SECTION 10: Number and qualifications of incorporators

➢ One person corporation

A one person corporation is a corporation with one stockholder provided that only a
natural person, trust, or an estate may form a one person corporation. Natural persons who
are licensed to practice a profession or associations organized for the purpose of
practicing a profession shall not be allowed to organize a corporation unless otherwise
provided under such special laws

Incorporator Corporator
Can be called The stockholders or members Those who compose a
are mentioned in the corporation, whether as
articles of incorporation as stockholders or as members
originally forming and
composing the corporation
and who are signatories
thereof
Signatory of the articles of A signatory of the articles May or may not be a
incorporation of incorporation signatory of the articles of
incorporation
Upon the sale of shares Does not cease to be an Ceases to be a corporator by
incorporator upon the sale sale of his shares in case
of his shares of a stock corporation. In
case of a non-stock
corporation, the corporator
ceases to be a member
Number of members Not more than fifteen There is no restriction as
persons to number except for close
corporation

➢ Steps in the creation of a corporation

1. Promotion

The formation and organization are brought by the promoters. The promotion includes
activities done by the promoter for the founding and organizing of the business.

2. Incorporation

Steps of incorporation

a. Execution of the articles of incorporation by the incorporators and other documents

required for registration of the corporation

b. Filing of the articles of incorporation with the SEC together with the treasurer’s
affidavit. In case the corporation is governed by special law, a favorable recommendation
of the appropriate agency that such articles of incorporation and by-laws is in accordance
with law

In short, drafting and execution of the articles of incorporation is the first step
necessary for the registration. Then, filing it with the Securities and Exchange
Commission together with the treasurer’s affidavit (wherein 25% of the authorized shares
is subscribed and 25% of that subscription has been paid in cash or property). Lastly,
payment for the filing and publication fees is necessary to receive the issuance of
certificate of incorporation.

3. Formal organization and commencement of business transactions

The examples of formal organization are adoption of by-laws and filing with the SEC,
election of board of directors or board of trustees and officers and payment of shares. It
will be further explain later.

➢ Number of incorporators

The number of incorporators as stated in the revised corporation code is that two or
more persons but not more than fifteen may organize themselves to form a corporation.
However, there is an exception which is the one person corporation wherein there is only a
single stockholder, as well as a sole director.

➢ Qualifications of incorporators

The qualifications of incorporations are:

1. Owner or Subscriber

One cannot be qualified to become an incorporator if he is neither an owner nor a

subscriber to at least one share of the capital stock

2. Composition

Incorporators may be composed of any combination of natural persons, SEC-registered

partnerships, SEC-registered domestic corporations or associations as well as foreign
corporations

Incorporators who are natural persons must be of legal age and must sign the
articles of incorporations or bylaws

➢ Partnerships as incorporators

In order for SEC-registered partnership to become an incorporator, a certain

document is required which is the partner’s affidavit, duly executed by all partners
certifying that they have authorized the partnership to invest in the corporation to be
formed and that they have designated one of the partners to be the signatory to the
incorporation documents.

However, partnerships that has dissolved or expired status with the Securities and
Exchange Commission shall not be authorized to become an incorporator.

➢ Domestic corporations or associations as incorporators

In order for a SEC-registered domestic corporations or associations to become an

incorporator, a certain document is required which is the director’s certificate or a
secretary’s certificate certifying that the incorporator has obtained the approval of
majority of its board of directors or trustees, ratified by at least 2/3 of the
outstanding capital stock or members, to invest in the proposed corporation and
specifically naming its signatory to the incorporation documents.
 However, domestic corporations under delinquent, suspended, revoked, or expired
status with the Securities and Exchange Commission shall not be authorized to become an
incorporator.

➢ Foreign corporations as incorporators

In order for a foreign corporations to become an incorporator, a certain document is

necessary which is the board resolution or directors’ certificate, or secretary’s
certificate, or its equivalent, duly authenticated by the Philippine Consulate, certifying
that the foreign corporation is authorized to invest in the proposed corporation and
specifically naming the signatory to the incorporation documents on behalf of the foreign
corporation.

➢ Natural persons

As stated earlier, incorporators who are natural persons must be of legal age and
must sign the articles of incorporators or bylaws

➢ Signatories of the articles of incorporation

An individual signing the articles of incorporation and bylaws must indicate the
capacity upon which the signatory is signing the same. For example, as incorporator, or as
representative of ABC Corporation

An individual designated to sign the articles of incorporation and bylaws on behalf

of an incorporator which is not a natural person must also indicate the corporate or
partnership name of the entity represented and for whom he/she is executing the same.

It is also prescribed that the taxpayer identification number of the natural person
or the corporation, partnership, or the association, as well as its designated signatory,
should be indicated in the articles of incorporation.

For foreign corporations which have not yet been issued a taxpayer identification
number, the passport number of all its foreign investors indicated in the articles of
incorporation should suffice. After incorporation, however, all the foreign investors,
natural or juridical, shall secure a taxpayer identification number, which shall be
reflected in all documents to be filed with the SEC.

➢ Designation of incorporators as directors or trustees

An individual who signed the articles of incorporation on behalf of an incorporator

who is not a natural person may not be named as director or trustee in the same articles
of incorporation unless such individual also owns at least one share or is also a member
of the proposed corporation

➢ Foreign nationals in the article of incorporation

The inclusion of foreign nationals in the articles of incorporation shall be subject

to the applicable constitutional, statutory, and regulatory restrictions, as well as
conditions, with respect to foreign participation in certain investment areas

➢ Additional requirements for certain corporations

Certain corporations such as banks, trust companies, and other financial

intermediaries cannot be approved unless accompanied with a favorable recommendation of
the appropriate government agency to the effect that the articles of incorporation are in
accordance with the law
SECTION 11: Corporate term

➢ General rule

A corporation shall have perpetual existence which means there is no limit to the
life of a corporation (a corporation shall exist for a period not exceeding fifty years
from the date of incorporation unless sooner dissolved or said period is extended)

➢ Exception

If the articles of incorporation provided otherwise or if it provides for a specific

period of time

➢ Corporation for specific period

A corporation for a specific period ceases to exist and is dissolved upon the
expiration of the fixed period in the articles of incorporation unless it shall be
extended by amending the articles of incorporation

➢ Corporate term

A corporate term can be extended or shortened by amending the articles of

incorporation within three years prior to the original or subsequent expiry unless there
are justifiable reasons for an earlier extensions

➢ Revival of corporate existence

A corporation whose term has expired may apply for a revival of its corporate
existence with all rights and privileges under its certificate of incorporation and
subject to all of its duties, debts, and liabilities existing prior to its revival

➢ General rule

Upon the approval by the Securities and Exchange Commission, the corporation shall
be deemed revived and a certificate of revival of corporate existence shall be issued,
giving it a perpetual existence

➢ Exception

If its application for revival provided otherwise or provided for a specific period
of time

➢ Who may apply for revival?

The following corporations may file a petition for revival of corporate existence:

a. Generally, a corporation whose term has expired

b. An expired corporation whose certificate of registration has been revoked for

non-filing of reports, provided that it shall file proper petition to lift its
revoked status, which may be incorporated in its petition to revive, and must settle
the corresponding penalties thereof

c. An expired corporation whose certificate of registration has been suspended,

provided that it shall file proper petition to lift its suspended status, which may
be incorporated in its petition to revive, and must settle the corresponding
penalties thereof

d. An expired corporation whose corporate name has already been validly re-used, and
is currently being used by another existing corporation duly registered with the
 SEC, provided that the former shall change its corporate name within thirty days
from the issuance of its certificate of revival of corporate existence

➢ Exceptions

Certain corporations require the favorable recommendation of the appropriate

government agency before the SEC will approve the application for revival of certificate
of incorporation such as: banks, banking and quasi-banking institutions, preneed,
insurance and trust companies, non-stock savings and loan associations, pawnshops,
corporations engaged in money service business, and other financial intermediaries

➢ Who may not apply for revival?

The following are not allowed to file a petition for revival of corporate existence:

a. An expired corporation which has completed the liquidation of its assets

b. A corporation whose certificate of registration has been revoked for reasons

other than non-filing of reports

c. A corporation dissolved by virtue of section 6c and 6d of presidential decree no.

902-A, as amended by Presidential Decree No. 1799

d. An expired corporation which already availed of re-registration, in accordance

with Memorandum Circular No. 13, series of 2019 or other memorandum circulars issued
by the SEC pertaining to re-registration, except when:

i. The re-registered corporation has given its consent to the petitioner to

use its corporate name, and has undertaken to undergo voluntary dissolution
immediately after the issuance of the Petitioner’s Certificate of Revival

ii. The re-registered corporation has given its consent to the petitioner to
use its corporate name and has undertaken to change its corporate name
immediately after the issuance of the petitioner’s certificate of revival

➢ Required vote to initiate revival

At least majority vote of the board of directors and the vote of at least majority
of the outstanding capital stock is required for the revival of an expired stock
corporation. On the other hand, non-stock corporations required at least majority vote of
the board of trustees and the vote of at least majority of the members

➢ Appraisal right

Appraisal right refers to the right of any stockholder of a corporation to dissent

and demand payment of the fair value of his or her share in the corporation. The revival
of corporate existence is without prejudice to the appraisal right of dissenting
stockholders in accordance with the provisions of the revised corporation code

SECTION 12: Minimum capital stock not required of stock corporations

➢ General rule

Stock corporations are not required to have a minimum capital stock

➢ Exception

If provided by special law

SECTION 13: Contents of the articles of incorporation

➢ Articles of incorporation

Articles of incorporation refers to the document or papers drawn up by or on behalf

of the incorporators of a proposed corporation to be presented for approval by the
Securities and Exchange Commission

➢ Contents of the articles of incorporation

All corporations shall file with the commission articles of incorporation in any of
the official languages, duly signed and acknowledged or authenticated, in such form or
manner as may be allowed by the commission, containing substantially the following
matters, except as otherwise prescribed by this code or by special law:

a. Corporate name – refers to the name to which the business organization will be
formally and legally known and called

b. Principal and Secondary purposes – refers to the specific purpose for which the
corporation is being incorporated, where a corporation has more than one stated
purpose, the articles of incorporation shall state which is the primary purpose and
which is the secondary purpose. A non-stock corporation may not also include a
purpose which would change or contradict its nature as such

c. Principal office – refers to the place where the head office of the corporation
is to be located, which must be within the Philippines

d. Corporate life – refers to the term for which the corporation is to exist, if it
does not elect perpetual existence

e. Incorporators – this would disclose the names, nationalities, and residences of

the incorporators

f. Directors or trustees – this would disclose the number of directors or trustees

which shall not be more than fifteen

g. Interim directors or trustees – this would disclose the names, nationalities,

and residences of persons who shall act as directors or trustees until the first
regular directors or trustees are duly elected and qualified in accordance with the
revised corporation code

h. Corporate capital of stock corporation – the amount of its authorized capital

stock in lawful money of the Philippines, the number of shares into which it is
divided, and incase the share are par value shares, the par value of each, the
names, nationalities, and residences of the original subscribers, and the amount
subscribed and paid by each on his subscription and if some or all of the shares are
without par value, such fact must be stated

i. Corporate capital of a non-stock corporation – the amount of its capital, the

names, nationalities, and residences of the contributors, and the amount contributed
by each

j. Other matters – refer to the disclosure of other information that are consistent
with law and which the incorporators may deem necessary and convenient
➢ Take note

Take note that the articles of incorporation and applications of amendments thereto
may be filed with the commission in the form of an electronic document, in accordance with
the commission’s rules and regulations on electronic filing

ARTICLE 1: Title

➢ R.A. 9520

This act shall be known as the Philippine Cooperative Code of 2008. It is an act
amending the cooperative code of the Philippines

ARTICLE 2: Declaration of policy

➢ Branch office

It refers to a business office outside the principal office where cooperative

activities and business operation are undertaken as per approved cooperative development
plan.

➢ Principal/Main office

It refers to the registered head office as indicated in the articles of cooperation

and bylaws of the cooperative where the business and cooperative activities are conducted
and central records and main books of accounts are kept. It is also the place where the
officers and key management staff of the cooperative direct, control, coordinate, and
manage its entire operation

➢ Pre-qualification requirements

Prior to the Cooperative Development Authority, a cooperative may establish a branch

subject to the following pre-qualification requirements:

1. The proposed establishment of a branch in another place but within the area of
operation of the applicant cooperative is necessitated by the existence of members in the
said place desiring to avail of the services of the cooperative within their reach.
Provided, that the number of members to be served by the branch office will be enough for
its viable operation as shown in the business plan

2. The principal office must have a minimum paid-up capital, as provided for in the
Articles of Cooperation. So, it is shown in the table the paid-up capital necessary per
category of the cooperative

3. Each branch must have an available operating capital as provided for in the Business
plan. So, it is provided in the table the operating capital necessary per category of the
cooperative

4. The cooperative did not incur net loss for the last three consecutive years and its net
worth is progressive for the last three years from the date of the application
➢ Net worth

It refers to equity inclusive of member’s equity, donations, grants, and reserve

funds less unbooked allowance for probable losses on loans, accounts receivable,
investment, and non-performing assets, and other capital adjustments as may be required by
CDA.

➢ Documentary requirements

A letter request for authority to establish a cooperative branch shall be signed by

the Chairman of the cooperative or General Manager as authorized by the Board and shall be
accompanied by the following information or documents:

1. Business plan – it refers to a business study showing the marketability of product or

services and also the financial, technical, legal and organizational aspects of the
proposed business establishment. It shall also include the financial projections for the
first three years of operations showing sustained viability. In the preparation of the
business plan, due consideration shall be given to allocation of resources to the proposed
branch

2. General assembly resolution authorizing the establishment of the branch and commitment
of investment or allocation of resources in its operation

3. Certification signed by the Chairman or General Manager of the following:

a. Presence of manual of operations for branch

Manual operation – refers to a document showing the compilation of detailed policies and
procedures in the operation of the cooperative

b. Address of the proposed branch

c. Audited financial statement for the last three years

➢ Certificate of Authority

The official document issued by the Cooperative Development Authority authorizing

the establishment and operation of a cooperative branch. A certificate of authority shall
be issued by the CDA to cooperatives applying for a branch upon compliance with the
documentary requirements and processing fee

➢ Relocation/Transfer of Branch of Cooperatives

Cooperatives may be allowed by the CDA to relocate or transfer branch subject to the
following conditions:

1. Notice to CDA of relocation or transfer of branch at least three (3) months before the
actual transfer

2. Posting notice of relocation or transfer in conspicuous place where the branch office
is located at least three (3) months prior to scheduled relocation or transfer

3. Compliance to pre-qualification number 1 which is the proposed establishment of a

branch in another place but within the area of operation of the applicant cooperative is
necessitated by the existence of members in the said place desiring to avail of the
services of the cooperative within their reach

4. Payment of processing fee for the issuance of new Certificate of Authority upon
surrender and cancellation of the old certificate
➢ Transfer office

It refers to the relocation of the office address of cooperative branch within the
same municipality or city. The extension office of the CDA where the branch office is
located is also authorized to conduct annual inspection to validate the conditions of
branch office operations

➢ Inspection report

It refers to the documents where the findings or observations, actions, and

recommendations of CDA authorized person who conducted the inspection are summarized and
presented

➢ Administrative regulations

1. All cooperatives intending to put up a branch and cooperatives with existing branch
office should be established within the area of operation of the cooperative. For
cooperatives intending to branch outside the area of operation, approval of the articles
of cooperation expanding the area of operation shall be secured

2. No branch should be established within 500-meter radius of the nearest cooperative

engaged in the same line of business as the proposed branch

3. The branch office shall have a separate Book of Accounts

4. Minimum of three (3) personnel to man the office such as but not limited to manager,
bookkeeper, and cashier

5. Adherence to the manual of operation at all times

6. Issuance of official receipt in the financial transactions of the branch

7. Imprest system of handling cash shall be complied at all times

8. All branch offices should secure a Barangay and Mayor’s permit

9. Compliance to other regulations as may be determined by other government agencies

including the CDA

10. Submission of operational reports to the principal or head office such as financial
statements, cash flows, and other relevant reports required by the main office and the CDA

11. Same report as mentioned in number 10 to be submitted to the CDA Extension Office
where the branch is located

➢ Voluntary Closure of Cooperative Branch

Voluntary closure of cooperative branch shall be allowed, provided, that the

following procedures are complied with:

1. A document, duly signed by Branch Manager noted by the Chairman of the Cooperative, of
its intention to close a branch office shall be submitted to the CDA at least three (3)
months prior to the closure

2. Sending of notice or posting of notice of closure in conspicuous place of the branch

office shall be made in order to inform members and creditors of the branch office to be
closed at least three (3) months prior to the closure
3. Upon submission of the report on the completion of Par. 1 and 2, CDA shall
automatically issue an order of closure to the concerned cooperative branch. This also
cancels the Certificate of Authority issued

➢ Satellite office

It refers to an office established by a cooperative outside of its main or principal

office but within its area of operation to provide limited services to its members but
which does not however maintain books of accounts as it is done only by the main or
principal office. The term satellite office shall include an extension office, a sub-
office, or other terms of similar import

➢ Documentary requirements

The application for a letter of authority to establish a cooperative satellite

office shall be accompanied by the following documents:

a. Certificate of Compliance for the preceding year

b. Oath of Undertaking signed by the Chairperson of the cooperatives for the specific
services or activities to be undertaken by the proposed satellite office

c. Certification as to available space and manpower to manage the office

d. Official receipt showing payment of the processing fee

➢ Letter of Authority

It refers to the official document issued by the Authority authorizing the

establishment and operation of a cooperative satellite office

➢ Services or Activities Allowed in a Cooperative Satellite Office

The cooperative satellite office shall render services and conduct business
activities, which shall not be limited to the following:

1. Recruitment of members

2. Acceptance of applications for membership

3. Acceptance of loan applications

4. Collection and acceptance of payments for share capital contributions, loans, and
utility bills in the case of electric and water service cooperatives

5. Release of loans, patronage refunds, and interest on capital

All applications for membership, loans, and other business transactions accepted in the
satellite office shall be endorsed to the principal or main office for appropriate action.
In no case shall the satellite office exercise discretion on such matters

➢ Conditions for Cooperative Satellite Office Operations

The following shall be the conditions that must be observed in operating a

cooperative satellite office:

1. Presence for signage as a cooperative satellite office

2. List of specific transactions that may only be undertaken as approved by the

cooperative’s Board of Directors

3. Presence of operational structure

4. Submission of summary reports to the head office

5. Presence of a Barangay’s permit and a Mayor’s permit that should be posted in the
office at all times

6. Maintenance of Accountable Forms

7. Maintenance of record of daily transactions to be submitted to the principal or main

office

8. Official Receipts showing payments of processing fee

9. Availability of appropriate logistics

10. Presence of a minimum number of personnel as determined by the principal office to

effectively discharge the functions of the satellite office

11. Turn-over or deposit of all collections within the day to the account of the principal
office or imprest system of handling cash

12. Other conditions as may be determined by the CDA

➢ Relocation or Transfer of Cooperative Satellite Office

Cooperatives may be allowed to relocate or transfer their satellite offices subject

to the following conditions:

1. Notice to the CDA of such relocation or transfer of satellite office at least three (3)
months before the actual transfer

2. Posting of notice of relocation or transfer in a conspicuous place where the satellite

office is located at least three (3) months prior to the scheduled date of relocation or
transfer

3. Payment of processing fee for the issuance of new Letter of Authority upon surrender
and cancellation of the old Letter of Authority

➢ Voluntary Closure of a Cooperative Satellite Office

Voluntary closure of cooperative satellite office shall be allowed, provided, that

the following procedures are complied with:

1. Submission of a Letter of Intention to close a satellite office at least three (3)

months prior to the closure

2. Sending of notice or posting of notice of closure in a conspicuous place of the

satellite office in order to inform members and creditors of the satellite office of such
closure at least three (3) months prior to the closure

3. After compliance with the first two procedures, the CDA shall issue an Order of Closure
of the cooperative satellite office to the concerned cooperative. Cancellation of the
Letter of Authority shall follow as a matter of course

Failure to comply with the stated procedures shall bar the cooperative from establishing
another satellite office anywhere within its area of operation
ARTICLE 3: General Concepts

I will discuss the definition of the following concepts of cooperative

➢ Bond of Membership

It refers to the conditions where members associate themselves to attain their

common goals and objectives which may either be residential, occupational, associational,
or institutional

➢ Capital

It refers to the sum of total of member’s share capital including deposits,

revolving capital, subsidies, donations, legacies, grants, aids, land structures, plants,
equipment facilities, machines, and other assets of a cooperative

➢ Share Capital

It refers to the money paid or required to be paid by the members for the conduct of
the operations of the cooperative

➢ Authorized Share Capital

It refers to the capitalization of the cooperative as prescribed in the Articles of

Cooperation

➢ Paid-up Share Capital

It refers to the portion of the subscribed share capital, which has been paid by the
members of the cooperative

➢ Unpaid Subscription

It refers to the subscribed share capital, which is not yet fully paid by a member

➢ Registration

It refers to the operative act gaining juridical personality to a proposed

cooperative as evidenced by a Certificate of Registration

And that’s the end of my report and I will give the stage to the next reporter