Corpo Notes 1

COMPARATIVE TABLES
Approval Vote and Other Requirements of Corporate Acts and Transactions
Corporate
Vote Required Other Requirements
Act/Transaction
- SEC should be notified of intention to retain

Election to Retain corporate term
Vote of its stockholders representing a
Specific Corporate
majority of its outstanding capital stock
Term - Without prejudice to appraisal right of dissenting
stockholders
Amendment of Articles
of Incorporation
- Should be for legitimate purposes
- Without prejudice to appraisal right of dissenting

stockholders
IF STOCK CORPORATION:
Majority vote of the board of directors - Original and amended articles together shall
or trustees and the vote or written assent contain all provisions required by law to be set out
of the stockholders representing at in the articles of incorporation
least two-thirds (2/3) of the outstanding
capital stock - Amendments to the articles are indicated by
underscoring the change or changes made
IF NON-STOCK CORPORATION:
vote or written assent of majority of the - A copy duly certified under oath by corporate
trustees and at least two-thirds (2/3) of secretary and a majority of the directors or trustees
the members. is submitted to the SEC
- A statement that the amendments have been duly

approved by the required vote is submitted to the
SEC
NOTES COMPILED BY 3A STUDY CIRCLE 1

RULES:
GENERAL RULE: each stockholder or member shall have the right to nominate any director
or trustee who possesses all of the qualifications and none of the disqualifications
EXCEPTION: when the exclusive right is reserved for holders of founders’ shares
MODES IN WHICH VOTES ARE CAST:
The owners of majority of the outstanding capital stock, or if there be no capital stock, a majority
of the members entitled to vote, should be:
1. Personally present
2. Present through a representative authorized to act by written proxy

Election of Directors
When authorized in the bylaws or by a majority of the board of directors, the stockholders or
members may also vote through:
1. Remote communication
2. In absentia
- If voting through these modes, such stockholder or member shall already be deemed present
for purposes of a quorum.
- For corporations vested with public interest, the right to vote can be exercised notwithstanding
its absence from the Articles of Incorporation
- Upon request by stockholder or member, the election can be made by ballet.

FOR STOCK CORPORATIONS
ALLOWED NUMBER OF VOTES: stockholders entitled to vote shall have the right to vote
the number of shares of stock standing in their own names in the stock books of the corporation
at the time fixed in the bylaws or where the bylaws are silent, at the time of the election.
OPTIONS OF THE STOCKHOLDER IN CASTING HIS/HER VOTES:
1. vote such number of shares for as many persons as there are directors to be elected
2. cumulate said shares and give one (1) candidate as many votes as the number of directors to
be elected multiplied by the number of the shares owned
3. distribute them on the same principle among as many candidates as may be seen fit
LIMITATIONS:
- the total number of votes cast shall not exceed the number of shares owned by the stockholders
as shown in the books of the corporation multiplied by the whole number of directors to be
elected
- no delinquent stock shall be vote
FOR NON-STOCK CORPORATIONS
GENERAL RULE: members of nonstock corporations may cast as many votes as there are
trustees to be elected but may not cast more than one (1) vote for one (1) candidate.
EXCEPTION: as otherwise provided in the articles of incorporation or in the bylaw Nominees

for directors or trustees receiving the highest number of votes shall be declared elected.
RESULTS: Nominees for directors or trustees receiving the highest number of votes shall be
declared elected.

RULES:
The SEC may summarily order that an election be held.
CONDITIONS:
1. no new date for election has been designated
2. the rescheduled election is likewise not held
Election of Directors
upon Summary Order
WHO APPLIES FOR THE ORDER: stockholder, member, director or trustee
of the SEC
WHEN: after verification of the unjustified non-holding of the election
POWERS OF THE SEC: power to issue such orders as may be appropriate, including:
- orders directing the issuance of a notice stating the time and place of the election, designated
presiding officer, and the record date or dates for the determination of stockholders or members
entitled to vote.

CONDITIONS
- Takes place either at a regular meeting of
the corporation or at a special meeting called for the
purpose
- After previous notice to stockholders or
members of the corporation of the intention to
propose such removal at the meeting
For purposes of removal, a SPECIAL MEETING

is called upon:
1. by the secretary on order of the

president or
2. upon written demand of the
stockholders representing or holding at least a
majority of the outstanding capital stock, or a
majority of the members entitled to vote.
3. The stockholder or member of the
corporation signing the demand may call for the
IF STOCK CORPORATION: Vote of meeting by directly addressing the stockholders or
the stockholders holding or representing members, when:
at least two-thirds (2/3) of the a. there is no secretary
outstanding capital stock b. if the secretary, despite demand, fails or
Removal of Directors
refuses to call the special meeting or to give notice
and Trustees
IF NON-STOCK thereof
CORPORATION: vote of at least two-
thirds (2/3) of the members entitled to NOTICE REQUIREMENT: Notice of the time
vote and place of such meeting, as well as of the intention
to propose such removal, must be given by
publication or by written notice prescribed in this
Code.
Removal may be with or without cause, but

removal without cause may not be used to deprive
minority stockholders or members of the right of
representation.
The SEC shall, motu proprio or upon verified

complaint, and after due notice and hearing,
order the removal of a director or trustee elected
despite the disqualification, or whose
disqualification arose or is discovered subsequent to
an election. This is without prejudice to other
sanctions that the SEC may impose on the board
of directors or trustees who, with knowledge of the
disqualification, failed to remove such director or
trustee.

Vacancies are filled by a vote of at least a
Vacancies in the Office majority of the remaining directors or
of the Director or trustees, if still constituting a quorum.
Trustee other than by N/A
Removal or by Term IF NOT, said vacancies must be filled by
Expiration the stockholders or members in a regular
or special meeting called for that purpose
Vacancy Due to Term Election shall be held no later than the day of such
N/A -- Filled by stockholders or members
Expiration expiration at a meeting called for that purpose
Election may be held on the same day of the meeting

Vacancy Due to
N/A -- Filled by stockholders or members authorizing the removal and this fact must be so
Removal
stated in the agenda and notice of said meeting.
There should be an election at a regular or at a

special meeting of stockholders or members duly
Filling Up of Seat Due
called for the purpose
to Increase in the
N/A -- Filled by stockholders or members or
Number of
In the same meeting authorizing the increase of
Directors or Trustees
directors or trustees if so stated in the notice of the
meeting

RULES:
GENERAL RULE: directors or trustees shall not
receive any compensation in their capacity as such
EXCEPTIONS:
1. When the bylaws fix their compensation
in such capacity
2. Reasonable per diems
3. When so granted by required number of
stockholders, in which case the amount thereof shall
be approved at a regular or special meeting.
May be granted by majority of the LIMITATION: In no case shall the total yearly
Compensation of
outstanding capital stock or majority of compensation of directors exceed ten (10%) percent
Directors and Trustees
the members of the net income before income tax of the
corporation during the preceding year.
RESTRICTION: Directors or trustees shall not

participate in the determination of their own per
diems or compensation.
OTHER REQUIREMENT: Corporations vested

with public interest shall submit to their
shareholders and the Commission, an annual report
of the total compensation of each of their directors
or trustees.

WHAT CONTRACTS ARE VOIDABLE?
Contracts of the corporation with (1) one or more
of its directors, trustees, officers, or their spouses
and relatives within the fourth civil degree of
consanguinity or affinity. These contracts become
voidable at the option of the corporation. This
means that they can choose whether or not to ratify.
WHEN OPTION DOES NOT EXIST:

Ratification is not at the option of the corporation
when the following conditions are present:
(a) The presence of such director or trustee in the

board meeting in which the contract was approved
was not necessary to constitute a quorum for such
meeting;
(b) The vote of such director or trustee was not

A voidable contract may be ratified by the necessary for the approval of the contract;
vote of the stockholders representing at
least two-thirds (2/3) of the outstanding (c) The contract is fair and reasonable under the
Voidable Contract with
capital stock or of at least two-thirds (2/3) circumstances;
Director or Trustee
of the members in a meeting called for
the purpose, only if certain conditions are (d) In case of corporations vested with public
met. interest, material contracts are approved by at least
two-thirds (2/3) of the entire membership of the
board, with at least a majority of the independent
directors voting to approve the material contract;
and
(e) In case of an officer, the contract has been

previously authorized by the board of directors.
If item a, b, OR c is absent, in the case of a

contract with a director or trustee, the contract may
only be ratified if compliant with the voting
requirement. Other conditions are:
1. Said vote should be made in a meeting for the
purpose
2. That full disclosure of the adverse interest of the
directors or trustees involved is made at such
meeting and the contract is fair and reasonable under
the circumstances.

CONDITIONS:
1. Director must acquire such business opportunity
by virtue of his office
2. The result of such acquisition is that the director
Ratification of a
obtained profits to the prejudice of such corporation
Business Opportunity
Ratified by a vote of the stockholders
Belonging to the
owning or representing at least two thirds CONSEQUENCE OF ACQUISITION: the
Corporation but
(2/3) of the outstanding capital stock director must account for and refund to the latter all
Acquired by the
such profits, unless ratified by the required vote.
Director
APPLICABILITY: the provision shall be
applicable, notwithstanding the fact that the director
risked one’s own funds in the venture.
NOTICE REQUIREMENT:
1. There should be written notice of:
a. The act extending or shortening the term
b. Time and place of the meeting
Approved by a majority vote of the c. Sent to the stockholders or members
board of directors or trustees, and 2. Notice must be sent to:
Extend or Shorten ratified at a meeting by the stockholders a. Place of residence as shown in the books
Corporate Term or members representing at least two- b. Deposited to (i) addressee in the post
thirds (2/3) of the outstanding capital office with postage prepaid, served personally (ii)
stock or of its members. sent electronically with the consent of the
stockholder or when allowed in the bylaws
Appraisal right may be exercised but only in case

of extension of corporate term.

NOTICE REQUIREMENT:
1. There should be written notice of:
a. The act extending or shortening the
term
b. Time and place of the meeting
c. Sent to the stockholders or members
2. Notice must be sent to:
a. Place of residence as shown in the
books
b. Deposited to (i) addressee in the post
office with postage prepaid, served personally (ii)
sent electronically with the consent of the
IF STOCK CORPORATION:
stockholder or when allowed in the bylaws
Approved by a majority vote of the
board of directors and by two-thirds
CONTENTS OF CERTIFICATE:
(2/3) of the outstanding capital stock at a
1. That the requirements of Sec. 37 have
stockholders’ meeting duly called for the
been complied with
Increase or Decrease purpose.
2. The amount of the increase or decrease
Capital Stock
of the capital stock
IF NON-STOCK CORPORATION:
3. In case of an increase of the capital stock,
Approved by a majority of the board of
the amount of capital stock or number of shares of
trustees and of at least two-thirds (2/3)
no-par stock thereof actually subscribed, the names,
of the members in a meeting duly called
nationalities and addresses of the persons
for the purpose.
subscribing, the amount of capital stock or number
of no-par stock subscribed by each, and the amount
paid by each on the subscription in cash or property,
or the amount of capital stock or number of shares
of no-par stock allotted to each stockholder if such
increase is for the purpose of making effective stock
dividend therefor authorized
4. The amount of stock represented at the
meeting
5. The vote authorizing the increase or
decrease of the capital stock

PRIOR APPROVAL: Any increase or decrease in
the capital shall require prior approval of the
Commission, and where appropriate, of the
Philippine Competition Commission
WHEN AND WHERE APPLICATION

MADE: made within six (6) months from the date
of approval of the board of directors and
stockholders, which period may be extended for
justifiable reasons; the application shall be filed with
the SEC
WHEN INCREASE/DECREASE
EFFECTIVE: After approval by the Commission
and the issuance by the Commission of its certificate
of filing
CONDITIONS FOR INCREASE:

The certificate of increase of capital stock must be
accompanied by a sworn statement of the treasurer
of the corporation lawfully holding office at the time
of the filing of the certificate, which shows:
1. PROOF OF SUBSCRIPTION: at least
twenty-five percent (25%) of the increase in capital
stock has been subscribed
2. PROOF OF PAYMENT: at least twenty-
five percent (25%) of the amount subscribed has
been paid in actual cash to the corporation or that
property, the valuation of which is equal to twenty-
five percent (25%) of the subscription, has been
transferred to the corporation
CONDITION FOR DECREASE: no decrease in

capital stock shall be approved by the Commission
if its effect shall prejudice the rights of corporate
creditors.
Corporate Act/ Transaction Vote Required Other Requirements

n. Incur, Create or Increase Approved by a majority vote of the - Written notice of time and place of the
Bonded Indebtedness (Sec 37) board of directors AND 2/3 of the meeting sent to stockholders’ residence as
outstanding capital stock at a shown in the books of the corporation and
stockholders' meeting duly called for served personally or through electronic
the purpose means recognized in the corporation’s by
laws and/or Commission’s rules as valid
mode for service of notice
- A certificate must be signed by a majority

of the directors of the corporation and
countersigned by the chairperson and
secretary of the stockholders meeting
setting forth any bonded indebtedness
incurred, created or increased
- Requires prior approval of the

Commission and where appropriate, of
the Philippine Competition Commission.
The application with the Commission
shall be made within 6 months from the
date of approval of the BOD and
stockholders which may be extended for
If nonstock corporations: approved justifiable reasons
by majority of the board of trustees
AND at least 2/3 of the members - Bonds issued by a corporation shall be
duly called for the purpose registered with the Commission, which
shall have the authority to determine the
sufficiency thereof.

p. Denial of Pre-Emptive GR: All stockholders of a stock - Such pre-emptive right shall not extend
Right (Sec 38) corporation shall enjoy pre-emptive to:
right to subscribe to all issues or 1. shares to be issued in compliance with
disposition of share of any class in laws requiring stock offerings or minimum
proportion to their respective stock ownership by the public
shareholdings 2. Shares to be issued in good faith with
the approval of the stockholders
ETR: Unless denied by the articles of representing 2/3 of the outstanding
incorporation or an amendment capital stock, in exchange for property
thereto needed for corporate purposes or in
payment of a previously contracted debt

q. Sale or Disposition of Assets By majority vote of its board of - Subject to the provisions of RA 10667 or
(Sec 39) directors or trustees the “Philippine Competition Act”
- upon such terms and conditions and for

such conditions which may be:
1. Money
2. Stocks
3.bonds
4.other instruments for the payment of
money
5.other property or consideration as its
board of directors or trustees may deem
expedient
- Written notice of the proposed action and

of the time and place for the meeting shall
be addressed to stockholders or members
at their places of residence as shown in the
books of the corporation and deposited to
the addressee in the post office with
postage prepaid, served personally, or
when allowed by the bylaws or done with
the consent of the stockholder, sent
electronically
- Subject to appraisal right
- After such authorization, the board of

directors or trustees may, nevertheless, in
its discretion, abandon such sale, lease,
exchange, mortgage, pledge, or other
disposition of property and assets, subject
to the rights of third parties under any
contract relating thereto, without
further action or approval by the
stockholders or members.
- Nothing in this section is intended to

restrict the power of any corporation,

In nonstock corporations where without the authorization by the
there are no members with voting stockholders or members, to sell, lease,
rights: exchange, mortgage, pledge, or otherwise
the vote of at least a majority of the dispose of any of its property and assets if
trustees in office will be sufficient the same is necessary in the usual and
authorization for the corporation to regular course of business of the
enter into any authorized transaction corporation or if the proceeds of the
under this section. sale or other disposition of such
property and assets shall be
appropriated for the conduct of its
remaining business.
r. Sale or Disposition of all or Authorized by the vote of the - The determination if the sale involves all
substantially all the assets (Sec stockholders representing at least or substantially all of the corporation’s
39) two-thirds (2/3) of the properties and assets is computed based
outstanding capital stock, OR at on its net asset value, as shown in its
least two-thirds (2/3) of the latest financial statements. A sale or
members, in a stockholders’ or other disposition shall be deemed to cover
members’ meeting duly called for the substantially all the corporate property and
purpose assets if thereby the corporation would
be rendered incapable of continuing
the business or accomplishing the
purpose for which it was incorporated.

In nonstock corporations where
there are no members with voting
rights:
the vote of at least a majority of the
trustees in office will be sufficient
authorization for the corporation to
enter into any authorized transaction
under this section.

-approved by a majority of the - Notice of the proposed investment and
board of directors or trustees the time and place of the meeting shall be
AND ratified by the stockholders addressed to each stockholder or
representing at least two-thirds member at the place of residence as
(2/3) of the outstanding capital shown in the books of the corporation
stock, or by at least two thirds and deposited to the addressee in the
(2/3) of the members in the case post office with postage prepaid,
of nonstock corporations, at a served personally, or sent
meeting duly called for the purpose electronically in accordance with the
rules and regulations of the
Commission on the use of electronic
data message, when allowed by the
bylaws or done with the consent of the
stockholders:
s. Investment of Corporate
Funds in another Corporation, - Subject to appraisal right
Business or any other Purpose
(Sec 41) - if investment by the corporation is
reasonably necessary to accomplish its
primary purpose as stated in the articles
of incorporation, the approval of the
stockholders or members shall not be
necessary.

-approval of stockholders - Board of directors of a stock corporation
representing at least two-thirds (2/3) may declare dividends out of the
of the outstanding capital stock at a unrestricted retained earnings which shall
regular or special meeting duly called be payable in cash, property, or in stock to
for the purpose. all stockholders on the basis of
outstanding stock held by them.
- Any cash dividends due on delinquent

stock shall first be applied to the unpaid
balance on the subscription plus costs and
expenses, while stock dividends shall be
withheld from the delinquent
stockholders until their unpaid
subscription is fully paid
- Stock corporations are prohibited from

retaining surplus profits in excess of one
hundred percent (100%) of their paid-in
capital stock, except:
(a) when justified by definite corporate

expansion projects or programs approved
by the board of directors; or (b) when the
t. Declaration of Dividends (Sec corporation is prohibited under any loan
42) agreement with financial institutions or
creditors, whether local or foreign, from
declaring dividends without their consent,
and such consent has not yet been
secured; or
(c) when it can be clearly shown that such
retention is necessary under special
circumstances obtaining in the
corporation, such as when there is need
for special reserve for probable
contingencies.

Approved by the board of directors - Service contracts or operating agreements
and by stockholders owning at which relate to the exploration,
least the majority of the development, exploitation or utilization of
outstanding capital stock, OR by natural resources may be entered into for
at least a majority of the members such periods as may be provided by the
in the case of a nonstock pertinent laws or regulations.
corporation, of both the managing
and the managed corporation, at a - No management contract shall be entered
meeting duly called for the purpose into for a period longer than five (5) years
u. Entering into a Management for any one (1) term.
Contract (Sec 43)
Must be approved by the

stockholders of the managed
corporation owning at least two-
1. Where a stockholder or thirds (2/3) of the total
stockholders representing the outstanding capital stock entitled
same interest of both the to vote, OR by at least two-thirds
managing and the managed (2/3) of the members in the case
corporations own or control of a nonstock corporation.
more than one-third (1/3) of the
total outstanding capital stock
entitled to vote of the managing
corporation; OR
2. Where a majority of the

members of the board of
directors of the managing
corporation also constitute a
majority of the members of the
board of directors of the
managed corporation, t

The affirmative vote of the - The bylaws shall be signed by the
stockholders representing at least a stockholders or members voting for
majority of the outstanding capital them and shall be kept in the principal
stock, or of at least a majority of office of the corporation, subject to the
the members in case of nonstock inspection of the stockholders or
corporations members during office hours.
- A copy thereof, duly certified by a majority

of the directors or trustees and
countersigned by the secretary of the
corporation, shall be filed with the
Commission and attached to the
original articles of incorporation.
- May be adopted and filed prior to

incorporation; in such case, such bylaws
shall be approved and signed by all the
incorporators and submitted to the
Commission, together with the articles of
incorporation.
- Shall be effective only upon the issuance

by the Commission of a certification that
the bylaws are in accordance with this
v. Adoption of Bylaws (Sec 45) Code.
- The Commission shall not accept for filing

the bylaws or any amendment thereto of
any:
1. bank
2. banking institution
3. building and loan association, 4. trust
company
4. insurance company
5. public utility
6. educational institution
7. or other special corporations governed
by special laws, unless accompanied by
a certificate of the appropriate
government agency to the effect that
such bylaws or amendments are in
accordance with law.

Majority of the board of directors
or trustees, AND the owners of at
least a majority of the outstanding
capital stock, OR at least a
majority of the members of a
nonstock corporation at a regular or
special meeting duly called for the
purpose, may amend or repeal the
w. Amendment to Bylaws (Sec bylaws or adopt new bylaws.
47)
The owners of two-thirds (2/3) of

the outstanding capital stock or
two-thirds (2/3) of the members
in a nonstock corporation may
delegate to the board of directors or
trustees the power to amend or repeal
the bylaws or adopt new bylaws
x. Delegation of Power to
Amend Bylaws (Sec 47)

Any power delegated to the board of
directors or trustees to amend or
repeal the bylaws or adopt new
bylaws shall be considered as revoked
whenever stockholders owning or
representing a majority of the
outstanding capital stock or
majority of the members shall so
vote at a regular or special
y. Revocation of Delegated meeting.
Power to Amend By Laws (Sec
47)
At all elections of directors or

trustees, there must be present, either
in person or through a representative
authorized to act by written proxy,
the owners of majority of the
outstanding capital stock, or if
there be no capital stock, a majority
of the members entitled to vote.
z. Election of Officers (Sec 23)

GR: Majority of the stockholders
representing the outstanding
capital stock or a majority of the
members in the case of nonstock
corporations.
ETR: Unless otherwise provided in

this Code or in the bylaws, a quorum
aa. Decision of the Board (Sec shall consist of the
52)

STOCK and NON-STOCK CORPORATION
STOCK CORPORATION NON-STOCK CORPORATION
No capital stock, but has capital is in the form

Capital Stock Has capital stock divided into shares
of contributions or donations.
Purpose Organized for profit Not organized for profit
Profits are not distributed to members. Any

Distribution of Profits are distributed to the stockholders through profit earned by the non-stock corporation is
Profit dividends used for the furtherance of the purpose or
purposes for which it is organized.
Number f The number of trustees shall be fixed in the

Directions should not exceed 15 in number, trustees
Directors of articles of incorporation or bylaws which may
may be more than 15
Trustees or may not be more than fifteen (15)
Directors shall be elected for a term of one (1) year from

among the holders of stocks registered in the They shall hold office for not more than three
Term of Office
corporation’s books, while trustees shall be elected for a (3) years until their successors are elected and
of Directors
term not exceeding three (3) years from among the qualified.
members of the corporation.
The members may directly elect officers of a

Election of The directors elect the officers immediately after their nonstock corporation unless otherwise
Officers election provided in the Articles of Incorporation or
in the bylaws.
Stockholders’ or members’ meetings, whether regular or

special, shall be held in the principal office of the
That the place of meeting shall be within
Place of Meeting corporation as set forth in the articles of incorporation,
Philippine territory.
or, if not practicable, in the city or municipality where
the principal office of the corporation is located:

In stock corporations, stockholders entitled to vote shall
have the right to vote the number of shares of stock
standing in their own names in the stock books of the
The right of the members of any class or
corporation at the time fixed in the bylaws or where the
classes to vote may be limited, broadened, or
bylaws are silent, at the time of the election. No share
denied to the extent specified in the articles of
may be deprived of voting rights except those classified
Right to Vote incorporation or the bylaws. Unless so
and issued as “preferred” or “redeemable” shares,
limited, broadened, or denied, each member,
unless otherwise provided in the Code.
regardless of class, shall be entitled to one (1)
vote.
The stockholders may vote through the modes (i.e.
remote communication) and in the manner (i.e.
cumulative voting) as provided under Sec. 23.
Membership in a nonstock corporation and

Shares of stock so issued are personal property and may
Transferability of all rights arising therefrom are personal and
be transferred by delivery of the certificate or certificates
Shares or non-transferable, unless the articles of
indorsed by the owner, his attorney-in-fact, or any other
Membership incorporation or the bylaws otherwise
person legally authorized to make the transfer.
provide.

I. LISTINGS AND ENUMERATIONS exchange or with assets of at least P50,000,000 and
1. Corporations that: having 200 or more holders of shares, each holding
A. Are not allowed to issue no-par value shares at least 100 shares of a class of its equity shares;
[Sec. 6, par. 5] 2. Banks and quasi-banks, NSSLAs, pawnshops,
1. Banks corporations engaged in money service business,
2. Trust preneed, trust and insurance companies, and other
3. Insurance financial intermediaries;
4. Preneed companies 3. Other corporations engaged in businesses vested
5. Public Utilities with public interest similar to the above, as may be
6. Building and Loan Associations determined by the Commission.
7. Other Corporations Authorized to obtain or
access funds from the public, whether publicly- E. Are required to secure certifications of the
listed or not relevant government agency before it may
adopt or amend its by-laws [Sec. 45, par. 4]
B. May not apply for a revival of certificate of 1. Bank
incorporation without the favorable 2. Banking institution
recommendation of the appropriate 3. Building and Loan Association
government agency [Sec. 11, par. 5] 4. Trust companies
1. Banks 5. Insurance company
2. Banking and Quasi- banking Institutions 6. Public utility
3. Preneed 7. Educational Institution
4. Insurance 8. Other special corporations governed by special
5. Trust companies laws
6. Non-stock Savings and Loan Associations
(NSSLAs) F. Cannot be a Close Corporation [Sec. 95, par. 2]
7. Pawnshops 1. Mining or Oil companies
8. Corporations engaged in money service 2. Stock Exchanges
business 3. Insurance companies
9. Other financial intermediaries 4. Public utilities
5. Educational Institutions
C. May not Secure an approval of its article of 6. Corporations declared to be vested with public
Incorporation or amendments thereof without interest
the favorable recommendation of the
appropriate government agency [Sec. 16, par. 2] 2. Laws Mentioned in the RCC (Subject Matter
1. Banks and/or Title):
2. Banking and Quasi- banking Institutions A. . Commonwealth Act No. 108
3. Preneed Title: The Anti-Dummy Law
4. Insurance
5. Trust companies Purpose: The Anti-Dummy Law punishes evasion of the laws
6. Non-stock Savings and Loan Associations on the nationalization of certain rights, franchises or
(NSSLAs) privileges. Any citizen of the Philippines or of any other
7. Pawnshops specific country who allows his name or citizenship to be
8. Other financial intermediaries used for the purpose of evading any constitutional or legal
provisions that requires Philippine citizenship as a requisite
D. Require Independent Directors [Sec. 22, par. 3] for the exercise or enjoyment of a right, franchise or
1. Corporations covered by Section 17.2 of RA 8799 privilege, and any alien or foreigner profiting thereby
(The Securities Regulation Code), namely those (a) (Sec.1).
whose securities are registered with the
Commission, (b) corporations listed with an Acts penalized under the Anti-Dummy Law
B. Republic Act No. 7042
a. Simulation of minimum capital stock – Falsely Title: Foreign Investments Act of 1991
simulating the minimum stock or capital
requirement provided in the constitution or any Purpose: To attract, promote and welcome productive
other laws, which specifies the minimum investments from foreign individuals, partnerships,
percentage ownership of Filipinos, for the corporations, and governments, including their political
purpose of evading said laws. subdivisions, in activities which significantly contribute to
b. Unlawful use, Exploitation or enjoyment – The national industrialization and socioeconomic development
following acts of any person, corporation, or to the extent that foreign investment is allowed in such
association which, having in its name or under activity by the Constitution and relevant laws.
its control, a right, franchise, privilege, property
or business, the exercise or enjoyment of which “Doing business” in the Philippines (Sec. 3)
is expressly reserved by the Constitution or the
laws to citizens of the Philippines or of any The phrase “doing business” shall include:
other specific country, or to corporations or (a) soliciting orders, service contracts, opening offices,
associations at least 60% of the capital of which whether called “liaison” offices or branches;
is owned by such citizens, are violative of the (b) appointing representatives or distributors domiciled
Anti-Dummy Law: in the Philippines or who in any calendar year stay in
i. permits or allows the use, exploitation or the country for a period or periods totalling 180 days or
enjoyment thereof by a person, more;
corporation or association not possessing (c) participating in the management, supervision or
the requisites prescribed by a the control of any domestic business, firm, entity or
Constitution or the laws; corporation in the Philippines; and
ii. leases, or in any other way, transfers or (d) any other act or acts that imply a continuity of
conveys said right, franchise, privilege, commercial dealings or arrangements.
property or business to a person,
corporation or association not otherwise The phrase “doing business” shall not be deemed to
qualified under the Constitution, or the include:
provisions of the existing laws; (a) mere investment as a shareholder by a foreign entity
iii. permits or allows any person, not in domestic corporations duly registered to do business,
possessing the qualifications required by and/or the exercise of rights as such investor;
the Constitution, or existing laws to (b) having a nominee director or officer to represent its
acquire, use, exploit or enjoy a right, interests in such corporation; nor
franchise, privilege, property or business, (c) appointing a representative or distributor domiciled
the exercise and enjoyment of which are in the Philippines which transacts business in its own
expressly reserved by the Constitution or name and for its own account.
existing laws to citizens of the Philippines;
iv. to intervene in the management, Restriction on foreign ownership:
operation, administration or control GR: there are no restrictions on extent of foreign ownership
thereof, whether as an officer, employee or of export enterprises. In domestic market enterprises,
laborer therein with or without foreigners can invest as much as one hundred percent
remuneration except technical personnel (100%) equity.
whose employment may be specifically
authorized by the Secretary of Justice; XPN: Those that are included in the negative list or list of
v. any person who knowingly aids, assists or areas of economic activity whose foreign ownership is
abets in the planning consummation or limited to a maximum of forty percent (40%) of the equity
perpetration of any of the acts herein capital of the enterprises engaged therein.
above enumerated.

Negative list/list of areas of economic activity whose foreign ownership Economic activity which no longer require further foreign investment;
is limited to a maximum of forty percent (40%) of the equity capital criteria (Sec. 9):
(Sec. 8): a) The industry is controlled by firms owned at least
sixty percent (60%) by Filipinos;
a) Areas of activities reserved to Philippine nationals b) Industry capacity is ample to meet domestic
by mandate of the Constitution and specific laws demand;
(List A). c) Sufficient competition exists within the industry;
d) Industry products comply with Philippine
b) Areas of activities and enterprises regulated standards of health and safety or, in the absence of
pursuant to law (List B): such, with international standards, and are reasonably
competitive in quality with similar products in the same
i. Which are defense-related activities, requiring price range imported into the country;
prior clearance and authorization from e) Quantitative restrictions are not applied on
Department of National Defense (DND) to imports of directly competing products;
engage in such activity, such as the f) The leading firms of the industry substantially
manufacture, repair, storage and/or comply with environmental standards; and
distribution of firearms, ammunition, lethal g) The prices of industry products are reasonable.
weapons, military ordnances, explosives,
pyrotechnics and similar materials, unless such C. Republic Act No. 11232
manufacturing or repair activity is specifically Title: Revised Corporation Code of the Philippines (RCC)
authorized, with a substantial export
component, to a non-Philippine national by the Effect of Amendment or Repeal of the Corporation Code (Sec. 184):
Secretary of National Defense; or
ii. Which have implications on public health and The following are not removed or impaired either by
morals, such as the manufacture and subsequent dissolution of the corporation or by any
distribution of dangerous drugs, all forms of subsequent amendment or repeal of the Revised
gambling; nightclubs, bars, beerhouses, dance Corporation Code:
halls; sauna and steam bathhouses and massage
clinics. (a) Vested rights or remedies in favor of or
iii. Small and medium-sized domestic market against any corporation, its stockholders, members,
enterprises, with paid-in equity capital less than directors, trustees, or officers;
the equivalent of US$500,000 are reserved to (b) Any liability incurred by any such
Philippine nationals, unless they involve corporation, stockholders, members, directors,
advanced technology as determined by the trustees, or officers.
Department of Science and Technology.
Export enterprises which utilize raw materials Also, according to Sec. 145 of the RCC, vested rights and
from depleting natural resources, with paid-in liabilities incurred by any corporation, is stockholders,
equity capital of less than the equivalent of members, directors, trustees, or officers under the
US$500,000 are likewise reserved to Philippine Corporation Code are not removed or impaired by the
nationals. passage of the RCC.
c) Areas of investment in which existing enterprises Rationale of the RCC:

already serve adequately the needs of the economy
and the consumer and do not require further foreign a. It enables corporations registered in the Philippines to
investments, as determined by NEDA applying the compete globally by codifying international corporate
criteria provided in Section 9 of RA No. 7042 (List best practices;
C). b. It encourages entrepreneurship and the formation of
small businesses by authorizing the establishment of
one person corporation;
c. It contributes to the ease of doing business by: making venture and evidenced by a certificate, contract,
i. mandating the SEC to develop and implement instruments, whether written or electronic in character
electronic filing and monitoring systems, and
ii. permitting corporations to exist perpetually, unless Kinds of securities:
their Certificate of Incorporation specify (a) Shares of stocks, bonds, debentures, notes
otherwise; evidences of indebtedness, asset-backed
d. it enhances the country’s competitiveness by favorably securities;
impacting two ease-of-doing-business indicators, (b) Investment contracts, certificates of
particularly in starting a business and protecting interest or participation in a profit sharing
minority stockholders; agreement, certifies of deposit for a future
e. it promotes stockholders’ rights by: subscription;
i. expanding the right of a stockholder to inspect the (c) Fractional undivided interests in oil, gas or
books of the corporation to include a other mineral rights;
stockholder’s representative who may be more (d) Derivatives like option and warrants;
knowledgeable in corporate issues; (e) Certificates of assignments, certificates of
ii. affording stockholders and members of the participation, trust certificates, voting trust
Boards to remotely participate in meetings and to certificates or similar instruments
vote in the same; (f) Proprietary or nonproprietary
f. it deters corporate abuse by: membership certificates in corporations;
i. requiring the election of independent directors in and
entities vested with public interest; (g) Other instruments as may be determined
ii. providing for corporate criminal liability, holing by the Commission.
not only the individuals responsible for their
violations but the corporation itself, subjecting the Requirement of Registration of Securities (Sec. 8)
latter to hefty fines; - Securities shall not be sold or offered for sale or
iii. streamlining cooperation between various distribution within the Philippines, without a
regulatory agencies and the SEC; and registration statement duly filed with and approved by
iv. endowing the SEC with additional powers, the Commission. Prior to such sale, information on the
including the power to hold persons in contempt securities shall be made available to each prospective
for failing to comply with any of the SEC’s orders purchaser.
or subpoenas. (Congressional Records, October 8, 2018,
pp 17-18) Why is it required to register securities before they can be sold or traded
with the public?
D. Republic Act No. 8799 - A primary means of protecting the investing public is
Title: The Securities Regulation Code the disclosure of the important financial information
Purpose through the registration of securities to enable investors
(a) To establish a socially aware and self-regulating free to make informed judgments.
market;
(b) To encourage more participation in owning an Exempt securities (Sec. 9)
enterprise; To enhance the democratization of wealth;
(c) To promote the capital market’s development; (a) Any security issued or guaranteed by the
(d) To protect investors; Government of the Philippines, or by any political
(e) To ensure full and fair disclosure of securities; and subdivision or agency thereof, or by any person
(f) To minimize or eliminate fraudulent activities such controlled or supervised by, and acting as an
as insider trading in the free market. instrumentality of said Government.
(b) Any security issued or guaranteed by the
What are “securities”? government of any country with which the Philippines
- these are shares, participation or interests in a maintains diplomatic relations, or by any state, province
corporation or in a commercial enterprise or profit-
or political subdivision thereof on the basis of (i) Subscriptions for shares of the capitals stocks of a
reciprocity. corporation prior to the incorporation thereof or in
(c) Certificates issued by a receiver or by a trustee in pursuance of an increase in its authorized capital stocks
bankruptcy duly approved by the proper adjudicatory under the Corporation Code, when no expense is
body. incurred, or no commission, compensation or
(d) Any security or its derivatives the sale or transfer of remuneration is paid or given in connection with the
which, by law, is under the supervision and regulation sale or disposition of such securities, and only when the
of the Office of the Insurance Commission, Housing purpose for soliciting, giving or taking of such
and Land Use Rule Regulatory Board, or the Bureau of subscription is to comply with the requirements of such
Internal Revenue. law as to the percentage of the capital stock of a
(e) Any security issued by a bank except its own shares corporation which should be subscribed before it can
of stock. be registered and duly incorporated, or its authorized,
capital increase.
Exempt Transactions (Sec. 10): (j) The exchange of securities by the issuer with the
existing security holders exclusively, where no
The requirement of registration shall not apply to the sale commission or other remuneration is paid or given
of any security in any of the following transactions: directly or indirectly for soliciting such exchange.
(k) The sale of securities by an issuer to fewer than
(a) At any judicial sale, or sale by an executor, twenty (20) persons in the Philippines during any
administrator, guardian or receiver or trustee in twelve-month period.
insolvency or bankruptcy. (l) The sale of securities to any number of the
(b) By or for the account of a pledge holder, or following qualified buyers:
mortgagee or any of a pledge lien holder selling of i. Bank;
offering for sale or delivery in the ordinary course of ii. Registered investment house;
business iii. Insurance company;
(c) An isolated transaction in which any security is sold, iv. Pension fund or retirement plan;
offered for sale, subscription or delivery by the owner v. Investment company; or
therefore, or by his representative for the owner’s vi. Such other person as the Commission may
account. determine as qualified buyers.
(d) The distribution by a corporation actively engaged vii.
in the business authorized by its articles of Procedure for registration of securities (Sec. 12):
incorporation, of securities to its stockholders or other (a) Filing by the issuer in the main office of the
security holders as a stock dividend or other Commission of worn registration statement form
distribution out of surplus. containing such information and documents
(e) The sale of capital stock of a corporation to its own Commission shall prescribe.
stockholders exclusively, where no commission or (b) Pay to the Commission a fee of no more than 1/10
other remuneration is paid or given. of 1% of the maximum aggregate price. The
(f) The issuance of bonds or notes secured by Commission shall prescribe by the rule diminishing fees
mortgage upon real estate or tangible personal property, in inverse proportion the value of the aggregate price of
when the entire mortgage together with all the bonds or the offering.
notes secured thereby are sold to a single purchaser at a (c) Notice of the filing immediately published by the
single sale. issuer, in 2 newspapers of general circulation in the
(g) The issue and delivery of any security in exchange Philippines, once a week for 2 consecutive weeks.
for any other security of the same issuer pursuant to a (d) Within 45 days after the date of filing of the
right of conversion entitling the holder of the security registration statement, the Commission shall declare the
surrendered in exchange to make such conversion. registration statement effective or rejected.
(h) Broker’s transaction, executed upon customer’s (e) The Commission shall enter an order declaring the
orders, on any registered Exchange or other trading registration statement effective if it finds that the
market. registration statement together with all the other papers
and documents attached thereto, is on its face complete
and that the requirements have been complied with. (e) To effect, either alone or others, any series of
(f) Issuer shall state under oath in every prospectus transactions for the purchase and/or sale of any security
that all registration have been met and that all traded in an Exchange for the purpose of pegging, fixing or
information are true and correct as represented by the stabilizing the price of such security.
issuer or the one making the statement.
What are “short sales”
Manipulative practices that are prohibited (Sec. 24): - This is a sale of securities which the seller does not own.
It is generally a transaction in which in investor sells
(a) To create a false or misleading appearance of active borrowed securities in anticipation of a price decline.
trading in any listed security traded in an Exchange of
any other trading market: Fraudulent transactions prohibited under transaction of securities (Sec.
26):
i. By effecting any transaction in such security which
involves no change in the beneficial ownership (a) Any device, scheme, or artifice to defraud.
thereof; (b) Money or property by means of any untrue
ii. By entering an order or orders for the purchase or statement of a material fact of any omission.
sale of such security with the knowledge that a (c) Act, transaction, practice or course of business
simultaneous order or orders of substantially the which operates or would operate as a fraud or deceit
same size, time and price, for the sale or purchase upon any person.
of any such security, has or will be entered by or
for the same or different parties; or Who is an “insider”?
iii. By performing similar act where there is no change
in beneficial ownership. (a) issuer of securities;
(b) a director or officer or a person controlling the
(b) To affect, alone or with others, a securities or issuer;
transactions in securities that: (c) a person whose relationship or former relationship
i. Raises their price to induce the purchase of a to the issuer gives or gave him access to material
security; information;
ii. Depress their price to induce the sale of a security; (d) government employee, director, or officer of an
or exchange, access to material information about an
iii. Creates active trading to induce such a purchase or issuer or a security that is not generally available to the
sale through manipulative devices such as marking public; or
the close, painting the tape, squeezing the float, (e) a person who learns such information by a
hype and dump, boiler room operations and such communication from any forgoing insiders
other similar devices.
What is “insider trading”
(c) To circulate or disseminate information that the price
of any security listed in an Exchange will or is likely to rise (a) selling or buying a security of the issuer while in
or fall because of manipulative market operations of any one possession of material information which is not
or more persons conducted for the purpose of raising or generally available to the public, unless
depressing the price of the security for the purpose of i. the insider proves that the information was
inducing the purpose of sale of such security. not gained from such relationship; or
ii. the insider proves: (1) that he disclosed the
(d) To make false or misleading statement with respect to information to the other party, or (2) that
any material fact, which he knew or had reasonable ground he had reason to believe that the other
to believe was so false or misleading, for the purpose of party otherwise is also in possession of the
inducing the purchase or sale of any security listed or traded information.
in an Exchange.
(b) Communicating material non-public information to tender offer to stockholders by filling with the
person who, by virtue of the communication, becomes Commission a declaration to that effect.
an insider’
(c) Where a tender offer has commenced or is about Purpose of the tender offer rule
to commence, (1) any person, other than the tender
offeror, who is in possession of material nonpublic - to protect minority shareholders against any
information relating to such tender offer, buys or sells scheme that dilutes the share value of their investments;
the securities of the issuer that are sought or to be - it gives the minority shareholders the chance to
sought by such tender offer; and (2) any tender offeror exit the company under reasonable terms, giving them
who communicates material nonpublic information the opportunity to sell their shares at the same price as
relating to tender offer those of the majority shareholders
Rules on Proxy Solicitation
When is information considered as “material non-public” (Sec. 27.2)?
(a) Proxies must be in writing, signed by the
(a) if it has not been generally disclosed to the public stockholder or his duly authorized representative and
and would likely affect the market price of the security file before the scheduled meeting with the corporate
after being disseminated to the public and the lapse of secretary.
a reasonable time for the market to absorb the (b) Unless otherwise provided in the proxy, it shall be
information; or valid only for the meeting for which it is intended. No
(b) would be considered by a reasonable person proxy shall be valid and effective for a period longer
important under the circumstances in determining his than five (5) years at one time.
course of action whether to buy, sell or hold a security. (c) No broker or dealer shall give any proxy, consent
or any authorization, in respect of any security carried
Presumption in case of purchase or sale of security by an insider (Sec. for the account of the customer, to a person other than
27) the customer, without written authorization of such
customer.
A purchase or sale of a security of the issuer made by an (d) A broker or dealer who holds or acquire the proxy
insider or insider’s spouse or relatives by affinity or for at least 10% or such percentage as the commission
consanguinity within the second degree, legitimate or may prescribe of the outstanding share of such issuer,
common-law, shall be presumed to have been effected while shall submit a report identifying the beneficial owner of
in possession of material nonpublic information if ten days after such acquisition, for its own account or
transacted after such information came into existence but customer, to the issuer of security, to the exchange
prior to dissemination of such information to the public and where the security is traded and to the Commission.
the lapse of a reasonable time for market to absorb such
information. E. Republic Act No. 10667
Such presumption is rebuttable upon a showing by the Title: Philippine Competition Act
purchaser or seller that he was aware of the material What is it about?
nonpublic information at the time of the purchase or sale. - The Philippine Competition Act (Republic Act 10667
or the “Act”) defines, prohibits and penalizes three
What is the “tender offer” (Sec. 19) types of anti-competitive conduct: anti-competitive
agreements, abuse of dominant position, and anti-
- Any person or group of persons acting in concert competitive mergers and acquisitions. It also creates
who intends to acquire at least 15% of any class of any the Philippine Competition Commission (“PCC”),
equity security of a listed corporation of any class of any which will have the original and primary authority to
equity security of a corporation with assets of at least conduct inquiries or investigations and to hear and
50,000,000 and having 200 or more stockholders at decide cases involving violations of the Act.
least 100 shares each or who intends to acquire at least
30% of such equity over a period of 12 shall make a Purpose (Sec. 2)
The Act seeks to:
(a) enhance economic efficiency and promote entry, discrimination in price or other terms, tying and
free and fair competition in trade, industry and bundling. There is a rebuttable presumption that an
all commercial activities; entity is in a “market dominant position” if the market
(b) prevent economic concentration that will share of such entity in the relevant market is at least
control production, distribution or trade, 50%, unless the PCC determines a new market share
which will unduly stifle competition or lessen, threshold for a particular sector.
manipulate or construct the discipline of free
markets; and (b) Anti-Competitive Mergers and Acquisitions
(c) penalize all forms of anti-competitive conduct - These refer to those mergers and acquisitions that
with the object of protecting consumer substantially prevent, restrict or lessen competition
welfare and advancing domestic and (Sec. 20).
international trade and economic - By way of exception, the PCC may exempt mergers and
development. acquisitions if the parties are able to prove that (i) the
concentration has brought about or is likely to bring
Scope and Application (Sec. 3) about gains in efficiencies that are greater than the
The Act covers any person or entity engaged in trade, effect of any limitation on competition that result or
industry and commerce in the Philippines. The Act also likely to result from the merger or acquisition; or (ii) a
applies to international trade having direct, substantial, and party thereto is faced with actual or imminent financial
reasonably foreseeable effects in the Philippine trade failure and the agreement represents the least anti-
industry or commerce, including those resulting from acts competitive alternative among the known alternative
done outside of the Philippines. The Act, however, excludes uses for the failing entity’s assets.
combinations or activities of workers or employees as well - Further, parties to mergers or acquisitions, the
as agreements or arrangements with employers when transaction value of which exceeds Php1 Billion are
designed solely to facilitate collective bargaining in respect prohibited from consummating the same until thirty
of conditions of employment. (30) days after the PCC has been notified thereof in the
form and containing the information specified in the
Key Provisions regulations to be issued by the PCC. Otherwise, the
(a) Anti-Competitive Agreements (Sec. 14) merger or acquisition is considered void and the parties
- The Act covers both horizontal and vertical agreements thereto liable to pay an administrative fine equivalent to
and include: 1%-5% of the transaction value (Sec. 17).
1. agreements that are per se violative of the Act, i.e.
agreements between competitors that (i) restrict F. Republic Act No. 8293
competition, as to the price or components thereof, or
as to other terms of trade; or (ii) fix the price at an Title
auction or in any form of bidding, including cover Intellectual Property Code of the Philippines
bidding, bid suppression, bid rotation, market Purpose (Sec. 2)
allocation and other analogous practices of bid - To promote the diffusion of knowledge and
manipulations; and information for the promotion of national
2. agreements that are prohibited if shown to have the development and progress and the common good;
object or effect of substantially preventing, restricting - To streamline administrative procedures of
or restricting competition, e.g. setting, limiting or registering patents, trademarks and copyright;
controlling production, markets, technical - To liberalize the registration on the transfer of
development, or investment, dividing or sharing the technology; and
market. - To enhance the enforcement of intellectual
property rights in the Philippines
(b) Abuse of Dominant Position (Sec. 15) Intellectual Property; meaning
- This refers to conduct that would substantially - Refers to any work or creation of a person, to
prevent, restrict or lessen competition and includes, which he is entitled to or possess rights, as it is a product
among others, predatory pricing, imposing barriers to of his intellect
Types of Intellectual Properties protected by the Philippine Law (Sec. qualities, characteristics, and reputation only to its
4) [geographical] origin.
“Intellectual property rights” consists of: Basically, applying for rights and protection over
(a) Copyright and Related Rights; geographic indications can give you a specific
(b) Trademarks and Service Marks; authorization over certain products, which can also be
(c) Geographic Indications; a source of [higher] income. Aside from that, its
(d) Industrial Designs; geographic origin can get widely known for producing
(e) Patents; such product, which is also a point of advantage.
(f) Layout-Designs (Topographies) of Integrated Industrial Designs
Circuits; and Industrial designs could either be three-dimensional
(g) Protection of Undisclosed Information. features (with shapes and surfaces) or two-dimensional
Copyright and Related Rights ones (with patterns, lines, or color). Essentially,
Copyright and other related rights refer to the industrial designs could be any handicraft, vehicle,
protection of literary, scientific, and artistic pieces or jewelry, fashion pieces, appliances, and a whole lot
domain. These may include books and other literary more.
articles, films, paintings, audio or music, and computer Your benefit as the owner of an industrial design is
or software programs. prohibiting other parties from producing and selling
The copyright law automatically grants authors and your goods that bear the exact same embodiment or
artists protection over their creations or work from the design, which is basically a copy.
moment they produce it. The benefit of applying for Patents
copyright protection over your works is that you Patens are usually granted to inventors, which provide
automatically get exclusive rights to use your piece and products or solutions to technical problems concerning
allow other people or organizations to use your work so any field in the human activity. However, patents
long as both parties agree on common terms and should be new, inventive, and industrially applicable.
conditions. The rightful owner and holder of the These are the three categories or criteria that inventors
copyright protection can either authorize or prohibit have to go through first before getting a government-
the reproduction of their work in any way, shape, or issued right and protection over the invention. All these
form. you can discuss with an experienced Philippine patent
Trademarks and Service Marks lawyer.
Meanwhile, trademarks could be a word, a group of Patent owners are granted exclusive rights in preventing
words, signs and symbols, logos, or a combination of other people from making, using, or selling the output
all, which identifies the primary source or origin of of his creation during the entire validity of the patent;
products and services as one entity differing from the this is because patent registration can only last up to a
rest. specific number of years, depending on the registrant.
Businesses usually apply for trademark rights and Layout-Designs or Topographies of Integrated Circuits
protection as it can give significant competitive edges. These types of designs are usually three-dimensional
Aside from that, a trademark protects your business’ elements or forms intended for manufacturing. Owners
identity in such a vast industry. Registering for of this invention or idea are granted rights in preventing
trademark protection gives you, the rightful owner, other parties from using the registered item or device
exclusive rights in preventing other people or for commercial purposes. Topographies, as compared
companies from using it for exploitation and such. to invention patents, are relatively inexpensive, easier to
Additionally, trademarks can be a good source of acquire, with fewer requirements needed.
income through licensing and franchise. Protection of Undisclosed Information
Geographic Indications If anything, this might be the most crucial out of all
A geographic indication can either be a name or a sign types of intellectual properties that need the protection
used by and for a particular product from a specific of the law.
geographical location. This may act as a guarantee or a Undisclosed information is usually very important or
right that a certain product may possess specific vital information that may either bring great benefits or
danger and panic to the entire state. More often than
not, the government tries to filter and publish only The Act does not apply to the following (Sec. 4):
those content that would not cause trauma or fear (a) Information about any individual who is or was an
among the nation. Typically, undisclosed information is officer or employee of a government institution;
discussed in closed-door, no-media meetings and (b) Information about an individual who is or was
conferences. performing service under contract for a
Judging by how crucial and confidential it may sound, government institution that relates to the services
that’s the very reason why it’s part of the Philippine performed;
law’s IP protection. Undisclosed information often (c) Information relating to any discretionary benefit of
hold something very valuable and relevant for the entire a financial nature such as the granting of a license
state; thus, the security. or permit given by the government to an individual,
Functions (Sec. 5) including the name of the individual and the exact
(a) Examine applications for grant of letters patent for nature of the benefit;
inventions and register utility models and industrial (d) Personal information processed for journalistic,
designs; artistic, literary or research purposes;
(b) Examine application for the registration of marks, (e) Information necessary in order to carry out the
geographic indication, integrated circuits; functions of public authority which includes the
(c) Register technology arrangements and settle processing of personal data for the performance by
disputes involving technology transfer covered and the independent, central monetary authority and
develop/implement strategies to promote and facilitate law enforcement and regulatory agencies of their
technology transfer; constitutionally and statutorily mandated functions;
(d) Promote the use of patent information as a tool for (f) Information necessary for banks and other
technology development; financial institutions to comply with Anti-Money
(e) Publish regularly in its own publication the patents, Laundering Act and other applicable laws; and
marks, utility models and industrial designs, issued and (g) Personal information originally collected from
approved, and the technology transfer arrangements residents of foreign jurisdictions in accordance with
registered; the laws of those foreign jurisdictions, including
(f) Administratively adjudicate contested proceedings any applicable data privacy laws, which is being
affecting intellectual property rights; and processed in the Philippines.
(g) Coordinate with other government agencies and Required agreements (Sec. 7)
the private sector efforts to formulate and implement The law requires that when sharing data, the sharing be
plans and policies to strengthen the protection of covered by an agreement that provides adequate safeguards
intellectual property rights in the country. for the rights of data subjects, and that these agreements are
subject to review by the National Privacy Commission.
g. Republic Act No. 10173 Approach
Title The Philippines law takes the approach that “The
Data Privacy Act of 2012 processing of personal data shall be allowed subject to
Purpose (Sec. 2) adherence to the principles of transparency, legitimate
- to protect the fundamental human right of privacy, purpose, and proportionality.”
of communication while ensuring free flow of information Collection, processing, and consent
to promote innovation and growth The act states that the collection of personal data “must be
Scope and Application (Sec. 4) a declared, specified, and legitimate purpose” and further
- This Act applies to the processing of all types of provides that consent is required prior to the collection of
personal information and to any natural and juridical all personal data. It requires that when obtaining consent,
person involved in personal information processing the data subject be informed about the extent and purpose
including those personal information controllers and of processing, and it specifically mentions the “automated
processors who, although not found or established in processing of his or her personal data for profiling, or
the Philippines, use equipment that are located in the processing for direct marketing, and data sharing.” Consent
Philippines, or those who maintain an office, branch or is further required for sharing information with affiliates or
agency in the Philippines. even mother companies.
Consent must be “freely given, specific, informed,” and the (a) Be informed whether personal information
definition further requires that consent to collection and pertaining to him or her shall be, are being or have been
processing be evidenced by recorded means. However, processed;
processing does not always require consent. (b) Be furnished the information before the entry of
Consent is not required for processing where the data his or her personal information into the processing
subject is party to a contractual agreement, for purposes of system of the personal information controller, or at the
fulfilling that contract. The exceptions of compliance with next practical opportunity;
a legal obligation upon the data controller, protection of the (c) Reasonable access to, upon demand, the following:
vital interests of the data subject, and response to a national i. Contents of his or her personal
emergency are also available. information that were processed;
An exception to consent is allowed where processing is ii. Sources from which personal information
necessary to pursue the legitimate interests of the data were obtained;
controller, except where overridden by the fundamental iii. Names and addresses of recipients of the
rights and freedoms of the data subject. personal information;
Sensitive Personal and Privileged Information (Sec. 3) iv. Manner by which such data were
The law defines sensitive personal information as being: processed;
(a) About an individual’s race, ethnic origin, marital v. Reasons for the disclosure of the personal
status, age, color, and religious, philosophical or information to recipients;
political affiliations; vi. Information on automated processes
(b) About an individual’s health, education, genetic or where the data will or likely to be made as
sexual life of a person, or to any proceeding or any the sole basis for any decision significantly
offense committed or alleged to have committed; affecting or will affect the data subject;
(c) Issued by government agencies “peculiar” (unique) vii. Date when his or her personal information
to an individual, such as social security number; concerning the data subject were last
(d) Marked as classified by executive order or act of accessed and modified; and
Congress. viii. The designation, or name or identity and
All processing of sensitive and personal information is address of the personal information
prohibited except in certain circumstances. The exceptions controller;
are (Sec. 13): (d) Dispute the inaccuracy or error in the personal
(a) Consent of the data subject has been given; information and have the personal information
(b) The processing of the same is provided for by controller correct it immediately and accordingly, unless
existing laws and regulations; the request is vexatious or otherwise unreasonable;
(c) The processing is necessary to protect the life and (e) Suspend, withdraw or order the blocking, removal
health of the data subject or another person; or destruction of his or her personal information from
(d) The processing is necessary to achieve the lawful the personal information controller’s filing system upon
and noncommercial objectives of public organizations discovery and substantial proof that the personal
and their associations information are incomplete, outdated, false, unlawfully
(e) The processing is necessary for purposes of medical obtained, used for unauthorized purposes or are no
treatment, is carried out by a medical practitioner or a longer necessary for the purposes for which they were
medical treatment institution; collected; and
(f) The processing concerns such personal (f) Be indemnified for any damages sustained due to
information as is necessary for the protection of lawful such inaccurate, incomplete, outdated, false, unlawfully
rights and interests of natural or legal persons in court obtained or unauthorized use of personal information.
proceedings, or the establishment, exercise or defense
of legal claims, or when provided to government or
public authority. 3. Requirements, limitations, requisites and other
Data subjects' rights (Sec. 16) considerations for the following:
a. Incorporators
Any person, partnership, association or corporation, singly (1) Of an offense punishable by imprisonment for
or jointly with others but not more than fifteen (15) in a period exceeding six (6) years;
number, may organize a corporation for any lawful purpose (2) For violating this Code; and
or purposes: Provided, That natural persons who are (3) For violating Republic Act No. 8799, otherwise
licensed to practice a profession, and partnerships or known as “The Securities Regulation Code”;
associations organized for the purpose of practicing a
profession, shall not be allowed to organize as a corporation (b) Found administratively liable for any offense involving
unless otherwise provided under special laws. Incorporators fraudulent acts; and
who are natural persons must be of legal age.
(c) By a foreign court or equivalent foreign regulatory
Each incorporator of a stock corporation must own or be a authority for acts, violations or misconduct similar to those
subscriber to at least one (1) share of the capital stock. enumerated in paragraphs (a) and (b) above.
A corporation with a single stockholder is considered a One The foregoing is without prejudice to qualifications or other
Person Corporation as described in Title XIII, Chapter III disqualifications, which the Commission, the primary
of this Code. (Section 10, Revised Corporation Code) regulatory agency, or the Philippine Competition
Commission may impose in its promotion of good
b. Directors/Trustees (number, qualifications, corporate governance or as a sanction in its administrative
disqualifications, etc) proceedings. (Section 26, Revised Corporation Code)
The number of directors shall not be more than fifteen (15). c. Independent directors/trustees (number,
The number of trustees may be more than fifteen (15). qualifications, disqualifications, etc)
(Section 13 (f), Revised Corporation Code) An independent director is a person who, apart from
shareholdings and fees received from the corporation, is
Unless otherwise provided in this Code, the board of independent of management and free from any business or
directors or trustees shall exercise the corporate powers, other relationship which could, or could reasonably be
conduct all business, and control all properties of the perceived to materially interfere with the exercise of
corporation. independent judgment in carrying out the responsibilities as
Directors shall be elected for a term of one (1) year from a director.
among the holders of stocks registered in the corporation’s
books, while trustees shall be elected for a term not Independent directors must be elected by the shareholders
exceeding three (3) years from among the members of the present or entitled to vote in absentia during the election of
corporation. Each director and trustee shall hold office until directors. Independent directors shall be subject to rules and
the successor is elected and qualified. A director who ceases regulations governing their qualifications, disqualifications,
to own at least one (1) share of stock or a trustee who ceases voting requirements, duration of term and term limit,
to be a member of the corporation shall cease to be such. maximum number of board memberships and other
(Section 22, Revised Corporation Code) requirements that the Commission will prescribe to
strengthen their independence and align with international
The directors or trustees elected shall perform their duties best practices. (Section 22, Revised Corporation Code)
as prescribed by law, rules of good corporate governance,
and bylaws of the corporation. (Section 23, Revised The board of the following corporations vested with public
Corporation Code) interest shall have independent directors constituting at least
twenty percent (20%) of such board:
A person shall be disqualified from being a director, trustee
or officer of any corporation if, within five (5) years prior to a. Corporations covered by Section 17.2 of Republic Act
the election or appointment as such, the person was: No. 8799, otherwise known as “The Securities
Regulation Code”, namely those whose securities are
(a) Convicted by final judgment: registered with the Commission, corporations listed
with an exchange or with assets of at least Fifty million
pesos (P50,000,000.00) and having two hundred (200) The President must be a director. (Section 24, Revised
or more holders of shares, each holding at least one Corporation Code)
hundred (100) shares of a class of its equity shares;
b. Banks and quasi-banks, NSSLAs, pawnshops, Corporate Secretary
corporations engaged in money service business, pre- The Corporate Secretary must be a citizen and resident of
need, trust and insurance companies, and other the Philippines. (Section 24, Revised Corporation Code)
financial intermediaries; and
c. Other corporations engaged in business vested with Treasurer
public interest similar to the above, as may be The Treasurer must be a resident of the Philippines.
determined by the Commission, after taking into (Section 24, Revised Corporation Code)
account relevant factors which are germane to the
objective and purpose of requiring the election of an Compliance Officer
independent director, such as the extent of minority If the corporation is vested with public interest, the board
ownership, type of financial products or securities shall also elect a compliance officer. (Section 24, Revised
issued or offered to investors, public interest involved Corporation Code)
in the nature of business operations, and other
analogous factors. (Section 22, Revised Corporation The same person may hold two (2) or more positions
Code) concurrently, except that no one shall act as president and
d. Executive committee, chairman, president, secretary or as president and treasurer at the same time,
corporate secretary, treasurer, compliance officer unless otherwise allowed in this Code.
(qualifications, prohibitions)
The officers shall manage the corporation and perform such
Executive Committee duties as may be provided in the bylaws and/or as resolved
If the bylaws so provide, the board may create an executive by the board of directors. (Section 24, Revised Corporation
committee composed of at least three (3) directors. Said Code)
committee may act, by majority vote of all its members, on
such specific matters within the competence of the board, e. Term, extension and shortening
as may be delegated to it in the bylaws or by majority vote
of the board, except with respect to the: (a) approval of any A corporation shall have perpetual existence unless its
action for which shareholders’ approval is also required; (b) articles of incorporation provides otherwise.
filling of vacancies in the board; (c) amendment or repeal of
bylaws or the adoption of new bylaws; (d) amendment or Corporations with certificates of incorporation issued prior
repeal of any resolution of the board which by its express to the effectivity of this Code, and which continue to exist,
terms is not amendable or repealable; and (e) distribution of shall have perpetual existence, unless the corporation, upon
cash dividends to the shareholders. a vote of its stockholders representing a majority of its
outstanding capital stock, notifies the Commission that it
The board of directors may create special committees of elects to retain its specific corporate term pursuant to its
temporary or permanent nature and determine the articles of incorporation: Provided, That any change in the
members’ term, composition, compensation, powers, and corporate term under this section is without prejudice to the
responsibilities. (Section 34, Revised Corporation Code) appraisal right of dissenting stockholders in accordance with
the provisions of this Code.
Chairman
The chairman or, in his absence, the president shall preside A corporate term for a specific period may be extended or
at all meetings of the directors or trustees as well as of the shortened by amending the articles of incorporation:
stockholders or members, unless the bylaws provide Provided, That no extension may be made earlier than three
otherwise. (Section 53, Revised Corporation Code) (3) years prior to the original or subsequent expiry date(s)
unless there are justifiable reasons for an earlier extension
President as may be determined by the Commission: Provided,
further, That such extension of the corporate term shall take
effect only on the day following the original or subsequent
expiry date(s). The non-holding of elections and the reasons therefor shall
A corporation whose term has expired may apply for a be reported to the Commission within thirty (30) days from
revival of its corporate existence, together with all the rights the date of the scheduled election. The report shall specify
and privileges under its certificate of incorporation and a new date for the election, which shall not be later than
subject to all of its duties, debts and liabilities existing prior sixty (60) days from the scheduled date.
to its revival. Upon approval by the Commission, the
corporation shall be deemed revived and a certificate of If no new date has been designated, or if the rescheduled
revival of corporate existence shall be issued, giving it election is likewise not held, the Commission may, upon the
perpetual existence, unless its application for revival application of a stockholder, member, director or trustee,
provides otherwise. (Section 11, Revised Corporation Code) and after verification of the unjustified non-holding of the
election, summarily order that an election be held. The
f. Failure to organize and commence business, Commission shall have the power to issue such orders as
subsequent inoperation, delinquent may be appropriate, including orders directing the issuance
of a notice stating the time and place of the election,
If a corporation does not formally organize and commence designated presiding officer, and the record date or dates for
its business within five (5) years from the date of its the determination of stockholders or members entitled to
incorporation, its certificate of incorporation shall be vote.
deemed revoked as of the day following the end of the five
(5)-year period. Notwithstanding any provision of the articles of
incorporation or bylaws to the contrary, the shares of stock
However, if a corporation has commenced its business but or membership represented at such meeting and entitled to
subsequently becomes inoperative for a period of at least vote shall constitute a quorum for purposes of conducting
five (5) consecutive years, the Commission may, after due an election under this section.
notice and hearing, place the corporation under delinquent
status. Should a director, trustee or officer die, resign or in any
manner cease to hold office, the secretary, or the director,
A delinquent corporation shall have a period of two (2) trustee or officer of the corporation, shall, within seven (7)
years to resume operations and comply with all days from knowledge thereof, report in writing such fact to
requirements that the Commission shall prescribe. Upon the Commission. (Section 25, Revised Corporation Code)
compliance by the corporation, the Commission shall issue
an order lifting the delinquent status. Failure to comply with H. Death, Resignation and Other Reasons for
the requirements and resume operations within the period Cessation of Office and Filling Up of Vacancies
given by the Commission shall cause the revocation of the Any vacancy occurring in the board of directors or trustees
corporation’s certificate of incorporation. other than by removal or by expiration of term may be filled
by the vote of at least a majority of the remaining directors
The Commission shall give reasonable notice to, and or trustees, if still constituting a quorum; otherwise, said
coordinate with the appropriate regulatory agency prior to vacancies must be filled by the stockholders or members in
the suspension or revocation of the certificate of a regular or special meeting called for that purpose.
incorporation of companies under their special regulatory
jurisdiction. (Section 21, Revised Corporation Code) When the vacancy is due to term expiration, the election
shall be held no later than the day of such expiration at a
g. Election results, postponement meeting called for that purpose. When the vacancy arises as
Within thirty (30) days after the election of the directors, a result of removal by the stockholders or members, the
trustees and officers of the corporation, the secretary, or any election may be held on the same day of the meeting
other officer of the corporation, shall submit to the authorizing the removal and this fact must be so stated in
Commission, the names, nationalities, shareholdings, and the agenda and notice of said meeting. In all other cases, the
residence addresses of the directors, trustees, and officers election must be held no later than forty-five (45) days from
elected. the time the vacancy arose. A director or trustee elected to
fill a vacancy shall be referred to as replacement director or rules, regulations or discipline of the religious
trustee and shall serve only for the unexpired term of the denomination, sect or church represented by the
predecessor in office. corporation sole to administer the temporalities and manage
the affairs, estate, and properties of the corporation sole
However, when the vacancy prevents the remaining shall exercise all the powers and authority of the corporation
directors from constituting a quorum and emergency action sole during such vacancy (Sec. 112 of the RCC)
is required to prevent grave, substantial, and irreparable loss
or damage to the corporation, the vacancy may be I. Meetings of Stockholders and Directors/Trustees
temporarily filled from among the officers of the (Regular or Special, Notice, Quorum, Closing of
corporation by unanimous vote of the remaining directors Books, Postponement, etc.)
or trustees. The action by the designated director or trustee
shall be limited to the emergency action necessary, and the Regular meetings of stockholders or members shall be held
term shall cease within a reasonable time from the annually on a date fixed in the bylaws, or if not so fixed, on
termination of the emergency or upon election of the any date after April 15 of every year as determined by the
replacement director or trustee, whichever comes earlier. board of directors or trustees: Provided, That written notice
The corporation must notify the Commission within three of regular meetings shall be sent to all stockholders or
(3) days from the creation of the emergency board, stating members of record at least twenty-one (21) days prior to the
therein the reason for its creation. Any directorship or meeting, unless a different period is required in the bylaws,
trusteeship to be filled by reason of an increase in the law, or regulation: Provided, further, That written notice of
number of directors or trustees shall be filled only by an regular meetings may be sent to all stockholders or members
election at a regular or at a special meeting of stockholders of record through electronic mail or such other manner as
or members duly called for the purpose, or in the same the Commission shall allow under its guidelines.
meeting authorizing the increase of directors or trustees if
so stated in the notice of the meeting (Sec. 28 of the RCC). At each regular meeting of stockholders or members, the
board of directors or trustees shall endeavor to present to
Trustees elected to fill vacancies occurring before the stockholders or members the following:
expiration of a particular term shall hold office only for the
unexpired period (Sec. 91 of the RCC). A. The minutes of the most recent regular meeting
which shall include, among others:
For educational corporations, unless otherwise provided in 1. A description of the voting and vote tabulation
the articles of incorporation or bylaws, the board of trustees procedures used in the previous meeting;
of incorporated schools, colleges, or other institutions of 2. A description of the opportunity given to
learning shall, as soon as organized, so classify themselves stockholders or members to ask questions and a
that the term of office of one-fifth (1/5) of their number record of the questions asked and answers given;
shall expire every year. Trustees thereafter elected to fill 3. The matters discussed and resolutions reached;
vacancies, occurring before the expiration of a particular 4. A record of the voting results for each agenda item;
term, shall hold office only for the unexpired period. 5. A list of the directors or trustees, officers and
Trustees elected thereafter to fill vacancies caused by stockholders or members who attended the
expiration of term shall hold office for five (5) years (Sec. meeting; and
106 of the RCC). 6. Such other items that the Commission may require
in the interest of good corporate governance and
For religious corporations, the successors in office of any the protection of minority stockholders.
chief archbishop, bishop, priest, minister, rabbi, or presiding
elder in a corporation sole shall become the corporation sole B. A members’ list for nonstock corporations and, for stock
on their accession to office and shall be permitted to corporations, material information on the current
transact business as such upon filing a copy of their stockholders, and their voting rights;
commission, certificate of election, or letters of
appointment, duly certified by any notary public with the C. A detailed, descriptive, balanced and comprehensible
Commission. The person or persons authorized by the assessment of the corporation’s performance, which shall
include information on any material change in the
corporation’s business, strategy, and other affairs; Notice of any meeting may be waived, expressly or
impliedly, by any stockholder or member: Provided, That
D. A financial report for the preceding year, which shall general waivers of notice in the articles of incorporation or
include financial statements duly signed and certified in the bylaws shall not be allowed: Provided, further, That
accordance with this Code and the rules the Commission attendance at a meeting shall constitute a waiver of notice
may prescribe, a statement on the adequacy of the of such meeting, except when the person attends a meeting
corporation’s internal controls or risk management systems, for the express purpose of objecting to the transaction of
and a statement of all external audit and non-audit fees; any business because the meeting is not lawfully called or
convened.
E. An explanation of the dividend policy and the fact of
payment of dividends or the reasons for nonpayment Whenever for any cause, there is no person authorized or
thereof; the person authorized unjustly refuses to call a meeting, the
Commission, upon petition of a stockholder or member on
F. Director or trustee profiles which shall include, among a showing of good cause therefor, may issue an order
others, their qualifications and relevant experience, length directing the petitioning stockholder or member to call a
of service in the corporation, trainings and continuing meeting of the corporation by giving proper notice required
education attended, and their board representations in other by this Code or the bylaws. The petitioning stockholder or
corporations; member shall preside thereat until at least a majority of the
stockholders or members present have chosen from among
G. A director or trustee attendance report, indicating the themselves, a presiding officer.
attendance of each director or trustee at each of the
meetings of the board and its committees and in regular or Unless the bylaws provide for a longer period, the stock and
special stockholder meetings; transfer book or membership book shall be closed at least
twenty (20) days for regular meetings and seven (7) days for
H. Appraisals and performance reports for the board and special meetings before the scheduled date of the meeting.
the criteria and procedure for assessment;
I. A director or trustee compensation report prepared in In case of postponement of stockholders’ or members’
accordance with this Code and the rules the Commission regular meetings, written notice thereof and the reason
may prescribe; therefor shall be sent to all stockholders or members of
record at least two (2) weeks prior to the date of the
J. Director disclosures on self-dealings and related party meeting, unless a different period is required under the
transactions; and/or bylaws, law or regulation.
K. The profiles of directors nominated or seeking election The right to vote of stockholders or members may be
or reelection. exercised in person, through a proxy, or when so authorized
in the bylaws, through remote communication or in
A director, trustee, stockholder, or member may propose absentia. The Commission shall issue the rules and
any other matter for inclusion in the agenda at any regular regulations governing participation and voting through
meeting of stockholders or members. remote communication or in absentia, taking into account
the company’s scale, number of shareholders or members,
Special meetings of stockholders or members shall be held structure, and other factors consistent with the protection
at any time deemed necessary or as provided in the bylaws: and promotion of shareholders’ or member’s meetings (Sec.
Provided, however, That at least one (1) week written notice 49 of the RCC).
shall be sent to all stockholders or members, unless a
different period is provided in the bylaws, law or regulation. J. Powers and Scope of Authority of the Board
A stockholder or member may propose the holding of a Unless otherwise provided in this Code, the board of
special meeting and items to be included in the agenda. directors or trustees shall exercise the corporate powers,
conduct all business, and control all properties of the representing at least two-thirds (2/3) of the outstanding
corporation (Sec. 22 of the RCC). capital stock or of its members. Written notice of the
proposed action and the time and place of the meeting shall
Sec. 35. Corporate Powers and Capacity. – Every be sent to stockholders or members at their respective place
corporation incorporated under this Code has the power of residence as shown in the books of the corporation, and
and capacity: must either be deposited to the addressee in the post office
1. To sue and be sued in its corporate name; with postage prepaid, served personally, or when allowed in
2. To have perpetual existence unless the certificate of the bylaws or done with the consent of the stockholder, sent
incorporation provides otherwise; electronically in accordance with the rules and regulations
3. To adopt and use a corporate seal; of the Commission on the use of electronic data messages.
4. To amend its articles of incorporation in In case of extension of corporate term, a dissenting
accordance with the provisions of this Code; stockholder may exercise the right of appraisal under the
5. To adopt bylaws, not contrary to law, morals or conditions provided in this Code.
public policy, and to amend or repeal the same in
accordance with this Code; SEC. 37. Power to Increase or Decrease Capital Stock;
6. In case of stock corporations, to issue or sell stocks Incur, Create or Increase Bonded Indebtedness. – No
to subscribers and to sell treasury stocks in corporation shall increase or decrease its capital stock or
accordance with the provisions of this Code; and to incur, create or increase any bonded indebtedness unless
admit members to the corporation if it be a approved by a majority vote of the board of directors and
nonstock corporation; by two-thirds (2/3) of the outstanding capital stock at a
7. To purchase, receive, take or grant, hold, convey, stockholders’ meeting duly called for the purpose. Written
sell, lease, pledge, mortgage, and otherwise deal notice of the time and place of the stockholders’ meeting
with such real and personal property, including and the purpose for said meeting must be sent to the
securities and bonds of other corporations, as the stockholders at their places of residence as shown in the
transaction of the lawful business of the books of the corporation and served on the stockholders
corporation may reasonably and necessarily personally, or through electronic means recognized in the
require, subject to the limitations prescribed by law corporation’s bylaws and/or the Commission’s rules as a
and the Constitution; valid mode for service of notices. A certificate must be
8. To enter into a partnership, joint venture, merger, signed by a majority of the directors of the corporation and
consolidation, or any other commercial agreement countersigned by the chairperson and secretary of the
with natural and juridical persons; stockholders’ meeting, setting forth:
9. To make reasonable donations, including those for 1. That the requirements of this section have been
the public welfare or for hospital, charitable, complied with;
cultural, scientific, civic, or similar purposes: 2. The amount of the increase or decrease of the
Provided, That no foreign corporation shall give capital stock;
donations in aid of any political party or candidate 3. In case of an increase of the capital stock, the
or for purposes of partisan political activity; amount of capital stock or number of shares of no-
10. To establish pension, retirement, and other plans par stock thereof actually subscribed, the names,
for the benefit of its directors, trustees, officers, nationalities and addresses of the persons
and employees; and subscribing, the amount of capital stock or number
11. To exercise such other powers as may be essential of no-par stock subscribed by each, and the amount
or necessary to carry out its purpose or purposes as paid by each on the subscription in cash or
stated in the articles of incorporation. property, or the amount of capital stock or number
of shares of no-par stock allotted to each
SEC. 36. Power to Extend or Shorten Corporate Term. stockholder if such increase is for the purpose of
– A private corporation may extend or shorten its term as making effective stock dividend therefor
stated in the articles of incorporation when approved by a authorized;
majority vote of the board of directors or trustees, and 4. Any bonded indebtedness to be incurred, created
ratified at a meeting by the stockholders or members or increased;
5. The amount of stock represented at the meeting; amendment thereto: Provided, That such preemptive right
and shall not extend to shares issued in compliance with laws
6. The vote authorizing the increase or decrease of the requiring stock offerings or minimum stock ownership by
capital stock, or the incurring, creating or increasing the public; or to shares issued in good faith with the
of any bonded indebtedness. approval of the stockholders representing two-thirds (2/3)
of the outstanding capital stock, in exchange for property
Any increase or decrease in the capital stock or the needed for corporate purposes or in payment of a
incurring, creating or increasing of any bonded previously contracted debt.
indebtedness shall require prior approval of the
Commission, and where appropriate, of the Philippine SEC. 39. Sale or Other Disposition of Assets. – Subject
Competition Commission. The application with the to the provisions of Republic Act No. 10667, otherwise
Commission shall be made within six (6) months from the known as “Philippine Competition Act”, and other related
date of approval of the board of directors and stockholders, laws, a corporation may, by a majority vote of its board of
which period may be extended for justifiable reasons. directors or trustees, sell, lease, exchange, mortgage, pledge,
Copies of the certificate shall be kept on file in the office of or otherwise dispose of its property and assets, upon such
the corporation and filed with the Commission and attached terms and conditions and for such consideration, which may
to the original articles of incorporation. After approval by be money, stocks, bonds, or other instruments for the
the Commission and the issuance by the Commission of its payment of money or other property or consideration, as its
certificate of filing, the capital stock shall be deemed board of directors or trustees may deem expedient.
increased or decreased and the incurring, creating or
increasing of any bonded indebtedness authorized, as the A sale of all or substantially all of the corporation’s
certificate of filing may declare: Provided, That the properties and assets, including its goodwill, must be
Commission shall not accept for filing any certificate of authorized by the vote of the stockholders representing at
increase of capital stock unless accompanied by a sworn least two-thirds (2/3) of the outstanding capital stock, or at
statement of the treasurer of the corporation lawfully least two-thirds (2/3) of the members, in a stockholders’ or
holding office at the time of the filing of the certificate, members’ meeting duly called for the purpose.
showing that at least twenty-five percent (25%) of the
increase in capital stock has been subscribed and that at least In nonstock corporations where there are no members with
twenty-five percent (25%) of the amount subscribed has voting rights, the vote of at least a majority of the trustees
been paid in actual cash to the corporation or that property, in office will be sufficient authorization for the corporation
the valuation of which is equal to twenty-five percent (25%) to enter into any transaction authorized by this section.
of the subscription, has been transferred to the corporation:
Provided, further, That no decrease in capital stock shall be The determination of whether or not the sale involves all or
approved by the Commission if its effect shall prejudice the substantially all of the corporation’s properties and assets
rights of corporate creditors. must be computed based on its net asset value, as shown in
its latest financial statements. A sale or other disposition
Nonstock corporations may incur, create or increase shall be deemed to cover substantially all the corporate
bonded indebtedness when approved by a majority of the property and assets if thereby the corporation would be
board of trustees and of at least two-thirds (2/3) of the rendered incapable of continuing the business or
members in a meeting duly called for the purpose. Bonds accomplishing the purpose for which it was incorporated.
issued by a corporation shall be registered with the
Commission, which shall have the authority to determine Written notice of the proposed action and of the time and
the sufficiency of the terms thereof. place for the meeting shall be addressed to stockholders or
members at their places of residence as shown in the books
SEC. 38. Power to Deny Preemptive Right. – All of the corporation and deposited to the addressee in the
stockholders of a stock corporation shall enjoy preemptive post office with postage prepaid, served personally, or when
right to subscribe to all issues or disposition of shares of any allowed by the bylaws or done with the consent of the
class, in proportion to their respective shareholdings, unless stockholder, sent electronically: Provided, That any
such right is denied by the articles of incorporation or an
dissenting stockholder may exercise the right of appraisal shown in the books of the corporation and deposited to the
under the conditions provided in this Code. addressee in the post office with postage prepaid, served
personally, or sent electronically in accordance with the
After such authorization or approval by the stockholders or rules and regulations of the Commission on the use of
members, the board of directors or trustees may, electronic data message, when allowed by the bylaws or
nevertheless, in its discretion, abandon such sale, lease, done with the consent of the stockholders: Provided, That
exchange, mortgage, pledge, or other disposition of any dissenting stockholder shall have appraisal right as
property and assets, subject to the rights of third parties provided in this Code: Provided, however, That where the
under any contract relating thereto, without further action investment by the corporation is reasonably necessary to
or approval by the stockholders or members. accomplish its primary purpose as stated in the articles of
incorporation, the approval of the stockholders or members
Nothing in this section is intended to restrict the power of shall not be necessary.
any corporation, without the authorization by the
stockholders or members, to sell, lease, exchange, mortgage, SEC. 42. Power to Declare Dividends. – The board of
pledge, or otherwise dispose of any of its property and directors of a stock corporation may declare dividends out
assets if the same is necessary in the usual and regular course of the unrestricted retained earnings which shall be payable
of business of the corporation or if the proceeds of the sale in cash, property, or in stock to all stockholders on the basis
or other disposition of such property and assets shall be of outstanding stock held by them: Provided, That any cash
appropriated for the conduct of its remaining business. dividends due on delinquent stock shall first be applied to
the unpaid balance on the subscription plus costs and
SEC. 40. Power to Acquire Own Shares. – Provided that expenses, while stock dividends shall be withheld from the
the corporation has unrestricted retained earnings in its delinquent stockholders until their unpaid subscription is
books to cover the shares to be purchased or acquired, a fully paid: Provided, further, That no stock dividend shall
stock corporation shall have the power to purchase or be issued without the approval of stockholders representing
acquire its own shares for a legitimate corporate purpose or at least two-thirds (2/3) of the outstanding capital stock at
purposes, including the following cases: a regular or special meeting duly called for the purpose.
a. To eliminate fractional shares arising out of stock
dividends; Stock corporations are prohibited from retaining surplus
b. To collect or compromise an indebtedness to the profits in excess of one hundred percent (100%) of their
corporation, arising out of unpaid subscription, in a paid-in capital stock, except: (a) when justified by definite
delinquency sale, and to purchase delinquent shares sold corporate expansion projects or programs approved by the
during said sale; and board of directors; or (b) when the corporation is prohibited
c. To pay dissenting or withdrawing stockholders under any loan agreement with financial institutions or
entitled to payment for their shares under the provisions of creditors, whether local or foreign, from declaring dividends
this Code. without their consent, and such consent has not yet been
secured; or (c) when it can be clearly shown that such
SEC. 41. Power to Invest Corporate Funds in Another retention is necessary under special circumstances obtaining
Corporation or Business or for Any Other Purpose. – in the corporation, such as when there is need for special
Subject to the provisions of this Code, a private corporation reserve for probable contingencies.
may invest its funds in any other corporation, business, or
for any purpose other than the primary purpose for which SEC. 43. Power to Enter into Management Contract. –
it was organized, when approved by a majority of the board No corporation shall conclude a management contract with
of directors or trustees and ratified by the stockholders another corporation unless such contract is approved by the
representing at least two-thirds (2/3) of the outstanding board of directors and by stockholders owning at least the
capital stock, or by at least two thirds (2/3) of the members majority of the outstanding capital stock, or by at least a
in the case of nonstock corporations, at a meeting duly majority of the members in the case of a nonstock
called for the purpose. Notice of the proposed investment corporation, of both the managing and the managed
and the time and place of the meeting shall be addressed to corporation, at a meeting duly called for the purpose:
each stockholder or member at the place of residence as Provided, That (a) where a stockholder or stockholders
representing the same interest of both the managing and the f. Outstanding shares exchanged for stocks in the
managed corporations own or control more than one-third event of reclassification or conversion;
(1/3) of the total outstanding capital stock entitled to vote g. Shares of stock in another corporation; and/or
of the managing corporation; or (b) where a majority of the h. Other generally accepted form of consideration.
members of the board of directors of the managing
corporation also constitute a majority of the members of the Where the consideration is other than actual cash or consists
board of directors of the managed corporation, then the of intangible property such as patents or copyrights, the
management contract must be approved by the valuation thereof shall initially be determined by the
stockholders of the managed corporation owning at least stockholders or the board of directors, subject to the
two-thirds (2/3) of the total outstanding capital stock approval of the Commission.
entitled to vote, or by at least two-thirds (2/3) of the
members in the case of a nonstock corporation. Shares of stock shall not be issued in exchange for
promissory notes or future service. The same considerations
These shall apply to any contract whereby a corporation provided in this section, insofar as applicable, may be used
undertakes to manage or operate all or substantially all of for the issuance of bonds by the corporation.
the business of another corporation, whether such contracts
are called service contracts, operating agreements or The issued price of no-par value shares may be fixed in the
otherwise: Provided, however, That such service contracts articles of incorporation or by the board of directors
or operating agreements which relate to the exploration, pursuant to authority conferred by the articles of
development, exploitation or utilization of natural resources incorporation or the bylaws, or if not so fixed, by the
may be entered into for such periods as may be provided by stockholders representing at least a majority of the
the pertinent laws or regulations. outstanding capital stock at a meeting duly called for the
purpose (Sec. 61 of the RCC).
No management contract shall be entered into for a period
longer than five (5) years for any one (1) term. L. Information/ Documents That Need To Be Kept
And Carefully Preserved At A Corporation’s Principal
SEC. 44. Ultra Vires Acts of Corporations. – No Office
corporation shall possess or exercise corporate powers
other than those conferred by this Code or by its articles of The bylaws shall be signed by the stockholders or members
incorporation and except as necessary or incidental to the voting for them and shall be kept in the principal office of
exercise of the powers conferred. the corporation, subject to the inspection of the
stockholders or members during office hours (Sec. 45 of the
K. Consideration for Stocks RCC).
Stocks shall not be issued for a consideration less than the Copies of the certificate (for the increase or decrease of
par or issued price thereof. Consideration for the issuance capital stock or incur, create or increase bonded
of stock may be: indebtedness) shall be kept on file in the office of the
a. Actual cash paid to the corporation; corporation and filed with the Commission and attached to
b. Property, tangible or intangible, actually received by the original articles of incorporation (Sec. 37 of the RCC)
the corporation and necessary or convenient for its use and
lawful purposes at a fair valuation equal to the par or issued Stock corporations must also keep a stock and transfer
value of the stock issued; book, which shall contain a record of all stocks in the names
c. Labor performed for or services actually rendered of the stockholders alphabetically arranged; the installments
to the corporation; paid and unpaid on all stocks for which subscription has
d. Previously incurred indebtedness of the been made, and the date of payment of any installment; a
corporation; statement of every alienation, sale or transfer of stock made,
e. Amounts transferred from unrestricted retained the date thereof, by and to whom made; and such other
earnings to stated capital; entries as the bylaws may prescribe. The stock and transfer
book shall be kept in the principal office of the corporation
or in the office of its stock transfer agent and shall be open Holders of nonvoting shares shall nevertheless be entitled
for inspection by any director or stockholder of the to vote on the following matters:
corporation at reasonable hours on business days (Sec. 73 a. Amendment of the articles of incorporation;
of the RCC). b. Adoption and amendment of bylaws;
c. Sale, lease, exchange, mortgage, pledge, or other
M. When Balance on Subscription is Due and When disposition of all or substantially all of the corporate
Interest on Unpaid Subscription is Due and at What property;
Rate d. Incurring, creating, or increasing bonded
indebtedness;
Subject to the provisions of the subscription contract, the e. Increase or decrease of authorized capital stock;
board of directors may, at any time, declare due and payable f. Merger or consolidation of the corporation with
to the corporation unpaid subscriptions and may collect the another corporation or other corporations;
same or such percentage thereof, in either case, with accrued g. Investment of corporate funds in another
interest, if any, as it may deem necessary. corporation or business in accordance with this Code; and
h. Dissolution of the corporation.
Payment of unpaid subscription or any percentage thereof,
together with any interest accrued shall be made on the date Except as provided in the immediately preceding paragraph,
specified in the subscription contract or on the date stated the vote required under this Code to approve a particular
in the call made by the board. Failure to pay on such date corporate act shall be deemed to refer only to stocks with
shall render the entire balance due and payable and shall voting rights.
make the stockholder liable for interest at the legal rate on
such balance, unless a different interest rate is provided in O. Minimum issue of no-par value shares - No-par
the subscription contract. The interest shall be computed value shares must be issued for a consideration of at least
from the date specified, until full payment of the Five pesos (P5.00) per share. (Section 6)
subscription. If no payment is made within thirty (30) days
from the said date, all stocks covered by the subscription P. Conditions for a contract with a director, officer,
shall thereupon become delinquent and shall be subject to trustee to be NOT voidable
sale as hereinafter provided, unless the board of directors
orders otherwise (Sec. 66 of the RCC). SEC. 31. Dealings of Directors, Trustees or Officers
with the Corporation. – A contract of the corporation with
Subscribers to stocks shall be liable to the corporation for (1) one or more of its directors, trustees, officers or their
interest on all unpaid subscriptions from the date of spouses and relatives within the fourth civil degree of
subscription, if so required by and at the rate of interest consanguinity or affinity is voidable, at the option of such
fixed in the subscription contract. If no rate of interest is corporation, unless all the following conditions are present:
fixed in the subscription contract, the prevailing legal rate
shall apply (Sec. 65 of the RCC). (a) The presence of such director or trustee in the board
meeting in which the contract was approved was not
N. Kinds of Shares that may be Deprived of Voting necessary to constitute a quorum for such meeting;
Rights, Provided that there is a Class or Series of Shares (b) The vote of such director or trustee was not necessary
with Complete Voting Rights for the approval of the contract;
The shares in stock corporations may be divided into classes (c) The contract is fair and reasonable under the
or series of shares, or both. No share may be deprived of circumstances;
voting rights except those classified and issued as
“preferred” or “redeemable” shares, unless otherwise (d) In case of corporations vested with public interest,
provided in this Code: Provided, That there shall always be material contracts are approved by at least two-thirds (2/3)
a class or series of shares with complete voting rights. of the entire membership of the board, with at least a
majority of the independent directors voting to approve the
material contract; and
to such director, trustee, stockholder or member for
(e) In case of an officer, the contract has been previously damages, and in addition, shall be guilty of an offense which
authorized by the board of directors, Where any of the first shall be punishable under Section 161 of this Code:
three (3) conditions set forth in the preceding paragraph is Provided, That if such refusal is made pursuant to a
absent, in the case of a contract with a director or trustee, resolution or order of the board of directors or trustees, the
such contract may be ratified by the vote of the stockholders liability under this section for such action shall be imposed
representing at least two-thirds (2/3) of the outstanding upon the directors or trustees who voted for such refusal:
capital stock or of at least two-thirds (2/3) of the members Provided, further, That it shall be a defense to any action
in a meeting called for the purpose: Provided, That full under this section that the person demanding to examine
disclosure of the adverse interest of the directors or trustees and copy excerpts from the corporation’s records and
involved is made at such meeting and the contract is fair and minutes has improperly used any information secured
reasonable under the circumstances. through any prior examination of the records or minutes of
such corporation or of any other corporation, or was not
Q. How notice of meeting may be waived and objected acting in good faith or for a legitimate purpose in making
the demand to examine or reproduce corporate records, or
Notice of any meeting may be waived, expressly or is a competitor, director, officer, controlling stockholder or
impliedly, by any stockholder or member: Provided, That otherwise represents the interests of a competitor.
general waivers of notice in the articles of incorporation or
the bylaws shall not be allowed: Provided, further, That SEC. 161. Violation of Duty to Maintain Records, to
attendance at a meeting shall constitute a waiver of notice Allow their Inspection or Reproduction; Penalties. –
of such meeting, except when the person attends a meeting The unjustified failure or refusal by the corporation, or by
for the express purpose of objecting to the transaction those responsible for keeping and maintaining corporate
of any business because the meeting is not lawfully called records, to comply with Sections 45, 73, 92, 128, 177 and
or convened. (Section 49, Title VI, Meetings) other pertinent rules and provisions of this Code on
inspection and reproduction of records shall be punished
R. Persons with no right to inspect or demand with a fine ranging from Ten thousand pesos (P10,000.00)
reproduction of corporate records to Two hundred thousand pesos (P200,000.00), at the
discretion of the court, taking into consideration the
Corporate records, regardless of the form in which they are seriousness of the violation and its implications. When the
stored, shall be open to inspection by any director, trustee, violation of this provision is injurious or detrimental to the
stockholder or member of the corporation in person or by public, the penalty is a fine ranging from Twenty thousand
a representative at reasonable hours on business days, and a pesos (P20,000.00) to Four hundred thousand pesos
demand in writing may be made by such director, trustee or (P400,000.00). The penalties imposed under this section
stockholder at their expense. shall be without prejudice to the Commission’s exercise of
its contempt powers under Section 157 hereof.
A requesting party who is not a stockholder or member of
record, or is a competitor, director, officer, controlling T. Persons authorized to sign the financial statements
stockholder or otherwise represents the interests of a
competitor shall have no right to inspect or demand A corporation shall furnish a stockholder or member,
reproduction of corporate records. (Section 73, Title within ten (10) days from receipt of their written request, its
VIII, Corporate Books and Records) most recent financial statement, in the form and substance
of the financial reporting required by the Commission. At
S. Liabilities in case of refusal to allow inspection the regular meeting of stockholders or members, the board
and/or reproduction and who are liable for such refusal of directors or trustees shall present to such stockholders or
and the defenses available to justify a refusal. members a financial report of the operations of the
corporation for the preceding year, which shall include
Any officer or agent of the corporation who shall refuse to financial statements, duly signed and certified in
allow the inspection and/or reproduction of records in accordance with this Code, and the rules the
accordance with the provisions of this Code shall be liable Commission may prescribe. However, if the total assets
or total liabilities of the corporation is less than Six hundred No voting right
thousand pesos (P600,000.00), or such other amount as may
be determined appropriate by the Department of Finance, b. Distribution of assets of a Non-Stock Corporation
the financial statements may be certified under oath by
the treasurer and the president. (Section 73, Title VIII) Rules of Distribution (Sec. 93)
The assets of a nonstock corporation undergoing the
SEC. 129. Reportorial Requirements. – The One Person process of dissolution, other than those set forth in Section
Corporation shall submit the following within such period 139 of the Revised Corporation Code, shall be applied and
as the Commission may prescribe: distributed as follows:
(a) All liabilities and obligations of the corporation shall be
(a) Annual financial statements audited by an independent paid, satisfied and discharged;
certified public accountant: Provided, That if the total assets (b) Assets held by the corporation upon a condition
or total liabilities of the corporation are less than Six requiring return, transfer or conveyance shall be
Hundred Thousand Pesos (P600,000.00), the financial returned, transferred or conveyed;
statements shall be certified under oath by the corporation’s (c) Assets received and held by the corporation subject to
treasurer and president. (Section 129, Chapter III, One limitations permitting their use only for charitable,
Person Corporation) religious, benevolent, education or similar purposes,
but not held upon a condition requiring return, transfer
4. Rule/s on: or conveyance by reason of dissolution, shall be
transferred or conveyed to one or more corporations,
a. Right to vote of Secured Creditors, Administrators, societies or organizations engaged in activities in the
Joint Owners, and Treasury Shares Philippines substantially similar to those of the
dissolving corporation;
Right to vote of Secured Creditors (Sec. 54) (d) Assets other than those mentioned in the preceding
GR: stockholder-grantor shall have the right to attend and paragraphs, if any, shall be distributed in accordance
vote at meetings of stockholders with the provisions of the articles of incorporation or
XPN: secured creditor may attend and vote at stockholders’ the bylaws, to the extent that the articles of
meeting, provided: incorporation or the bylaws determine the distributive
rights of members; and
a) such right is expressly given in writing (e) In any other case, assets may be distributed to such
b) such right must be recorded in the appropriate persons, societies, organizations or corporations as may
corporate books be specified in a plan of distribution adopted.
Right to vote of executors, administrators, receivers, and other legal Plan of Distribution of Assets (Sec. 94)
representatives (Sec. 54) A plan providing for the distribution of assets may be
Executors, administrators, receivers, and other legal adopted in the following manner:
representatives appointed by the court may attend and vote a. The board of trustees shall, by majority vote, adopt a
in behalf of the stockholders or members without need of resolution recommending a plan of distribution and
any written proxy. directing the submission thereof to a vote at a regular
Right to vote of Joint Owners (Sec. 55) or special meeting of members having voting rights;
GR: the consent of all the co-owners shall be necessary in b. Each member entitled to vote shall be given a written
voting of shares of stock notice setting forth the proposed plan of distribution
XPN: one or some of the joint owners may vote, provided: or a summary thereof and the date, time and place of
such meeting; and
a) there is a written proxy c. Such plan of distribution shall be adopted upon
b) such written proxy is signed by all the co-owners approval of at least 2/3 of the members having voting
authorizing one or some of them to vote rights present or represented by proxy at such meeting.
5. Instances when:
Right to vote of Treasury Shares (Sec. 56) a. Even non-voting shares are entitled to vote:
i. Amendment of the articles of incorporation; vii. The Commission may place the corporation under
ii. Adoption and amendment of bylaws; delinquent status should the corporation fail to
iii. Sale, lease, exchange, mortgage, pledge, or other submit the reportorial requirements three (3)
disposition of all or substantially all of the times, consecutively or intermittently, within a
corporate property; period of five (5) years (Sec. 129).
iv. Incurring, creating, or increasing bonded c. A six-month limitation is imposed by the RCC:
indebtedness; i. The amendments (on the Articles of
v. Increase or decrease of authorized capital stock; Incorporation) shall take effect upon their
vi. Merger or consolidation of the corporation with approval by the Commission or from the date of
another corporation or other corporations; filing with the said Commission if not acted upon
vii. Investment of corporate funds in another within six (6) months from the date of filing for a
corporation or business in accordance with this cause not attributable to the corporation (Sec. 15).
Code; and ii. Any increase or decrease in the capital stock or the
viii. Dissolution of the corporation. incurring, creating or increasing of any bonded
b. A five-year limitation is imposed by the RCC: indebtedness shall require prior approval of the
i. Where the exclusive right to vote and be voted for Commission, and where appropriate, of the
in the election of directors is granted, it must be Philippine Competition Commission. The
for a limited period not to exceed five (5) years application with the Commission shall be made
from the date of incorporation (Sec. 7). within six (6) months from the date of approval of
ii. If a corporation does not formally organize and the board of directors and stockholders, which
commence its business within five (5) years from period may be extended for justifiable reasons
the date of its incorporation, its certificate of (Sec. 37).
incorporation shall be deemed revoked as of the iii. A subscription of shares in a corporation still to be
day following the end of the five (5)-year period. formed shall be irrevocable for a period of at least
However, if a corporation has commenced its six (6) months from the date of subscription,
business but subsequently becomes inoperative for unless all of the other subscribers consent to the
a period of at least five (5) consecutive years, the revocation, or the corporation fails to incorporate
Commission may, after due notice and hearing, within the same period or within a longer period
place the corporation under delinquent status (Sec. stipulated in the contract of subscription. No pre-
21). incorporation subscription may be revoked after
iii. No management contract shall be entered into for the articles of incorporation is submitted to the
a period longer than five (5) years for any one (1) Commission (Sec. 60).
term (Sec. 43). iv. No action to recover delinquent stock sold can be
iv. No proxy shall be valid and effective for a period sustained upon the ground of irregularity or defect
longer than five (5) years at any one time (Sec. 57). in the notice of sale, or in the sale itself of the
v. One or more stockholders of a stock corporation delinquent stock, unless the party seeking to
may create a voting trust for the purpose of maintain such action first pays or tenders to the
conferring upon a trustee or trustees the right to party holding the stock the sum for which the
vote and other rights pertaining to the shares for a same was sold, with interest from the date of sale
period not exceeding five (5) years at any time: at the legal rate. No such action shall be
Provided, That in the case of a voting trust maintained unless a complaint is filed within six (6)
specifically required as a condition in a loan months from the date of sale (Sec. 68).
agreement, said voting trust may be for a period v. Within six (6) months after each fiscal year of the
exceeding five (5) years but shall automatically licensee, the Commission shall require the licensee
expire upon full payment of the loan (Sec. 58). to deposit additional securities or financial
vi. Trustees elected to fill vacancies caused by instruments equivalent in actual market value to
expiration of term shall hold office for five (5) two percent (2%) of the amount by which the
years (Sec. 106). licensee’s gross income for that fiscal year exceeds
Ten million pesos (P10,000,000.00) (Sec. 143).
d. Directors or trustees are liable jointly and severally for e. When name is not distinguishable even if it contains
all damages suffered by the stockholder or members or one or more of the following:
other persons:
i. Directors or trustees who willfully and knowingly i. The word “corporation”, “company”,
vote for or assent to patently unlawful acts of the “incorporated”, “limited”, “limited liability”, or an
corporation or who are guilty of gross negligence abbreviation of one of such words; and
or bad faith in directing the affairs of the ii. Punctuations, articles, conjunctions, contractions,
corporation or acquire any personal or pecuniary prepositions, abbreviations, different tenses,
interest in conflict with their duty as such directors spacing, or number of the same word or phrase.
or trustees shall be liable jointly andseverally for all
damages resulting therefrom suffered by the f. When SEC may summarily order a corporation to cease
corporation, its stockholders or members and and desist from using a particular name and require it
other persons (Sec. 30). to register a new one, upon determination that the
ii. Where the single stockholder cannot prove that corporate name is:
the property of the One Person Corporation is i. not distinguishable from a name already reserved
independent of the stockholder’s personal or registered for the use of another corporation;
property, the stockholder shall be jointly and ii. already protected by law; or
severally liable for the debts and other liabilities of iii. contrary to law, rules and regulations,
the One Person Corporation (Sec. 130). g. When a person is disqualified from being a
iii. If the corporation fails to comply with the director, trustee or officer:
Commission’s order, the Commission may hold Under Section 26 of the Revised
the corporation and its responsible directors or Corporation Code, a person shall be disqualified
officers in contempt and/or hold them from being a director, trustee or officer of any
administratively, civilly and/or criminally liable corporation if, within five years prior to the election
under this Code and other applicable laws and/or or appointment as such, the person was:
revoke the registration of the corporation (Sec. a. Convicted by final judgment:
17). 1. Of an offense punishable by
iv. Liability of directors for watered stocks (Sec. 64) - imprisonment for a period exceeding six
- A director or officer of a corporation who: (a) years;
consents to the issuance of stocks for a 2. For violating this Code; and
consideration less than its par or issued value; (b) 3. For violating Republic Act No.
consents to the issuance of stocks for a 8799, otherwise known as “The Securities
consideration other than cash, valued in excess of Regulation Code”;
its fair value; or (c) having knowledge of the b. Found administratively liable for any
insufficient consideration, does not file a written offense involving fraudulent acts; and
objection with the corporate secretary, shall be c. By a foreign court or equivalent foreign
liable to the corporation or its creditors, solidarily regulatory authority for acts, violations or
with the stockholder concerned for the difference misconduct similar to those enumerated in
between the value received at the time of issuance paragraphs a and b above.
of the stock and the par or issued value of the
same. h. A Corporation can acquire its own shares:
v. All persons who assume to act as a corporation Under Section 40 of the Revised Corporation Code,
knowing it to be without authority to do so shall Provided, That the corporation has unrestricted retained
be liable as general partners for all debts, liabilities earnings in its books to cover the shares to be purchased or
and damages incurred or arising as a result thereof acquired, a stock corporation shall have the power to
(Sec. 20). (not 100% sure if joint and several yung purchase or acquire its own shares for a legitimate corporate
liability ng general partners pero ang pagkakaalam purpose or purposes, including the following cases:
ko, oo hehe pls recheck).

a. To eliminate fractional shares arising out of stock k. When Appraisal right may be exercised:
dividends;
b. To collect or compromise an indebtedness to the Under Section 80 of the Revised Corporation Code, any
corporation, arising out of unpaid subscription, in a stockholder of a corporation shall have the right to dissent
delinquency sale, and to purchase delinquent shares and demand payment of the fair value of the shares in the
sold during said sale; and following instances:
c. To pay dissenting or withdrawing stockholders
entitled to payment for their shares under the (a) In case an amendment to the articles of incorporation
provisions of this Code. has the effect of changing or restricting the rights of any
stockholder or class of shares, or of authorizing preferences
i. A Corporation may be allowed to retain surplus in any respect superior to those of outstanding shares of any
profits in excess of 100% of its paid-up capital: class, or of extending or shortening the term of corporate
Under Section 42, paragraph 2 of the Revised Corporation existence;
Code, stock corporations are prohibited from restraining
surplus profits in excess of one hundred percent (100%} of (b) In case of sale, lease, exchange, transfer, mortgage,
their paid-in capital stock, except: pledge or other disposition of all or substantially all of the
corporate property and assets as provided in this Code;
a. when justified by the definite corporate expansion
projects or programs approved by the board of (c) In case of merger or consolidation; and
directors; or
b. when the corporation is prohibited under any loan (d) In case of investment of corporate funds for any
agreement with financial institutions or creditors, purpose other than the primary purpose of the corporation.
whether local or foreign, from declaring dividends
without their consent, and such consent has not yet l. When right to payment ceases (after exercise of
been secured; or Appraisal Right):
c. when it can be clearly shown that such retention is
necessary under special circumstances obtaining in the Under Section 83 of the Revised Corporation Code, no
corporation, such as when there is need for special demand for payment under this Title may be withdrawn
reserve for probable contingencies. unless the corporation consents thereto. If, however, such
demand for payment is withdrawn with the consent of the
j. Directors and officers are liable for issuance for corporation, or if the proposed corporate action is
watered stocks: abandoned or rescinded by the corporation or disapproved
by the Commission where such approval is necessary, or if
Under Section 64 the Revised Corporation Code, a director the Commission where such stockholder is not entitled to
or officer of a corporation who: the appraisal right, then the right of the stockholder to be
paid the fair value of the shares shall cease, the status as the
(a) consents to the issuance of stocks for a consideration stockholder shall be restored, and all dividend distributions
less than its par or issued value; which would have accrued on the shares shall be paid to the
stockholder.
(b) consents to the issuance of stocks for a consideration
other than cash, valued in excess of its fair value; or (other way of answering):
(c) having knowledge of the insufficient consideration, does Under Section 83 of the Revised Corporation Code, the
not file written objection with the corporate secretary, shall right of the stockholder to be paid the fair value of the
be liable to the corporation or its creditors, solidarily with shares shall cease, the status as the stockholder shall be
the stockholder concerned for the difference between the restored, and all dividend distributions which would have
value received at the time of issuance of the stock and the accrued on the shares shall be paid to the stockholder under
par or issued value of the same. any of the following instances:

a. If the demand for payment is withdrawn with the bylaws or of any articles of merger or consolidation within
consent of the corporation; or the time prescribed by this Title;
b. If the proposed corporate action is abandoned or
rescinded by the corporation or disapproved by the (e) A misrepresentation of any material mater in any
Commission where such approval is necessary; or application, report, affidavit or other document submitted
c. If the Commission determines that such stockholder by such corporation pursuant to this Title;
is not entitled to the appraisal right.
(f) Failure to pay any and all taxes, imposts, assessments or
penalties, if any, lawfully due to the Philippine Government
6. Grounds for: or any of its agencies or political subdivisions;
a. Disapproval of Articles of Incorporation or (g) Transacting business in the Philippines outside of the
Amendments thereto (Sec. 16) purpose or purposes for which such corporation is
The following are ground for such disapproval: authorized under its license;
(a) The articles of incorporation or any amendment thereto (h) Transacting business in the Philippines as agent of or
is not substantially in accordance with the form prescribed acting on behalf of any foreign corporation or entity not
herein; duly licensed to do business in the Philippine; or
(b) The purpose or purposes of the corporation are patently (i) Any other ground as would render it unfit to transact
unconstitutional, illegal, immoral or contrary to government business in the Philippines.
rules and regulations;
(c) The certification concerning the amount of capital stock 7. Contents of:
subscribed and/or paid is false; and a. Notice of meeting ( Sec. 50)
Notice of meetings shall be sent through the means of
(d) The required percentage of Filipino ownership of the communication provided in the bylaws, which notice shall
capital stock under existing laws or the Constitution has not state the time, place and purpose of the meetings.
been complied with.
Each notice of meeting shall further be accompanied by the
b. Revocation of license of Foreign Corp. (Sec. 151) following:
Without prejudice to other grounds provided under special (a) The agenda for the meeting;
laws, the license of a foreign corporation to transact
business in the Philippines may be revoked or suspended by (b) A proxy which shall be submitted to the corporate
the Commission upon any of the following grounds: secretary within a reasonable time prior to the meeting;
(a) Failure to file its annual report or pay any fees as required (c) When attendance, participation, and voting are allowed
by this Code; by remote communication or in absentia, the requirements
and procedures to be followed when a stockholder or
(b) Failure to appoint and maintain a resident agent in the member elects either option; and
Philippines as required by this Title;
(d) When the meeting is for the election of directors or
(c) Failure, after change of its resident agent or address, to trustees, the requirements and procedure for nomination
submit to the Commission a statement of such change as and election
required by this Title;
b. Stock and transfer book (Sec. 73)
(d) Failure to submit to the Commission an authenticated
copy of any amendment to its articles of incorporation or
Every corporation shall keep and carefully preserve at its
principal office all information relating to the corporation (3) The matters discussed and resolutions reached;
including, but not limited to:
(4) A record of the voting results for each agenda item;
(a) The articles of incorporation and bylaws of the
corporation and all their amendments; (5) A list of the director or trustees, officers and
stockholders or members who attended the meeting; and
(b) The current ownership structure and voting rights of the
corporation, including lists of stockholders or members (6) Such other items that the Commission may require in
group structures, intra-group relations, ownership data, and the interest of good corporate governance and protection
beneficial ownership. of minority stockholders;
(c) The names and addresses of all the members of the d. Plan of Merger or Consolidation (Sec. 75)
board of directors or trustees and the executive officers; The board of directors or trustees of each corporation, party
to the merger or consolidation, shall approved a plan of
(d) A record of all business transactions; merger or consolidation, setting forth the following:
(e) A record of the resolutions of the board of directors or (a) The names of the corporations proposing to merge or
trustees and of the stockholders or members; consolidate hereinafter referred to as the constituent
corporations;
(f) Copies of the latest reportorial requirements submitted
to the Commission; and (b) The terms of the merger or consolidation and the mode
of carrying the same into effect;
(g) The minutes of all meetings of stockholders or members,
or of the board of directors or trustees. Such minutes shall (c) A statement of the changes, if any, in the articles of
set forth in detail among others; the time and the place of incorporation of the surviving corporation in case of
the meeting held, how it was authorized, the notice given, merger; and, in case of consolidation, all the statements
the agenda therefor, whether the meeting was regular or required to be set forth in the articles of incorporation for
special, its object if special, those present and absent, and corporations organized under this Code; and
every act done or ordered done at the meeting. Upon the (d) Such other provisions with respect to the proposed
demand of a director trustee, stockholder or member, the merger or consolidation as are deemed necessary or
time when any director, trustee, stockholder or member desirable.
entered or left the meeting must be noted in the minutes;
and on a similar demand, the yeas and nays must be taken e. Articles of Merger or Consolidation (Sec. 77)
on any motion or proposition, and a record thereof carefully
made. The protest of a director, trustee, stock holder or (a) The plan of the merger or the plan of consolidation;
member on any action or proposed action must be recorded
in full upon their demand. (b) As to stock corporations, the number of shares
outstanding, or in the case of nonstock corporations, the
c. Minutes of the meeting (Sec. 49) number of members;
The minutes of the most recent regular meeting which shall
include, among others: (c) As to each corporation, the number of shares or
members voting for or against such plan, respectively;
(1) A description of the voting and the vote tabulation
procedures used in the previous meetings; (d) The carrying amounts and fair values of the assets and
liabilities of the respective companies as of the agreed cut-
(2) A description of the opportunity given to stockholders off date;
or members to ask questions and record of the questions
asked and answers given;
(e) The method to be used in the merger or consolidation those specifically stated in the certificate of authority issued
of accounts of the companies; by the appropriate government agency;
(f) The provisional or pro forma values, as merged or (f) The names and addresses of the present directors and
consolidated, using the accounting method; and officers of the corporation;
(g) Such other information as may be prescribed by the (g) A statement of its authorized capital stock and the
Commission. aggregate number of shares which the corporation has
authority to issue, itemized by class, par value of shares,
f. Articles of Incorporation of a Corporation Sole (Secs. shares without par value, and series, if any;
14 and 118)
(h) A statement of its outstanding capital stock and the
A One Person Corporation shall file articles of aggregate number of shares which the corporation has
incorporation in accordance with the requirements under issued, itemized by class, par value of shares, shares without
Section 14 of this Code. It shall likewise substantially par value, and series, if any;
contain the following:
(i) A statement of the amount actually paid in; and
(a) If the single stockholder is a trust or an estate, the name,
nationality, and residence of the trustee, administrator, (j) Such additional information as may be necessary or
executor, guardian, conservator, custodian, or other person appropriate in order to enable the Commission to determine
exercising fiduciary duties together with the proof of such whether such corporation is entitled to a license to transact
authority to act on behalf of the trust or estate; and business in the Philippines, and determine and assess the
fees payable.
(b) Name, nationality, residence of the nominee and
alternate nominee, and the extent, coverage and limitation
of the authority. 8. PROCEDURE ON/IN:
g. Items that need to be specified in the application for Creating, filing, examining and terminating voting
a license of a Foreign Corporation (Sec. 142) trust agreements (Section 58, RCC)
The application shall be under oath and, unless already
stated in its articles of incorporation, shall specifically set CREATION OF VOTING TRUST AGREEMENTS
forth the following:
(a) The date and term of incorporation; One or more stockholders of a stock corporation may
create a voting trust for the purpose of conferring upon a
(b) the address including the street number, of the principal trustee or trustees the right to vote and other rights
office of the corporation in the country or State of pertaining to the shares for a period not exceeding five (5)
incorporation; years at any time.
(c) The name and address of its resident agent authorized to In case of a voting trust specifically required as a condition
accept summons and process in all legal proceedings and all in a loan agreement, said voting trust may be for a period
notices affecting the corporation, pending the establishment exceeding five (5) years but shall automatically expire
of a local office; upon full payment of the loan.
(d) The place in the Philippines where the corporation Must be in writing and notarized, and shall specify the
intends to operate; terms and conditions thereof.
(e) The specific purpose or purposes which the corporation FILING OF VOTING TRUST AGREEMENTS
intends to pursue in the transaction of its business in the
Philippines: Provided, That said purpose or purposes are

A certified copy of such agreement shall be filed with the
corporation and with the Commission; otherwise, the Transferring shares (Section 62, RCC)
agreement is ineffective and unenforceable.
Shares of stock so issued are personal property and
The certificate or certificates of stock covered by the voting may be transferred by delivery of the certificate or
trust agreement shall be cancelled and new ones shall be certificates indorsed by the owner, his attorney-in- fact,
issued in the name of the trustee or trustees, stating that they or any other person legally authorized to make the
are issued pursuant to said agreement. transfer.
The books of the corporation shall state that the transfer in No transfer, however, shall be valid, except as between the
the name of the trustee or trustees is made pursuant to the parties, until the transfer is recorded in the books of the
voting trust agreement. corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the
EXAMINATION OF VOTING TRUST certificate or certificates, and the number of shares
AGREEMENTS transferred.
The voting trust agreement filed with the corporation shall The Commission may require corporations whose securities
be subject to examination by any stockholder of the are traded in trading markets and which can reasonably
corporation in the same manner as any other corporate demonstrate their capability to do so to issue their securities
book or record. or shares of stocks in uncertificated or scripless form in
accordance with the rules of the Commission.
Provided, That both the trustor and the trustee or trustees
may exercise the right of inspection of all corporate books No shares of stock against which the corporation holds any
and records in accordance with the provisions of this Code unpaid claim shall be transferable in the books of the
corporation.
Any other stockholder may transfer the shares to the same
trustee or trustees upon the terms and conditions stated in Delinquency sale, when it may be questioned and its
the voting trust agreement, and thereupon shall be bound effects (Section 67, RCC)
by all the provisions of said agreement.
PROCEDURE FOR DELINQUENCY SALE
No voting trust agreement shall be entered into for
purposes of circumventing the laws against anti-competitive RESOLUTION
agreements, abuse of dominant position, anti-competitive The board may issue resolution ordering the sale of the
mergers and acquisitions, violation of nationality and capital delinquent stock and which shall specifically state:
requirements, or for the perpetuation of fraud.
a. The amount due on each subscription;
TERMINATION OF VOTING TRUST b. All accrued interest; and
AGREEMENTS c. The date, time and place of the Sale
Unless expressly renewed, all rights granted in a voting trust Shall not be less than thirty (30) days nor more than sixty
agreement shall automatically expire at the end of the (60) days from the date the stocks become delinquent.
agreed period. The voting trust certificates as well as the
certificates of stock in the name of the trustee or trustees NOTICE TO DELINQUENT STOCKHOLDERS
shall thereby be deemed cancelled and new certificates of Notice of the sale, with a copy of the resolution, shall be
stock shall be reissued in the name of the trustors. sent to every delinquent stockholder either personally, by
registered mail, or through other means provided in the
The voting trustee or trustees may vote by proxy or in any bylaws.
manner authorized under the bylaws unless the agreement
provides otherwise. PUBLICATION OF NOTICE
The notice shall be published once a week for two (2) EFFECTS OF DELINQUENCY SALE (Section 70,
consecutive weeks in a newspaper of general circulation in RCC)
the province or city where the principal office of the
corporation is located. No delinquent stock shall be voted for, be entitled to vote,
or be represented at any stockholder’s meeting, nor shall the
SALE OF THE SHARES holder thereof be entitled to any of the rights of a
The delinquent stock shall be sold at a public auction to stockholder except the right to dividends in accordance with
such bidder who shall offer to pay the full amount of the the provisions of this Code, until and unless payment is
balance on the subscription together with accrued made by the holder of such delinquent stock for the amount
interest, costs of advertisement and expenses of sale, for the due on the subscription with accrued interest, and the costs
smallest number of shares or fraction of a share. and expenses of advertisement, if any.
NOTE: The sale may be cancelled by: Issuing new certificates of stocks in lieu of those which
have been lost, stolen or destroyed (Section 72, RCC)
a. Payment on or before date of the sale
b. Order of the board to that effect PROCEDURE FOR ISSUANCE OF NEW
CERTIFICATE OF STOCK
TRANSFER OF STOCKS IN CORPORATE BOOKS
The stock so purchased shall be transferred to such AFFIDAVIT
purchaser in the books of the corporation and a certificate The registered owner of a certificate of stock in a
for such stock shall be issued in the purchaser’s favor. corporation or such person’s legal representative shall file
with the corporation an affidavit in triplicate setting
CREDIT REMAINDER forth, if possible the:
Remaining shares, if any, shall be credited in favor of the
delinquent stockholder who shall likewise be entitled to the a. Circumstances as to how the certificate was lost, stolen
issuance of a certificate of stock covering such shares. or destroyed;
b. Number of shares represented by such certificate;
Procedure if there is no bidder: c. Serial number of the certificate; and
If there is no bidder at the public auction who offers to pay d. Name of the corporation which issued the same.
the full amount of the balance on the subscription together e. Such other information and evidence as may be deemed
with accrued interest, costs of advertisement, and expenses necessary.
of sale, for the smallest number of shares or fraction of a
share, the corporation may, subject to the provisions of this VERIFICATION
Code, bid for the same, and the total amount due shall be The corporation shall verify the affidavit and other
credited as fully paid in the books of the corporation. information and evidence with the books of the
corporation.
WHEN IT MAY BE QUESTIONED (Section 68, RCC)
PUBLICATION
1. The action is filed on the ground of irregularity or The corporation shall publish a notice in a newspaper of
defect in the notice of sale, or in the sale of the general circulation in the place where the corporation has its
delinquent stock; principal office, once a week for three (3) consecutive weeks
2. The party seeking to maintain such action first pays or at the expense of the registered owner of the certificate of
tenders to the party holding the stock the sum for which stock which has been lost, stolen or destroyed.
the same was sold with interest from the date of the sale
at the legal rate; and ONE YEAR WAITING PERIOD
3. The complaint was filed within six (6) months from the The notice shall state the name of the corporation, the name
date of the sale. of the registered owner, the serial number of the certificate,
the number of shares represented by such certificate, and
shall state that after the expiration of one year from the date
of the last publication, if no contest has been presented to although not necessarily, of the stockholders of the original
the corporation regarding the certificate of stock, the right corporations.
to make such contest shall be barred and the corporation
shall cancel the lost, destroyed or stolen certificate of stock The parties to a merger or consolidation are called
in its books. constituent corporations.
In lieu thereof, the corporation shall issue a new certificate In consolidation, all the constituent corporations are
of stock, unless the registered owner files a bond or other dissolved and absorbed by the new consolidated
security as may be required, effective for a period of one corporation.
year, for such amount and in such form and with such
sureties as may be satisfactory to the board of directors, in In merger, all constituent corporations, except the surviving
which case a new certificate may be issued even before the corporation, are dissolved.
expiration of the one year period provided herein.
In both cases, there is no liquidation of the assets of the
CONTEST dissolved corporations, and the surviving or consolidated
If a contest has been presented to the corporation or if an corporation assumes ipso jure the liabilities of the dissolved
action is pending in court regarding the ownership of the corporations, regardless of whether the creditors have
certificate of stock which has been lost, stolen or destroyed, consented or not to such merger or consolidation.
the issuance of the new certificate of stock in lieu thereof
shall be suspended until the court renders a final decision The board of directors or trustees of each corporation, party
regarding the ownership of the certificate of stock which to the merger or consolidation, shall approve a plan of
has been lost, stolen or destroyed. merger or consolidation setting forth the following:
Except in case of fraud, bad faith, or negligence on the (a) The names of the corporations proposing to merge
part of the corporation and its officers, no action may be or consolidate, hereinafter referred to as the constituent
brought against any corporation which shall have issued corporations;
certificate of stock in lieu of those lost, stolen or destroyed
pursuant to the procedure above-described. (b) The terms of the merger or consolidation and the
mode of carrying the same into effect;
REPLACEMENT
If there is no contest within one year period, the corporation (c) A statement of the changes, if any, in the articles of
shall then replace the certificate. incorporation of the surviving corporation in case of
merger; and, in case of consolidation, all the statements
The replacement of share can only be made before the required to be set forth in the articles of incorporation
expiration of the one year period, if a bond is posted. for corporations organized under this Code; and
Submitting the plan of merger and consolidation for (d) Such other provisions with respect to the proposed
approval merger or consolidation as are deemed necessary or
desirable.
MERGER – is a union whereby one or more existing
corporations are absorbed by another corporation which J.) INVOLUNTARY DISSOLUTION (ALL KINDS)
survives and continues the combined business.
1. Dissolved by the SEC motu proprio or upon filing of a
CONSOLIDATION - is the union of two or more verified complaint by any interested party.
existing corporations to form a new corporation called the
consolidated corporation. It is a combination by agreement Grounds Under Section 138:
between two or more corporations by which their rights, a. Non-use of corporate charter as provided under
franchises, privileges and properties are united and become Section 21 of this Code;
those of a single, new corporation, composed generally,
b. Continuous inoperation of a corporation as
provided under Section 21 of this Code; (c) Non-filing of by-laws
c. Upon receipt of a lawful court order dissolving the
corporation; K.) SERVICE OF PROCESS TO A FOREIGN
d. Upon finding by final judgment that the CORPORATION (SEC. 145)
corporation procured its incorporation through
fraud; Foreign corporation shall file with the SEC a written power
e. Upon finding by final judgment that the of attorney designating a person (resident agent) who must
corporation: be a resident of the Philippines, on whom summons and
i. Was created for the purpose of other legal processes may be served in all actions or other
committing, concealing or aiding the legal proceedings against such corporation,
commission of securities violations,
smuggling, tax evasion, money laundering, Foreign corporation consents that service upon such
or graft and corrupt practices; resident agent shall be admitted and held as valid as if served
ii. Committed or aided in the commission of upon the duly authorized officers of the foreign corporation
securities violations, smuggling, tax at its home office.
evasion, money laundering, or graft and
corrupt practices, and its stockholders Foreign corporation shall execute and file with the SEC an
knew; and agreement or stipulation, executed by the proper authorities
iii. Repeatedly and knowingly tolerated the of said corporation, in form and substance as follows:
commission of graft and corrupt practices
or other fraudulent or illegal acts by its “The (name of foreign corporation) hereby stipulates and agrees, in
directors, trustees, officers, or employees. consideration of being granted a license to transact business in the
iv. If a corporation is dissolved pursuant to Philippines, that if the corporation shall cease to transact business in
subpar (e), the assets, after payment of its the Philippines, or shall be without any resident agent in the
liabilities, shall, upon petition of the SEC, Philippines on whom any summons or other legal processes may be
be forfeited in favor of the national served, then service of any summons or other legal process may be made
government. The forfeiture shall be upon the Commission in any action or proceeding arising out of any
without prejudice to the rights of innocent business or transaction which occurred in the Philippines and such
stockholders and employees for services service shall have the same force and effect as if made upon the duly
rendered and to the application of other authorized officers of the corporation at its home office.”
penalty or sanctions under the RCCP or
other laws. Whenever such service of summons or other process is
made upon the SEC, the SEC shall, within 10 days
2. Legislative dissolution (UST Golden Notes) thereafter, transmit by mail a copy of such summons or
A corporation created by special law can be dissolved by an other legal process to the corporation at its home or
enactment of special law or expiration of its charter. principal office.
3. Revocation of certificate of incorporation (Aquino) The sending of such copy by the Commission shall be a
necessary part of and shall complete such service.
(a) Refusal or obstruction, without justifiable cause, of
the SEC’s exercise of visitorial powers (Sec. 178, RCCP) All expenses incurred by the SEC for such service shall be
paid in advance by the party at whose instance the service is
(b) Failure to comply with the SEC’s order to made.
immediately cease and desist from using corporate name
and require the corporation to register a new one or to It shall be the duty of the resident agent to immediately
remove all the visible signages, marks, advertisements, notify the Commission in writing of any change in the
labels, prints, and other effects bearing such corporate name resident agent’s address.
(Sec.17, RCCP)
L.) HOW RELIGIOUS SOCIETIES MAY f. The names, nationalities, and residence addresses
INCORPORATE FOR THE ADMINISTRATION of the trustees, not less than five (5) nor more than
OF ITS TEMPORALITIES OR FOR THE fifteen (15), elected by the religious society or
MANAGEMENT OF ITS AFFAIRS, PROPERTIES, religious order, or the diocese, synod, or district
AND ESTATE (SEC. 114) organization to serve for the first year or such other
period as may be prescribed by the laws of the
GR: Any religious society, religious order, diocese, synod, religious society or religious order, or of the
or district organization of any religious denomination, sect diocese, synod, or district organization.
or church, may incorporate for the administration of its
temporalities or for the management of its affairs, M.) CORPORATE LIQUIDATIONS, INCLUDING
properties, and estate THE PROCESS, EXTENT, AND RESTRICTIONS
(SEC. 139)
XPN: Forbidden by competent authority, the Constitution,
pertinent rules, regulations, or discipline of the religious LIQUIDATION - Process by which all the assets of the
denomination, sect or church of which it is a part, corporation are converted into liquid assets (cash) in order
to facilitate the payment of obligations to creditors and the
HOW RELIGIOUS SOCIETIES MAY remaining balance if any is to be distributed to the
INCORPORATE stockholders
Written consent and/or by an affirmative vote of at least METHODS OF LIQUIDATION

two-thirds (2/3) of its membership at a meeting called for 1. By the corporation itself or its board of directors or
the purpose trustees
Filing with the Commission, articles of incorporation Every corporation whose charter expires pursuant to its
verified by the affidavit of the presiding elder, secretary, or articles of incorporation, is annulled by forfeiture, or whose
clerk or other member of such religious society or religious corporate existence is terminated in any other manner:
order, or diocese, synod, or district organization of the a. shall nevertheless remain as a body corporate for
religious denomination, sect or church, setting forth the three (3) years after the effective date of
following: dissolution,
b. for the purpose of
a. That the religious society or religious order, or i. prosecuting and defending suits by or against it
diocese, synod, or district organization is a religious and
organization of a religious denomination, sect or ii. enabling it to settle and close its affairs,
church; iii. dispose of and convey its property, and
b. That at least 2/3 of its membership has given iv. distribute its assets,
written consent or has voted to incorporate, at a c. but NOT for the purpose of continuing the
duly convened meeting of the body; business for which it was established.
c. That the incorporation of the religious society or
religious order, or diocese, synod, or district 2. By conveyance to a trustee within a three-year period
organization is not forbidden by competent a. At any time during said three (3) years, the
authority or by the Constitution, rules, regulations corporation is authorized and empowered to
or discipline of the religious denomination, sect or convey all of its property to trustees for the benefit
church of which it forms part; of stockholders, members, creditors and other
d. That the religious society or religious order, or persons in interest.
diocese, synod, or district organization desires to b. After any such conveyance by the corporation of
incorporate for the administration of its affairs, its property in trust for the benefit of its
properties and estate; stockholders, members, creditors and others in
e. The place within the Philippines where the interest, all interest which the corporation had in
principal office of the corporation is to be the property terminates, the legal interest vests in
established and located; and the trustees, and the beneficial interest in the
stockholders, members, creditors or other persons- the proposed corporate action is implemented, the
in-interest. corporation shall pay the stockholder, upon surrender
of the certificate or certificates of stock representing the
3. By a management committee or rehabilitation stockholder’s shares, the fair value thereof as of the day
receiver appointed by court before the vote was taken, excluding any appreciation or
depreciation in anticipation of such corporate action.
LIQUIDATION AFTER 3 YEARS (Aquino)
If, within sixty (60) days from the approval of the corporate
a.) If full liquidation can only be effected after the action by the stockholders, the withdrawing stockholder
three-year period and there is no trustee, the directors and the corporation cannot agree on the fair value of the
may be permitted to complete the liquidation by shares, it shall be determined and appraised by three (3)
continuing as trustees by legal implication disinterested persons, one of whom shall be named by the
stockholder, another by the corporation, and the third by
b.) Cases that were filed while the corporation was the two (2) thus chosen. The findings of the majority of the
still in existence and remain pending when the three- appraisers shall be final, and their award shall be paid by the
year liquidation period expired may be continued by the corporation within thirty (30) days after such award is made
trustees or directors until rendition of final judgment,
even if such judgment is rendered beyond the three-year Provided, That no payment shall be made to any dissenting
period. stockholder unless the corporation has unrestricted
retained earnings in its books to cover such payment:
RESTRICTIONS UNDER SEC. 139 Provided, further, That upon payment by the corporation
of the agreed or awarded price, the stockholder shall
Banks are covered by the applicable provisions of RA No. forthwith transfer the shares to the corporation.
7653 (New Central Bank Act as amended) and RA No. 3591
(Philippine Deposit Insurance Corporation Charter, as F. ELECTING TRUSTEE AND OFFICERS OF A
amended) NON-STOCK CORPORATION, AS WELL AS
CALLING THE MEETING OF THE MEMBERS
Upon the winding up of corporate affairs, any asset (SEC. 91)
distributable to any creditor or stockholder or member who
is unknown or cannot be found shall be escheated in favor The number of trustees shall be fixed in the articles of
of the national government except as otherwise provided incorporation or bylaws which may or may not be more
for in Sections 93 and 94 of this Code (Distribution Of than fifteen (15). They shall hold office for not more than
Assets In Nonstock Corporations) three (3) years until their successors are elected and
qualified. Trustees elected to fill vacancies occurring before
No corporation shall distribute any of its assets or property the expiration of a particular term shall hold office only for
except upon lawful dissolution and after payment of all its the unexpired period.
debts and liabilities except by decrease of capital stock and
as otherwise allowed by this Code Except with respect to independent trustees of nonstock
corporations vested with public interest, only a member of
E. EXERCISING APPRAISAL RIGHT (SEC. 81) the corporation shall be elected as trustee.
The dissenting stockholder who votes against a proposed Unless otherwise provided in the articles of incorporation
corporate action may exercise the right of appraisal by or the bylaws, the members may directly elect officers of
making a written demand on the corporation for the a nonstock corporation.
payment of the fair value of shares held within thirty (30)
days from the date on which the vote was taken CALLING OF MEETING (SEC.92)
The corporation shall, at all times, keep a list of its members
Provided, That failure to make the demand within such and their proxies in the form the Commission may require.
period shall be deemed a waiver of the appraisal right. If
The list shall be updated to reflect the members and proxies stockholder, shall have the power to arbitrate the
of record twenty (20) days prior to any scheduled election. dispute.
- The bylaws may provide that the members of a In the exercise of such power, the Commission shall have
nonstock corporation may hold their regular or special authority to make appropriate orders, such as:
meetings at any place even outside the place where
the principal office of the corporation is located: (a) cancelling or altering any provision contained in the
Provided, That proper notice is sent to all members articles of incorporation, bylaws, or any stockholder’s
indicating the date, time and place of the meeting: agreement;
Provided, further, That the place of meeting shall be
within Philippine territory. (b) cancelling, altering or enjoining a resolution or act of the
corporation or its board of directors, stockholders, or
G. SUBMITTING FOR APPROVAL THE PLAN OF officers;
DISTRIBUTION (SEC. 94)
(c) directing or prohibiting any act of the corporation or its
A plan providing for the distribution of assets, consistent board of directors, stockholders, officers, or other persons
with the provisions of this Title, may be adopted by a non- party to the action;
stock corporation in the process of dissolution in the
following manner: (d) requiring the purchase at their fair value of shares
of any stockholder, either by the corporation regardless
- The board of trustees shall, by majority vote, adopt a of the availability of unrestricted retained earnings in its
resolution recommending a plan of distribution and books, or by the other stockholders;
directing the submission thereof to a vote at a
regular or special meeting of members having (e) appointing a provisional director;
voting rights;
- Each member entitled to vote shall be given a written (f) dissolving the corporation; or
notice setting forth the proposed plan of distribution
or a summary thereof and the date, time and place of (g) granting such other relief as the circumstances may
such meeting within the time and in the manner warrant.
provided in this Code for the giving of notice of
meetings; and A provisional director:
- Such plan of distribution shall be adopted upon - shall be an impartial person who is neither a stockholder
approval of at least two-thirds (2/3) of the members nor a creditor of the corporation or any of its
having voting rights present or represented by subsidiaries or affiliates, and whose further
proxy at such meeting. qualifications, if any, may be determined by the
Commission.
H. CASE OF DEADLOCK IN CLOSE - is not a receiver of the corporation and does not have
CORPORATION (SEC. 103) the title and powers of a custodian or receiver.
- shall have all the rights and powers of a duly elected
Notwithstanding any contrary provision in the close director, including the right to be notified of and to vote
corporation’s articles of incorporation, bylaws, or at meetings of directors until removed by order of the
stockholders’ agreement, if the directors or stockholders are Commission or by all the stockholders.
so divided on the management of the corporation’s business - The compensation of the provisional director shall be
and affairs that the votes required for a corporate action determined by agreement between such director and
cannot be obtained, with the consequence that the business the corporation, subject to approval of the
and affairs of the corporation can no longer be conducted Commission, which may fix the compensation
to the advantage of the stockholders generally, the absent an agreement or in the event of disagreement
Commission, upon written petition by any between the provisional director and the corporation.
I. VOLUNTARY DISSOLUTION (ALL KINDS)
Within fifteen (15) days from receipt of the verified
a. By the vote of the BOD/ BOT and the stockholders/ request for dissolution, and in the absence of any
members where no creditors are affected (SEC. 134) withdrawal within said period, the Commission shall
If dissolution of a corporation does not prejudice the rights approve the request and issue the certificate of
of any creditor having a claim against it, the dissolution may dissolution. The dissolution shall take effect only upon
be effected by majority vote of the board of directors or the issuance by the Commission of a certificate of
trustees, and by a resolution adopted by the affirmative dissolution.
vote of the stockholders owning at least majority
of the outstanding capital stock or majority of the No application for dissolution of banks, banking and quasi-
members of a meeting to be held upon the call of the banking institutions, preneed, insurance and trust
directors or trustees. companies, NSSLAs, pawnshops, and other financial
intermediaries shall be approved by the Commission
- NOTICE AND PUBLICATION: At least twenty (20) unless accompanied by a favorable recommendation of
days prior to the meeting, notice shall be given to each the appropriate government agency.
shareholder or member of record personally, by
registered mail, or by any means authorized under b. By the judgment of the SEC after hearing of petition
its bylaws whether or not entitled to vote at the meeting, for voluntary dissolution, where creditors are affected
in the manner provided in Section 50 of this Code and (SEC. 135)
shall state that the purpose of the meeting is to Where the dissolution of a corporation may prejudice the
vote on the dissolution of the corporation. Notice rights of any creditor, a verified petition for dissolution
of the time, place, and object of the meeting shall be shall be filed with the Commission. The petition shall be
published once prior to the date of the meeting in a signed by a majority of the corporation’s board of
newspaper published in the place where the directors or trustees, verified by its president or
principal office of said corporation is located, or if secretary or one of its directors or trustees, and shall set
no newspaper is published in such place, in a forth all claims and demands against it, and that its
newspaper of general circulation in the Philippines. dissolution was resolved upon by the affirmative vote of the
- A verified request for dissolution shall be filed with the stockholders representing at least two-thirds (2/3) of the
Commission stating: outstanding capital stock or at least two-thirds (2/3) of the
o the reason for the dissolution; members at a meeting of its stockholders or members called
o the form, manner, and time when the notices for that purpose.
were given;
o names of the stockholders and directors or The petition shall likewise state:
members and trustees who approved the (a) the reason for the dissolution;
dissolution; (b) the form, manner, and time when the notices were
o the date, place, and time of the meeting in given; and
which the vote was made; and (c) the date, place, and time of the meeting in which the
o details of publication. vote was made.
The corporation shall submit the following to the The corporation shall submit to the Commission the
Commission: following:
- a copy of the resolution authorizing the (1) a copy of the resolution authorizing the dissolution,
dissolution, certified by a majority of the board certified by a majority of the board of directors or trustees
of directors or trustees and countersigned by and countersigned by the secretary of the corporation; and
the secretary of the corporation; (2) a list of all its creditors.
- proof of publication; and
- favorable recommendation from the appropriate PUBLICATION: If the petition is sufficient in form
regulatory agency, when necessary. and substance, the Commission shall, by an order
reciting the purpose of the petition, fix a deadline for filing
objections to the petition which date shall not be less than (b) The reason for dissolution and winding up;
thirty (30) days nor more than sixty (60) days after the entry (c) The authorization for the dissolution of the corporation
of the order. Before such date, a copy of the order shall by the particular religious denomination, sect or church; and
be published at least once a week for three (3) (d) The names and addresses of the persons who are to
consecutive weeks in a newspaper of general supervise the winding up of the affairs of the corporation.
circulation published in the municipality or city where
the principal office of the corporation is situated, or if there Upon approval of such declaration of dissolution by the
be no such newspaper, then in a newspaper of general Commission, the corporation shall cease to carry on its
circulation in the Philippines, and a similar copy shall be operations except for the purpose of winding up its affairs.
posted for three (3) consecutive weeks in three (3)
public places in such municipality or city. e. Merger or consolidation (Golden Notes)
Upon five (5) days’ notice, given after the date on which the I. DEFINITION
right to file objections as fixed in the order has expired, the 1. Corporation
Commission shall proceed to hear the petition and try any Under Section 2 of RA 11232, a corporation is an artificial
issue raised in the objections filed; and if no such objection being created by operation of law, having the right of
is sufficient, and the material allegations of the petition are succession and the powers, attributes, and properties
true, it shall render judgment dissolving the corporation and expressly authorized by law or incidental to its existence.
directing such disposition of its assets as justice requires,
and may appoint a receiver to collect such assets and pay 2. Stock Corporation
the debts of the corporation. Under Section 3 of RA 11232, stock corporations are
those which have capital stock divided into shares and are
The dissolution shall take effect only upon the issuance by authorized to distribute to the holders of such shares,
the Commission of a certificate of dissolution. dividends, or allotments of the surplus profits on the basis
of the shares held. All other corporations are nonstock
c. By amending the AOI to shorten the corporate term corporations.
(SEC. 136)
3. Close Corporation
A copy of the amended articles of incorporation shall be Under Section 95 of RA 11232, a close corporation is one
submitted to the Commission in accordance with this Code. whose articles of incorporation provides that: (a) all the
Upon the expiration of the shortened term, as stated in corporation’s issued stock of all classes, exclusive of
the approved amended articles of incorporation, the treasury shares, shall be held of record by not more than a
corporation shall be deemed dissolved without any further specified number of persons, not exceeding twenty (20); (b)
proceedings, subject to the provisions of this Code on all the issued stock of all classes shall be subject to one or
liquidation. more specified restrictions on transfer permitted by this
Title; and (c) the corporation shall not list in any stock
In the case of expiration of corporate term, dissolution shall exchange or make any public offering of its stocks of any
automatically take effect on the day following the last day class. Notwithstanding the foregoing, a corporation shall
of the corporate term stated in the articles of not be deemed a close corporation when at least two-thirds
incorporation, without the need for the issuance by the (2/3) of its voting stock or voting rights is owned or
Commission of a certificate of dissolution controlled by another corporation which is not a close
corporation within the meaning of this Code.
d. In case of a corporation sole, by submitting to the
SEC a verified declaration of the dissolution for 4. Foreign Corporation
approval (SEC. 113) Under Section 140 of RA 11232, for purposes of the said
A corporation sole may be dissolved and its affairs settled Code, a foreign corporation is one formed, organized or
voluntarily by submitting to the Commission a verified existing under laws other than those of the Philippines’ and
declaration of dissolution, setting forth: whose laws allow Filipino citizens and corporations to do
(a) The name of the corporation; business in its own country or State. It shall have the right
to transact business in the Philippines after obtaining a Under Section 22 of RA 11232, an independent director
license for that purpose in accordance with this Code and a is a person who, apart from shareholdings and fees received
certificate of authority from the appropriate government from the corporation, is independent of management and
agency. free from any business or other relationship which could, or
could reasonably be perceived to materially interfere with
5. Corporators the exercise of independent judgment in carrying out the
Under Section 5 of RA 11232, corporators are those who responsibilities as a director.
compose a corporation, whether as stockholders or
shareholders in a stock corporation or as members in a Independent directors must be elected by the shareholders
nonstock corporation. present or entitled to vote in absentia during the election of
directors. Independent directors shall be subject to rules and
6. Incorporators regulations governing their qualifications, disqualifications,
Under Section 5 of RA 11232, incorporators are those voting requirements, duration of term and term limit,
stockholders or members mentioned in the articles of maximum number of board memberships and other
incorporation as originally forming and composing the requirements that the Commission will prescribe to
corporation and who are signatories thereof. strengthen their independence and align with international
best practices.
7. Resident Agent
Under Section 144 of RA 11232, a resident agent is either 11. Replacement Director or Trustee
an individual residing in the Philippines or a domestic Under Section 28 of RA 11232, a director or trustee
corporation lawfully transacting business in the Philippines: elected to fill a vacancy shall be referred to as
Provided, That an individual resident agent must be of good replacement director or trustee and shall serve only for
moral character and of sound financial standing: Provided, the unexpired term of the predecessor in office.
further, That in case of a domestic corporation who will act
as a resident agent, it must likewise be of sound financial 12. Substantial Stockholdings
standing and must show proof that it is in good standing as Under Section 32 of RA 11232, stockholdings exceeding
certified by the Commission. twenty percent (20%) of the outstanding capital stock shall
be considered substantial for purposes of interlocking
8. Redeemable Shares directors.
Under Section 8 of RA 11232, redeemable shares are
shares which may be purchased by the corporation from the 13. Subscription Contract
holders of such shares upon the expiration of a fixed period, Under Section 59 of RA 11232, any contract for the
regardless of the existence of unrestricted retained earnings acquisition of unissued stock in an existing corporation or a
in the books of the corporation, and upon such other terms corporation still to be formed shall be deemed a
and conditions stated in the articles of incorporation and the subscription within the meaning of this Title,
certificate of stock representing the shares, subject to rules notwithstanding the fact that the parties refer to it as a
and regulations issued by the Commission. These shares purchase or some other contract.
may be issued by the corporation when expressly provided
in the articles of incorporation. 14. Corporate Liquidation
Under Section 139 of RA 11232, except for banks, which
9. Treasury Shares shall be covered by the applicable provisions of Republic
Under Section 9 of RA 11232, treasury shares are shares Act No. 7653, otherwise known as the “New Central Bank
of stock which have been issued and fully paid for, but Act”, as amended, and Republic Act No. 3591, otherwise
subsequently reacquired by the issuing corporation through known as the Philippine Deposit Insurance Corporation
purchase, redemption, donation, or some other lawful Charter, as amended, every corporation whose charter
means. Such shares may again be disposed of for a expires pursuant to its articles of incorporation, is annulled
reasonable price fixed by the board of directors. by forfeiture, or whose corporate existence is terminated in
any other manner, shall nevertheless remain as a body
10. Independent Director corporate for three (3) years after the effective date of
dissolution, for the purpose of prosecuting and defending (a) That the religious society or religious order, or diocese,
suits by or against it and enabling it to settle and close its synod, or district organization is a religious organization of
affairs, dispose of and convey its property, and distribute its a religious denomination, sect or church;
assets, but not for the purpose of continuing the business (b) That at least two-thirds (2/3) of its membership has
for which it was established. given written consent or has voted to incorporate, at a duly
convened meeting of the body;
At any time during said three (3) years, the corporation is (c) That the incorporation of the religious society or
authorized and empowered to convey all of its property to religious order, or diocese, synod, or district organization is
trustees for the benefit of stockholders, members, creditors not forbidden by competent authority or by the
and other persons in interest. After any such conveyance by Constitution, rules, regulations or discipline of the religious
the corporation of its property in trust for the benefit of its denomination, sect or church of which it forms part;
stockholders, members, creditors and others in interest, all (d) That the religious society or religious order, or diocese,
interest which the corporation had in the property synod, or district organization desires to incorporate for the
terminates, the legal interest vests in the trustees, and the administration of its affairs, properties and estate;
beneficial interest in the stockholders, members, creditors (e) The place within the Philippines where the principal
or other persons-in-interest. office of the corporation is to be established and located;
and
15. Corporation Sole (f) The names, nationalities, and residence addresses of the
Under Section108 of RA 11232, a corporation sole is a trustees, not less than five (5) nor more than fifteen (15),
corporation that may be formed by the chief archbishop, elected by the religious society or religious order, or the
bishop, priest, minister, rabbi, or other presiding elder of diocese, synod, or district organization to serve for the first
such religious denomination, sect, or church for the purpose year or such other period as may be prescribed by the laws
of administering and managing, as trustee, the affairs, of the religious society or religious order, or of the diocese,
property and temporalities of any religious denomination, synod, or district organization.
sect or church.
II. DISCUSS
16. Religious Societies
Under Section 114 of RA 11232, religious societies are EFFECTS/CONSEQUENCES OF:
those societies incorporated by religious society, religious
order, diocese, synod, or district organization of any A. MERGER/CONSOLIDATION:
religious denomination, sect or church, upon written
consent and/or by an affirmative vote at a meeting called SEC. 79. Effects of Merger or Consolidation. – The
for the purpose of at least two-thirds (2/3) of its merger or consolidation shall have the following
membership, for the administration of its temporalities or effects:
for the management of its affairs, properties, and estate, - The constituent corporations shall become a single
unless forbidden by competent authority, the Constitution, corporation which, in case of merger, shall be the
pertinent rules, regulations, or discipline of the religious surviving corporation designated in the plan of merger;
denomination, sect or church of which it is a part, any and, in case of consolidation, shall be the consolidated
religious society, religious order, diocese, synod, or district corporation designated in the plan of consolidation;
organization of any religious denomination, sect or church. - The separate existence of the constituent corporations
shall cease, except that of the surviving or the
To incorporate, it is by way of filing with the Commission consolidated corporation;
articles of incorporation verified by the affidavit of the - The surviving or the consolidated corporation shall
presiding elder, secretary, or clerk or other member of such possess all the rights, privileges, immunities, and
religious society or religious order, or diocese, synod, or powers and shall be subject to all the duties and
district organization of the religious denomination, sect or liabilities of a corporation organized under this Code;
church, setting forth the following: - The surviving or the consolidated corporation shall
possess all the rights, privileges, immunities and
franchises of each constituent corporation; and all real
or personal property, all receivables due on whatever (d) In case of investment of corporate funds for
account, including subscriptions to shares and other any purpose other than the primary purpose of
choses in action, and every other interest of, belonging the corporation
to, or due to each constituent corporation, shall be
deemed transferred to and vested in such surviving or SEC. 82. Effect of Demand and Termination of Right.
consolidated corporation without further act or deed; – From the time of demand for payment of the fair value of
and a stockholder’s shares until either the abandonment of the
- The surviving or consolidated corporation shall be corporate action involved or the purchase of the said shares
responsible for all the liabilities and obligations of each by the corporation, all rights accruing to such shares,
constituent corporation as though such surviving or including voting and dividend rights, shall be suspended in
consolidated corporation had itself incurred such accordance with the provisions of this Code, except the
liabilities or obligations; and any pending claim, action right of such stockholder to receive payment of the fair
or proceeding brought by or against any constituent value thereof: Provided, That if the dissenting stockholder
corporation may be prosecuted by or against the is not paid the value of the said shares within thirty (30) days
surviving or consolidated corporation. The rights of after the award, the voting and dividend rights shall
creditors or liens upon the property of such constituent immediately be restored.
corporations shall not be impaired by the merger or
consolidation. C. ISSUANCE OR TRANSFER OF STOCKS IN
BREACH OF QUALIFYING CONDITIONS IN
CLOSE CORPORATIONS
B. EXERCISING APPRAISAL RIGHT:
EC. 98. Effects of Issuance or Transfer of Stock in
APPRAISAL RIGHT – right of dissenting stockholder to Breach of Qualifying Conditions. –
withdraw from the corporation amd demand payment of
the fair value of his/her shares, which right is exercised after (a) If a stock of a close corporation is issued or
dissenting from or voting against proposed corporate acts transferred to any person who is not eligible to
involving fundamental changes in the corporate structure be a holder thereof under any provision of the
articles of incorporation, and if the certificate
SEC. 80. When the Right of Appraisal May Be Exercised. for such stock conspicuously shows the
– Any stockholder of a corporation shall have the right to qualifications of the persons entitled to be
dissent and demand payment of the fair value of the shares holders of record thereof, such person is
in the following instances: conclusively presumed to have notice of the
fact of the ineligibility to be a stockholder.
(a) In case an amendment to the articles of
incorporation has the effect of changing or (b) If the articles of incorporation of a close
restricting the rights of any stockholder or class corporation states the number of persons, not
of shares, or of authorizing preferences in any exceeding twenty (20), who are entitled to be
respect superior to those of outstanding shares stockholders of record, and if the certificate for
of any class, or of extending or shortening the such stock conspicuously states such number,
term of corporate existence; and the issuance or transfer of stock to any
person would cause the stock to be held by
(b) In case of sale, lease, exchange, transfer, more than such number of persons, the person
mortgage, pledge or other disposition of all or to whom such stock is issued or transferred is
substantially all of the corporate property and conclusively presumed to have notice of this
assets as provided in this Code; fact.
(c) In case of merger or consolidation; and (c) If a stock certificate of a close corporation
conspicuously shows a restriction on transfer
of the corporation’s stock and the transferee
acquires the stock in violation of such contained, except those required by this Title
restriction, the transferee is conclusively to be embodied in said articles of
presumed to have notice of the fact that the incorporation.
stock was acquired in violation of the
restriction. (b) A written agreement signed by two (2) or more
stockholders may provide that in exercising any
(d) Whenever a person to whom stock of a close voting right, the shares held by them shall be
corporation has been issued or transferred has voted as provided or as agreed, or in
or is conclusively presumed under this section accordance with a procedure agreed upon by
to have notice of: (1) the person’s ineligibility them.
to be a stockholder of the corporation; or (2)
that the transfer of stock would cause the stock (c) No provision in a written agreement signed by
of the corporation to be held by more than the the stockholders, relating to any phase of
number of persons permitted under its articles corporate affairs, shall be invalidated between
of incorporation; or (3) that the transfer the parties on the ground that its effect is to
violates a restriction on transfer of stock, and make them partners among themselves.
the corporation may, at its option, refuse to
register the transfer in the name of the (d) A written agreement among some or all of the
transferee. stockholders in a close corporation shall not be
invalidated on the ground that it relates to the
(e) The provisions of subsection (d) shall not be conduct of the business and affairs of the
applicable if the transfer of stock, though corporation as to restrict or interfere with the
contrary to subsections (a), (b) or (c), has been discretion or powers of the board of directors:
consented to by all the stockholders of the Provided, That such agreement shall impose
close corporation, or if the close corporation on the stockholders who are parties thereto the
has amended its articles of incorporation in liabilities for managerial acts imposed on
accordance with this Title. directors by this Code.
(f) The term “transfer”, as used in this section, is (e) Stockholders actively engaged in the
not limited to a transfer for value. (g) The management or operation of the business and
provisions of this section shall not impair any affairs of a close corporation shall be held to
right which the transferee may have to either strict fiduciary duties to each other and among
rescind the transfer or recover the stock under themselves. The stockholders shall be
any express or implied warranty. personally liable for corporate torts unless the
corporation has obtained reasonably adequate
D. EXECUTING A STOCKHOLDER’S liability insurance
AGREEMENT IN CLOSE CORPORATION
SEC. 99. Agreements by Stockholders. – E. DOING BUSINESS WITHOUT LICENSE

(FOREIGN CORPORATION)
(a) Agreements duly signed and executed by and
among all stockholders before the formation SEC. 150. Doing Business Without a License. – No
and organization of a close corporation shall foreign corporation transacting business in the Philippines
survive the incorporation and shall continue to without a license, or its successors or assigns, shall be
be valid and binding between such permitted to maintain or intervene in any action, suit or
stockholders, if such be their intent, to the proceeding in any court or administrative agency of the
extent that such agreements are consistent with Philippines; but such corporation may be sued or proceeded
the articles of incorporation, irrespective of against before Philippine courts or administrative tribunals
where the provisions of such agreements are
on any valid cause of action recognized under Philippine authorize voting through remote communication and/or in
laws. absentia.
F. SPECIAL CLAUSES WHICH MAY BE Section 89. Nontransferability of Membership. - Membership in a

INCORPORATED IN THE ARTICLES OF nonstock corporation and all rights arising therefrom are
INCORPORATION OF CLOSE CORPORATION personal and nontransferable, unless the articles of
incorporation or the bylaws otherwise provide.
SEC. 96. Articles of Incorporation. – The articles of
incorporation of a close corporation may provide for: Section 90. Termination of Membership. - Membership shall be
terminated in the manner and for the cause provided in the
(a) A classification of shares or rights, the qualifications for articles of incorporation or the bylaws. Termination of
owning or holding the same, and restrictions on their membership shall extinguish all rights of a member in the
transfers, subject to the provisions of the following section; corporation or in its property, unless otherwise provided in
the articles of incorporation or the bylaws.
(b) A classification of directors into one (1) or more classes,
each of whom may be voted for and elected solely by a 3. Board of Trustees of an Educational Corporation in
particular class of stock; and terms of powers, number, term of office, election,
termination and the likes.
(c) Greater quorum or voting requirements in meetings of
stockholders or directors than those provided in this Code. Section 105. Incorporation. - Education corporations shall be
governed by special laws and by the general provisions of
The articles of incorporation of a close corporation may this Code.
provide that the business of the corporation shall be
managed by the stockholders of the corporation rather than Section 106. Board of Trustees. - Trustees of educational
by a board of directors. So long as this provision continues institutions organized as nonstock corporations shall not be
in effect, no meeting of stockholders need be called to elect less than five (5) nor more than fifteen (15): Provided, That
directors: Provided, That the stockholders of the the number of trustees shall be in multiples of five (5).
corporation shall be deemed to be directors for the purpose
of applying the provisions of this Code, unless the context Unless otherwise provided in the articles of incorporation
clearly requires otherwise: Provided, further, That the or bylaws, the board of trustees of incorporated schools,
stockholders of the corporation shall be subject to all colleges, or other institutions of learning shall, as soon as
liabilities of directors. The articles of incorporation may organized, so classify themselves that the term of office of
likewise provide that all officers or employees or that one-fifth (1/5) of their number shall expire every year.
specified officers or employees shall be elected or appointed Trustees thereafter elected to fill vacancies, occurring before
by the stockholders, instead of by the board of directors the expiration of a particular term shall hold office only for
the unexpired period. Trustees elected thereafter to fill
2. Concept of membership in a Non-stock Corporation vacancies caused by expiration of term shall hold office for
in terms of voting rights, transferability and five (5) years. A majority of the trustees shall constitute a
termination quorum for the transaction of business. The powers and
authority of trustees shall be defined in the bylaws.
Section 88. Right to Vote. - The right of the members of any
class or classes to vote may be limited, broadened, or denied For institutions organized as stock corporations, the
to the extent specified in the articles of incorporation or the number and term of directors shall be governed by the
bylaws. Unless so limited, broadened, or denied, each provisions on stock corporations.
member, regardless of class, shall be entitled to one (1) vote.
Unless otherwise provided in the articles of incorporation 4. Salient changes introduced by the RCC
or the bylaws, a member may vote by proxy, in accordance
with the provisions of this Code. The bylaws may likewise 1. Perpetual term – There’s forever with the RCC.
Section 115 provides that corporations are now allowed to
exist beyond the 50-year term provided in the old code. This The incorporator of an OPC being a natural person must
will eliminate the possibility of legitimate and productive be of legal age.
business prematurely closing down only because they have
failed to renew their registration. As an incorporator, the “trust” as used by the law does not
refer to a trust entity, but as subject being managed by a
2. One person corporation - Build your corporation trustee.
on your own, literally. The RCC removed the minimum If the single stockholder is a trustee, administrator,
number of incorporators required to organize a corporation executor, guardian, conservator, custodian, or other person
and allowed the formation of one-person corporation, a exercising fiduciary duties, proof of authority to act on
corporation with a single stockholder and without a behalf of the trust or estate must be submitted at the time
minimum authorized capital stock required. of incorporation.
3. No minimum capital stock - Start your business In General

with as little capital or funding possible. Section 12 provides - The suffix “OPC” should be indicated by the one
that Corporations shall not be required to have a minimum person corporation either below or at the end of its
capital stock, except as otherwise specifically provided by corporate name.
special law. - It has been said that limited liability is the corporation’s
most precious characteristic. OPC takes this innovation
4. Participation via remote communication, in by combining limited liability with the complete
absentia - Be involved in the decision-making process dominion of a sole proprietorship.
whenever and wherever you are. The RCC has allowed the - The OPC is not required to have a minimum authorized
use of remote communication such as videoconferencing capital stock except as otherwise provided by special
and teleconferencing during stockholder meetings. law.
Stockholder may also participate and vote in absentia. - The single stockholder shall be the sole director and
president of the OPC.
5. Emergency Board – Be more decisive in times of
emergency. Amendment also includes the provision of an Limitations
emergency board when a vacancy in a corporation’s board - The single stockholder may not be appointed as
of directors prevents the remaining directors from corporate secretary but may assume the role of a
consulting a quorum and consequently from making treasurer. The single stockholder who assumes the
emergency action required to prevent grave, substantial and position of the Treasurer shall post a surety bond to be
irreparable loss or damage. computed based on the authorized capital stock of the
OPC
6. Electronic Filing and Monitoring System – - Banks and quasi-banks, preneed, trust, insurance, public
Register, apply or file online. As part of efforts of doing and publicly-listed companies, and non-chartered
business in the country, the RCC mandated the government-owned and -controlled corporations may
Commission to develop and implement an electronic filing not incorporate as ONe Person Corporations:
and monitoring system. So far, the Commission has Provided, further, That a natural person who is licensed
implemented an online company registration system. to exercise a profession may not organize as a One
Person Corporation for the purpose of exercising such
5. Salient features and requirements in incorporating a profession except as otherwise provided under special
One Person Corporation (Sections 115 to 132) laws.
- A foreign natural person may put an OPC, subject to
What is One Person Corporation? the applicable constitutional and statutory restrictions
A one person corporation (OPC) is a corporation with a on foreign participation in certain investment areas or
single stockholder, who can only be a natural person, trust activities.
or estate. - Only a Domestic Corporation organized as a Stock
Corporation may be converted into a One Person
Corporation. The Ordinary Stock Corporation (OCS)
may only apply for its conversion to OPC after a natural 1. Annual audited financial statements within 120 days
person of legal age, a trust, or an estate (“single from the end of its fiscal year as indicated in its Articles
stockholder”) acquired all outstanding capital stocks of of Incorporation;
an OSC. 2. A report on all explanations or comments by the
Nominees president on the qualification, reservation or adverse
- Within fifteen (15) days from the issuance of its remarks made by the auditor in the financial statements;
certificate of incorporation, the OPC shall appoint a 3. A disclosure of all self-dealings and related party
treasurer, corporate secretary, and other officers, and transactions entered into between the OPC and the
notify the SEC thereof within five (5) days from single stockholder;
appointment, using the Appointment Form as may be 4. Other reports as the SEC may require.
prescribed by the SEC.
- The single stockholder is required to designate a Required documents for converting to OPC
nominee and an alternate nominee named in the Conversion is processed in the same manner as amendment
Articles of Incorporation in the event of death and of an Articles of Incorporations/By-laws. It shall take effect
incapacity. The written consent of both the nominee upon approval of the Amended Articles of Incorporation
and alternate nominee shall be attached to the through the issuance of a Certificate of Filing of Conversion
application for incorporation. to One Person Corporation.
- The single stockholder may, at any time, change its
nominee and alternate nominee by submitting to the 1. Amendment of AOI
Commission the names of the new nominees and their o Name of the Corporation, for the inclusion of
corresponding written consent. The Articles of the suffix OPC and removal of any suffix
Incorporation need not be amended. indicating an Ordinary Stock Corporation such
- In case the single stockholder becomes incapacitated, as Corporation, Incorporated, Corp. or Inc.
the nominee can take over the management of the OPC o Reducing director into one (1) providing name,
as director and president. At the end of the incapacity, nationality and residence of the natural person,
the single stockholder can resume the management of trustee, administrator, executor or other
the OPC. person exercising fiduciary duties.
- In case of death or permanent incapacity of the single o Nominee and Alternate Nominee
stakeholder, the nominee will take over the o Amendment or removal of provisions
management of the OPC until the legal heirs of the distinctive to Ordinary Stock Corporations
single stockholder have been lawfully determined and
the heirs have agreed among themselves who will take 2. Secretary’s certificate
the place of the deceased. • Single stockholder acquired all of the
outstanding shares in the Ordinary Stock
AOI and by-laws Corporation (OSC);
- The OPC shall file its Articles of Incorporation (AI) in • The single stockholder has decided to convert
accordance with the requirements of Section 14 of the the OSC to OPC and for the purpose, has
Revised Corporation Code of the Philippines. decided to:
- The AI must set forth its primary purpose, principal o Amend the Articles of Incorporation;
office address, term of existence, names and details of o Repeal the By-laws of the OSC or
the single stockholder, the nominee and alternate adopt a new By-laws for the OPC;
nominee and the authorized, subscribed and paid-up o Appoint a nominee and alternate for
capital and such other matters consistent with law and the OPC;
which may be deemed necessary and convenient. o All taxes and obligations in favor of
- The OPC is not required to submit and file its By-Laws. the government has been settled; and
o The OSC, or any of its stockholder,
Reportorial requirements of OPC director, or officer is not involved in
any intra-corporate dispute.

3. Proof of acquisition of all the outstanding shares such as
but not limited to certified true copies of deeds of
assignments and of certificates authorizing registration
issued by the BIR;
4. Affidavit of acceptance executed under oath by the

nominee and by the alternate nominee , if not yet included
in the secretary’s certificate;
5. Name reservation;
6. Monitoring clearance; and,
7. Undertaking to change corporate name duly executed

under oath by the single stockholder of the sole remaining
director, if not yet included in the AOI.

Corpo Notes 1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Corpo Notes 1

Uploaded by

Copyright:

Available Formats

COMPARATIVE TABLES

Approval Vote and Other Requirements of Corporate Acts and Transactions

- SEC should be notified of intention to retain

- Should be for legitimate purposes

- Without prejudice to appraisal right of dissenting

- A statement that the amendments have been duly

NOTES COMPILED BY 3A STUDY CIRCLE 1

MODES IN WHICH VOTES ARE CAST:

2. Present through a representative authorized to act by written proxy

- Upon request by stockholder or member, the election can be made by ballet.

NOTES COMPILED BY 3A STUDY CIRCLE 2

OPTIONS OF THE STOCKHOLDER IN CASTING HIS/HER VOTES:

- no delinquent stock shall be vote

FOR NON-STOCK CORPORATIONS

EXCEPTION: as otherwise provided in the articles of incorporation or in the bylaw Nominees

NOTES COMPILED BY 3A STUDY CIRCLE 3

NOTES COMPILED BY 3A STUDY CIRCLE 4

For purposes of removal, a SPECIAL MEETING

1. by the secretary on order of the

Removal may be with or without cause, but

The SEC shall, motu proprio or upon verified

NOTES COMPILED BY 3A STUDY CIRCLE 5

Election may be held on the same day of the meeting

There should be an election at a regular or at a

NOTES COMPILED BY 3A STUDY CIRCLE 6

RESTRICTION: Directors or trustees shall not

OTHER REQUIREMENT: Corporations vested

NOTES COMPILED BY 3A STUDY CIRCLE 7

WHEN OPTION DOES NOT EXIST:

(a) The presence of such director or trustee in the

(b) The vote of such director or trustee was not

(e) In case of an officer, the contract has been

If item a, b, OR c is absent, in the case of a

NOTES COMPILED BY 3A STUDY CIRCLE 8

Appraisal right may be exercised but only in case

NOTES COMPILED BY 3A STUDY CIRCLE 9

NOTES COMPILED BY 3A STUDY CIRCLE 10

WHEN AND WHERE APPLICATION

CONDITIONS FOR INCREASE:

CONDITION FOR DECREASE: no decrease in

Corporate Act/ Transaction Vote Required Other Requirements

NOTES COMPILED BY 3A STUDY CIRCLE 11

- A certificate must be signed by a majority

- Requires prior approval of the

NOTES COMPILED BY 3A STUDY CIRCLE 12

NOTES COMPILED BY 3A STUDY CIRCLE 13

- upon such terms and conditions and for

- Written notice of the proposed action and

- Subject to appraisal right

- After such authorization, the board of

- Nothing in this section is intended to

NOTES COMPILED BY 3A STUDY CIRCLE 14

NOTES COMPILED BY 3A STUDY CIRCLE 15

NOTES COMPILED BY 3A STUDY CIRCLE 16

NOTES COMPILED BY 3A STUDY CIRCLE 17

- Any cash dividends due on delinquent

- Stock corporations are prohibited from

(a) when justified by definite corporate

NOTES COMPILED BY 3A STUDY CIRCLE 18

Must be approved by the

2. Where a majority of the

NOTES COMPILED BY 3A STUDY CIRCLE 19

- A copy thereof, duly certified by a majority