TITLE XI- NONSTOCK CORPORATION

SECTION 86. definition of a non-stock corporation

Non-stock corporation- one where no part of its income is distributable as dividends to its members,
trustees or officers. (Sec. 86 of RCCP)

Essential requisites:
1. No capital stock divided into shares;
 No CS but distributes dividends – Stock Corporation
 Jurisprudence provides that non-existence of Cs is not determinative factor to say it is non-stock
corp
2. No part of its income is distributable as dividends to its members;
 MIAA case. Non-stock Corporation must have members; in that case no members.
3. Must be formed or organized for purposes provided under Sec. 87 of the RCCP.
 Not for profit or business purposes

Non-stock Corporation does not mean no income.

Sources of Income of Non-stock Corporation:
1. Contribution
2. Profits which may come from business
3. Private donation given to

NON-STOCK CORPORATION STOCK CORPORATION

1. Components Members Shareholders
2. Board Members Trustees Directors
3. Existences of Shares No capital stock divided into There is capital stock divided
shares into shares
4. Purpose Non-profit and only those Business/profit
specified under Sec. 87 of the
RCCP
5. Dividends Not declared Declared
 For distribution
6. Business Activities Only incidental Primary purpose
7. Voting rights GR: One member, one vote One share - one vote policy
Can be modified, limited or
broadened
8. Transferability of Not generally transferable Transferable
interest  Right to dispose
9. Termination Membership can be terminated; Cannot be terminated unless
 Reason: Non-stock corp there is transfer or liquidation
may provide for
qualifications
10. Effect of death Terminates membership Shares can be acquired through
 Membership is personal succession
11. Dues Payment can be required No dues are paid
 For operation
12. Board Can be more than 15 Cannot be more than 15
 13. Term 3 years 1 year
14. Voting Cumulative voting not allowed Cumulative voting is expressly
unless otherwise provided in AI allowed
or Bylaws
15. Liquidation Members will not get a share in Shareholders will get shares
the assets unless otherwise
provided in AI or Bylaws
16. Election of officers Members directly elect unless BOD
otherwise provided in AI or
Bylaws

Capital
 The amount of its capital, the names, nationalities, and residence addresses of the contributors,
and amount contributed by each provided in the AOI. (Sec. 13(i) of the RCCP.
 Used for operation
 Increase/Decrease – no need to amend AOI

Non-profit
 Means it does not distribute any part of its income to stockholders or members.
 Non-stock/Non-profit vs. Charitable Institutions; not all non-stock corp are charitable institution;
not all charitable institution are non-stock
 Is a non-stock the same non-profit corporation? Is non-stock corp necessarily a non-profit
corp?
o Yes. Non-stock = non-profit
 Can a non-stock corp earn income?
o Yes. Incidental income only. It cannot distribute profits to its members.

Nationality
 Computed on the basis of the nationality of its members and not premised on the membership
contribution
 Philippine national:
o All members are Filipinos
o At least 60% of its members entitled to vote are Filipinos
o If all members of foreign corp licensed to operate in PH are Filipinos
 Constitutional limitations are also followed with regards to nationalized activities

Purposes
 Sec 87. Non-stock corporations may be formed or organized for charitable, religious,
educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar
purposes. like trade industry, agricultural and like chambers, or any combination thereof
 Reacreational institutions: If distributes income, it is a stock corp

Profitable business
 As a general rule corporation cannot engaged into business activities. However, it may do so if
its incidental to its operations.

Distribution of income
  It is not a non-stock corporation if its charter allows distribution of income.
 May be in any form or kind; e.g.; cash, grocery items distributed, etc.

Conversion
 Non-stock to stock corporation, cannot be converted by amendment of AI
o Effect of distribution of asset and property; contrary to its formation
o Vulnerable to fraud/abuse; i.e. Corp will ask donations, later the money of the donors
will be distributed as shares in stock corp
o
 Stock to non-stock corporation, can be converted.
o Allowed – shares/dividends/assets will be given to corporation for its purpose

 Non-stock to OPC – not allowed; same as stock of corp

 What shall be done?

 Winding up and dissolution, not amendment