REVISED CORPORATION CODE (AMENDMENTS)
Corporation can enter into a partnership and joint venture.
A domestic corporation can now give donations in aid of any political party or candidate or for
purposes of partisan political activity. Prohibition is limited to foreign corporations only.
SEC was granted the power to:
1. Authority to summarily order the corporation to immediately cease and desist from using
such name and require the corporation to register a new one whenever its name is:
a. Not distinguishable from a name already reserved or registered for the use of another
corporation;
b. Already protected by law; or
c. Contrary to law, rules and regulations.
2. Cause the removal of all visible signages, marks, advertisements, labels, prints and other
effects bearing such corporate name; and
3. Hold the corporation and its responsible directors or officers in contempt and/or hold them
administratively, civilly and/or criminally liable and/or revoke the registration of the
corporation if the corporation fails to comply with the Commission’s order.
Corporation shall have perpetual existence unless its articles of incorporation provides
otherwise.
Extension: 3 years prior to expiration.
A partnership, association or corporation are now included in the enumeration of who may be
incorporators.
Minimum number of incorporators: Not more than 15.
Residency requirement for incorporators= REMOVED
Number of directors in AOI= not more than 15, Trustees= may be more than 15.
Corporations vested with public interest shall have INDEPENDENT DIRECTORS constituting at
least 20% of such board.
AUTHORIZED CAPITAL= maximum amount fixed in the articles to be subscribed and paid-in or
secured to be paid by the subscribers. May also refer to the maximum number of shares that a
corporation can issue.
Consideration for stocks:
a. Actual cash paid to the corporation;
b. Property, tangible or intangible, actually received by the corporation and necessary or
convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of
the stock issued;
c. Labor performed for or services actually rendered to the corporation;
d. Previously incurred indebtedness of the corporation;
e. Amounts transferred from unrestricted retained earnings to stated capital; and
f. Outstanding shares exchanged for stocks in the event of reclassification or conversion.
Consideration now includes: a. Shares of stocks in another corporation; and/or
b. Other generally accepted form of consideration.
Note: Stocks cannot be issued for a consideration less than the par or issue price thereof.
Promissory notes or future service cannot be considered valid consideration for stocks.
OUTSTANDING CAPITAL STOCK= total number of shares issued, including those which are
subscribed and not yet fully paid, but EXCLUDING treasury shares.
QUALIFICATIONS of a DIRECTOR/TRUSTEE:
a. Must own at least 1 share in their own names or a member
b. Majority must be RESIDENT of PH. Aliens may be elected as directors, provided majority of
directors are residents of PH.
DISQUALIFICATIONS of DIRECTOR/TRUSTEE:
a. If within 5 years prior to election or appointment, the person was convicted by FINAL
JUDGEMENT:
i. Of an offense punishable by imprisonment for a period exceeding 6 years;
ii. Violation of the corporation code.
iii. Violation of the Securities Regulation Code
iv. Found administratively liable for any offense involving fraud acts; and
v. By a foreign court or equivalent foreign regulatory authority for acts, violations or
misconduct similar to the disqualifications under the Code.
vi. Such other (provided in by-laws)
Reporting requirement:
a. Non-holding of elections: report within 30 days to the SEC, (include new date for election),
shall not be later than 60 days from the scheduled date.
b. If no new date or rescheduled election was not held, SEC may summarily order that an
election be held.
Vacancy: Director, trustee or officer die, resign or in any manner cease to hold office, secretary, or
director, trustee or officer of corporation, or in case of death, the officer’s heirs shall, within 7 days from
knowledge REPORT in writing to SEC.
In non-stock corporations, cumulative voting is generally not allowed.
(REI)
Removal- STOCKHOLDERS- Same day of the meeting authorizing the removal.
Expiration of the Term- STOCKHOLDERS- No later than the day of such expiration at a meeting called for
that purpose.
Increase in the number of Directors- STOCKHOLDERS- In general or special meeting called for the
purpose or in the same meeting authorizing the increase in the number of directors.
Other causes (death, resignation, abandonment)= BOD- IF QUORUM, STOCKHOLDERS- if directors not in
QUORUM= No later than 45 days from the time the vacancy arose.
EMERGENCY BOARD= notify SEC within 3 days from creation.
CORPORATE OPPORTUNITY DOCTRINE: it places a director of a corporation in the position of a fiduciary
and prohibits him from seizing a business opportunity and/or developing it at the expense and with the
facilities of the corporation. He cannot appropriate himself opportunity which in fairness should belong
to the corporation.
SELF-DEALING DIRECTORS= one who deals or transacts business with his own corporation.
GENERAL RULE: VOIDABLE, corporation’s option.
EXCEPT: 1. Presence of such director or trustee not necessary to constitute a quorum.
2. Vote of director/trustee was not necessary for approval of contract.
3. Contract is fair and reasonable under the circumstances.
Any of the first two conditions absent= VOIDABLE= subject to 2/3 OCS ratification.
SELF-DEALING OFFICERS= GENERALLY VOIDABLE
INTERLOCKING DIRECTOR: director in one corporation who deals or transacts with another corporation
of which he is also a director. (DUAL AGENCY).
GENERAL RULE: VALID
EXCEPTIONS: 1. If there is fraud; or
2. Interest of interlocking director in one corporation EXCEEDS 20% (SUBSTANTIAL) and in the
other merely nominal= VOIDABLE at corporation’s option. Effect= self-dealing director.
IF INTEREST IN BOTH COMPAINIES IS EITHER BOTH SUBSTANTIAL OR BOTH NOMINAL= VALID.
REPRESENTATIVE or CLASS SUIT- one or more members of a class sue for themselves.
DERIVATIVE SUIT- an action based on injury TO THE CORPORATION- to enforce a corporate right.
(recovery is in favor of and for the corporation.) PARTY BRINGING SUIT MUST BE A SHAREHOLDER.
EXECUTIVE COMMITTEE= by-laws may create= NOT LESS THAN 3 MEMBERS OF THE BOARD.
MAY BE DELEGATED TO EXECUTIVE COMMITTEE EXCEPT:
1. Approval of any action for which shareholders is also required.
2. The filing of vacancies of the board.
3. The amendment or repeal or bylaws or the adoption of new by-laws.
4. The amendment or repeal of any resolution of the board which by its express terms is not
amendable or repealable; and
5. A distribution of cash dividends to shareholders. (ALSO STOCK DIVIDENDS NOT ALLOWED). =
requires stockholder’s approval.
REVISED CODE OF CORPORATE GOVERNANCE:
AUDIT COMMITTEE= at least 3 directors, preferably accounting and finance backgrounds.
Internal Auditor= functionally report directly to the Audit Committee. Audit Committee will ensure
that in performance of work of Internal Auditor, he shall be free from interference by outside
parties.
Nomination Committee= at least 3 members
Compensation or Remuneration Committee= may be composed of at least 3 members.
GENERAL RULE: DIRECTORS are not entitled to receive any compensation.
EXCEPT: 1. Reasonable per diems
2. As provided in the by-laws
3. Upon majority vote of stockholders
4. They are performing functions other than that of a director.
IN NO CASE SHALL THE TOTAL YEARLY COMPENSATION OF THE DIRECTORS EXCEED 10% of the NI
BEFORE TAX OF THE CORPORATION DURING THE PRECEDING YEAR.
AMENDMENT: Director/Trustee prohibited from participating in the fixing of their own per diems or
compensation.
Corporations vested with public interest are required to submit to their shareholders and the
Commission an annual report of the total compensation of each of their directors or trustees.
CORPORATE OFFICERS= MUST BE A DIRECTOR
SECRETARY= SHOULD BE A RESIDENT AND CITIZEN OF PH
TREASURER= SHOULDER BE A RESIDENT
Compliance Officer= report directly to the Chair of the Board.
PREFERRED STOCK= CAN BE ISSUED ONLY WITH A STATED PAR VALUE
Preference must be stated in the AOI and in the certificate of stock
Determination of whether or not the sale involves all or substantially all of the corporation’s
properties and assets must be computed BASED on its net asset value as shown in its latest F/S.
Par value= indicated in the AOI
No par value shares= deemed fully paid and non assessable
-consideration should not be less than P5
-entire consideration constitutes capital, not available for dividend declaration
- cannot be issued as preferred stock
-cannot be issued by banks, trust companies, insurance companies, public utilities and building
and loans associations.
WATERED STOCK: shares are issued at LESS THAN ITS PAR VALUE OR ISSUE PRICE.
WATERING OF STOCK CAN ALSO APPLY TO NO PAR VALUE SHARES.
REDEEMABLE RIGHTS (same as preferred as to voting)= grants the corporation the right to
REPURFCHASE the shares at its option or at the option of the holder.
REPURCHASE NOT SUBJECT TO THE AVAILABILITY OF UNRESTRICTED R.E.
TREASURY SHARES= Issued and fully paid for (subsequently reacquired by issuing corporation) = do not
form part of outstanding shares (do not have right to vote and receive dividends)
Subscription to shares of stock are DEEMED INDIVISIBLE and no certificate of stock can be issued unless
and until the full amount of his subscription including interest and expenses, if any is paid.
GENERAL RULE: EFFECT OF DELINQUENCY: stockholder loses the right to vote and be voted upon.
EXCEPT: THE RIGHT TO RECEIVE DIVIDENDS ( MEANING, EVEN IF DELINQUENT, STILL RECEIVE
DIVIDENDS)
Cash dividends= first applied to unpaid balance on his subscription plus cost and expenses
Stock dividends= withheld until unpaid subscription is paid in full.
HIGHEST BIDDER= bid for least number of shares in exchange for total amount due.
