TITLE 11: NONSTOCK CORPORATION
The following shall
SEC 86. Definition
- No part of its income may be received as a
dividend (any income that was obtained should
not be distributed among its members and officer)
- If it was able to obtain profit it should only be
incidental because nonstock corporation is not
established to earn profit. (STOCK-PROFIT,
NONSTOCK-NON-PROFITTABLE)
- The provisions shall be applicable in nonstock if
there is inconsistency in the charter of bylaws in
nonstock.
SEC 87. Purpose
- Charitable, religious, education, professional
(group of lawyers), cultural (group of
Kapampangan), fraternal, literary, scientific, social,
civil service, industry, agricultural and the like
chambers.
SEC 88. Member
- Can a member be denied from voting? – Yes, the
right to vote can be denied in accordance with the
AOI and bylaws. HOWEVER, EACH MEMBER IS
ENTITLED TO 1 VOTE IF THE RIGHT TO VOTE IS
NOT DENIED OR IF THEY ARE REQUIRED TO.
General rules:
- Every member is entitled to one vote UNLESS
DENIED.
- Proxy voting is allowed.
- Voting through remote communication or in
absentia is now allowed if stated in its bylaws.
SEC 89. Non-transferability of membership
- As a general rule, membership is not transferrable
unless AOI provides otherwise.
SEC 90. Termination of membership
- Is governed by the bylaws and AOI.
SEC 91. Election and term of trustees
- The number of trustees should be stated in AOI
and shall not exceed 15.
- There will be a 1/3 expiration of term of BOT. The
term of office will be 3 years.
- Every year 1/3 of the BOT shall expire, there will
be an election thereafter on those who expired
(This shall only be applicable on the first election
of BOT). Example:
 ABC, DEF, GHI are elected in 2022 as BOT. ABC will
have a term ‘til 2023 and in 2024 the term of DEF
shall expire while GHI will have a complete term of
3 years. What will happen to those ABC, DEF? –
They can be re-elected to full term.
- In case of vacancy, the unexpired term shall be
filled.
- If a nonstock is imbued with public interest, an
independent trustee may hold public office.
(PROTECT THE INTEREST OF MINORITY OF SH)
ALLIGNED WITH THE BOT/BOD.
SEC 92. List of members and proxies, places of meeting.
- Shall keep the list of member and appointed
proxies and shall be updated 20 days prior to any
scheduled meeting.
- The meeting can be held anywhere as long as it is
within the PH provided there is a notice containing
the date, time and place of meeting.
SEC 93. Rules of distribution
- Dissolution of nonstock corp.
be observed;
 If the law mandates that a specific asset shall
be distributed, then that shall be applied.
(Settle the liabilities)
 Contingent assets shall be returned in case of
dissolution.
 Limited assets held by the corporation used
for charitable, religious, benevolent,
educational or similar purposes shall be
transferred to corporations with similar
endeavors.
 Assets not governed by any restrictions may
be transferred to anyone even if that
corporation is organized for profit provided
that it is pursuant to the provisions of RCC.
SEC 94. Plan for distribution of assets.
- Agreed disposition of the assets of corporation
provided it is consistent with the RCC. The
procedure shall be;
 By a majority vote of BOT
 A written notice containing the plan of
distribution, time, place and date of the
meeting where the members shall vote.
 2/3 of the members shall approve for it to be
adopted.
TITLE 12: CLOSE CORPORATIONS
SEC 95. Definition and applicability of the provisions.
- A close corporation (not open to public, is only
limited to certain people – usually family) is one
whose AOI provides;
 The shares shall be held by not more than 20
individuals.
 In case the shares are restricted to be
transferred.
 Not registered in any stock exchange or make
public offering. The corporation is not close if
2/3 of its voting right is owned by a
corporation which is not close.
- Mining or oil companies, stock exchange, banks,
insurance companies, public utilities, educational
institutions shall not be allowed to be a close corp.
because they are open to PUBLIC.
- All provisions of RCC can be applied in close corp.
SEC 96. AOI
- Classification of shares on rights, qualifications for
owning holding the same and restrictions on their
transfers.
- Classification of directors, how do we elect the
directors.
- Greater quorum is required. The standard in
determining the quorum is usually majority or half
plus 1 but in close corp. it can provide in AOI is a
specific number of shares.
- The AOI may provide that the shareholders can
manage the corporation therefore their liabilities
is like the directors.
SEC 97. Validity of restriction on transfer of shares
- RCC allows restriction provided that it must be
indicated in AOI, bylaws and stock certificate, if
not the restriction is not valid.
SEC 98. Effects of issuance of stock in breach.
 - If there is breach the following are a safeguard;
a. Presumptive notice (assumed that all SH know
that transfer is not allowed)
b. In case it was sold without the compliance with
the RCC, it shall not be recorded. (Not binding
with the corporation)
c. Right to recission;
- If the shares were transferred to a non-qualified
person.
- If the transfer would violate the number of
shareholders stated in AOI.
- The transfer can be refused to be recorded in AOI,
however, if all the SH consent and the AOI is
amended then the transfer is valid.
SEC 99. Agreements of SH
- The SH may agree among themselves to prevent
the transfer of shares PROVIDED it is not
inconsistent with the AOI.
- They may agree that it is signed in writing by all of
them provides voting rights.
- No provisions in any written agreement shall be
invalidated between the parties and shall make
them partners among themselves. (Note: The
liability will be different if they are considered
PARTNERS)
- The SH agreement shall not be invalidated.
- The SH can manage the operations of the
corporation and shall be held STRICT FIDUCIARY
duties to each other.
SEC 100. When board meeting is unnecessary or
improperly held.
- Even without notice the directors can conduct a
business and shall be valid provided it is not
inconsistent with bylaws and the following are
present:
 Before and after, a written consent by all
directors is present.
 All SH are knowledgeable of the meeting and
there is no written objection.
 The directors are accustomed to do an
informal action and is approved by all SH.
 All directors are aware of the meeting and
there is no written objection.
- It shall be deemed as ratified corporate action if a
director fails to attend even if he had a notice.
Even though he failed to attend and he did not file
a written objection, then that is VALID.
SEC 101. Preemptive right
- SH are given a preemptive right to all its shares,
including treasury shares, money, property,
service or debt.
- When a corporation decides to release shares, all
SH have a right to purchase the newly issued
shares in accordance with their interest.
SEC 102. Amendment of AOI
- The AOI can be amended requiring only 2/3
ratification of the SH.
SEC 103. Deadlock
- If the directors are so divided respecting the
management of business and affairs.
- If the votes required for corporate action cannot
be obtained and that consequences the business
and affairs to no longer be conducted. The
following are the acts done by SEC;
 Cancel or alter the provision of AOI or any SH
agreement.
 Cancel, alter or enjoin any resolution of the
directors.
 Prohibit the act of the directors.
 Require the corporation to redeem the shares
of any SH who is against the act. (AT FV)
 Appoint provisional director to manage the
corporation even if he is not an SH.
 Order the dissolution of the CORP.
 Grant any relief as any circumstance may
warrant.
- Provision director is neither an SH or creditor of
corporation. The qualification will be determined
by the SEC.
SEC 104. Withdrawal of SH or dissolution
 Compel the corporation to buy his shares at FV,
not less than par.
 Compel the dissolution of the corporation
whenever the acts of the directors are illegal,
fraudulent, dishonest, oppressive or unfairly
prejudicial to the corporation or its SH.
TITLE 13. SPECIAL CORPORATIONS
CHAPTER 1
SEC 105. Educational Corporation (different from stock)
- Provide learning (Stock or Nonstock)
- Maintain regular faculty, regular curriculum,
organized body of pupils and attendance at place
where educational activities are regularly held
(School).
- Governed by special laws and by the general
provisions of RCC.
SEC 106. Stock and Nonstock Educational corporation
- Those organized as stock corporations are
governed by the provisions of a stock corporation
as to the number and term of directors.
*BOD/BOT of educational corp.
A. Nonstock
 The number of trustees shall not be less than 5
and no more than 15.
 In multiples of 5 (5,10,15)
 Unless otherwise provided in AOI, terms of office
of the first elected trustee shall be staggered with
one year interval. (1/5 shall expire every year)
 Trustees subsequently elected will have a term of
5 years.
 Replacement trustees will only be filling the
unexpired term.
 Majority of trustees will constitute the quorum of
corporation. (2/3)
 The powers and authority of trustee shall be
defined in the bylaws. (SEC 22)
B. Stock
 The number and term of directors is governed by
the provisions on stock corp.
CHAPTER 2
SEC 107. Religious corporation
- Governed primarily by SEC 107 to 114 of title 13
and by the general provisions of title 11.
- Composed entirely of spiritual person
(Archbishop, bishop) for the furtherance of
religion or church.
 - Religious corporations is different from an
ordinary nonstock corporation organized for
religious purposes.
- If the bylaws is inconsistent with the law, the law
will prevail.
SEC 108.
*Classes of Religious Corporation
 Corporation Sole- consists of one incorporator and
his successor.
 Religious society- incorporated by an aggregate of
person. (NOTE: Is a religious organization who
incorporated into a corporation)
SEC 109. AOI
- The chief archbishop MUST file with a SEC a
verified AOI in accordance with the matters stated
in SEC 109: (Shall be accompanied by a copy of the
commission, cert. of election or letter of
appointment (SEC 110))
 States that he is the chief archbishop and that he
desires to be a corporation sole.
 Rules, regulations and discipline of the religion
that are not inconsistent with his becoming a
corp. sole.
 Charged with management and properties of his
denomination and within his territorial
jurisdiction.
 Vacancy shall be filled in accordance with the rules
and regulations.
 Location must be within PH.
SEC 110. Effects of filing
- (From and after filing) The corporation will be sole
and the temporalities, estate and properties will
be administered by the archbishop for the
benefits of the corporation. AFTER FILINF THE
CORP IS ALREADY CONSIDERED SOLE.
- Does not expressly require the approval of SEC.
SEC 111. Acquisition and alienation of property.
- May purchase and hold property, real or personal,
and receive gifts for religious purposes.
- If the corporation chooses to sell a property, there
must be authority from the RTC where the
corporation is located. If there is provisions
concerning the selling of property, there is no
need for authorization from RTC.
SEC 112. Filling of vacancy
- There will be a successor and that successor will
be the corporation sole on the filing of a notarized
copy of the commission, cert. of election or letter
of appointment.
- In case of vacancy, the person authorized in the
rules shall fill the vacancy and will exercise the
power and authority of corporation sole. (Not
required to state the term of existence unless
otherwise provided in the AOI)
SEC 113. Dissolution
- May be dissolved by voluntarily filing with the SEC
for the approval of verified declaration of
dissolution in accordance with the matters stated
in 113. In dissolution, approval of SEC is needed.
 Name of corporation
 Reason for dissolution
 Authorization for dissolution
 Names and addresses of the people who are
supervised to wind up the affairs of a corporation.
SEC 114. Religious Societies
*Filing of AOI- must file a verified AOI with SEC in
accordance with SEC 114. (DOES NOT NEED APPROVAL OF
SEC)
 Is a religious organization.
 At least 2/3 of members have given a WRITTEN
CONSENT to incorporate at a duly convened
meeting.
 Not forbidden by a competent authority or rules
to be incorporated.
 Decided to incorporate to manage its affairs,
properties and estate.
 The place of principal office.
 The names, nationalities, and residences of the
elected trustees to serve for the 1st year or by the
rules of the corporation. NOT LESS THAN 5 AND
NO MORE THAN 15.
*Registration not mandatory- the law does not require the
churches to register as a corporation but they may do so
to acquire a LEGAL PERSONALITY for managing their affairs
and property.
*Term of existence- is perpetual unless revoked by law.
CHAPTER 3
SEC 115. Applicability of provisions
- Governed primarily by the provisions of this title
and by applicable provisions under RCC.
SEC 116. OPC
- A corporation with a single stockholder. It has a
personality separate and distinct from a single
stockholder. Essentially a stock corp. except it has
only one stockholder.
*Person who may form an OPC
 Only a natural person, trust or estate.
 In case of natural person, the incorporator must
be of legal age.
*Person who may NOT form an OPC
 Banks, quasi-banks, pre-need, trust, insurance,
public and publicly-owned companies and non-
chartered government owned and government-
controlled corps.
*Exercise of a profession- a person licensed to exercise a
profession may NOT form an OPC except otherwise stated
in special laws.
SEC 117. Capital Stock
- Not required to have a minimum authorized
capital stock for operation unless stated otherwise
in special laws.
SEC 118. AOI
- An OPC shall file its AOI in accordance with the
requirements in sec 13 and sec 14 of RCC.
Including;
 Trust or estate- Name, nationality and residence
of the trustee or anyone exercising fiduciary
duties TOGETHER WITH the proof of authority.
(WHO MANAGES THE TRUST OR ESTATE)
 Name, nationality and residence of the nominee
and alternate nominee and the extent and
limitation of the authority.
SEC 119. Bylaws
- Is not required to submit and file corporate
bylaws. (Internal laws)
SEC 120. Corporate name
- Shall indicate “OPC” either below or at the end of
the corporate name.
- The single stockholder may use his/her name
PROVIDED that said name is accompanied by
other descriptive words aside from the suffix OPC.
May use other person’s name as long as there is
consent or if the person is deceased (his estate).
SEC 121. Directors and president
- The single stockholder shall be sole director and
president.
SEC 122. Officers
- 15 days from the issuance of AOI, the OPC shall
appoint a treasurer, corporate secretary and other
officers as it may deem necessary and notify SEC
within 5 days from appointment.
*Rules regarding treasurer
 The single stockholder may be the self-appointed
treasurer.
 File a bond with SEC which shall be renewed every
two years or as it is required.
 A self-appointed treasurer shall undertake a
writing to faithfully administer the OPC’s funds to
be received, to disburse and invest the same IN
ACCORDANCE with the AOI.
 The stockholder CANNOT be appointed as
secretary.
 The special functions of a secretary in sec 25 and
123 PROHIBIT the self-appointment of the
stockholder to be a secretary.
 OPC can designate other functions to secretary.
SEC 123. Special functions of secretary
- Maintaining minutes book/records of corp.
- Notify the nominee or alternate nominee in case
of death or incapacity of the single stockholder.
(NO LATER THAN 5 DAYS)
- Notify SEC of the death of the stockholder WITHIN
5 DAYS and stating the names, residence and
contact details of known legal heirs.
- Call the nominee or alternate nominee and the
known legal heirs to a meeting with regards with
the election of new director, amendment of AOI
and other matters.
SEC 124. Nominee and alternate nominee
- Is designated by the single stockholder – in the
event of incapacity or death of the single
stockholder shall take place as director and
manage the corporation’s affairs.
- The single stockholder is required to designate a
nominee and an alternate nominee to be named
in AOI and shall contain their name, address and
contact details as well as the extent and
limitations of their authority.
- Attached in the AOI is the written consent of both
the nominee and alternate nominee. The consent
may be withdrawn in writing any time BEFORE the
incapacity of the single stockholder.
SEC 125. Term of nominee
- Incapacity- the nominee may manage the OPC
until the single stockholder regains capacity (by
self-determination).
- Death or permanent incapacity- until the legal
heirs has been determined and designated one of
them to be OPC.
- Alternate nominee- will manage the OPC in case
of nominee’s incapacity, death or refusal to
discharge functions as director (only for the same
term as nominee)
SEC 126. Change of nominee
- May change its nominee by submitting the names
of new nominees and their written consent.
SEC 127. Minutes book
- Shall contain all actions, decisions and resolutions
taken by the OPC.
SEC 128. Records in minutes book
- No need for a meeting but it shall be sufficient to
prepare a written resolution, signed and dated by
the single stockholder and recorded in minutes
book.
- The date stated in the minutes book is considered
the date of the meeting.
SEC 129. Reportorial requirements
- Imposed to prevent abuse and conflict of interest.
*Documents to be submitted
 Annual financial statement by a CPA. If the total
assets pr liabilities are less than 600,000 then the
treasurer may take care of it.
 Report containing explanations or comment of the
president on every qualification, reservation or
adverse remark made by the auditor.
 Disclosure of all self-dealings and transactions
entered by the OPC and the single stockholder.
 Other reports required by SEC.
*Effect of delinquency- the OPC will be considered
delinquent if the corporation failed to submit the
reportorial requirements 3 times, consecutively or
intermittently, within 5 years.
SEC 130. Limited liability
- Limited to investment but has the burden of
showing that the corporation is adequately
financed.
- If the stockholder cannot prove that the property
is independent of the stockholder’s personal
property, the stockholder shall be JOINTLY and
SEVERALLY liable for the debt and other liabilities
of the OPC.
*Piercing the corporate veil- applies with equal force to a
OPC.
SEC 131. Ordinary corp. to OPC
- Can an ordinary corp. be converted into OPC? –
Yes, when one stockholder acquires all the stocks
of an ordinary stock corporation.
- The remaining stockholder shall submit
documents required by the SEC, then the
application may be approved and the SEC shall
issue a certificate filing the amended AOI.
- The OPC converted shall succeed the latter and be
legally responsible for all the outstanding liabilities
as of the date od conversion.
SEC 132. OPC to ordinary corp.
- When one chooses to invest in corp., the OPC may
be converted and must inform the SEC about such
fact which lead to the conversion and after
compliance with all requirements in sec 14 and 15.
The notice shall be filed 60 days from the
occurrence of the event leading to the conversion.
- When all requirements are complied with, the SEC
may then file a certificate of filing the amended
AOI.
- Is liable for OPC’s liabilities (conversion).