implemented
the commission
- Minutes of all meetings
The minutes must indicate
- Time and place
- How the meeting was authorized
- Notice given
- Agenda
- Whether the meeting was regular or
special
- If special must state the object and
purpose
- Who are present and absent
- Act done and ordered in the meeting
Stock and transfer books contains
- Record of all stocks in the name of stock
holder alphabetically
- Installments paid and unpaid and the
date of payment of installment
- Statement of alienation, sale or transfer
of stock
- Entries as the bylaws may prescribe
- Compliant had predeceased the
accused
- Complainants mother had executed an
affidavit of desistance averring the
filling of the compliant or a mere
misunderstanding.
Process in brief of merger
- Directors or trustees of each
corporation that is party to the merger
or consolidation shall approve a plan of
merger, includes names of the
corporations merging, the terms and
mode of carrying the same, statement
of changes, provisions with the respect
to the proposed merger that are
deemed necessary or desirable
- The plan or amendments needs two
level of approval, majority of the board
and stock holders or members of each
 of such corporation at separate
corporate meeting and must at
least 2/3 convened
- After the approval, articles of merger
or consolidation shall be drawn by
each of the constituent corporations
to be signed by their respective
president and certified by their
respective secretary. Setting forth the
following
1. The plan of merger or
consolidation
2. In stock corporation, the number
of shares outstanding or in the
case of nonstock, number of
members
3. Number of shares or members
voting for against the plan
4. Carrying amount and fair value of
the assets and liabilities
- Prohibit the implementation of
agreement
- Prohibit the implementation unless it is
modified by changes specified by the
commission
- Prohibit the implementation of the
agreement until the pertinent party or
parties enter into legally enforceable
specified agreement set by the
commission.
Effects of Merger
- The two corporation shall become singe
corporation with the surviving
corporation will be the new corporation
designated in the plan of consolidation
- Separate existence of the corporations
shall cease except the surviving one
- The surviving corporation shall possess
al the rights and privileges, powers,
immunities, duties and liabilities of a
corporation
- The surviving corporation shall be
responsible for all the liabilities and
obligation of each constituents and any
pending claim, action against the
constituent corporation
5. Method to be used in merger or
consolidation of accounts
6. Provisional values using accounting
method
7. Other information prescribed
by the commission
- Submission of the articles of merger or
consolidation to appropriate
government agency for corporation
governed by the special law
- Approval by the SEC or conduct of
hearing that the proposed is contrary or
inconsistent with the provision, then
the sec will issue a certificate of merger
after the determination that it does not
contravene with the code and other
laws
Philippine Competition Commission (PCC)
other specific powers
resources as part of their business strategy,
Articles of incorporation of closed corporation
provides
- All corporation issued stock of all share,
exclusive of treasury shares, shall be
held by not more than 20 person
- All the issued classes of stock shall be
subject to one or more restriction to
transfer
- Shall not list in any stock exchange or
make public offering
One person corporation- is a corporation with a
single stock holder, who can only be a natural
person, trust or estate

Reason for merging- to combine their

Limitation of One Person Corporation require Voluntary dissolution
cannot engage
requirements
- Banks, non-bank financial institution,
- Majority vote of the board of directors
quasi banks, preneed, trust
or trustees; notice to each
insurance, public and publicly listed
- stockholder or member at least twenty
companies, non-chartered
(20) days prior to the meeting, either by
government owned and controlled
registered mail or any other means
corporation
authorized by the corporation's bylaws;
- Exercise of profession except
- a resolution duly adopted by the
provided under special laws
affirmative vote of stockholders owning
One man corporation is required to at least a majority of the outstanding
submit documents within the period. capital stock (for stock corporations); or
by the affirmative vote of at least a
- Annual audited financial statements
majority of the members (for non-stock
within 120 days from the end of its
corporations) at a meeting duly called
fiscal year in its article of
by a director or trustee.
incorporation
- A verified request for dissolution must
- Report on all explanation or
be filed with the Commission and must
comments by the president on
include the following information:
qualification made by the auditor
- The reason for the dissolution; the
- Disclosure of all self dealings
form, manner, and time of the notices;
and related party transaction
- The names of the stockholders and
- Other reports as the SEC
directors or members; and the date of
the dissolution. Trustees who voted to - Refusal to comply or defiance of any
dissolve the corporation; the date, lawful order of the commission
location, and time of the meeting at restraining commission of acts that
which the vote was taken was made, as would amount to grave violation of
well as the publication's specifics. its franchise
- The corporation must also submit to - Continuous inoperation for a period
the Commission a copy of the of at least 5 years
resolution authorizing the dissolution, - Failure to file bylaws within
which must be certified by a majority of the required period
the board of directors or trustees and - Failure to file required reports in
countersigned by the corporation's appropriate forms as determined by
secretary; proof of publication; and, if the commission within the prescribed
necessary, a favorable period
recommendation from the appropriate
Foreign Corporation- a foreign corporation is
regulatory agency.
one formed, organized or existing under laws
Revocation of corporation certificate other than those of the Philippines and whose
of registration grounds laws allow Filipino citizens and corporations to
do business in its own country or State.
- Fraud in procuring its certificate
of registration
- Serious misinterpretation as to what
the corporation can do or is doing to
the great prejudice of or damage to
the general public
Securities to be deposited required for
foreign corporations

- Satisfactory to sec, consisting of

bonds or other evidence of
indebtedness of the government of
the Philippines and registered under
the securities regulation code
- Shares of stock in domestic
corporation listed in stock exchange
- Any stocks or financial instrument
with a market value of at least
500,000

Resident agent- is necessarily a resident of

the Philippines, may be natural or juridical
person, and must be sound and has a good
moral character

Principles governing a foreign corporation

right to sue in the Philippine

- Who have license to do business in

the Philippines
- Even without license as so long they
are not doing business in the
Philippines
- The foreign corporation can be
sued anytime for a valid cause