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CLASSES OF CORPORATIONS
Section 3 of the RCCP classified private corporations into:
1. Stock Corporation. - Corporations which have share capital divided into shares and are
authorized to distribute to the holders of such shares, dividends or allotments of the
surplus profits on the basis of the shares held.
2. Non-stock Corporation. - A non-stock corporation is one where no part of its income is
distributable as dividends to its members, trustees or officers. Any profit that a non-stock
corporation may obtain as an incident to its operation shall, whenever necessary or
proper, be used for the furtherance of the purpose or purposes for which the corporation
was organized (Sec. 86).
- Non-stock corporations may be formed or organized for charitable, religious
educational, professional, cultural, recreational, fraternal, literary, scientific,
social, civic service, or similar purposes, like trade, industry, agricultural, and like
chambers or any combination (Sec. 87).
OTHER CLASSIFICATIONS OF CORPORATIONS
1. According to number of persons:
A. Corporation aggregate. A corporation consisting of more than one corporator.
B. Corporation sole or a special form of corporation usually associated with the clergy: It
is a corporation which consists of only one member or corporator and his successors
such as a bishop.
2. According to nationality:
A. Domestic Corporation. A corporation organized under Philippine laws.
B. Foreign Corporation. A corporation formed, organized or existing under laws other than
the Philippines and whose laws allow Filipino citizens and corporations to do business in
its own country or State (Sec. 140).
3. According to whether for public or private purpose:
A. Public Corporation. A corporation formed or organized for the government of a portion
of the state (e.g, provinces, cities, municipalities and barangays).
B. Private Corporation. A corporation created for private aim, benefit or purpose.
4 According to whether for charitable purpose or not:
A. Ecclesiastical Corporation. Those organized for religious purposes.
B. Eleemosynary Corporation. Those established for public charity.
C. Civil Corporation. Those established for business or profit.
5. According to their legal right to corporate existence:
A. De jure Corporation. A corporation existing in fact and in law. It is organized in strict
with the law.
B. De facto corporation. A corporation existing in fact but not in law.
6. According to degree of public participation with regard to share ownership:
A. Close corporation. A corporation whose share ownership is limited to selected persons or
members of a family not exceeding 20 persons.
B. Open corporation. A corporation where the share is available for subscription or
purchase by any person.
C. Publicly-held Corporation. A corporation with a class of equity securities listed on an
exchange or with assets in excess of P50,000,000 and having 200 or more holders, at
least 200 of which are holding at least 100 shares of a class of its equity securities (SRC
Rule 3-1.M, Amended IRR of the Securities Regulations Code (R.A. 8799)).
7. According to their relation to another corporation:
A. Parent or holding corporation. A corporation that is related to another corporation that it
has the power to either directly or indirectly elect the majority of the directors of a
subsidiary corporation.
B. Subsidiary Corporation. A corporation controlled by another corporation known as a
parent corporation.
COMPONENTS OF A CORPORATION
1. Corporators - are those who compose a corporation, whether as stockholders or shareholders
in a stock corporation or as members in a nonstock corporation (Sec. 51).
2. Incorporators - are those stockholders or members mentioned in the Articles of Incorporation
(AOI) as originally forming and composing the corporation and who are signatories to said
articles of incorporation (Sec. 5).
- Section 10 of the RCCP provides that any person, partnership, association or corporation,
singly or jointly with others but not more than fifteen (15) in number, may organize a
corporation for any lawful purpose or purposes.
- Natural persons who are licensed to practice a profession, and partnerships or
associations organized for the purpose of practicing a profession, shall not be allowed to
organize as a corporation unless otherwise provided under special laws.
- Incorporators who are natural persons must be of legal age. Each incorporator of a stock
corporation must own or be a subscriber to at least one (1) share of the capital stock.
- Note: All incorporators (if they continue to be shareholders) are corporators of a
corporation, but not all corporators are incorporators. An incorporator will always
retain his status as such though no longer having an interest in the corporation.
3. Shareholders or stockholders - are corporators in a stock corporation (Sec. 5). Shareholders
may be natural or juridical persons.
4. Members - are corporators of a non-stock corporation (Sec. 5).
5. Subscribers - are persons who have agreed to take and pay for original, unissued shares of a
corporation formed or to be formed. Note: All incorporators are subscribers but a subscriber
need not be an incorporator.
6. Promoter - is a person who, acting alone or with others, takes initiative in founding and
organizing the corporation and receives consideration therefor.
7. Underwriters - are usually investment bankers who have-
agreed, alone or with others, to buy at stated terms an entire or a substantial part of an
issue of securities; or
guaranteed the sale of an issue by agreement to buy from the issuing corporation any
unsold portion at a stated price; or
agreed to use his best efforts to market all or part of an issue, or
offered for sale shares he has purchased from a controlling stockholder.
8. Independent director - is a person who, apart from shareholdings and fees received from the
corporation, is independent of management and free from any business or other relationship
which could, or could reasonably be perceived to, materially interfere with the exercise of
independent judgment in carrying out the responsibilities as a director (Sec. 22).
9. Additional General Powers per RCCP. - Every corporation incorporated under the RCCP is
expressly given the power to enter into a partnership, joint venture, or any commercial agreement
with natural or juridical persons (Note under BP68, only to enter into merger or consolidation
with other corporations)
- Also, domestic corporations are allowed to give donations in aid of any political party or
candidate or for purposes of partisan political activity (Sec 35). These were not allowed in the
Corporation Code.
CLASSES OF SHARES
1. Par value shares. - One in which a specific amount is fixed in the articles of incorporation
and appearing on the certificate of stock. The par value is the minimum issue price of the shares.
- Section 6 of the Code states that preference (or preferred) shares of stock may be issued only as
par value shares.
2. No-par value shares. - One without any value appearing on the face of the certificate of
stock.
- A no-par value share may have a stated value which may be fixed in the articles of
incorporation or by the board of directors or the shareholders. Thus, the issue price may vary
from time to time as it is usually fixed based on the book value of the corporation's shares.
3. However, the minimum stated value of a no-par value share is five pesos (P5.00) per share.
4. Voting shares. Those issued with the right to vote.
5. Non-voting shares. Those issued without the right to vote.
6. Ordinary shares. These shares entitle the holder to an equal pro-rata division of profits
without any preference.
7. Preference shares. These shares entitle the holder to certain advantages or benefits over the
holders of ordinary shares.
8. Founders' shares may be given certain rights and privileges not enjoyed by the owners of
other stocks (Sec. 7).
9. Redeemable shares - may be issued by the corporation when expressly provided in the
articles of incorporation.
- They are shares which may be purchased by the corporation from the holders of such
shares upon the expiration of a fixed period, regardless of the existence of unrestricted
retained earnings in the books of the corporation, and upon such other terms and
conditions stated in the articles of incorporation and the certificate of stock representing
the shares (Sec. 8).
10. Treasury shares. - A stock that has been issued by the corporation as fully paid and later
reacquired but not retired.
11. Promotion shares. - Those issued to promoters as compensation in promoting the
incorporation of a corporation, or for services rendered in launching or promoting the welfare of
the corporation.
12. Convertible shares. - A stock which is convertible or changeable from one class to another
class.
NO MINIMUM CAPITAL STOCK
- Stock corporations shall not be required to have a minimum capital stock, except as
otherwise specifically provided by special law (Sec 12).
- The minimum paid-in capital of at least P5,000 under Sec. 13 of the Corporation Code of
the Philippines was deleted.
- There is also no minimum subscribed capital and no minimum paid in capital
requirement.
- The requirements under Section 13 of the Corporation Code of the Philippines, which
states: "at the time of incorporation, at least 25% of the authorized capital stock as
stated in the articles of incorporation must be subscribed and at least 25% of the total
subscription must be paid upon subscription," have been deleted in the RCCP.
- Note that the 25% subscribed and 25% paid-up rule is still applicable when the
corporation increases its capital stock (Sec. 37).
RIGHTS OF A SHAREHOLDER
The following are some of the rights of a shareholder:
1. Right to be issued certificate of stock or other evidence of share ownership and to transfer
such shares.
2. Right to vote via remote communication or in absentia (Note: under BP68, in person or
by proxy only) at shareholders' meetings (Sec. 57).
3. Right to elect and remove directors.
4. Right to adopt, amend or repeal the by-laws.
5. Right to purchase a portion of any new shares issued to maintain the same percentage of
stock ownership. This right is known as the pre-emptive right. However, this right is not
absolute and may be denied.
6. Right to receive dividends when declared.
7. Right to inspect corporate books and records, and to receive financial reports of the
corporation's operations.
8. Right to participate in the distribution of corporate assets upon dissolution.