Revised Corporation Code Oct 2020

Revised Corporation Code of the
Philippines
(R.A. 11232)
ATTY. JOHNSON A.H. ONG, CPA, MBA
EFFECTIVITY
TOPIC May 2016 Oct 2017 May 2019- P
Obligation 15 10 10
Contract 15 10 10
Partnership 15 10 10
Corporation, SRC and Corporate Governance 30 20 28
Negotiable Instruments 9 4 4
Sales 10 7 7
Credit Transaction 6 3 4
Financial Rehabilitation and Insolvency Act (FRIA 2010) 10 -
Bouncing Check 3 2
Cooperatives 10 10
PDIC Law 3 2
Secrecy of Bank Deposit and unclaimed Balances Law 2 2
General Banking Law 2 -
AMLA Law 2 5
The New Central Bank Act 2 -
Intellectual Property Law 2 2
Data Privacy Act 2
E-Commerce Law 1
Ease of Doing Business Law 1
Total 100 100 100
Effectivity of R.A. 11232
• The law was Approved February 20, 2019
– SEC. 188. Effectivity. – This Act shall take effect
upon completion of its publication in the Official
Gazette or in at least two (2) newspapers of
general circulation.
• Republic Act No. 11232 otherwise known as
the Revised Corporation Code of the
Philippines took effect on February 23, 2019,
upon completion of its publication in Manila
Bulletin and the Business Mirror, on Saturday,
February 23, 2019.
Repealing Clause
Batas Pambansa BIg. 68, otherwise known as
"The Corporation Code of the Philippines", is
hereby repealed. Any law, presidential decree
or issuance, executive order, letter of
instruction, administrative order, rule or
regulation contrary to or inconsistent with any
provision of this Act is hereby repealed or
modified accordingly. (Sec 187, R.A. 11232)
Title of the Code
Revised Corporation Code of

the Philippines
(Sec 1, R.A. 11232)
Element of a private Corporation
1. It is an artificial being
2. Created by operation of law
3. Having the right of succession
4. The powers, attributes and properties
expressly authorized by law or incident to its
existence. (Sec 2, R.A. 11232) (2)
Corporation
1. Doctrine of separate juridical personality
Corporation has juridical personality separate and
distinct from the stockholders composing the
corporation.
2. Doctrine of Piercing the veil of corporate entity
When the veil of corporate fiction is used as a
shield to perpetuate fraud, to defeat public
convenience, justify wrong or defend crime, this
fiction shall be disregarded and the individuals
composing it will be treated identically.
3. Doctrine of limited capacity
Corporation may exercise only powers expressly
authorized by law or incident to its existence.
Problem
PR Corporation owns a beach resort with several
cottages. Jaime, the President of PR, occupied one
of the cottages for residential purposes. After
Jaime’s term expired. PR wanted to recover
possession of the cottage. Jaime refused to
surrender the cottage, contending that as a
stockholder and former President, he has a right to
possess and enjoy the properties of the
corporation .
Question:
Is Jaime’s contention correct? Explain. (2000, 1996
Bar exam)
Theory of Corporation
1. Theory of concession – Exist by grant of the
state (Philippine Setting)
2. Gennosenshaft theory – It exist because the
parties want it to exist
Private Corporation can only be
created by corporation code (B.P. 68)
• Under Art. XII, Sec 16 of the 1987 Constitution which
provides as follows:
“The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private
corporations. Government-owned or controlled
corporations may be created or established by special
charters in the interest of the common good and
subject to the test of economic viability.”
• Special law can create only
– Public corporation
– Government owned or controlled corporations provided:
• In the interest of common goods
• Subject to test of economic viability.
Corporation not entitled to moral damages
General Rule:
• A corporation, being an artificial person and having existence only in
legal contemplation, has no feeling, no emotions, no senses; therefore,
it cannot experience physical suffering, mental anguish, fright, serious
anxiety, wounded feelings, etc. ABS-CBN BROADCASTING
CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS,
REPUBLIC BROADCASTING CORP, VIVA PRODUCTION, INC., and
VICENTE DEL ROSARIO, G.R. No. 128690 January 21, 1999)
Exception:
• Nevertheless, AMEC’s claim for moral damages falls under item 7 of
Article 2219 of the Civil Code. This provision expressly authorizes the
recovery of moral damages in cases of libel, slander or any other form
of defamation. Article 2219(7) does not qualify whether the plaintiff is a
natural or juridical person. Therefore, a juridical person such as a
corporation can validly complain for libel or any other form of
defamation and claim for moral damages. (FILIPINAS BROADCASTING
NETWORK, INC., petitioner, vs. AGO MEDICAL AND EDUCATIONAL
CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and
ANGELITA F. AGO, G.R. No. 141994, January 17, 2005)
Distinction between Partnership and
Corporation
1. Manner of creation
2. Formalities required
3. Number of incorporators
4. Commencement of juridical personality
5. Powers
6. Management
7. Effect of mismanagement
8. Right of succession
9. Transferability of interest
10. Term of existence
11. As to liability
12. Firm name
13. Dissolution
14. Laws which govern
Partnership vs Cooperative
Partnership Cooperative
As to number of Two or more person Not less than 15 natural person
partner/organizer
Minimum capital No minimum capital Not less than P15,000
Residency requirement No requirement of All organizer must be residing or
of Partner/Organizer residency working in the intended area of
operation
Filing of article of co- Securities and Exchange Cooperative Development
partnership/cooperation Commission (SEC) Authority (CDA)
As to Name Use the name of any “Cooperative”
partner, some or all of them
Commencement of Upon execution of the Upon issuance by the
juridical personality contract unless the partners Cooperative Development
agree otherwise. Authority a certificate of
registration under its official seal.
Tax Taxable as corporation Exempted
Corporation vs. Cooperative
Corporation Cooperative
As to number of Not less than 5 but not more than Not less than (15) natural
incorporator/orga fifteen (15) natural persons. However, persons
nizer under R.A. 11232, any number not
more than 15.
Residency Majority must be resident of the All must be actually residing or
requirement of Philippines. (BP 68). However, no working in the intended area of
incorporator/orga residency requirement under R.A. operation.
nizer 11232)
Citizenship Not required All must be Filipino citizen
requirement of
incorporator
Minimum paid up Not less than Five thousand pesos Not less than Fifteen thousand
capital (P5,000) under Sec 13 BP 26. pesos (P15,000) and may
However, no minimum paid up capital increase every five (5) years upon
requirement under R.A. 11232, except consultation with cooperative
by special law sector and the NEDA.
As to Name There is extension word “Corporation” There is extension word
or “Inc.” or “OPC” . “Cooperative” or “Kooperativa”.
Filing of article Securities and exchange Cooperative Development
commission (SEC) Authority (CDA)
Voting requirements for Majority of the BOD and written By two third (2/3) vote of all
Amendment of articles vote or assent of at least 2/3 of members with voting right
the Outstanding capital stock
Effectivity of amendment Upon approval by the SEC. Upon approval by the authority or
of articles However, if the SEC failed to act within 30 days from the date of
within six month, the filing
amendment took effect upon
filing.
Voting requirements for Not applicable ¾ of all members with voting
Division of Cooperatives rights, present with a valid quorum
Voting requirements for Majority of the BOD and at least ¾ of all members with voting
Merger or consolidation 2/3 of the outstanding capital rights, present with a valid quorum
stock of both corporation of each of the constituent
cooperative
Adoption of by- May be filed together with the articles Filed at the same time as the
laws of incorporation or filed within 30 days articles of cooperation
upon receipt of the official notice of
issuance of certificate of incorporation.
However, the 30 days was removed by
R.A. 11232
Amendment of By- Majority of the BOD and majority of the By 2/3 of all the members with
laws Outstanding stock voting rights
Commencement of Upon issuance by the SEC of the Upon issuance by the
juridical Certificate of Incorporation under its Cooperative development
personality official seal. authority of a certificate of
registration under its official seal.
Denial of Petition before the court Appeal before the Office of the
Application President
Term of office of One year for Director of stock Two years. (Sec 37)
director corporation, three years for trustee in
case of non stock and five years for non
stock educational corporation.
Voting 2/3 of the outstanding capital stock ¾ of all members with voting
requirements for in case of stock or 2/3 of members in power
Ratification of self case of non stock corporation
dealing director
Voting 2/3 of the outstanding capital stock ¾ of all members with voting
requirements power
Ratification of
disloyal director
Vote Based on number of shares 1 vote only for each member
Filing of Within three (3) before the expiry Within five (5) years before the
amendment for date expiry date
extension of
corporate term
Similarities Between Corporation and
Cooperative
1. As to liability –Limited liability
2. Term of Existence – 50 years under BP 68 but
not under R.A. 11232)
3. Juridical personality – It has juridical
personality.
4. Association of person
Classification of corporation
• Stock corporation - Corporations which have
capital stock 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. (Sec 3,
R.A. 11232)(3)
• Non-stock corporation – All other corporations
are non-stock corporations.
Other classification of Corporations
• Number of persons
– Corporation aggregate – more than one member
– Corporation sole – one member or corporator.
– One person corporation – Compose of one corporator
• Religious purpose or not
– Ecclesiastical corporation - Religious
– Lay corporation – other than religious purpose. (Either
eleemosynary or civil)
• Charitable or not
– Eleemosynary corporation - Charitable
– Civil corporation – Business of profit
• Country of creation
– Domestic corporation – incorporated under Philippine law
– Foreign corporation – Incorporated under foreign law
• Legal right to corporate existence
– De jure corporation – exist in fact and in law
– De facto corporation – exist in fact but not in law
• Close or open
– Close corporation – limited to selected persons
– Open corporation – open to any person
• Relation to other corporation
– Parent corporation – Owner of more than 50% of another
corporation
– Subsidiary corporation – acquire of parent company
• True or limited sense
– True corporation
– Quasi corporation
• Corporation by prescription – exercise power for indefinite period
without interference from sovereign power. (Roman Catholic Church)
• Corporation by estoppels
• Public or private purpose
– Public corporation
– Private corporation
• Going public or not
– Going public – Decide to list its share in the stock
exchange
– Going private – Restrict the share to certain group
Classes of shares
❑ Par value share
❑ No par value share
– Limitation:
1. Cannot be issued by the following corporation: (BPI-TB-PO)
• Bank
• Public utilities
• Insurance company
• Trust company
• Building and loan association
• Pre need companies
• Other corporation authorized to obtain or access funds from
the public, whether publicly listed or not
2. Preferred shares not allowed
3. Cannot be issued for a consideration less than five peso (P5)
4. Deemed fully paid and non assessable
5. Entire consideration received shall be treated as capital and not
available for dividend distribution.
Corporation prohibited to issue no par
value
BP 68 (BPI-TB) R.A. 11232 (BPI-TB PO)
• Bank • Bank
• Public utilities • Public utilities
• Insurance company • Insurance company
• Trust company • Trust company
• Building and loan association • Building and loan association
+
• Pre need companies
• Other corporation authorized
to obtain or access funds from
the public, whether publicly
listed or not
Classes of shares
• Voting share
– That there shall always be a class or series of shares which have
complete voting rights.
– That no share may be deprived of voting rights except those
classified and issued as "preferred" or "redeemable" shares.
• Non voting share- shares without right to vote
– Non voting shares classified as such may still vote under the
following circumstances:
• Amendment of the articles of incorporation;
• Adoption and amendment of by-laws;
• Sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of the corporate property;
• Increase or decrease of capital stock;
• Incurring, creating or increasing bonded indebtedness;
• Investment of corporate funds in another corporation or business
except where the investment by the corporation is reasonably
necessary to accomplish its primary purpose as stated in the articles
of incorporation
• Merger or consolidation
• Dissolution of the corporation
Classes of shares
• Common stock – equal right. Except as otherwise
provided in the articles of incorporation and stated in
the certificate of stock, each share shall be equal in all
respects to every other share. (6)
• Preferred stock – Preferred shares of stock issued by
any corporation may be given preference in the
distribution of the assets of the corporation in case of
liquidation and in the distribution of dividends, or such
other preferences as may be stated in the articles of
incorporation.
• Promotion stock – issued to promoter
• Share in escrow – Subject to agreement where the
stock is deposited to third and kept by the depositary
until the condition contained in agreement happened.
• Convertible stock – May be convertible to other shares
Classes of shares
Founder share – Founders' shares may be given certain
rights and privileges not enjoyed by the owners of other
stocks.
BP 68 R.A. 11232
Requirement to be Classified as such in the No need to classified in the
stated in the article articles of incorporation article of incorporation
Commencement of The five-year period shall 5 years from the date of
period of exclusive commence from the date incorporation. (Sec 7, R.A.
right to vote and be of the aforesaid approval 11232)
voted by the Securities and
Exchange Commission.
(Sec 7 BP 68)
Limitation of Not stated 1. Anti dummy law (C.A.
exclusive right to 108)
vote 2. Foreign Investment Act
of 1991 (R.A. 7042)
3. Other pertinent laws
Classes of shares
• Redeemable share (Sec 8, BP 68)
– Must be expressly so provided in the articles of
incorporation
– Purchased or taken up by the corporation upon
the expiration of a fixed period, regardless of the
existence of unrestricted retained earnings.
– Terms and conditions must be stated in the
articles of incorporation and certificate of stock
– Subject to rules and regulations issued by the
commission. (Amended by Sec 8, R.A. 11232)
Classes of shares
• Treasury stock – shares of stock which have
been issued and fully paid but subsequently
reacquired by the issuing corporation by
purchase, redemption, donation or other
lawful means. Such shares may again be
disposed of for a reasonable price fixed by
the board of directors. (Sec 9, R.A. 11232)
Distinction between Corporators and
Incorporators (Sec 5, R.A. 11232)
Corporators Incorporators
Depend on the capital stock. Limit only to not more than 15.
Not signatories in the article of Originally formed and signatories of

incorporation. the article of incorporation
They cease to be corporators when Remain as incorporators even no

they are no longer a holder of longer a holder of shares of stock
shares of stock.
Steps in the creation of corporations
Promotion Incorporation Organization and

commencement of
business operations
The act of getting it upon 1. Submit the intended corporate name to the
organizing it and procuring Commission for verification and the SEC reserved it
of subscriptions to capital in favor of the incorporators.
stock
2. Submit the articles of incorporation and bylaws to
1. Taking preliminary
options and making of the Commission.
promotion and financing 1. Treasurer’s affidavit (removed by R.A. 11232)
arrangements by the 2. Statement of assets and liabilities
organizers or promoters 3. Certificate as to the name of the corporation
with the aid of 4. Favorable recommendation of appropriate
competent legal advisers government agency if applicable
2. Solicitation of pre 3. Payment of the filing fees and publication fee
incorporation
4. Commission finds that the submitted documents
subscriptions, such as,
the registration and/or are fully compliant law, the Commission shall issue
licensing of securities. the certificate of incorporation
ACTIVITIES WITH ENDORSEMENTS
Air transport Civil Aeronautics Board (CAB)
Banking, pawnshops & other financial intermediaries
with quasi-banking functions Bangko Sentral ng Pilipinas (BSP)
Professional boxing Games and Amusement Board (GAB)
Operation of games of chance (e.g. lotto) Phil. Charity Sweepstakes Office(PCSO)
Educational institution - elementary to high school Dept. of Education (DepEd)
Educational institution - college or tertiary course Commission on Higher Education (CHED)
Educational institution - technical or vocational Technical and Skills Development Authority
course (TESDA)
Electric power plants Department of Energy (DOE)
Hospitals Department of Health (DOH)
Insurance Insurance Commission (IC)
Land Transportation Franchise Regulatory
Land transport Board (LTFRB)
Water transport, construction & building of vessels Maritime Industry Authority (MARINA)
National Telecommunications
Operation of radio, television & telephone Commission(NTC)
Philippine Overseas Employment
Recruitment for overseas employment Administration (POEA)
Security agencies Philippine National Police (PNP)
Contents of the articles of Incorporation (Sec 13, R.A. 11232)
(a) The name of the corporation;
(b) The specific purpose or purposes for which the corporation is being
formed. Where a corporation has more than one stated purpose,
the articles of incorporation shall indicate the primary purpose and
the secondary purpose or purposes: Provided, That a nonstock
corporation may not include a purpose which would change or
contradict Its nature as such;
(c) The place where the principal office of the corporation is to be
located, which must be within the Philippines;
(d) The term for which the corporation is to exist, if the corporation
has not elected perpetual existence;
(e) The names, nationalities, and residence addresses of the
incorporators;
(f) The number of directors, which shall not be more than fifteen (15)
or the number of trustees which may be more than fifteen (15);
(g) The names, nationalities, and residence addresses of persons who
shall act as directors or trustees until the first regular directors or
trustees are duly elected and qualified In accordance with this Code;
Contents of the articles of Incorporation (Sec 13, R.A. 11232 )
h) If it be a stock corporation, the amount of its
authorized capital stock, number of shares into
which it is divided, the par value of each,
names, nationalities, and residence addresses of
the original subscribers, amount subscribed and
paid by each on the subscription, and a
statement that some or all of the shares are
without par value, if applicable;
i) If it be a non stock corporation, the amount of
its capital, the names, nationalities, and
residence addresses of the contributors, and
amount contributed by each; and
j) Such other matters consistent with law and
which the incorporators may deem necessary
and convenient.
Contents of the articles of Incorporation (Sec 13) R.A. 11232
(b) The specific purpose or purposes for which the corporation is being formed. Where a
corporation has more than one stated purpose, the articles of incorporation shall
indicate the primary purpose and the secondary purpose or purposes: Provided, That
a nonstock corporation may not include a purpose which would change or contradict
its nature as such;
(c) The place where the principal office of the corporation is to be located, which must
be within the Philippines;
(d) The term for which the corporation is to exist, if the corporation has not elected
perpetual existence;
(e) The names, nationalities, and residence addresses of the incorporators;
(f) The number of directors, which shall not be more than fifteen (15) or the number of
trustees which may be more than fifteen (15);
(g) The names, nationalities, and residence addresses of persons who shall act as
directors or trustees until the first regular directors or trustees are duly elected and
qualified in accordance with this Code;
(h) If it be a stock corporation, the amount of its authorized capital stock, number of
shares into which it is divided, the par value of each, names, nationalities, and
residence addresses of the original subscribers, amount subscribed and paid by each
on the subscription, and a statement that some or all of the shares are without par
value, if applicable;
(i) If it be a non stock corporation, the amount of its capital, the names, nationalities,
and residence addresses of the contributors, and amount contributed by each; and
(j) Such other matters consistent with law and which the incorporators may deem
necessary and convenient.
Arbitration agreement
An arbitration agreement may be provided in
the articles of incorporation pursuant to Section
181 of this Code.
Filing of articles of incorporation
Either
1. Personal filing
2. Electronic filing in accordance with the
Commission's rules and regulations. (Sec 13,
R.A. 11232)
(d) The term for which the corporation is to exist, if the corporation has
not elected perpetual existence;
incorporators;
Limitation of corporate name
Sec 18, BP 68 Sec 17, R.A. 11232
1. Identical or deceptively 1. Not distinguishable
or confusingly similar from that already
to that of any existing reserved or registered
corporation or for the use of another
2. To any other name corporation, or
already protected by 2. If such name is already
law or protected by law, or
3. Patently deceptive, 3. When its use is contrary
confusing or contrary to existing law, rules
to existing laws and regulations
Corporate Name “Not distinguishable”
A name is not distinguishable even if it contains
one or more of the following:
(a) The word "corporation", "company",
"incorporated", "limited", "limited liability",
or an abbreviation of one of such words; and
(b) Punctuations, articles, conjunctions,
contractions, prepositions, abbreviations,
different tenses, spacing, or number of the
same word or phrase
Violation of corporate name
(1) Not distinguishable from a name already
reserved or registered for the use of another
corporation;
(2) Already protected by law; or
(3) contrary to law, rules and regulations. (Sec
17, R.A. 11232)
Effect of violation of corporate name
• May summarily order the corporation to
immediately cease and desist from using such
name and require the corporation to register a
new one.
– The Commission shall also cause the removal of all
visible signages, marks, advertisements, labels,
prints and other effects bearing such corporate
name.
• Upon the approval of the new corporate
name, the Commission shall issue a certificate
of incorporation under the amended name.
(Sec 17, R.A. 11232)
Unauthorized Use of Corporate Name;
Penalties
Fine ranging from Ten thousand pesos
(P10,000.00) to Two hundred thousand pesos
(P200,000.00). (Sec 159, R.A. 11232)
Failure to comply with the
Commission’s order (CLR)
Hold the corporation and its responsible
directors or officers in Contempt
and/or
Hold them administratively, civilly and/or
criminally Liable under this Code and other
applicable laws
and/or
Revoke the registration of the corporation.
Corporate name
1. Change of corporate name does not result in creation
of another corporation
2. Corporate names of educational institutions
containing the word “Lyceum”
3. General banking Act (“bank”, “banking”, “banker”,
“building and loan association)
4. Rural Bank Act (“Rural bank)”
5. Act 2612 prohibit the word National (business of
bankers, brokers, or saving institutions)
6. R.A. 226 – emblems, official seal and name of the
United Nations
7. R.A. 247 – “bonded” as trade name or business name
of those maintaining any warehouse which neither
licensed under the law
(b) The specific purpose or purposes for which the corporation is
being formed. Where a corporation has more than one stated
purpose, the articles of incorporation shall indicate the primary
purpose and the secondary purpose or purposes: Provided, That a
nonstock corporation may not include a purpose which would
change or contradict Its nature as such;
incorporators;
incorporators;
Principal office of the corporation
• Prior to SEC MC 3, 2006 - city, town or
municipality or "Metro Manila" as a valid
principal office address.
• SEC MC 3, 2006
– Requiring to indicate in the principal office, if feasible,
the street number, street name, barangay, city or
municipality
– city or municipality; and that "Metro Manila" shall no
longer be allowed as address of the principal office.
– existing corporations and partnerships which state
only "Metro Manila", or a city, town, or municipality in
their principal office address were not required to
amend their articles
Principal office of the corporation
Existing corporations and partnerships whose articles of
incorporation or articles of partnership indicate only a
general address as their principal office address, such that
it refers only to a city, town or municipality, or "Metro
Manila", are directed to file an amended articles of
incorporation or amended articles of partnership in
order to specify their complete address, such that, if
feasible, it has a street number, street name, barangay,
city or municipality, and if applicable, the name of the
building, the number of the building, and name or
number of the room or unit. (Sec 1, SEC MC-6, 2014)
Affected corporations and partnerships are given until 31
December 2014 to effect a change in their principal office
address. (Sec 2, SEC MC-6, 2014)
Sanction for violation of MC-6, 2014
Rule: No penalty for non-compliance within the
time prescribed.
The Commission can impose the sanctions of
deferment of applications such as amendments,
certifications, and clearances, and the like. (Sec
4, SEC MC-6, 2014)
(d) The term for which the corporation is to exist, if the corporation
has not elected perpetual existence;
incorporators;
Corporate term
• Perpetual existence unless the articles of
incorporation provides otherwise
• Corporation with certificate prior to the issuance
of this code
– Perpetual existence
– Retain its specific corporate term
• Notify the commission
• Majority of the outstanding capital stock
• Corporate term expired
– Apply for revival of its corporate existence
• Perpetual existence unless its application for revival provides
otherwise. (Sec 11, R.A. 11232)
Revival of certificate of incorporation
The following requires favorable recommendation of the
appropriate government agency: (BPI –TB-PCON)
1. Bank
2. Pre need
3. Insurance
4. Trust companies
5. Banking and quasi banking institution
6. Pawnshop
7. Corporation engaged in money service business
8. Other financial intermediaries
9. Non stock savings and loan associations (NSSLAs) (Sec
11, R.A. 11232)
Grounds when articles of incorporation or
amendment may be disapproved
1. That the articles of incorporation or any
amendment thereto is not substantially in
accordance with the form prescribed herein
2. That the purpose or purposes of the corporation
are patently unconstitutional, illegal, immoral,
or contrary to government rules and regulations;
3. That the Certification concerning the amount of
capital stock subscribed and/or paid is false;
4. That the required percentage of Filipino
ownership of the capital stock under existing
laws or the constitution has not been complied
with. (Sec 16, R.A. 11232)
Grounds when articles of incorporation or
amendment may be disapproved
Due Process Requirement
• That the Commission shall give the
incorporators, directors, trustees, or officers a
reasonable time from receipt of the
disapproval within which to modify the
objectionable portions of the articles or
amendment. (Sec 16, R.A. 11232)
Requires favorable recommendation of
articles of incorporation and its amendment
BP 68 (Sec 17) R.A. 11232 (Sec 16)
• Bank • Bank
• Banking and Quasi banking • Banking and Quasi banking
institution institution
• Trust companies • Trust companies
• Other financial intermediaries • Other financial intermediaries
• Insurance companies • Insurance companies
Deleted Added
• Building and loan association • Pre need companies
• Public utilities • NSSLAs
• Educational institutions • Pawnshop
• Other corporation governed
by special laws
100% Filipino
a. Mass media
b. Practice of professions
c. Retail trade enterprises with paid-up capital of less
than US$2,500,000
d. Private security agencies
e. Small scale mining
f. Utilization of marine resources in archipelagic waters,
territorial sea, and exclusive eonomic zone as well as
small-scale utilization of natural resources in rivers,
lakes, bays and lagoons
g. Ownership, operation and management of cockpits
h. Manufacture of firecrackers and other pryrotechnic
devices.
Partially nationalized Corporation
• 75% Filipino
a. Private radio communications network
b. Private recruitment whether for local of
overseas recruitment
c. Contract for the construction and repair of
locally funded public works
d. Contracts for the construction of defense
related structures.
• 70% Filipino
– Pawnshop business
– business activity of advertising.
• 60% Filipino
a. Exploration, development and utilization of natural
resources
b. Ownership of private lands
c. Operation of public utilities
d. Educational institutions other than those established by
religious groups and mission boards
e. Culture, production, milling, processing, trading except
retailing of rice and corn and acquiring, by barter,
purchase or otherwise, rice and corn and the by-
products thereof.
f. Contracts for the supply of materials, goods and
commodities to government-owned or controlled
corporation, company, agency or municipality
g. Facility operator of an infrastructure or a development facility
requiring a public utility franchise
h. Operation of deep-sea commercial fishing vessel
i. Adjustment companies
j. Ownership of condominium units
k. Manufacture, repair, storage, and/or distribution of products
and/or ingredients requiring Philippine National Police (PNP)
Clearance
l. Manufacture, repair, storage and/or distribution of products
requiring Department of National Defense (DND) clearance
m. Manufacture and distribution of dangerous drugs
n. Sauna and steam bathhouses, massage clinics and like other
activities regulated by law because of risks posed to public health
and morals
o. Domestic market enterprises with paid-in equity capital of less
than the equivalent of US$200,000
p. Domestic market enterprises, which involved advanced
technology or employ at least fifty direct employees with paid-in
equity capital or less than the equivalent of US$100,000
• 40%
–Financing companies
–Investment house
Business activities wherein foreigner's ownership
could be more than forty (40) percent up to one
hundred percent
1. Export enterprises and
2. Domestic market enterprises with paid-in
equity capital of at least the equivalent of
US$200,000
3. Domestic market enterprises, which involved
advanced technology or employ at least fifty
direct employees with paid-in equity capital
of at least the equivalent of US$100,000.
Number and Qualifications of
Incorporators
BP 68 R.A. 11232
Not less than 5 but not more Not more than 15
than 15
Any natural person Any person, partnership,
association or corporation
All must be of legal age Legal age not required except in
case of incorporator as a natural
person
Majority of the incorporator Residency not required
must be resident of the
Philippines
Must be an owner or subscriber of at least one (1) share of capital
stock. (Sec 10, R.A. 11232)
Minimum Capital Stock Not Required
of Stock Corporations
BP 68 R.A. 11232
Stock corporations shall not be required to have a minimum
capital stock, except as otherwise specifically provided by
special law. (Sec 12, R.A. 11232)
Subject to 25% Rule and not Removed
less than P5,000 paid up
capital. (Sec 14, BP 68)
Minimum capital stock requirement
Prior to R.A. 11232
• At least twenty-five percent (25%) of the
authorized capital stock as stated in the
articles of incorporation must be subscribed at
the time of incorporation,
• At least twenty-five (25%) per cent of the total
subscription must be paid upon subscription
• That in no case shall the paid-up capital be
less than five Thousand (P5,000.00) pesos.
(Sec 13, BP 68)
MINIMUM PAID-UP CAPITAL REQUIREMENTS
Banks Pls refer to BSP guidelines
Break Bulk Agent PhP250,000.00
Cargo Consolidator PhP200,000.00
Financing company (head Office)
- Metro Manila and other 1st class cities PhP10,000,000.00
- Other classes of cities PhP5,000,000.00
- Municipalities PhP2,500,000.00
Foreign Branch office US$200,000.00
Foreign Representative office US$30,000.00
Freight Forwarders PhP300,000.00
Foundations (Non-stock corporations) PhP100,000.00 (Working Capital)
Health Maintenance Organization PhP10,000,000.00
Pls refer to Dept. of Finance Order No.100-
Insurance Company 94 dated 24 October 1996
Insurance Adjuster Same as above
Investment Adviser/Manager PhP10,000,000.00
Investment Company PhP50,000,000.00 (Subscribed and Paid-up)
Investment House PhP300,000,000.00
Pls refer to Dept. of Environmental & Natural
Mining Resources Memorandum Order 99-10.
Non-Vessel Operating Common Carrier PhP500,000.00
Pawnshop PhP100,000.00
Pre-Need Plan Issuer PhP100,000,000.00
Pre-Need Plan Agent PhP5,000,000.00
Recruitment Agency for Overseas Employment PhP1,000,000.00
Pls refer to Dept. of Finance Order No.100-94
Reinsurance Company dated 24 October 1996
Retail Trade Activities with Foreign Equity US$2,500,000.00
School
- Elementary Education PhP1,000,000.00
- Elementary & Secondary Education PhP2,500,000.00
- Elementary, Secondary, Tertiary, Post Graduate
Education PhP5,000,000.00
Security Agency PhP500,000.00
Securities Broker/Dealer (New/SRO-Member) * PhP100,000,000.00
Securities Broker/Dealer (Existing/SRO-Member) * PhP5,000,000.00
Securities Broker/Dealer in Proprietary Shares (Non
SRO-Member) * PhP5,000,000.00
Securities Broker/Dealer in Proprietary
Shares (Non SRO-Member) * PhP5,000,000.00
Various, depending on GRT; Pls
Shipping Transport/Vessel Owner refer to PD 474, EO 125 & EO 125-
(Corporation) A
refer to MARINA Memo Circular
Shipping Transport/Vessel Owner No. 79, PD 474, EO 125 & EO 125-
(Partnership) A
Shipping Transport/Vessel Owner (Not refer to MARINA Memo Circular
yet owning or operating vessel at time No. 79, PD 474, EO 125 & EO 125-
of application for accreditation) A
Shipbuilder and/or Ship Repair
(Shipyard) Operator, Afloat Repair/Ship Pls refer to MARINA Circular No.
Repairer, Boat Builder, Ship Breaker 95, Series of 1994
Transfer Agent PhP1,000,000.00
Old – BP 68
Authorized Capital Subscribed Capital Paid up capital

Stock Stock
1,000,000 250,000 62,500
100,000 25,000 6,250
50,000 12,500 5,000

10,000 5,000 5,000
5,000 5,000 5,000
No par value – Old Bp 68
Capital Stock Subscribed Capital Paid up capital

Stock
1,000,000 250,000 62,500
100,000 50,000 30,000
50,000 20,000 20,000

50,000 30,000 15,000
Commencement of corporate existence
• A private corporation formed or organized under
this Code commences to have corporate
existence and juridical personality and is deemed
incorporated from the date the Securities and
Exchange Commission issues a certificate of
incorporation under its official seal; and
thereupon the incorporators, stockholders/
members and their successors shall constitute a
body politic and corporate under the name stated
in the articles of incorporation for the period of
time mentioned therein, unless said period is
extended or the corporation is sooner dissolved
in accordance with law. (Sec. 18, R.A. 11232) (19)
De facto corporations
The due incorporation of any corporation
claiming in good faith to be a corporation under
this Code, and its right to exercise corporate
powers, shall not be inquired into collaterally in
any private suit to which such corporation may
be a party. Such inquiry may be made by the
Solicitor General in a quo warranto proceeding.
(Sec 19, R.A. 11232) (18)
Compromise between conflicting
public policy
Favor of doing
Unauthorized justice to the parties
assumption of and of establishing a
corporate general assurance of
security in business
power dealing
Requisites of a de facto corporation
1. Existence of a valid statute
2. An attempt in good faith to form a
corporation according to the requirements of
law
3. Exercise of corporate powers
Cases of defects not precluding de
facto existence
1. Defects in the execution of incorporation
paper
2. Corporate name violates the statute
3. Ineligibility of one or more incorporators
Defects precluding de facto existence
1. Entity formed under unconstitutional law
2. Corporation formed for a purpose not
permitted by law
3. Failure to execute articles of incorporation
4. Failure to file articles
5. Lack of certificate of incorporation
practices of professions in corporate
form
1. Practice of architecture
2. Practice of interior design
3. Practice of real estate services
4. Practice of customs brokerage
Direct/Indirect attack to corporate
existence
De jure De facto
Direct attack by the No Yes
state
Indirect attack by the No No
state
Direct or Indirect No No
attack by private
litigant
Such inquiry may be made by the solicitor general on a quo

warranto proceeding
Corporation by estoppel
• All persons who assume to act as a corporation
knowing it to be without authority to do so shall
be liable as general partners for all debts,
liabilities and damages incurred or arising as a
result thereof: Provided, however, That when any
such ostensible corporation is sued on any
transaction entered by it as a corporation or on
any tort committed by it as such, it shall not be
allowed to use as a defense its lack of corporate
personality.
• On who assumes an obligation to an ostensible
corporation as such, cannot resist performance
thereof on the ground that there was in fact no
corporation. (Sec 20, R.A. 11232) (19)
Illustration: Corporation by estoppel
• A,B, C, D and E attempted to incorporate X association but
failed to comply one requirement of the law, with knowledge
of this failure to comply. Nevertheless, they assume to act as
a corporation as a result of which they incur a P500,000
obligation from Y. Assuming the total assets of X association
is P300,000.
Determine the liability of A, B, C, D and E and X association.
1. When it does not fall Art. 1822 and 1823 of NCC (Not
solidary)
2. When the circumstances fall under Art. 1822 and 1823
(Solidary liability)
3. Assuming A, B, C, D and E agreed to distribute profit and
losses at (A 40%, and 15% from each of B, C,D and E)
4. Assuming A, B, C, D and E agreed to distribute profit and
losses based on capital contribution. A contributed
P150,000 or 50% and the rest contributed P37,500 each, or
12.5%
5. Assuming A is an innocent passive associate
De jure/Defacto/corporation by estoppel
De jure corporation De facto corporation
There is substantial compliance of No substantial compliance but only
the statutory requirements for colorable compliance with the
incorporation statutory requirements for
incorporation
Cannot e attacked either collaterally Can be questioned or attacked by
or directly even by the state the state in a direct proceeding
De facto corporation Corporation by estoppel

It has real existence in law No real existence in law but a mere
fiction existing only for a particular act
May exist even no dealing between the It cannot exist unless there are dealings
parties on a corporate basis between the parties on a corporate
basis
Less seriously defective. Totally defective
Effects of Non- Use of Corporate Charter and
Continuous Inoperation
BP 68 R.A. 11232
Failure to formally 2 years 5 years
organize and commence
its business
Effects Corporate powers cease Certificate of
and the corporation shall incorporation shall be
be deemed dissolved deemed revoked
Formally organized but 5 years 5 years
subsequently becomes
inoperative
Effects Ground for the After due notice
suspension or revocation and hearing, place the
of its corporate franchise corporation under
delinquent status
or certificate of
incorporation.
Effects of Non-Use of Corporate Charter and
Continuous Inoperation
• If a corporation does not formally organize and
commence its business within five (5) years from
the date of incorporation, its certificate of
incorporation shall be deemed revoked as of the
day following the end of the five (5) year period
• However, if a corporation has commenced its
business but subsequently becomes inoperative
for a period of at least five (5) consecutive years,
the Commission may, after due notice and
hearing, place the corporation under delinquent
status.
Effects of Non-Use of Corporate
Charter and Continuous Inoperation
• A delinquent corporation shall have a period of two (2)
years to resume operations and comply with all
requirements that the Commission shall prescribe.
Upon compliance by the corporation, the Commission
shall issue an order lifting the delinquent status. Failure
to comply with the requirement and resume
operations within the period given by the Commission
shall cause the revocation of the corporation's
certificate of incorporation.
• The Commission shall give reasonable notice to, and
coordinate with the appropriate regulatory agency
prior to the suspension or revocation of the certificate
of incorporation of companies under their special
regulatory jurisdiction. (Sec. 21, R.A. 11232)
Election of Directors or Trustees
• Each stockholder or member (except founder’s share
with exclusive right to vote and be voted) shall have
the right to nominate any director or trustee who
possesses all of the qualifications and none of· the
disqualifications
• either in person or through a representative
authorized to act by written proxy
• Authorized in the by laws or by a majority of the
board of directors
– stockholders or members may also vote through
remote communication or in absentia
• Exception: In corporations vested with public interest,
notwithstanding the absence of a provision in the bylaws of such
corporations. (Sec. 23, R.A. 11232)
Number of directors
Under BP 68
Not less than five (5) but not more than fifteen
(15)
Under R.A. 11232

The number of directors, which shall not be
more than fifteen (15) (Sec 15 par f, R.A. 11232)
Terms of office of Director
One (1) year until the successor is elected and
qualified. (Sec 22, R.A. 11232)
Qualification of directors
1. Owner of at least one share of stock (Sec 22,
R.A. 11232)
2. Possesses all of the qualifications and
3. None of the disqualifications. (Sec 23, R.A.
11232)
• Corporations vested with public interest shall

have independent directors constituting at least
twenty percent (20%) of such board.
• Residence is no longer required
Disqualification of Directors, Trustees or Officers
BP 68 (Sec 27) R.A. 11232 (Sec 26)
1. Convicted by final If, within five (5) years prior to the election or
judgment of an appointment as such, the person was:
offense punishable by (a) Convicted by final judgment:
imprisonment for a (1) Of an offense punishable by imprisonment
period exceeding six for a period exceeding six (6) years;
(6) years, or (2) For violating this Code; and
2. Violation of this Code (3) For violating Republic Act No. 8799,
committed within five otherwise known as "The Securities
(5) years prior to the Regulation Code";
date of his election or (b) Found administratively liable for any
appointment. offense involving fraudulent acts; and
(c) By a foreign court or equivalent foreign
regulatory authority for acts, violations or
misconduct similar to those enumerated in
paragraphs (a) and (b) above
Other disqualifications
Impose by:
1. Commission,
2. Primary regulatory agency, or the
3. Philippine Competition Commission
• For the
– promotion of good corporate governance or
– as a sanction in its administrative proceedings.
(Sec 26, R.A. 11232)
Powers of the board of director
1. Exercise the corporate powers,
2. Conduct all business, and
3. Control all properties of the corporation. (Sec
22, R.A. 11232)
Definition: 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, R.A. 11232)
Who elect the independent director?
• Independent directors must be elected by the
shareholders present or entitled to vote in
absentia during the election of directors.
Independent director
Independent directors shall be subject to rules and
regulations governing their:
1. Qualifications
2. Disqualifications
3. Voting requirements
4. Duration of term and term limit
5. Maximum number of board memberships and
6. Other requirements that the Commission will
prescribe to strengthen their independence and
align with international best practices. (Sec 22,
R.A. 11232)
Corporation required to have independent director
The board of the following corporations vested with
public interest shall have independent directors
constituting at least twenty percent (20%) of such
board:
1. Corporations covered by Section 17.2 of
Republic Act No. 8799, otherwise known as ''The
Securities Regulation Code“
– namely those whose securities are 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) or
more holders of shares, each holding at least one
hundred (100) shares of a class of its equity shares;
Corporation required to have independent director
2. Banks and quasi-banks, NSSLAs, pawnshops,
corporations engaged in money service
business, preneed, trust and insurance
companies, and other financial
intermediaries’ and
3. Other corporations engaged in businesses
vested with public interest similar to the
above, as may be determined by the
Commission.
Relevant factors which are germane to the objective
and purpose of requiring the election of an
independent director
1. Minority ownership,
2. Type of financial products or
3. Securities issued or offered to investors,
4. Public interest involved in the nature of
business operations, and
5. Other analogous factors (Sec 22, R.A. 11232)
Qualification/disqualification of Corporate officer
BP 68 R.A. 11232
President Must be director
Secretary Resident and citizen of the Philippines
Treasurer May or may not be a director Must be resident
Compliance Not required Corporation vested with public interest

officer*
Disqualification 1. Convicted by final If, within five (5) years prior to the election or
judgment of an offense appointment as such, the person was:
punishable by (a) Convicted by final judgment:
imprisonment for a 1. Offense punishable by imprisonment for
period exceeding six (6) a period exceeding six (6) years;
years, or 2. Violating this Code
2. Violation of this Code 3. Violating Republic Act No. 8799,
committed within five otherwise known as "The Securities
(5) years prior to the Regulation Code"
date of his election or (b) Found administratively liable for any offense
appointment. involving fraudulent acts
(c) By a foreign court or equivalent foreign
regulatory authority for acts, violations or
misconduct similar to those enumerated in
paragraphs (a) and (b) above.
Concurrent position of corporate
officer
1. President + secretary – Not allowed
2. President + treasurer – Not allowed
3. Secretary + treasure – Allowed
unless otherwise allowed in this Code. (Sec 24,
R.A. 11232) (25)
REVISED CODE OF CORPORATE
GOVERNANCE
SEC Memorandum Circular No. 6
Series of 2009
Effectivity: July 15, 2009
Corporate Governance
• It is a framework of (SRP)
– Rules
– systems
– Processes in the corporation
• Governs the performance by the Board of
Directors and Management of their respective
duties and responsibilities to the stockholders.
(Art. 1, SMC 6)
Coverage of MC 6
1. Registered corporations
2. Branches or subsidiaries of foreign corporations
operating in the Philippines that
(a) sell equity and/or debt securities to the public that
are required to be registered with the Commission,
or
(b) have assets in excess of Fifty Million Pesos
(a) At least two hundred (200) stockholders
(b) Who own at least one hundred (100) shares each of equity
securities
(c) whose equity securities are listed on an Exchange
(d) grantees of secondary licenses from the
Commission.
Interpretation in case of doubt
Resolved in favor of promoting (FAT)
1. Transparency
2. Accountability
3. Fairness
To the stockholders and investors of the
corporation. (Art. 2, SMC 6)
Responsibility of governance
• Board of Directors (the “Board”) is
primarily responsible for the governance
of the corporation.
–setting the policies for the
accomplishment of the corporate
objectives, it shall
–provide an independent check on
Management
Composition of the BOD – MC 6
• At least five (5), but not more than fifteen (15)
• Shall have at least two (2) independent directors or
such number of independent directors that constitutes
twenty percent (20%) of the members of the Board,
whichever is lesser, but in no case less than two (2).
– All other companies are encouraged to have independent
directors in their boards.
• The exchange are required to have at least 3
independent and an independent director-president.
(MC No 16, 2002)
• May be a combination of executive and non-executive
directors (which include independent directors) in
order that no director or small group of directors can
dominate the decision making process
Definition of terms
Independent director – a person who, apart from
his fees and shareholdings, is independent of
management and free from any business or other
relationship which could, or could reasonably be
perceived to, materially interfere with his exercise
of independent judgment in carrying out his
responsibilities as a director.
Executive director – a director who is also the head
of a department or unit of the corporation or
performs any work related to its operation.
Non-executive director – a director who is not the
head of a department or unit of the corporation nor
performs any work related to its operation.
Multiple Board Seats
• The Board may consider the adoption of
guidelines on the number of directorships that its
members can hold in stock and non-stock
corporations.
• Lower indicative limit for membership in other
boards
– The Chief Executive Officer (“CEO”)
– Other executive directors
– Independent or non-executive directors who, at the
same time, serve as full-time executives in other
corporations.
The Chair and Chief Executive Officer
• The roles of Chair and CEO should, as much as
practicable, be separate.
1. Foster an appropriate balance of power
2. Increased accountability
3. Better capacity for independent decision-making
by the Board.
• If unified
– the proper checks and balances should be laid
down
• to ensure that the Board gets the benefit of
independent views and perspectives.
Duties and responsibilities of the Chair
in relation to the Board
1. Ensure that the meetings of the Board are held
in accordance with the by-laws or as the Chair
may deem necessary
2. Supervise the preparation of the agenda of the
meeting in coordination with the Corporate
Secretary, taking into consideration the
suggestions of the CEO, Management and the
directors.
3. Maintain qualitative and timely lines of
communication and information between the
Board and Management.
Qualifications of Directors
In addition to Corporation Code, Securities
Regulation Code and other relevant laws, the Board
may provide for additional qualifications
1. College education or equivalent academic
degree;
2. Practical understanding of the business of the
corporation;
3. Membership in good standing in relevant
industry, business or professional organizations;
and
4. Previous business experience.
Disqualification of Directors
1. Permanent Disqualification
2. Temporary Disqualification
(i) Permanent disqualification
Convicted by final judgment of any crime that
Involves the purchase or sale of securities under
SRC arises out of
1. The person’s conduct as an underwriter, broker,
dealer, investment adviser, principal, distributor,
mutual fund dealer, futures commission
merchant, commodity trading advisor, or floor
broker.
2. His fiduciary relationship with a bank, quasi-
bank, trust company, investment house or as an
affiliated person of any of them. (i)
(ii) Permanent disqualification
Any person who, by reason of misconduct, after hearing,
is permanently enjoined by a final judgment or order of
the Commission or any court or administrative body of
competent jurisdiction from:
a) Acting as underwriter, broker, dealer, investment
adviser, principal distributor, mutual fund dealer,
futures commission merchant, commodity trading
advisor, or floor broker;
b) Acting as director or officer of a bank, quasibank,
trust company, investment house, or investment
company;
c) engaging in or continuing any conduct or practice in
any of the capacities mentioned in sub-paragraphs (a)
and (b) above, or willfully violating the laws that
govern securities and banking activities.
(iii) Permanent disqualification
Any person convicted by final judgment or order by a court or
competent administrative body of an offense involving
1. Moral turpitude
2. Fraud
3. Embezzlement
4. Theft
5. Estafa
6. Counterfeiting
7. Misappropriation
8. Forgery
9. Bribery,
10. False affirmation
11. Perjury
12. Other fraudulent acts
(iv) Permanent disqualification
Any person who has been adjudged by final judgment or
order of the Commission, court, or competent administrative
body to have:
1. willfully violated
2. Willfully aided
3. Abetted
4. Counseled
5. Induced or
6. Procured
Violation of any provision of
1. the Corporation Code
2. Securities Regulation Code
3. Any other law administered by the Commission or BSP, or
any of its rule, regulation or order
Permanent disqualification
v. Any person earlier elected as independent director who becomes an
(CEO)
• Consultant
• Employee
• Officer
of the same corporation.
vi. Any person judicially declared as insolvent
vii. Any person found guilty by final judgment or order of a foreign

court or equivalent financial regulatory authority of acts, violations or
misconduct similar to any of the acts, violations or misconduct
enumerated in sub-paragraphs (i) to (v) above.
Permanent disqualification
viii. Conviction by final judgment of an offense
punishable by imprisonment for more than six
(6) years, or a violation of the Corporation Code
committed within five (5) years prior to the date
of his election or appointment.
Temporary Disqualification
1. Refusal to comply with the disclosure requirements
– Securities Regulation Code and
– its Implementing Rules and Regulations.
The disqualification shall be in effect as long as the refusal
persists.
2. Absence in more than fifty (50) percent of all regular

and special meetings of the Board during his
incumbency, or any twelve (12) month period during
the said incumbency.
– Exception
• Absence is due to illness,
• Death in the immediate family or
• Serious accident. The disqualification shall apply for purposes of the
succeeding election.
Temporary Disqualification
3. Dismissal or termination for cause as director of any
corporation covered by this Code. The disqualification
shall be in effect until he has cleared himself from any
involvement in the cause that gave rise to his dismissal or
termination.
4. If the beneficial equity ownership of an independent
director in the corporation or its subsidiaries and affiliates
exceeds two percent of its subscribed capital stock. The
disqualification shall be lifted if the limit is later complied
with.
5. If any of the judgments or orders cited in the grounds for
permanent disqualification has not yet become final.
A temporarily disqualified director shall, within sixty (60)

business days from such disqualification, take the appropriate
action to remedy or correct the disqualification.
Specific Duties and Responsibilities of
a Director
1. A director’s office is one of trust and
confidence.
2. A director should act in the best interest of
the corporation in a manner characterized by
transparency, accountability and fairness
(FAT).
3. To exercise leadership, prudence and
integrity in directing the corporation towards
sustained progress
Board Meetings (MC 6, 2009)
Regular and special meetings
• In person
• Teleconferencing in accordance with SEC rules
and regulations.
Board Meetings (MC 6, 2009)
• Independent directors should always attend
Board meetings. Unless otherwise provided in
the by-laws, their absence shall not affect the
quorum requirement.
• The Board may, to promote transparency, require
the presence of at least one independent director
in all its meetings.
To monitor the directors attendance requirements:

• Submit a sworn certification of directors record
of attendance in Board meetings on or before
January 30 of the following year.
Board Committees (MC 6, 2009)
1. The Audit Committee
2. Nomination Committee
3. Compensation or Remuneration Committee
Audit Committee
• Composition:
– Consist of at least three (3) directors
• one of whom shall be an independent
director
• Preferably have accounting and finance
backgrounds
• One with audit experience.
• The chair should be an independent
director.
Nomination Committee
• Composition:
– Composed of at least three (3) members
• One should be an independent director
• Function:
– To review and evaluate the qualifications of all
persons nominated to the Board and other
appointments that require Board approval.
– To assess the effectiveness of the Board’s
processes and procedures in the election or
replacement of directors
Compensation or Remuneration
Committee (MC 6, 2009)
• Composition:
– At least three (3) members
• One of whom should be an independent director
• Function:
– To establish a formal and transparent procedure
for developing a policy on remuneration of
directors and officers to ensure that their
compensation is consistent with the corporation’s
culture, strategy and the business environment in
which it operates.
Corporate Secretary (MC 6, 2009)
1. Be responsible for the safekeeping and preservation
of the integrity of the minutes of the meetings of the
Board and its committees, as well as the other official
records of the corporation;
2. Be loyal to the mission, vision and objectives of the
corporation;
3. Work fairly and objectively with the Board,
Management and stockholders;
4. Have appropriate administrative and interpersonal
skills;
5. If he is not at the same time the corporation’s legal
counsel, be aware of the laws, rules and regulations
necessary in the performance of his duties and
responsibilities;
Corporate Secretary (MC 6, 2009)
6. Have a working knowledge of the operations of the
corporation;
7. Inform the members of the Board, in accordance with the
bylaws, of the agenda of their meetings and ensure that
the members have before them accurate information that
will enable them to arrive at intelligent decisions on
matters that require their approval;
8. Attend all Board meetings, except when justifiable
causes, such as, illness, death in the immediate family and
serious accidents, prevent him from doing so;
9. Ensure that all Board procedures, rules and regulations
are strictly followed by the members; and
10. If he is also the Compliance Officer, perform all the duties
and responsibilities of the said officer as provided for in
this Code.
The Compliance Officer
• Appointed by the Board
• Report directly to the Chair of the Board.
Function of Compliance Officer
1. Monitor compliance by the corporation with this
Code and the rules and regulations of regulatory
agencies.
1. If any violations are found - report the matter to the
Board and recommend the imposition of appropriate
disciplinary action on the responsible parties and the
adoption of measures to prevent a repetition of the
violation.
2. Appear before the Commission when summoned in
relation to compliance with this Code
3. Issue a certification every January 30th of the year on
the extent of the corporation’s compliance with this
Code for the completed year and, if there are any
deviations, explain the reason for such deviation.
End of Corporate governance
Removal of director or trustees
Removal of director or trustees
1. By the stockholders
2. By the commission
Removal of directors or trustees
• Voting requirements
– Stock corporation - at least two-thirds (2/3) of the
outstanding capital stock
– Nonstock corporation - at least two-thirds (2/3) of the
members entitled to vote
• That such removal shall take place either at
– Regular meeting of the corporation
– Special meeting called for the purpose
• Previous notice to stockholders or members of the
corporation of the intention to propose such removal at
the meeting.
• Removal may be with or without cause:
– That removal without cause may not be used to deprive
minority stockholders or members of the right of
representation. (Sec 27, R.A. 11232) (28) (2-2019)
Calling for removal of director/trustees
• A special meeting of the stockholders or members for
the purpose of removing any director or trustee must
be called by the
1. Secretary on order of the president
2. 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. If there is no secretary, or if the secretary, despite
demand, fails or refuses to call the special meeting or to
give notice thereof, the stockholder or member of the
corporation signing the demand may call for the meeting
by directly addressing the stockholders or members.
• Notice of the time 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. (Sec 27, R.A. 11232) (28)
Removal of director by order from
commission
• The Commission 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.
• The removal of a disqualified director shall be
without prejudice to other sanctions that the
Commission may impose on the board of
directors or trustees who, with knowledge of the
disqualification, failed to remove such director or
trustee. (Sec 27, R.A.11232)
Report of election
• If no new date has been designated, or if the rescheduled
election is likewise not held, the 'Commission may, upon
the application of a stockholder, member, director or
trustee, and after verification of the unjustified non-holding
of the election, summarily order that an election be held.
The Commission shall have the 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.
• Notwithstanding any provision of the articles of
incorporation or bylaws to the contrary, the shares of stock
or membership represented at such meeting and entitled
to vote shall constitute a quorum for purposes of
conducting an election under this section. (Sec 25, R.A.
11232) (26)
Report of election (Sec 25, R.A. 11232 ) (26)
Election conducted
Within thirty (30) days after the election of the
directors, trustees and officers of the corporation,
the secretary, or any other officer of the
corporation, shall submit to the Commission,
1. the names,
2. nationalities,
3. shareholdings, and
4. residence addresses
of the directors, trustees and officers elected. (Sec
25, R.A. R.A.11232)
Report of death, resignation or cessation from
office (Sec 25, R.A. 11232) (26)
• Who may report?
– The secretary, or the director, trustee or officer of
the corporation
• Period to report
Bp 68 R.A. 1232
Immediately Within seven (7) days
from knowledge thereof
• Form of report
– In writing
Report of election
No election conducted
• Non-holding of elections and the reasons
therefor shall be reported to the Commission
within thirty (30) days from the date of the
scheduled election.
• The report shall specify a new date for the
election, which shall not be later than sixty
(60) days from the scheduled date. (Sec 25,
R.A. 11232 ) (26)
Alpha Corporation's articles of incorporation provide for 7 directors
and an authorized capital stock of P1,000,000.00 dividend into 10,000
shares with a par value of P100.00 per share. In the election of directors for
2012, the following run for the position: A, B, C, D, E, F, G and H. On that
date, the corporation had 7,000 outstanding shares of which 5,000 shares
had been paid in full, while 2,000 shares were paid to the extent of 50% of
the subscription price. All the shares were subscribed at par value and
covered by a binding subscription agreement If you were a stockholder who
owns 500 shares, how many votes are you entitled to cast in the election of
directors?
a. 500 votes.
b. 3,500 votes.
c. 4,000 votes.
Answer- B
d. 7 votes.
Refer to the information in the preceding number. The number of
shares issued by the corporation is:
a. 7,000 shares
b. 5,000 shares
c. 6,000 shares
d. 10,000 shares Answer- A
Formula:
D = [A x B] / [C + 1] + 1
E=DxC
A = Total number of outstanding shares entitled to
vote
B = Number of directors desired to be elected
C= Total number of directors to be elected
D = Number of shares necessary to elect desired
number of directors
E = Number of votes required to elect desired
number of directors
Problem
X, a stockholder, wishes to be elected to a nine-man
board. He expects that out of 3,000 outstanding
shares, only 2,000 shares will be represented at the
meeting. If X seeks control of the company and
desired to elect five directors, how many shares are
needed to elect five directors?
D = [A x B] / [C + 1] + 1
(2,000 x 5)
D= +1
(9 + 1)
D = 1,001 shares
Problem
Suppose there are 20,000 outstanding shares of a
corporation and 11 directors are to be elected. The
minority stockholders wish to elect three directors.
a.) How many shares are required to elect three
directors?
b.) How many votes are required to elect three directors
D = [A x B] / [C + 1] + 1 E=DxC
(20,000 x 3) + 1 E = 5,001 x 11
D=
(11 + 1) E = 55,011
D = 5,001 shares
Vacancies in the office of director (Sec
28, R.A. 11232) (29)
Stockholder Remaining BOD
Expiration
Removal
Other than ERI ( Quorum)
Increase
Other than ERI (no quorum)
Vacancies in the office of director or trustee
1. Other than removal by the stockholders or
members or expiration of term – Majority of the
remaining directors or trustees if still constituting
quorum.
2. Removal by stockholder or members or expiration
of term or increase in the number of director or
other than (Removal, expiration or increase) but
was referred by the BOD to the stockholders –
Stockholder in a regular or special meeting called
for that purpose.
• Director or trustee elected - served only the
unexpired term of his predecessor in office. (Sec 28,
R.A. 11232) (29)
Vacancies in the Office of Director or
Trustee
Grounds Period of election to fill up vacancy
Expiration The election shall be held no later than
the day of such expiration at a meeting
called for that purpose.
Removal The election may be held on the same
day of the meeting authorizing the
removal and this fact must be so stated
in the agenda and notice of said meeting
All other cases The election must be held no later than
forty-five (45) days from the time the
vacancy arose. (Sec 28, R.A. 11232)
Emergency Board
Vacancy may be temporarily filled from among the
officers of the corporation when the following
requisites are present:
1. The vacancy prevents the remaining directors
from constituting a quorum
2. Emergency action is required to prevent grave,
substantial, and irreparable loss or damage to
the corporation,
3. That there is unanimous vote of the remaining
directors or trustees. (Sec 28, R.A. 11232)
Termination of emergency board
The term shall cease:
1. Within a reasonable time from the
termination of the emergency or
2. Election of the replacement director or
trustee
whichever comes earlier. (Sec 28, R.A. 11232)
Notice to the commission
The corporation must notify the Commission
within three (3) days from the creation of the
emergency board, stating therein the reason for
its creation. (Sec 28, R.A. 11232)
Compensation of director
• General rule: No compensation except for reasonable
per diems
• Exception:
1. Provided for in by laws
2. Vote of the stockholders representing at least a
majority of the outstanding capital stock at
regular or special meeting
3. Directors and director-officer render extraordinary
or unusual services, that is, services which are not
properly incidental to their office and rendered
outside of their regular duties.
• Total yearly compensation shall not exceed 10% of
the net income before income tax of the preceding
year. (Sec 29, R.A. 11232) (30)
Liability of Directors, Trustees or Officers
• Liability: liable jointly and severally for all damages
resulting therefrom suffered by the corporation, its
stockholders or members and other persons: (OLD)
– willfully and knowingly vote for or assent to patently
unlawful acts of the corporation (Duty of obedience)
– who are guilty of gross negligence or bad faith in
directing the affairs of the corporation (Duty of
diligence)
– acquire any personal or pecuniary interest in conflict
with their duty as such directors or trustees (Duty of
loyalty) (Sec 30, par (1), R.A. 11232) (31)
Liability of Directors, Trustees or Officers
A director, trustee or officer shall not attempt to
acquire, or acquire any interest adverse to the
corporation in respect of any matter which has
been reposed in them in confidence, and upon
which, equity imposes a disability upon
themselves to deal in their own behalf;
otherwise, the said director, trustee or officer
shall be liable as a trustee for the corporation
and must account for the profits which
otherwise would have accrued to the
corporation. (Sec 30, par (2), R.A. 11232) (31)
Dealings of Directors, Trustees or Officers
General Rule: with the Corporation
• A contract of the corporation with one (1) or more of its directors,
trustees, officers or their spouses and relatives within the fourth civil
degree of consanguinity or affinity is voidable, at the option of such
corporation.
Exception: Valid when all the requisites 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 necessary for the
approval of the contract;
(c) The contract is fair and reasonable under the circumstances;
(d) In case of corporations vested with public 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. (Sec 31, R.A. 11232) (32)
Ratification of self dealing
directors/officers
In the case of a contract with a director or trustee, where
any of the first three (3) conditions set forth is absent
Voting requirements
• Contract may be ratified by the vote of the
stockholders representing at least two-thirds (2/3) of
the outstanding capital stock or of at least two-thirds
(2/3) of the members in a meeting called for the
purpose: Provided, 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. (Sec 31, R.A. 11232) (32)
Illustration
Total Number of director 15
Required approval by director - 2/3 10
Independent director - 20% of total number of 3
director
Required approval by independent director - 2
Majority
Interlocking director
General Rule:
Except in cases of fraud, and provided the contract is fair
and reasonable under the circumstances, a contract
between two or more corporations having interlocking
directors shall not be invalidated on that ground alone.
Exception:
If the interest of the interlocking director in one
corporation is substantial and his interest in the other
corporation or corporations is merely nominal, he shall be
subject to the provisions of the preceding section insofar as
the latter corporation or corporations are concerned.
• Stockholdings exceeding twenty (20%) percent of the

outstanding capital stock shall be considered substantial for
purposes of interlocking directors. (Sec 32, R.A. 11232)(33)
Disloyalty of a director
Where a director, by virtue of such office, acquires
a business opportunity which should belong to the
corporation, thereby obtaining profits to the
prejudice of such corporation, the director must
account for and refund to the latter all such
profits, unless the act has been ratified by a vote
of the stockholders owning or representing at least
two-thirds (2/3) of' the outstanding capital stock.
This provision shall be applicable, notwithstanding
the fact that the director risked one's own funds in
the venture. (Sec 33, R.A. 11232)(34) (2-2019)
Executive committee
1. The bylaws so provide
2. composed of at least three (3) directors.
3. They may act, by majority vote of all its
members
4. On such specific matters within the
competence of the board, as may be
delegated to it in the bylaws or by majority
vote of the board. (Sec 34, R.A. 11232) (35)
Limitation of power of the Executive
Committee
Executive committees have no power to:
(a) approval of any action for which shareholders'
approval is also required;
(b) filling of vacancies in the board;
(c) amendment or repeal of bylaws or the adoption
of new bylaws;
(d) amendment or repeal of any resolution of the
board which by its express terms is not
amendable or repealable; and
(e) distribution of cash dividends to the
shareholders. (Sec 34, R.A. 11232) (35)
Management, and Other Special
Committees
• The board of directors may create special
committees of temporary or permanent
nature and determine the members' term,
composition, compensation, powers, and
responsibilities. (Sec 34, R.A. 11232) (35)
Express/implied/inherent powers
Express power Implied power
Largely with main object or purposes of Largely with the means and method of
the corporation attaining those objects and purposes
Determined by the language of the May change according to time, place and
corporate charter and fundamental law surrounding circumstances
Founds in the words of the charter or law Fairly incidental to the express power and
reasonably necessary to carrying them
out
Implied power Inherent power

Derived from express power, as well as Incident to corporate existence are not
from powers incident to corporate derived from express power, but from the
existence very existence of the corporation as being
inherent in it as a legal entity
Express Power (Sec 35, R.A. 11232 ) (36)
1. To sue and be sued in its corporate name;
2. To have perpetual existence unless the certificate of incorporation provides otherwise
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in accordance with the provisions of this Code;
5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in
accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers
and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to
the corporation if it be a non-stock corporation;
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal
with such real and personal property, including securities and bonds of other corporations, as the
transaction of the lawful business of the corporation may reasonably and necessarily require,
subject to the limitations prescribed by law and the Constitution;
8. To enter into a partnership, joint venture, merger or consolidation, or any other commercial
agreement with natural or juridical persons; (2-2019)
9. To make reasonable donations, including those for the public welfare or for hospital, charitable,
cultural, scientific, civic, or similar purposes: Provided, That no corporation, domestic (removed)
or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan
political activity; (2-2019)
10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and
employees; and
11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes
as stated in the articles of incorporation. (Implied power)
Implied power: 7 and 11 Inherent power: par 1, 3, 5 and 7

Power to extend or shorten corporate term
Voting requirement
• Approved by a majority vote of the board of directors or trustees, and
ratified at a meeting by the stockholders or members representing at
least two-thirds (2/3) of the outstanding capital stock or of its
members. (2-2019) 2 questions
Meeting
• Written notice of the proposed action and the time and place of the
meeting shall be sent to stockholders or members at their respective
place of residence as shown in the books of the corporation, and must
be deposited to the addressee in the post office with postage prepaid,
served personally, or when allowed in the bylaws or done with the
consent of the stockholder, sent electronically in accordance with the
rules and regulations of the Commission on the use of electronic data
messages.
Appraisal right
• In case of extension of corporate term, a dissenting stockholder may
exercise the right of appraisal under the conditions provided in this
Code. (Sec 36, R.A. 11232) (37)
Power to increase/decrease capital
stock; Increase bond indebtedness
1. Written notice of the time and place of the
stockholders' meeting and the purpose for said
meeting must be sent to the stockholders at
their places of residence as shown in the books
of the corporation and served on the
stockholders personally, or through electronic
means recognized in the corporation's bylaws
and/or the Commission’s rules as a valid mode
for service of notices.
2. 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: (Sec 37,
R.A. 11232) (38)
(a) That the requirements of this section have been complied with;
Power to increase/decrease capital
(b) The amount of the increase or decrease of the capital stock;
(c) In case of an increase of the capital stock, the amount of capital stock or
stock; Increase bond indebtedness
number of shares of no-par stock thereof actually subscribed, the names,
1.nationalities
Written and addresses of the persons subscribing, the amount of
notice of the time and place of the
capital stock or number of no-par stock subscribed by each, and the
stockholders'
amount paid by each onmeeting andin cash
the subscription theorpurpose foramount
property, or the said
of meeting
capital stock must
or number beofsent
shares to the stockholders
of no-par stock allotted to eachat
their places
stockholder of residence
if such increase as shown
is for the purpose in the
of making books
effective stock
of therefor
dividend the authorized;
corporation and served on the
(d) Any bonded indebtedness to be incurred, created or increased;
stockholders personally, or through electronic
(e) The amount of stock represented at the meeting; and
(f) Themeans recognized
vote authorizing inorthe
the increase corporation's
decrease bylaws
of the capital stock, or the
and/or
incurring, theorCommission’s
creating rules
increasing of any bonded as a valid mode
indebtedness.
for service of notices.
2. 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: (Sec 37,
R.A. 11232) (38)
Power to Increase or Decrease Capital Stock;
Incur, Create or Increase Bonded Indebtedness
• Any increase or decrease in the capital stock
or the incurring, creating or increasing of any
bonded indebtedness shall require prior
approval of the Commission, and where
appropriate, of the Philippine Competition
Commission. The application with the
Commission shall be 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. (Sec 37, R.A. 11232) (38)
Power to Increase or Decrease Capital
Stock
• No application for the issuance of unissued
shares.
– The board resolution is sufficient since the board
of directors has the authority to approve the
issuance authorized shares, without stockholder’s
vote. (2-2020)
Power to Increase or Decrease Capital Stock;
Incur, Create or Increase Bonded Indebtedness
• Copies of the certificate shall be kept on file in the office of the
corporation and filed with the Commission and attached to the original
articles of incorporation. After approval by the Commission and the
issuance by the Commission of its certificate of filing, the capital stock
shall be deemed increased or decreased and the incurring, creating or
increasing of any bonded indebtedness authorized, as the certificate of
filing may declare;
• That the Commission shall not accept for filing any certificate of increase
of capital stock unless accompanied by a sworn statement of the treasurer
of the corporation lawfully holding office at the time of the filing of the
certificate, showing that at least twenty-five percent (25%) of the increase
in capital stock has been subscribed and that 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:
• That no decrease in capital stock shall be approved by the Commission if
its effect shall prejudice the rights of corporate creditors. (Sec 37, R.A.
11232) (38)
Power to deny pre-emptive right
• All stockholders of a stock corporation shall enjoy
pre-emptive right to subscribe to all issues or
disposition of shares of any class, in proportion to
their respective shareholdings, unless such right is
denied by the articles of incorporation or an
amendment thereto:
1. Shares to be issued in compliance with laws requiring
stock offerings or minimum stock ownership by the
public;
2. Shares to be issued in good faith with the approval of
the stockholders representing two-thirds (2/3) of the
outstanding capital stock, in exchange for property
needed for corporate purposes or in payment of a
previously contracted debt. (Sec 39, R.A. 11232) (38)
Types of Bond
1. Mortgage bonds – Bonds secured by mortgage on real
properties.
2. Collateral trust bonds – Bonds secured by stocks and
bonds of other corporation.
3. Debenture bonds – Bonds without collateral security.
4. Registered bonds – Requires the registration of the name
of the bondholders on the books of the corporation.
5. Coupon or bearer bonds – are unregistered bonds in the
sense that the name of the bondholder is not recorded
on the company books.
6. Convertible bonds – are those which give the holders
thereof the right to convert their bondholdings into share
capital or other securities of the issuing company within
a specified period of time.
Types of Bond
7. Callable bonds – are bonds issued whereby
another party promises to make payment if the
borrowing company fails to do so.
8. Junk bonds – are high risk, high yield bonds issued
by enterprises that are heavily indebted or
otherwise in weak financial condition. (2-2019)
9. Treasury bonds – are company’s own bonds
originally issued and reacquired but not cancelled.
10.Term bonds – are bonds with a single date of
maturity.
11.Serial bonds – are those with a series of maturity
dates.
Sale or other disposition of assets
Corporate act:
• Sell, lease, exchange, mortgage, pledge, or otherwise
dispose of its property and assets, upon such terms and
conditions and for such consideration, which may be
money, stocks, bonds, or other instruments for the
payment of money or other property or consideration, as
its board of directors or trustees may deem expedient.
Voting Requirement:
1. Not all or substantially all
– Majority vote of its board of directors or trustees
2. All or substantially all
– Majority vote of its board of directors or trustees
– Authorized by the vote of the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock, or at
least two-thirds (2/3) of the members, in a stockholders or
members meeting duly called for the purpose
1. Subject to the provisions of Republic Act No. 10667, otherwise
known as the "Philippine Competition Act", and other related laws
2. Authorized by the vote of the stockholders representing at least
two-thirds (2/3) of the outstanding capital stock, or at least two-
thirds (2/3) of the members, in a stockholders' or members meeting
duly called for the purpose.
3. 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:
4. That any dissenting stockholder may exercise the right of appraisal
5. After such authorization or approval by the stockholders or
members, 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. (Sec 39, R.A.
11232) (40)
No vote of stockholders is required

1. Sale of assets which is necessary in the usual
and regular course of business, or
2. If the proceeds of the sale or other
disposition of such property and assets be
appropriated for the conduct of its remaining
business. (Sec 39, R.A. 11232) (40)
What constitute substantially all of
corporate property?
A sale or other disposition shall be deemed to
cover substantially all the corporate property
and assets if thereby the corporation would be
rendered incapable of continuing the business
or accomplishing the purpose for which it was
incorporated. (Sec 39, R.A. 11232) (40)
Determination of substantially all of
the corporate property?
The determination of whether or not the sale
involves all or substantially all of the
corporation's properties and assets must be
computed based on its net asset value, as
shown in its latest financial statements.
Power to acquire own shares
1. For legitimate corporate purpose or purposes,
including but not limited to the following cases:
a. To eliminate fractional shares arising out of stock
dividends
b. To collect or compromise an indebtedness to the
corporation, arising out of unpaid subscription, in a
delinquency sale, and to purchase delinquent shares
sold during said sale; and
c. To pay dissenting or withdrawing stockholders
entitled to payment for their shares under the
provisions of this Code.
2. Corporation has unrestricted retained earnings
in its books to cover the shares to be purchased
or acquired. (Sec 40, R.A. 11232) (41)
Power to Invest Corporate Funds in Another
Corporation or Business or for Any Other Purpose
1. Other than primary purpose
2. Majority of the board of directors or trustees and ratified by the
stockholders representing at least two-thirds (2/3) of the
outstanding capital stock or members stockholder's or member's
meeting duly called for the purpose.
3. Notice of the proposed investment and the time and place of the
meeting shall be addressed to each stockholder or member at the
place 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 sent 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.
Note: Approval of the stockholders or members shall not be necessary

Investment by the corporation is reasonably necessary to accomplish
its primary purpose as stated in the articles of incorporation(Sec 40,
R.A. 11232) (42)
Power to declare dividend (Sec 43)
Cash/property Stock dividend
dividend
Delinquent 1st applied to unpaid Withheld until his
balance on the unpaid subscription is
subscription plus fully paid
cost and expense
Approval of the Without approval of Approval of 2/3 of the

stockholder stockholders. outstanding capital
stock (Regular/special
meeting called for the
purpose) (2-2019)
Limitation: Unappropriated Retained earnings
General Rule:
Stock corporations are prohibited from retaining surplus profits in
excess of one hundred percent (100%) of their paid in capital stock
Exception:
1. Definite corporate expansion projects or programs
(appropriation for expansion project)
2. Prohibition under any loan agreement with any financial
institution or creditor without its/his consent, and such
consent has not yet been secured; or (Appropriation for bond
redemption)
3. Retention is necessary under special circumstances obtaining
in the corporation, such as when there is need for special
reserve for probable contingencies. (Appropriation for
contingency)
4. Addition: provided by law. (appropriation for treasury stock)
(Sec 42, R.A. 11232) (43)
Power to enter into management contract
• No corporation shall conclude a management contract
with another corporation (also apply to any contract
whereby a corporation undertakes to manage or
operate all or substantially all of the business of another
corporation, whether such contracts are called service
contracts, operating agreements or otherwise) unless
such contract shall have been approved by the board of
directors and by stockholders owning at least the
majority of the outstanding capital stock, or by at least
a majority of the members in the case of a non-stock
corporation, of both the managing and the managed
corporation, at a meeting duly called for the purpose.
(Sec. 43, R.A. 11232) (44)
Power to enter into management contract
Exception:
The management contract must be approved by the stockholders of the
managed corporation owning at least two-thirds (2/3) of the total
outstanding capital stock entitled to vote, or by at least two-thirds (2/3) of
the members in the case of a non-stock corporation under the following:
• Interlocking Stockholders
– Where a stockholder or stockholders representing the same
interest of both the managing and the managed corporations own
or control more than one-third (1/3) of the total outstanding capital
stock entitled to vote of the managing corporation; or
• Interlocking Director
– 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. (Sec. 43, R.A.
11232) (44)
Maximum period of management contract
General Rule:
No management contract shall be entered into for a
period longer than five years for any one term.
Exception:
That such service contracts or operating
agreements which relate to the exploration,
development, exploitation or utilization of natural
resources may be entered into for such periods as
may be provided by the pertinent laws or
regulations. (Sec. 43, R.A. 11232) (44)
Adoption of by-laws
• Every corporation formed must, within one (1)
month after receipt of official notice of the
issuance of its certificate of incorporation by
the Securities and Exchange Commission,
adopt a code of by-laws for its government
not inconsistent with the corporation Code.
*(Removed under R.A. Sec 45, 11232) (46)
Adoption of by-laws
• The bylaws shall be signed by the stockholders
or members voting for them
• Kept in the principal office of the corporation
– 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.
• Subject to the inspection of the stockholders
or members during office hours.
Certification from appropriate
government agency
The Securities and Exchange Commission shall not accept
for filing the by-laws or any amendment unless
accompanied by a certificate of the appropriate
government agency to the effect that such by-laws or
amendments are in accordance with law.
1. bank,
2. banking institution,
3. building and loan association,
4. trust company,
5. insurance company,
6. public utility,
7. educational institution or
8. other special corporations governed by special laws
Voting requirements: Adoption of by-laws
Before Incorporation
• Approved and signed by all the incorporators
and submitted to the Commission, together
with the articles of incorporation.
After Incorporation
• Affirmative vote of the stockholders
representing at least a majority of the
outstanding capital stock, or of at least a
majority of the members in case of nonstock
corporations. (Sec. 43, R.A. 11232) (44)
Contents of by-laws (Sec 47)
A private corporation may provide the following in its bylaws:
a. The time, place and manner of calling and
conducting regular or special meetings of the
directors or trustees;
b. The time and manner of calling and conducting
regular or special meetings of the stockholders or
members thereof;
c. The required quorum in meetings of stockholders or
members and the manner of voting therein;
d. The modes by which a stockholder, member, director, or
trustee may attend meetings and cast their votes;
(inserted by R.A. 11232)
e. The form for proxies of stockholders and members
and the manner of voting them;
A private corporation may provide the following in its
bylaws:
f. The directors or trustees' qualifications, duties and
responsibilities, the guidelines for setting the
compensation of directors or trustees and officers, and
the maximum number of other board representations
that an independent director or trustee may have
which shall, in no case, be more than the number
prescribed by the Commission;
g. The time for holding the annual election of directors of
trustees and the mode or manner of giving notice
thereof;
h. The manner of election or appointment and the term of
office of all officers other than directors or trustees;
(5) The qualifications, duties and compensation of directors or
trustees, officers and employees; (Sec 47 (5), BP 68)
bylaws:
f. The directors or trustees' qualifications, duties and
responsibilities, the guidelines for setting the
compensation of directors or trustees and officers, and
the maximum number of other board representations
that an independent director or trustee may have
which shall, in no case, be more than the number
prescribed by the Commission;
g. The time for holding the annual election of directors of
trustees and the mode or manner of giving notice
thereof;
h. The manner of election or appointment and the term of
office of all officers other than directors or trustees;
Contents of by-laws
bylaws:
i. The penalties for violation of the by-laws;
j. In the case of stock corporations, the manner of
issuing stock certificates; and
k. Such other matters as may be necessary for the
proper or convenient transaction of its
corporate affairs for the promotion of good
governance and anti-graft and corruption
measures. (as amended by Sec 46, R.A. 11232)
(47)
An arbitration agreement may be provided in the bylaws
pursuant to Section 181 of this Code. (inserted by R.A.
11232)
Amendments to by-laws
• Whenever the bylaws are amended or new
bylaws are adopted, the corporation shall file
with the Commission such amended or new
bylaws and, if applicable, the stockholders' or
members' resolution authorizing the delegation
of the power to amend and/or adopt new bylaws,
duly certified under oath by the corporate
secretary and a majority of the directors or
trustees.
• The amended or new bylaws shall only be
effective upon the issuance by the Commission of
a certification that the same is in accordance with
this Code and other relevant laws. (Sec 47, R.A.
11232)(48)
Amendment of By laws
1. A 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
2. Delegation of power to Board of Director - The
owners of two-thirds (2/3) of the outstanding capital
stock or two-thirds (2/3) of the members in a
nonstock corporation.
3. Revocation of power – 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
meeting. (Sec 47, R.A. 11232)
Ultra Vires Acts of Corporations
• Those entered into in the name of another person by one
who has been given no authority or legal representation, or
who has acted beyond his powers is unenforceable contract
(Art. 1317 and 1403 (1))
• Illegal acts of a corporation contemplate the doing of an act
which is contrary to law, morals, or public order, or
contravene some rules of public policy or public duty, and
are, like similar transactions between individuals, void.
They can not serve as basis of a court action, nor acquire
validity by performance, ratification, or estoppel. On the
other hand, ultra vires acts or those which are not illegal
and void ab initio but are merely within the scope of the
article of incorporation, are merely voidable and may
become binding and enforceable when ratified by the
stockholders. (Maria Clara vs. Dela Rama Steamship Co.,
G.R. No. L-5377. December 29, 1954) (2-2019)
Limitation/ratification
1. Ratified by all the stockholders
2. When no creditors, or the creditors are not
injured thereby
3. Where the right of the state or the public are
not are not involved
Effect of illegal contract
• Amounting to crime
– Both parties being in pari delicto, they shall have no
action against each other.
• Not amounting to crime
– Both parties at fault, neither may recover what he has
given by virtue of the contract, or demand the
performance of the other ‘s undertaking
– When only one of the contracting parties is at fault
• At fault - cannot recover what he has given by reason of the
contract
• Not at fault – may demand the return of what he has given
without any obligation to comply with his promise.
Meetings
Director meeting Stockholder meeting
➢ Proxy ➢ Cannot attend or vote by proxy (Sec 52) ➢ Proxy vote allowed
➢ Date of ➢ Regular meeting – monthly unless the ➢ Regular meeting – annually as fixed by the
meeting By law provide otherwise. (Sec 53) by law if not (any date after April 15) +
➢ Special meeting – At anytime upon call written notice 21 days prior to meeting
of the president or provided in the by unless the law, regulation or bylaws so
laws. (Sec 52) (53) provide. (2-2019)
➢ Regular or special meeting required a ➢ Special meeting – at any time deemed
notice of at least 2 days prior to necessary + written notice 1 week prior to
scheduled meeting unless the by law meeting or stated in by law. (2-2019)
provide.
➢ Notice can be waived express of
implied.
➢ Place of ➢ Anywhere in or out side of the ➢ Principal office of the corporation set in
meeting Philippines unless the by law provide the article of incorporation. If not
otherwise. (Sec 52) (53) practicable, in the city or municipality
where the principal office of the
corporation is located. Metro manila,
Metro Cebu, Metro Davao and Other
metropolitan are considered city or
municipality.
➢ Improperly held or called – valid if within
the power or authority of the corporation and
provided all stockholders or members are
present or duly represented.
Meetings
Director meeting Stockholder meeting
➢ Manner ➢ Either in person, remote ➢ Either in person or proxy.
of voting communication such as By remote communication
videoconferencing, when authorized by the by
teleconferencing or other laws or by the board of
alternative modes of directors.
communication.
➢ Quorum ➢ Majority of the BOD/trustee as ➢ Majority of the outstanding
fixed in the article of capital stock or majority of
incorporation unless the article the members. (Sec 52)
or by law provides a greater
majority. (Sec 52)
➢ Preside ➢ Chairman or in his absence, the President shall preside unless
the the by law provide otherwise. (Sec 53)
meeting
Postponement of stockholders or
members regular meetings
Unless a different period is required under the
bylaws, law or regulation.
• Written notice thereof and the reason
therefor shall be sent to all stockholders or
members of record at least two (2) weeks
prior to the date of the meeting. (Sec 49, R.A.
11232)
Notice of meeting
• Notice of meetings shall be sent through the
means of communication provided in the bylaws,
Content of notice of meeting

Notice shall state the
1. Time,
2. Place and
3. Purpose of the meetings.
Attachment to the notice of meeting
Each notice of meeting shall further be
accompanied by the following:
(a) The agenda for the meeting;
(b) A proxy form which shall be submitted to the
corporate secretary within a reasonable time
prior to the meeting;
(c) When attendance, participation, and voting are
allowed by remote communication or in
absentia, the requirements and procedures to
be followed when a stockholder or member
elects either option.
Report by the Board
At each regular meeting of stockholders or members, the
board of directors or trustees shall endeavour to present to
stockholders or members the following:
(a) The minutes of the most recent regular meeting which
shall include, among others:
(1) A description of the voting and vote tabulation procedures
used in the previous meeting;
(2) A description of the opportunity given to stockholders or
members to ask questions and a record of the questions
asked and answers given;
(3) The matters discussed and resolutions reached:
(4) A record of the voting results for each agenda item
(5) A list of the directors or trustees, officers and stockholders or
members who attended the meeting; and
(6) Such other items that the Commission may require in the
interest of good corporate governance and the protection of
minority stockholders; (Sec 49, R.A. 11232)
Report by the Board
(b) A members" list for nonstock corporations and,
for stock corporations, material information on the
current stockholders, and their voting rights;
(c) A detailed, descriptive, balanced and
comprehensible assessment of the corporation's
performance, which shall include information on
any material change in the corporation's business,
strategy, and other affairs;
(d) A financial report for the preceding year, which
shall include financial statements duly signed and
certified in accordance with this Code and the
rules the Commission may prescribe, a statement
on the adequacy of the corporation’s internal
controls or risk management systems, and a
statement of all external audit and non-audit fees;
Report by the Board
(e) An explanation of the dividend policy and the fact of
payment of dividends or the reasons for non-payment
thereof;
(f) Director or trustee profiles which shall include,
among others, their qualifications and relevant
experience, length of service in the corporation,
trainings and continuing education attended, and their
board representations in other corporations;
(g) A director or trustee attendance report, indicating
the attendance of each director or trustee at each of the
meetings of the board and its committees and in regular
or special stockholder meetings;
(h) Appraisals and performance reports for the board
and the criteria and procedure for assessment;
Report by the Board
(i) A director or trustee compensation report
prepared in accordance with this Code and the
rules the Commission may prescribe;
(j) Director disclosures on self-dealings and
related party transactions; and/or
(k) The profiles of directors nominated or
seeking election or reelection.
Waiver of notice of meeting
• Notice of any meeting may be waived, expressly
or impliedly, by any stockholder or member:
– General waivers of notice in the articles of
incorporation or the bylaws shall not be allowed:
• That attendance at a meeting shall constitute a
waiver of notice of such meeting,
Exception:
– when the person attends a meeting for the express
purpose of objecting to the transaction of any
business because the meeting is not lawfully called
or convened. (Sec 49, R.A. 11232)
Proper person to call meeting
1. Person designated in the by laws have authority to call stockholder’s or
members meetings.
2. In the absence of such provision in the by laws, the meeting may be
called by a director or trustee or by officer entrusted with the
management of the corporation.
3. Whenever for any cause, there is no person authorized or the person
authorized unjustly refuses to call a meeting, the Commission, upon
petition of a stockholder or member on a showing of good cause
therefor, may issue an order, directing the petitioning stockholder or
member to call a meeting of the corporation by giving proper notice
required by this Code or the bylaws. The petitioning stockholder or
member shall preside thereat until at least a majority of the stockholders
or members present have chosen from among themselves, a presiding
officer. (amended by Sec. 49, R.A. 11232) (50)
4. A special meeting of the stockholders or members of a corporation for
the purpose of removal of directors or trustees, or any of them, must be
called by the secretary on order of the president or on the written
demand of the stockholders representing or holding at least a majority of
the outstanding capital stock, or, if it be a non-stock corporation, on the
written demand of a majority of the members entitled to vote. (Sec 28)
5. Special meetings of the board of directors or trustees may be held at any
time upon the call of the president or as provided in the by-laws. (Sec 53)
Period to close stock and transfer book
Unless the bylaws provide for a longer period,
the stock and transfer book or membership
book shall be closed
• Regular meeting
– at least twenty (20) days before the scheduled
date of the meeting
• Special Meeting
– Seven (7) days before the scheduled date of the
meeting. (Sec 49, R.A. 11232)
Voting by stockholder’s (Sec 57)
The right to vote of stockholders or members
may be
1. Exercised in person,
2. Through a proxy, or
3. When so authorized in the bylaws or majority
of the board of directors
– through remote communication or in absentia.
• The votes are received before corporation finishes the
tally of votes.
• Deemed present for purpose of the quorum
Factor to considered in voting by
absentia
1. Company's scale,
2. Number of shareholders or members,
3. Structure and other factors consistent with
the basic right of corporate suffrage.
Voting power
1. Secured creditors – Stockholder-grantor shall have
the right to attend and vote at meetings of
stockholders, unless the secured creditor is expressly
given by the stockholder-grantor such right in writing
which is recorded in the appropriate corporate books
(Sec 54) (55)
2. Administrator - Executor/administrator/receiver and
other legal representative appointed by the court
without any written proxy. (Sec 54) (55)
3. Treasury shares no right to vote as long as remain in
treasury. (Sec 56) (57)
4. Joint Ownership of Stock - The consent of all the co-
owners shall be necessary. When the sharesare
owned in an "and/or" capacity by the holders
thereof, any one of the joint owners can vote said
shares or appoint a proxy therefor. (Sec 55)
Proxies
1. In writing
2. Any form authorized in the bylaws
3. Signed and filed by stockholder or member
4. Received by the corporate secretary within
reasonable time before the scheduled
meeting.
5. Valid only for the meeting which it is
intended unless provided in the proxy form.
6. If provided a period, it has a limit for a period
of 5 years at any one time. (Sec 57, R.A. 11232)
(58)
Voting trusts
1. Must be in writing and notarized
2. Specify the term and condition
3. Filed with the corporation and the SEC
4. Period of agreement not to exceed 5 years except voting trust
specifically required as a condition in a loan agreement
(automatically expire upon payment of the loan)
5. Certificate of stock covered by voting trust agreement shall be
cancelled and a new one shall be issued in the name of the trustee.
6. The book of corporation shall noted the transfer
7. No voting trust agreement shall be entered into for purposes of
circumventing the laws against anti-competitive agreements, abuse
of dominant position, anti-competitive mergers and acquisitions,
violation of nationality .and capital requirements, or for the
perpetuation of fraud.
8. Automatically expire at the end of the agreed period unless
renewed.
9. May be voted by proxy unless the agreement prohibit it. (Sec 58, R.A.
11232) (59)
Stock corporation Non stock corporation
Number of Not more than fifteen Fixed in the articles of incorporation or
director (15) (Sec 13, R.A. bylaws which may or may not be more
11232) (14) than fifteen (15). (Sec 91, R.A. 11232)
Term of office of One (1) year until their They shall hold office for not more than
the director/ successors are elected three (3) years until their successors are
trustees and qualified. (Sec 22, elected and qualified. (Sec 91, R.A.
R.A. 11232) (23) 11232) (92)
Purpose For profit Formed or organized for charitable,
religious, educational, professional,
cultural, fraternal, literary, scientific,
social, civic service, or similar purposes,
like trade, industry, agricultural and like
chambers, or any combination thereof
(Sec 87, R.A. 11232) (88)
Voting Cumulative Non cumulative (entitled to 1 vote) unless
authorized under the article of
incorporation or by laws. (Sec 88, R.A.
11232) (89)
Manner of Voting either in person Voting by mail or other similar
voting or by representative means by members of non-stock
authorized to act by corporations may be authorized by
written proxy (Sec 24) the by-laws of non-stock
corporations. (Sec 89)
Distribution Authorized to No part of its income is
of dividend distribute dividends to distributable as dividends to its
stockholders members, trustees, or officers. (Sec
86, R.A. 11232) (87)
Transferabilit Transferrable Membership in a non-stock
y of interest corporation and all rights arising
therefrom are personal and non-
transferable, unless the articles of
incorporation or the by-laws
otherwise provide. (Sec 89, R.A.
11232) (90)
Ownership of At least owner of one share of Must be a member of the
director stock. (Sec 22, R.A. 11232) corporation, except
independent trustees
vested with public interest
(Sec 91, R.A. 11232) (92)
Stockholder/m Principal office of the corporation That the place of meeting
ember Place of as set forth in the articles of shall be within Philippine
meeting incorporation, or, if not practicable, territory. (Sec 92, R.A.
(Regular and in the city or municipality where 11232) (93)
special) the principal office of the
corporation is located: Provided,
That any city or municipality in
Metro Manila, Metro Cebu, Metro
Davao, and other Metropolitan
areas shall, for purposes of this
section, be considered a city or
municipality. (Sec 50, R.A. 11232)
Subscription Contract
• Any contract for the acquisition of unissued
stock in an existing corporation or a
corporation still to be formed shall be deemed
a subscription within the meaning of this Title,
notwithstanding the fact that the parties refer
to it as a purchase or some other contract (Sec
59, R.A. 11232) (60)
• Holder’s of subscribed shares not fully paid
which are not delinquent shall have all the
rights of a stockholder. (Sec. 71, R.A. 11232)
Pre-incorporation Subscription
A subscription of shares in a corporation still to be
formed
• BEFORE submission of articles of incorporation to the
SEC
– Irrevocable for a period of at least six (6) months from the
date of subscription
– Exception:
• all of the other subscribers consent to the revocation
• The corporation fails to incorporate within the same period or
within a longer period stipulated in the contract of subscription.
• AFTER submission of articles of incorporation to the
Commission
– No pre-incorporation subscription may be revoked. (Sec
60, R.A. 11232)
Consideration for stocks
Stocks shall not be issued for a consideration less than the par or issued
price thereof otherwise it is watered stock.
(a) Actual cash paid to the corporation;
(b) Property, tangible or intangible, actually received by the corporation
and necessary or convenient for its use and lawful purposes at a fair
valuation equal to the par or issued value of the stock issued;
(c) Labor performed for or services actually rendered to the corporation;
(d) Previously incurred indebtedness of the corporation;
(e) Amounts transferred from unrestricted retained earnings to stated
capital;
(f) Outstanding shares exchanged for stocks in the event of reclassification
or conversion;
(g) Shares of stock in another corporation; and/or
(h) Other generally accepted form of consideration.
Where the consideration is other than actual cash, or consists of intangible
property such as patents or copyrights, the valuation thereof shall initially
be determined by the stockholders or the board of directors, subject to the
approval of the Commission
Shares of stock shall not be issued in exchange for promissory notes or
future service. (Sec 61, R.A. 11232) (62)
Issued price of no par
The issued price of no-par value shares may be
• If fixed
– In the articles of incorporation or
– By the board of directors pursuant to authority
conferred by the articles of incorporation or the
bylaws
• If not so fixed
– by the stockholders representing at least a
majority of the outstanding capital stock at a
meeting duly called for the purpose. (Sec 61, R.A.
11232)
Certificate of Stock and Transfer of Shares
• Shares of stock so issued are personal property and may be
transferred by delivery of the certificate or certificates
indorsed by the owner, his attorney-in-fact, or any other
person legally authorized to make the transfer. No transfer,
however, shall be valid, except as between the parties, until
the transfer is recorded in the books of the corporation
showing the names of the parties to the transaction, the date
of the transfer, the number of the certificate or certificates,
and the number of shares transferred.
• The Commission may require corporations whose securities
are traded in trading markets and which can reasonably
demonstrate their capability to do so to issue their
securities or shares of stocks in uncertificated or scripless
form in accordance with the rules of the Commission.
• No shares of stock against which the corporation holds any
unpaid claim shall be transferable in the books of the
corporation. (Sec 62, R.A. 11232) (63)
Issuance of Stock Certificates
• No certificate of stock shall be issued to a
subscriber until the full amount of the
subscription together with interest and
expenses (in case of delinquent shares), if any
is due, has been paid. (Sec 63, R.A. 11232)
Liability of directors for watered stocks
A director or officer of a corporation who:
(a) consents to the issuance of stocks for "a
consideration less than its par or issued value;
(b) consents to the issuance of stocks for a
consideration other than cash, valued in excess
of its fair value; or
(c) having knowledge of the insufficient
consideration, does not file a written objection
with the corporate secretary
Shall be liable to the corporation or its creditors,
solidarily with the stockholder concerned for the
difference between the value received at the time
of issuance of the stock and the par or issued value
of the same. (Sec 64, R.A. 11232) (65)
Right of stockholders to bring suits
1. Derivative suit – One brought by one or more
stockholders or members in the name and on behalf of
the corporation to redress wrongs committed against it
or to protect or vindicate corporate rights, whenever
the officials of the corporation refuse to sue, or are the
ones to be sued or hold control of the corporation.
2. Individual suit – Action brought by a stockholder against
the corporation for direct violation of his contractual
rights as such individual stockholders. Any recovery by
the stockholder belongs to him.
3. Representative suit – When a wrong is committed
against a group of stockholders, a stockholder may bring
suit in behalf of himself and all other stockholders who
are similarly situated.
Remedies for payment of stock subscription
1. Extra judicial sale at public auction (Sec 66-69, R.A. 11232)
2. Judicial Action - collecting by action in a court of proper
jurisdiction the amount due on any unpaid subscription,
with accrued interest, costs and expenses. (Sec 69, R.A.
11232)
3. Collection from cash dividends and withholding of stock
dividends - 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 stockholder until his
unpaid subscription is fully paid (Sec 42) R.A. 11232
4. To deny delinquent shares the right to vote -No delinquent
stock shall be voted for, be entitled to vote, or be
represented at any stockholder's meeting, nor shall the
holder thereof be entitled to any of the rights of a
stockholder except the right to dividends. (Sec 70, R.A.
11232) (71)
Procedure: Extrajudicial sale
1. Payment of unpaid subscription or any percentage
thereof, together with any interest accrued, shall be
made on the date specified in the subscription contract
or on the date stated in the call made by the board.
2. Failure to pay on such date shall render the entire
balance due and payable and shall make the stockholder
liable for interest at the legal rate on such balance, unless
a different interest rate is provided in the subscription
contract. The interest shall be computed from the date
specified, until full payment of the subscription.
3. If no payment is made within thirty (30) days from the
said date, all stocks covered by the subscription shall
thereupon become delinquent and shall be subject to
sale as hereinafter provided, unless the board of
directors orders otherwise. (Sec 66, R.A. 11232)
4. The board of directors may, by resolution, order the sale of delinquent
stock and shall specifically state the amount due on each subscription
plus all accrued interest, and the date, time and place of the sale
which shall not be less than thirty (30) days nor more than sixty (60)
days from the date the stocks become delinquent.
5. Notice of the sale, with a' copy of the resolution, shall be sent to every
delinquent stockholder either personally, by registered mail, or
through other means provided in the bylaws. The same shall be
published once a week for two (2) consecutive weeks in a newspaper
of general circulation in the province or city where the principal office
of the corporation is located.
6. Unless the delinquent stockholder pays to the corporation, on or
before the date specified for the sale of the delinquent stock, the
balance due on the former's subscription, plus accrued interest, costs
of advertisement and expenses of sale, or unless the board of
directors otherwise orders, said delinquent stock shall be sold at a
public auction to such bidder who shall offer to pay the full amount of
the balance on the subscription together with accrued interest, costs
of advertisement and expenses of sale, for the smallest number of
shares or fraction of a share. (Sec 67, R.A. 11232)
7. The stock so purchased shall be transferred to such
purchaser in the books of the corporation and a certificate
for such stock shall be issued in the purchaser's favor. The
remaining shares, if any, shall be credited in favor of the
delinquent stockholder who shall likewise be entitled to the
issuance of a certificate of stock covering such shares.
8. Should there be no bidder at the public auction who offers to
pay the full amount of the balance on the subscription
together with accrued interest, costs of advertisement, and
expenses of sale, for the smallest number of shares or
fraction of a share, the corporation may, subject to the
provisions of this Code, bid for the same, and the total
amount due shall be credited as fully paid in the books of the
corporation.
9. Title to all the shares of stock covered by the subscription
shall be vested in the corporation as treasury shares and may
be disposed of by said corporation in accordance with the
provisions of this Code. (Sec 67, R.A. 11232)
Effect of Delinquency
No delinquent stock shall be
1. Voted for
2. Be entitled to vote
3. Be represented at any stockholder's meeting,
4. Be entitled to any of the rights of a
stockholder
Exception
• Right to dividends (Sec 70, R.A. 11232)
Books to be Kept
Every corporation shall keep and carefully preserve at its principal
office all information relating to the corporation including, but not
limited to:
(a) The articles of incorporation and bylaws of the corporation and
all their amendments;
(b) The current ownership structure and voting rights of the
corporation, including lists of stockholders or members, group
structures, intra-group relations, ownership data, and beneficial
ownership;
(c) The names and addresses of all the members of the board of
directors or trustees and the executive officers;
(d) A record of all business transactions;
(e) A record of the resolutions of the board of directors or trustees
and of the stockholders or members;
(f) Copies of the latest reportorial requirements submitted to the
Commission; and
(g) The minutes of all meetings of stockholders or members, or of the
board of directors or trustees. (Sec 73, R.A. 11232)
Right to inspect corporate record
Corporate records, regardless of the form in
which they are stored, shall be open to
inspection by any director, trustee, stockholder
or member of the corporation in person or by a
representative at reasonable hours on business
days, and a demand in writing may be made by
such director, trustee or stockholder at their
expense, for copies of such records or excerpts
from said records. (Sec 73, R.A. 11232)
Who cannot inspect or demand
reproduction of corporate record?
A requesting party who is
1. Not a stockholder or member of record
2. Competitor
3. Director, officer, controlling stockholder or
otherwise represents the interests of a
competitor. (Sec 73, R.A. 11232)
Abuse of right of stockholders
Any stockholder who shall abuse the rights
granted shall be penalized
1. Fine ranging from (P5,000.00) to
(P2,000,000.00), and
2. Not more than (P1,000.00) for each day of
continuing violation but in no case to exceed
(P2,000,000.00); (Section 158, R.A. 11232)
without prejudice to the provisions of
1. Intellectual Property Code of the Philippines
(R.A. 8293)
2. Data Privacy Act of 2012 (R.A.10173)
CORPORATE BOOKS AND RECORDS
Any officer or agent of the corporation who shall refuse to allow
the inspection and/or reproduction of records in accordance with
the provisions of this Code shall be liable to such director, trustee,
stockholder or member for damages, and in addition, shall be
guilty of an offense which shall be punishable under Section 161
of this Code. (Sec 73, R.A. 11232)
BP 68 R.A. 11232
Fine of not less than (P1,000.00) Fine ranging from (P10,000,00) to
but not more than (P10,000.00) (P200,000.00), at the discretion of the
pesos or by imprisonment for not court, taking into consideration the
less than (30) days but not more seriousness of the violation and its
than (5) years, or both, in the implications. When the violation is
discretion of the court. injurious or detrimental to the public, the
penalty is a fine ranging from (P20,000,00)
to (P400,000,00) without prejudice to the
Commission's exercise of its contempt
powers (Sec 161, R.A. 11262)
Valid defense: Denial of right to
inspect corporate books and records
That it shall be a defense to any action that the person
demanding to examine and copy excerpts from the
corporation's records and minutes has
1. Improperly used any information secured through any
prior examination of the records or minutes of such
corporation or of any other corporation.
2. Was not acting in good faith or for a legitimate
purpose in making the demand to examine or
reproduce corporate records, or
3. A competitor, director, officer, controlling
stockholder or otherwise represents the interests of
a competitor. (Sec 73, R.A. 11232) (2-2019)
Right to Financial Statement
• A corporation shall furnish a stockholder or member, within
ten (10) days from receipt of their written request, its most
recent financial statement, in the form and substance of
the financial reporting required by the Commission.
• At the regular meeting of stockholders or members, the
board of directors or trustees shall present to such
stockholders or members a financial report of the
operations of the corporation for the preceding year, which
shall include financial statements, duly signed and certified
in accordance with this Code, and the rules the Commission
may prescribe.
• However, if the total assets or total liabilities of the
corporation are less than Six hundred thousand pesos
(P600,000.00), or such other amount as may be determined
appropriate by the Department of Finance, the financial
statements may be certified under oath by the treasurer
and the president. (Sec 74, R.A. 11232) (75)
Merger/Consolidation
Two (2) or more corporations may merge into a
single corporation which shall be one of the
constituent corporations or may consolidate into
a new single corporation which shall be the
consolidated corporation. (Sec 75, R.A.
11232)(76)
Effects of Merger or Consolidation
The merger or consolidation shall have the following
effects:
(a) The constituent corporations shall become a single
corporation which, in case of merger, shall be the
surviving corporation designated in the plan of
merger; and, in case of consolidation, shall be the
consolidated corporation designated in the plan of
consolidation;
(b) The separate existence of the constituent
corporations shall cease, except that of the surviving
or the consolidated corporation;
(c) The surviving or the consolidated corporation shall
possess all the rights, privileges, immunities, and
powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code;
Effects of Merger or Consolidation
d) 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 account, including subscriptions
to shares and other chases in action, and every other interest
of, belonging to, or due to each constituent corporation, shall
be deemed transferred to and vested in such surviving or
consolidated corporation without further act or deed; and
e) The surviving or consolidated corporation shall be
responsible for all the liabilities and obligations of each
constituent corporation as though such surviving or
consolidated corporation had itself incurred such liabilities or
obligations; and any pending claim, action or proceeding
brought by or against any constituent corporation may be
prosecuted by or against the surviving or consolidated
corporation. The rights of creditors or liens upon the
property of such constituent corporations shall not be
impaired by the merger or consolidation.
Appraisal Right
Any stockholder of a corporation shall have the right to
dissent and demand payment of the fair value of the shares in
the following instances:
a. In case an amendment to the articles of incorporation has
the effect of changing or restricting the rights of any
stockholder or class of shares, or of authorizing
preferences in any respect superior to those of
outstanding shares of any class, or of extending or
shortening the term of corporate existence;
b. In case of sale, lease, exchange, transfer, mortgage, pledge
or other disposition of all or substantially all of the
corporate property and assets as provided in this Code;
c. In case of merger or consolidation; and
d. In case of investment of corporate funds for any purpose
other than the primary purpose of the corporation. (Sec
60, R.A. 11232)
Procedure: Exercise of appraisal right
1. Any stockholder who shall have voted against the proposed corporate action
2. Written demand on the corporation for the payment of the fair value of
shares held within thirty (30) days from the date on which the vote was
taken: Provided, That failure to make the demand within such period shall be
deemed a waiver of the appraisal right
3. If the proposed corporate action is implemented, the corporation shall pay
the stockholder, upon surrender of the certificate or certificates of stock
representing the stockholder's shares, the fair value thereof as of the day
before the vote was taken, excluding any appreciation or depreciation in
anticipation of such corporate action.
4. If, within sixty (60) days from the approval of the corporate action by the
stockholders, the withdrawing stockholder and the corporation cannot agree
on the fair value of the shares, it shall be determined and appraised by three
(3) disinterested persons, one of whom shall be named by the stockholder,
another by the corporation, and the third by the two (2) thus chosen. The
findings of the majority of the appraisers shall be final, and their award shall
be paid by the corporation within thirty (30) days after such award is made
5. The corporation has unrestricted retained earnings in its books to cover such
payment.
6. Upon payment by the corporation of the agreed or awarded price, the
stockholder shall forthwith transfer his shares to the corporation. (Sec 81,
R.A. 11232) (82)
Effect of Demand and Termination of Right
• From the time of demand for payment of the fair
value of a stockholder's shares until either the
abandonment of the corporate action involved or
the purchase of the said shares by the corporation,
all rights accruing to such shares, including voting
and dividend rights, shall be suspended in
accordance with the provisions of this Code, except
the right of such stockholder to receive payment of
the fair value thereof: Provided, That if the
dissenting stockholder is not paid the value of the
said shares within thirty (30) days after the award,
the voting and dividend rights shall immediately be
restored. (Sec 82, R.A. 11232)
When Right to Payment Ceases?
No demand for payment under this Title may be
withdrawn unless the corporation consents thereto.
If, however, such demand for payment is withdrawn
with the consent of the corporation, or if the
proposed corporate action is abandoned or
rescinded by the corporation or disapproved by the
Commission where such approval is necessary, or if
the Commission determines that such stockholder
is not entitled to the appraisal right, then the right
of the stockholder to be paid the fair value of the
shares shall cease, the status as the stockholder
shall be restored, and all dividend distributions
which would have accrued on the shares shall be
paid to the stockholder.. (Sec 83, R.A. 11232)
Who Bears Costs of Appraisal?
The costs and expenses of appraisal shall be
borne by the corporation, unless the fair value
ascertained by the appraisers is approximately
the same as the price which the corporation
may have offered to pay the stockholder, in
which case they shall be borne by the latter. In
the case of an action to recover such fair value,
all costs and expenses shall be assessed against
the corporation, unless the refusal of the
stockholder to receive payment was unjustified.
(Sec 84, R.A. 11232)
Non stock Corporation
A nonstock corporation is one where no part of
its income is distributable as dividends to its
members, trustees, or officers: Provided, That
any profit which a nonstock corporation may
obtain incidental to its operations shall,
whenever necessary or proper, be used for the
furtherance of the purpose or purposes for
which the corporation was organized. (Sec 86,
R.A. 11232) (87)
Election and Term of Trustees
The number of trustees shall be fixed in the articles of
incorporation or bylaws which may or may not be more
than fifteen (15). They shall hold office for not more than
three (3) years until their successors are elected and
qualified. Trustees elected to fill vacancies occurring
before the expiration of a particular term shall hold office
only for the unexpired period.
“The term of office of one-third (1/3) of their number
shall expire every year; and subsequent elections of
trustees comprising one-third (1/3) of the board of
trustees shall be held annually. (Removed)”
Purposes of non stock corporation
Nonstock corporations may be formed or organized for
1. Charitable,
2. Religious
3. Educational
4. Professional
5. Cultural
6. Fraternal
7. Literary
8. Scientific
9. Social
10. Civic service,
11. Similar purposes,
– like trade,
– industry,
– agricultural and
– like chambers, or
– any combination thereof. (Sec 87, R.A. 11232)
CLOSE CORPORATION
• All corporation’s issued shares are not owned by
not more than twenty (20) person
• Issued stock are subject to specified restriction on
transfer
• Cannot be listed in any stock exchange or make
any public offering of any of its stock of any class.
• A corporation is not a close corporation when at
least two-thirds (2/3) of its voting stock or voting
rights is owned or controlled by another
corporation which is not a close corporation.
Cannot incorporate Close Corporation
(BPI MOSEC)
1. Mining or oil companies
2. Stock exchanges
3. Banks
4. Insurance companies
5. Public utilities
6. Educational institutions
7. Corporation vested with public interest. (Sec
95, R.A. 11232) (96)
CLOSE CORPORATION
• The articles of incorporation of 'a close corporation may
provide that the business of the corporation shall be
managed by the stockholders of the corporation rather
than by a board of directors. So long as this provision
continues in effect, no meeting of stockholders need be
called to elect directors: Provided, That the stockholders of
the corporation shall be deemed to be directors for the
purpose of applying the provisions of this Code, unless the
context clearly requires otherwise: Provided, further, That
the stockholders of the corporation shall be subject to all
liabilities of directors.
• The articles of incorporation may likewise provide that all
officers or employees or that specified officers or
employees shall be elected or appointed by the
stockholders, instead of by the board of directors. (Sec 96,
R.A. 11232)
EDUCATIONAL CORPORATIONS
• SEC. 106. Board of Trustees. - Trustees of educational institutions
organized as nonstock corporations shall not be less than five (5) nor
more than fifteen (15): Provided, That the number of trustees shall be
in multiples of five (5) (Sec 106, R.A. 11232) (108)
• Unless otherwise provided in the articles of incorporation or bylaws,
the board of trustees of incorporated schools, colleges, or other
institutions of learning shall, as Soon as organized, so classify
themselves that the term of office of one fifth (1/5) of their number
shall expire every year. Trustees thereafter elected to fill vacancies,
occurring before the expiration of a particular term, shall hold office
only for the unexpired period. Trustees elected thereafter to fill
vacancies caused by expiration of term shall hold office for five (5)
years. A majority of the trustees shall constitute a quorum for the
transaction of business. The powers and authority of trustees shall be
defined in the bylaws.
• For institutions organized as stock corporations, the number and term
of directors shall be governed by the provisions on stock corporations.
(Sec 106, R.A. 11232)
RELIGIOUS CORPORATIONS
• Religious corporations may be incorporated by one or more persons. Such
corporations may be classified into: (Sec 107, R.A. 11232) (109)
a. Corporations sole - as trustee, the affairs, property and temporalities of any
religious denomination, sect or church, a corporation sole may be formed by
the chief archbishop, bishop, priest, minister, rabbi, or other presiding elder of
such religious denomination, sect or church. (Sec 108, R.A. 11232)(110)
• From and after the filing with the Securities and Exchange Commission of the said articles
of incorporation, such chief archbishop, bishop, priest, minister, rabbi or presiding elder shall
become a corporation sole.
• Any corporation sole may purchase and hold real estate and personal property for its church,
charitable, benevolent or educational purposes, and may receive bequests or gifts for such
purposes. (Sec 113)
b. Religious societies. - Unless forbidden by competent authority, the
Constitution, pertinent. rules, regulations, or discipline of the religious,
denomination, sect or church of which it is a part, any religious Society,
religious order, diocese, or synod, or district organization of any religious
denomination, sect or church, may, upon written consent and/or by an
affirmative vote at a meeting called for the purpose of at least two-thirds (2/3)
of its membership, incorporate for the administration of ,its temporalities or,
for the management of its affairs, properties, and estate by filing with the
Commission, articles of incorporation verified by the affidavit of the presiding
elder, secretary, or clerk or other member of such religious society or religious
order, or diocese, synod, or district organization of the religious denomination,
sect or church. (Sec 114, R.A. 11232) (116)
One Person Corporation
Definition
A One Person Corporation is a corporation with a
single stockholder. (Sec 115, R.A. 11232)
SEC MC 7, 2019 – Effective May 1, 2019 (Manila

standard and Manila Bulletin)
Term of existence
• OPC of natural person
– Perpetual life
• Trust or estate
– Co-terminous with existence of trust or estate
– OPC under the name of estate may be dissolved
upon proof of partition
• Order of partition – Judicial settlement
• Deed of extrajudicial settlement – Summary settlement
of the estate
– OPC under the name of trustee may be dissolve
• Proof of termination of the trust. (Sec 2, SEC MC 7,
2019)
Who can form a one Person
Corporation?
Only
1. Natural person
– The incorporator of an OPC being a natural person must be of
legal age.
2. Trust
– As an incorporator, the “trust” as used by the law does not
refer to a trust entity, but as subject being managed by a
trustee.
3. Estate
• If the single stockholder is a trustee, administrator,

executor, guardian, conservator, custodian, or other person
exercising fiduciary duties, proof of authority to act on
behalf of the trust or estate must be submitted at the time
of incorporation. (Sec 1, SEC MC 7, 2019)
Cannot incorporate as OPC
1. Banks
2. Quasi-banks
3. Preneed
4. Trust
5. Insurance
6. Public and publicly-listed companies,
7. Non-chartered government owned and controlled
corporations (GOCCs)
8. Natural person for the purpose of exercising a
profession except as otherwise provided under special
laws. (Sec 116, R.A. 11232)
9. Non bank financial institution (Sec 13, SEC MC 7,
2019)
Characteristic of OPC
1. No required minimum authorized capital stock except as otherwise
provided by special law. (Sec 117)
– Unless required by applicble laws or regulations, no portion of the
authorized capital is required to e paid up at the time of incorporation.
(SEC MC 7, 2019)
2. Not required to submit and file corporate bylaws. (Sec 119)
3. Required to indicate the letters "OPC" either below or at the end of
its corporate name. (Sec 120)
4. The single stockholder shall be the sole director and president of the
One Person Corporation (Sec 121)
5. The single stockholder may not be appointed as the corporate
secretary. (Sec 122)
6. A single stockholder may be a self appointed treasurer of the
corporation. (Sec 122)
7. The single stockholder shall designate a nominee and an alternate
nominee who shall, in the event of the single stockholder’s death or
incapacity, take the place of the single stockholder as director and
shall manage the corporation's affairs. (Sec 123)
1. No required minimum authorized capital stock except as otherwise
provided by special law. (Sec 117)
– Unless required by applicble laws or regulations, no portion of the
authorized capital is required to e paid up at the time of incorporation.
(SEC MC 7, 2019)
2. Not required to submit and file corporate bylaws. (Sec 119)
3. Required to indicate the letters "OPC" either below or at the end of
its corporate name. (Sec 120)
4. The single stockholder shall be the sole director and president of the
One Person Corporation (Sec 121)
5. The single stockholder may not be appointed as the corporate
secretary. (Sec 122)
6. A single stockholder may be a self appointed treasurer of the
corporation. (Sec 122)
7. The single stockholder shall designate a nominee and an alternate
nominee who shall, in the event of the single stockholder’s death or
incapacity, take the place of the single stockholder as director and
shall manage the corporation's affairs. (Sec 123)
Bond Requirements for the self appointed
Treasurer (Sec 10, SEC MC 7, 2019)
Authorized capital stock Surety bond coverage
1.00 to P1,000,000 1,000,000
1,000,0001 to 2,000,000 2,000,000
2,000,0001 to 3,000,000 3,000,000
3,000,0001 to 4,000,000 4,000,000
4,000,0001 to 5,000,000 5,000,000
P5,000,001 and above = Amount of surety bond
coverage shall be equal to OPC’s ACS
Bond Requirements for the self appointed
Treasurer (Sec 10, SEC MC 7, 2019)
• Subject to renewal every two years or as may be
required, upon review of the annual submission
of the Audited Financial Statements/Financial
statements certified under oath by the
Company’s President and Treasurer
• The bond is a continuing requirement for so long
as the single stockholder is the self appointed
Treasurer of the OPC.
• The bond may be cancelled upon proof of
appointment of another person as the Treasurer
and Filling of Amended Form for Appointment of
Officers.
8. Shall maintain a minutes book which shall contain all
actions, decisions, and resolutions taken by the One
Person Corporation. (Sec 127)
9. Annual financial statements audited by an independent
certified public accountant, except when the total assets
or total liabilities of the corporation are less than Six
hundred thousand pesos (P600,000.00) (Sec 129)
10. The fiscal year of a One Person Corporation shall be that
set forth in its articles of incorporation or, in the absence
thereof, the calendar year. (Sec 129)
11. The Commission may place the corporation under
delinquent status should the corporation fail to submit the
reportorial requirements three (3) times, consecutively or
intermittently, within a period of five (5) years. (Sec 129)
12. A sole shareholder claiming limited liability has the
burden of affirmatively showing that the corporation was
adequately financed. (Sec 130)
Articles of Incorporation of OPC
Content of Article of incorporation under Sec 14
(a) If the single stockholder is a trust or an estate, the

name, nationality, and residence of the trustee,
administrator, executor, guardian, conservator,
custodian, or other person exercising fiduciary
duties together with the proof of such authority
to act on behalf of the trust or estate; and
(b) Name, nationality, residence of the nominee and
alternate nominee, and the extent, coverage and
limitation of the authority.
Officers - OPC
• Within fifteen (15) days from the issuance of
its certificate of incorporation, the OPC shall
appoint a treasurer, corporate secretary, and
other officers, and notify the SEC thereof
within five (5) days from appointment, using
the Appointment Form as may be prescribed
by the SEC.
• The single stockholder may not be appointed
as corporate secretary but may assume the
role of a treasurer. (Sec 9, SEC MC 2019)
Nominee and alternate nominee
The single stockholder is required to designate a nominee and
an alternate nominee named in the Articles of Incorporation
in the event of death and incapacity. The written consent of
both the nominee and alternate nominee shall be attached to
the application for incorporation. (Sec 5, SEC MC 7, 2019)
• In case the single stockholder becomes incapacitated, the
nominee can take over the management of the OPC as
director and president. At the end of the incapacity, the
single stockholder can resume the management of the
OPC. (Sec 12, SEC MC 2019)
• In case of death or permanent incapacity of the single
stockholder, the nominee will take over the management of
the OPC until the legal heirs of the single stockholder have
been lawfully determined and the heirs have agreed among
themselves who will take the place of the deceased.
Foreign National
• A foreign natural person may put an OPC,
subject to the applicable constitutional and
statutory restrictions on foreign participation
in certain investment areas or activities. (Sec
15, SEC MC 7, 2019)
Reportorial Requirements
The OPC must submit the following documents within the
period required by the SEC:
a) annual audited financial statements within 120 days from
the end of its fiscal year as indicated in its Articles of
Incorporation; Provided, that if the total assets or total
liabilities of the corporation are less than six hundred
thousand pesos (P600,000), the financial statements shall
be certified under oath by the corporation’s treasurer.
b) a report on all explanations or comments by the president
on the qualification, reservation or adverse remarks made
by the auditor in the financial statements;
c) a disclosure of all self-dealings and related party
transactions entered into between the OPC and the single
stockholder; and
d) other reports as the SEC may require. (Sec 13, SEC MC
2019)
Methods of dissolution (Sec 117)
• Voluntary dissolution where no creditors are
affected (Sec 134, R.A. 11232) (118)
• Voluntary dissolution where creditors are
affected (Sec 135, R.A. 11232) (Sec 119)
• Dissolution by shortening corporate term (Sec
136, R.A. 11232) (Sec 120)
• Involuntarily (Sec 138, R.A. 11232) (Sec 121)
Corporate Liquidation
General Rule:
• Every corporation whose charter expires pursuant to its
articles of incorporation, is annulled by forfeiture, or whose
corporate existence is terminated in any other manner,
shall nevertheless remain as a body corporate for three (3)
years after the effective date of dissolution, for the purpose
of prosecuting and defending suits by or against it and
enabling it to settle and close its affairs, dispose of and
convey its property, and distribute its assets, but not for the
purpose of continuing the business for which it was
established.
Exception:
• Except for banks, which shall be covered by R.A. 7653 (The
New Central Bank Act) and R.A. 3591 (Philippine Deposit
Insurance Corporation Charter) (Sec 139, R.A. 11232) (122)
Corporate Liquidation
• At any time during said three (3) years, the corporation is
authorized and empowered to convey all of its property to
trustees for the benefit of stockholders, members, creditors
and other persons in interest. After any such conveyance by
the corporation of its property in trust for the benefit of its
stockholders, members, creditors and others in interest, all
interest which the corporation had in the property terminates,
the legal interest vests in the trustees, and the beneficial
interest in the stockholders, members, creditors or other
persons-in-interest.
• Upon the winding up of corporate affairs, any asset
distributable to any creditor or stockholder or member who is
unknown or cannot be found shall be escheated in favor of the
national government.
• Except by decrease of capital stock and as otherwise allowed
by this Code, no corporation shall distribute any of its assets or
property except upon lawful dissolution and after payment of
all its debts and liabilities. (Sec 139, R.A. 11232) (122)
Foreign Corporation
• Foreign corporation is one formed, organized or
existing under laws other than those of the
Philippines' and whose laws allow Filipino citizens
and corporations to do business in its own country or
State. (Sec 140, R.A. 11232) (123)
• A resident agent may be either an individual residing
in the Philippines or a domestic corporation lawfully
transacting business in the Philippines:
– Individual resident agent must be of good moral
character and of sound financial standing.
– Domestic corporation as a resident agent - it must
be of sound financial standing and must show
proof that it is in good standing as certified by the
Commission. (Sec 144, R.A. 11232) (127)
Law Applicable: Foreign corporation
General Rule:
A foreign corporation lawfully doing business in the
Philippines shall be bound by all laws, rules and
regulations applicable to domestic corporations of
the same class
Exception:
1. Those which provide for the creation formation,
organization or dissolution of corporations
2. Those which fix the relations, liabilities,
responsibilities, or duties of stockholders,
members, or officers of corporations to each
other or to the corporation. (Sec 146, R.A.
11232) (129)
Grounds for the revocation of license
Without prejudice to other grounds provided under
special laws, the license of a foreign corporation to
transact business in the Philippines may be revoked or
suspended by the Commission upon any of the following
grounds:
(a) Failure to file its annual report or pay any fees as
require d by this Code;
(b) Failure to appoint and maintain a resident agent in the
Philip pines as required by this Title;
(c) Failure, after change of its resident agent or address,
ta submit to the Commission a statement of such
change as requited by this Title;
(d) Failure to submit to the Commission an authenticated
copy of any amendment to its articles of incorporation
or bylaws or of any articles of merger or consolidation
within the time prescribed by this Title;
Grounds for the revocation of license
e) A misrepresentation of any material matter in any
application, report, affidavit or other document
submitted by such corporation pursuant to this Title;
f) Failure to pay any and all taxes, imposts, assessments
or penalties, if any, lawfully due to the Philippine
Government or any of its agencies or political
subdivisions;
g) Transacting business in the Philippines outside of the
purpose or purposes for which such corporation is
authorized under its license;
h) Transacting business in the Philippines as agent of or
acting on behalf of any foreign corporation or entity
not duly licensed to do business in the Philippines; or
i) Any other ground as would render it unfit to transact
business in the Philippines. (Sec 151, R.A. 11232)
The End

Revised Corporation Code Oct 2020

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Revised Corporation Code of the

Revised Corporation Code of

Not signatories in the article of Originally formed and signatories of

They cease to be corporators when Remain as incorporators even no

Promotion Incorporation Organization and

Authorized Capital Subscribed Capital Paid up capital

100,000 25,000 6,250

50,000 12,500 5,000

Capital Stock Subscribed Capital Paid up capital

100,000 50,000 30,000

50,000 20,000 20,000

Such inquiry may be made by the solicitor general on a quo

De facto corporation Corporation by estoppel

Under R.A. 11232

• Corporations vested with public interest shall

Compliance Not required Corporation vested with public interest

vi. Any person judicially declared as insolvent

vii. Any person found guilty by final judgment or order of a foreign

2. Absence in more than fifty (50) percent of all regular

A temporarily disqualified director shall, within sixty (60)

To monitor the directors attendance requirements:

Stockholder Remaining BOD

Exception: Valid when all the requisites are present

• Stockholdings exceeding twenty (20%) percent of the

Implied power Inherent power

Implied power: 7 and 11 Inherent power: par 1, 3, 5 and 7

No vote of stockholders is required

Note: Approval of the stockholders or members shall not be necessary

Approval of the Without approval of Approval of 2/3 of the

Content of notice of meeting

SEC MC 7, 2019 – Effective May 1, 2019 (Manila

• If the single stockholder is a trustee, administrator,

(a) If the single stockholder is a trust or an estate, the

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