TITLE 2: INCORPORATION AND ORGANIZATION OF PRIVATE

CORPORATIONS
SECTION 10: Number and Qualifications of 1. Formation and organization of corporation are
Incorporators brought about generally at the instance under
the supervision of one or more so called
Incorporation of a private corporation, a mere
promoters
privilege
2. Upon incorporation, the practice is for the
- The right to be and act as a corporation does not board of directors to pass a resolution ratifying
belong to any person as a natural and civil right, the contracts entered into by the incorporators
but as a special privilege conferred upon a group of with the promoters. In such case, they become
persons by the sovereign power of the State agents of the corporation
- Since corporation is merely a creation of law, it can 3. However, corporation may be formed and
be dissolved at any time by legislative enactment, organized by the incorporators themselves
subject to certain limitations. without the getting the services of so-called
promoters
One Person Corporation
Steps in Incorporation
- Corporation with a single stockholder
- Only a natural person, trust, or an estate may form 1. Drafting and execution of articles of
a one person corporation incorporation by the incorporators. In this
- Its registration must comply with the guidelines on connection, the person chosen as temporary
the establishment of an OPC treasurer pending incorporations must also
- Natural persons who execute.
a. An affidavit regarding the capital subscribed
Difference between Incorporator and Corporator and paid up.
Incorporator Corporator
Stockholder or members Those who compose a 2. Filing with the SEC of articles of incorporation
mentioned in the articles corporation whether as together with the following
of incorporation as stockholders or as a. Treasurer’s affidavit showing at least 25% of
originally forming and members the entire authorized shares has been
composing the subscribed and at least 25% of the subscription
corporation has been paid in cash and or property to the
A signatory of the articles May or may not be corporation.
of incorporation signatory of the articles b. In case corporation is governed by a special law,
of incorporation a favorable recommendation of the appropriate
Does not cease to be an Ceases to be a corporator government agency that such articles of
incorporator upon sale of by sale of shares in case incorporation is in accordance with law
his shares of a stock corporation 3. Payment of the filing and publication fees
In case of non-stock, the 4. Issuance by the SEC of the certificate of
corporator ceases to be a incorporation if all the papers filed after the
member verification and examination, are found in order
Not more than 15 There is no restriction as Note: There are rules or requirements under special
to number except for laws to be complied with in organizing specific business
close corporation and to endow the corporation with the capacity to
transact the business for which it was created.
Steps in the creation of law Incorporators: Number and Qualifications
1. Promotion - Incorporators must not be less than five but nor
2. Incorporation more than 15, all of legal age, and a majority of
3. Formal organization and commencement of whom are residents of the Philippines
business operations
Partnership as Incorporators
Promotion of Corporation
- Application of registration must be accompanied by
- The term promotion is said to be not a legal but a a partner’s affidavit, duly executed by all partners,
business term, usually summing up in a single word, to effect that they have authorized the partnership
a number of business operations peculiar to the to invest in the corporation about to be formed and
business world by which a company is generally that they have designated one of the partners to
brought into existence become a signatory
Note: Partnerships under dissolved or expired status
with the SEC shall not be authorized to become an
incorporator
Domestic Corporations or Associations as
Incorporators
- Must be approved by a majority of the board of
directors or trustees
- Ratified by stockholders representing at least 2/3
of the members in outstanding capital stock or 2/3
of members for non-stock corporation
- Directors/Trustees/Secretary certificate indicating
the necessary approvals, as well as the authorized
signatory to the incorporating documents shall be
executed under oath
Note: Domestic corporations under delinquent or
suspended, revoked or expired status with the SEC shall
not be authorized to become an incorporator
Foreign Corporations as Incorporators
- Must be accompanied by a copy of documents such
as Directors/Trustees/Secretary certificate or its
equivalent, duly authenticated by a Philippine
Consulate or with an apostille affixed, authorizing
the foreign corporation to invest in the corporation
being formed and specifically naming the designates
signatory on behalf of foreign corporation
Signatories of the Articles of Incorporation
- Each individual signing the articles must the indicate
the capacity upon which he/she is affixing his/her
signature
- An individual designated to sign the articles in
behalf of incorporator, which is not a natural
person must also indicate the corporate/
partnership name of the entity being represented
- TIN of principal, and designated signatory should be
also indicated in the articles
- No application for incorporation shall be accepted
unless the registration documents reflects TIN or
passport of all its foreign investors other than
foreign corporation which have not yet issued TIN
- After incorporation, all foreign investors, natural or
juridical shall secure a TIN. All documents to be
filed with SEC after incorporation shall not be
accepted unless the TIN of all foreign investors are
indicated
Designation of Incorporators as Directors or Trustees
- Individual who signs articles in behalf of
incorporator, which is not a natural person, may
not be named as a director or trustee in the same
articles, unless that individual is also an owner of at
least one share of stock, or is a member of
corporation being formed
Additional Requirements for Certain Corporation
- No articles of incorporation of for corporation
governed by special laws without favorable
recommendation of appropriate government
agency to effect the articles are in accordance of
law
1. Natural Persons
- These five persons or more must be natural
persons
- Corporation cannot be an incorporator of another
corporation
- As an exception to this rule, duly established
cooperatives may organize rural banks and/or
subscribe to shares of stock of any rural bank
- If the corporation is a cooperative, it may become
an incorporator of a rural bank.
Note: Corporation may subscribe to the stocks of
another corporation
2. Capacity to Contract
- Incorporators must have the capacity to enter into a
valid contract, the act of forming a corporation as
between the parties being contractual
- Furthermore, the articles of incorporation must be
acknowledged by the incorporators before a notary
public
- There is a requirement that the incorporator must
be qualified to enter into a contract
Purpose: Of requiring the acknowledgement is to guard
against the possibility of any fictitious name being
subscribed to the articles and to assure that the
signatures appearing are genuine
3. Residents of the Philippines
- Majority of the incorporators must be residents of
the PH; the rest may be persons who are neither
residents nor citizens of the PH
- However for subjects of
a. Country cannot lawfully contract with the
subjects of the country with which it is at war.
The residence requirement is mandatory
Residents – means domiciled residents physically
present in the PH with an intention to remain in the
country as distinguished from temporary residents with
domicile in another country.
4. Citizens of the Philippines
- By specific constitutional and legal provisions,
citizenship is a necessary qualification for
incorporators in corporations in which a certain
percentage of the capital stock is required to be
owned by the Filipino citizens
- Foreign shareholders may be debarred from certain
activities which are exclusively reserved for Filipino
citizens
5. Owners of or Subscribers to at least one share
- Code now expressly requires that each of the
incorporators of a stock corporation must own or
be a subscriber to at least one share of capital
stock of the corporation
- The presumption is that where an incorporator has
some pecuniary interest in a corporation, he will be
concerned with the management of its affairs
Requirement of minimum number of incorporators
mandatory
- Corporation cannot be formed be legally less than
the prescribed number except in the case of a
corporation sole
- In case of educational corporations, their
incorporation shall be governed by special laws and
by the general provisions of the Code
1. Reduction of stockholder or members to less
than a minimum
- Number of stockholders or members after the
corporation is organized may become less than the
minimum number required for incorporation
without affecting corporate existence unless valid
grounds exist for piercing or lifting the corporate
veil
2. Beneficial ownership on one individual
- Beneficial ownership is not necessary. A person
with legal title is qualified to become an
incorporator
a. Requirement of minimum number of
incorporators is one of those provisions,
however, which are regularly evaded in
practice. Since the law permits a scheme by
which all shares are owned by a single
individual, the latter may incorporate provided
he associates with him, at least nominally, the
number of persons required by the law
b. Validity of the incorporation is not affected by
the fact that it is formed in the interest of a
single individual, and that the other persons are
under his control, without any substantial
interest, or without individual responsibility
who may be only be called “qualifying
stockholders” or who are popularly known as
dummies or “men of straw”
3. Subsequent accumulation of shares in one
individual
- Nor is the existence of the corporation originally
formed by the required number of incorporators
affected by the subsequent accumulation of all the
shares in the hands of one individual, unless, as
previously said, circumstances exist to justify the
piercing of veil corporate entity
SECTION 11: Corporate Term
Term of Corporate Existence
GR: A corporation shall have perpetual existence
EXPN: If articles of incorporation provides otherwise or
it provides for a specific period
Note: Corporate term for a specific period may be
extended or shortened by amending the articles of
incorporation
Note: Corporation for a specified period ceases to exist
and is dissolved by the very fact upon the expiration of
the period fixed in the original articles of incorporation,
in the absence of compliance with legal requisites of
extension of period.
Corporations with certificates of incorporation issued
prior to the effectivity of this Code, and which continue
to exist, shall have perpetual existence, unless the
corporation upon vote Of its stockholders representing
a majority of its outstanding capital stock, notifies the
Commission that it elects to retain its specific
corporate term pursuant to its articles of
incorporation: Provided, that any change in the
corporate term under this section is without prejudice
to the appraisal right of dissenting stockholders in
accordance with the provisions of this Code.
Revival of Corporate Existence
- Corporation whose term has expired may apply for
a revival of its corporate existence
GR Corporation shall be deemed revived and a
certificate of revival of corporate existence shall be
issued, giving it perpetual existence upon approval by
SEC
EXPN: If its application for revival provides otherwise or
provides for a specific period
A corporation whose term has expired may apply for a
revival Of its corporate existence, together with all the
rights and privileges under its certificate of
incorporation and subject to all Of its duties, debts and
liabilities existing prior to its revival.
FF are corporations that requires favorable
recommendation of the appropriate government
before SEC will approve the application for revival of
certificate of incorporation
1. Bank
2. Banking and quasi-banking institutions
3. Preneed
4. Insurance and trust
5. Nonstock savings and loan associations
6. Corporations engaged in money service
business and
Other financial intermediaries
Who may apply for revival?
a. Generally, a corporation whose term has
expired
b. Expired corporation whose certificate of
registration has been revoked for non-filing
reports, provided that it shall file the petition
to lift its revoked status, which may be
incorporated in its petition to revive, and must
be settle the corresponding penalties
 c. Expired corporation whose certificate of
registration has been suspended, provided that
it shall file the proper petition to lift its
suspended status. Which may be incorporated
in its petition to revive, and must be settle the
corresponding penalties
d. Expired corporation whose corporate name has
already been validly re-used, and is currently
used, by another existing corporation duly
registered with the SEC, provided that the
former shall change its corporate name within
30 days from the issuance of its certificate of
revival of corporate existence
Who may not apply for revival?
a. Expired corporation which has completed the
liquidation of its assets
b. Corporation whose certificate of registration
has been revoked for reasons other than non-
filing reports
c. Corporation dissolved by virtue of section 6 c
and d of presidential decree no. 902-a, as
amended by presidential decree no.1799
d. Expired corporation which have already availed
of re-registration in accordance with
memorandum circular no. 13 series of 2019, or
other memorandum circulars issued by the SEC
pertaining to registration except when
1. The re-registered corporation has given its
consent to the petitioner to use its
corporate name, and has undertaken to
undergo voluntary dissolution immediately
after the issuance of the petitioner’s
certificate of revival
2. The re-registered corporation has given its
consent to the petitioner to use its
corporate name, and has undertaken to
change its corporate name immediately
after the issuance of the petitioner’s
certificate of revival.
Required Vote to Initiate Revival
- Majority vote of the board of directors and at least
majority of the outstanding capital stock
- Majority vote of trustees, and the vote of at least
majority of members for non-stock corporation
Appraisal Right
- The revival of the corporate existence is without
prejudice to the appraisal right of dissenting
stockholders in accordance with the provisions of
RCC
Extension of Corporate Term
1. Limitation
a. Term shall not exceed 50 years
b. Amendment is effected before the
expiration of the corporate term of
existence for after dissolution by the
expiration of the corporate term there is no
more corporate life to extend. Hence, the
extension cannot be done during three-
year period of liquidation. Expiration of the
term does not produce its immediate
dissolution for all purposes
c. Extension cannot be made earlier than 5
years prior to the expiration date unless
there are justifiable reasons therefor as
may be determined by the SEC
Note: Corporation Code places no limit to the number of
extensions that may be made
2. Effect of extension/expiration of term
- Mere extension before the expiration of original
term constitutes a continuation of the old, and not
the creation of new corporation
- Upon the expiration of the period fixed
3. Automatic Dissolution
- Allows automatic extension of corporate existence
by amendment of the articles of incorporation
within the five year period before the expiration
date of the existing term, during which the SEC may
look, if necessary, into the financial structure of the
corporation and its past operations
SECTION 12: Minimum Capital Stock required of Stock
Corporations
GR: No minimum authorized capital stock
EXPN: Provided by special law
Capital Stock Requirement
- Code does not set a minimum authorized capital
stock except as otherwise stated by special law as
long as the paid-up capital, is not less than 5,000.
- The old law has also no capital stock requirement.
It merely requires that the articles of incorporation
state the amount of the corporation’s capital stock
- Special laws may require a higher paid-up capital,
as in the case of commercial banks, insurance
companies, and investment houses
Filipino Percentage Ownership Requirement regarding
Corporate Capital
- By specific constitutional and legal provisions,
Filipino ownership of a certain percentage of the
capital stock or capital is required in certain cases
such as:
1. Corporations for exploration, development
and utilization of natural resources
- At least 60% of the capital which is owned by
citizens of the PH. Capital in the above
constitutional provision should be understood to
mean “outstanding capital stock” in case of stock
corporations.
2. Public Service Corporations
- At least 60% of the capital of which is owned by
citizens of the PH.

3. Educational Corporations
- Other than those established by religious orders
and mission boards, at least 60% of the capital
which is owned by citizens of the PH
4. Banking Corporations
- At least 60% of the voting stock of the corporation
shall be owned or controlled by the citizens of the.
R.A NO. 8791 allows the full entry of foreign banks
in the PH subject to guidelines approved by the
Monetary Board of the Bangko Sentral ng Pilipinas.
5. Corporations engaged in retail trade
- Enterprises with less that 2.5 million paid-up
capital are reserved exclusively for Filipino citizens
and corporations wholly-owned by Filipino citizens
6. Rural banks
- Before, no less than 40% of the voting stocks of
which shall be owned by the Filipino citizens or
corporations at least 60% of whose capital is
owned by such citizens
- Foreign investors are now allowed to own acquire
or purchase up to 60% of a voting stock in a rural
bank
7. Corporations engaged in coastwise shipping
- At least 60% of the capital stock of which or of any
interest in said capital is totally owned by citizens of
the PH.
8. Corporations engaged in the pawnshop
business
- At least 70% of the voting capital stock shall be
owned by citizens of the PH
9. Under the Flag law
- In the purchase of articles for the government,
preference shall be given to materials and supplies
produced, made, or manufactured in the PH, and
to domestic entities
Domestic Entities – Means any citizen of the PH or any
corporate body or commercial company at least 75% of
the capital of which is owned by citizens of the PH
SECTION 13: Contents of the article of Incorporation
- All corporations shall file with the Commission
articles of incorporation in any of the official
languages, duly signed and acknowledged or
authenticated, in such form and manner as may be
allowed by the Commission, containing the
substantially the following matters, except
otherwise prescribed by this code
A. Name of corporation
B. Specific purpose of which corporation is being
formed. Where a corporation has more than
one stated purpose, articles shall indicate the
primary purpose and secondary purposes,
provided that nonstock corporation nay not
include a purpose which would contradict its
nature
C. Place where principal office of corporation is
located, which must be in the PH
D. Term which the corporation is exist, if the
corporation has not elected perpetual existence
E. Names, nationalities, and residence addresses
of incorporators
F. Number of directors or number of trustees
G. Names, nationalities, and residences of persons
who shall act as directors or trustees until the
first regular directors or trustees are duly
elected and qualified with this Code
H. In stock corporation, the amount of authorized
capital stock, number of shares which is divided,
par value of each, name, 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 share are without par value
I. In nonstock corporation, amount of capital,
names, nationalities, and residence addresses of
the contributors and amount contributed
J. Such other matters consistent with law and
which the incorporators may deem necessary
and convenient
- Articles of incorporation and application for
amendments may filed with the Commission in the
form of an electronic document in accordance with
Commission’s rules and regulations on electronic
filing
SECTION 13: Amount of Capital Stock to be Subscribed
any paid for purposes of incorporation.
Minimum Subscription and Paid-up Capital
1. Pre-incorporation
- At least 25% of the amount of the capital stock has
been actually subscribed and at least 25% of such
subscription paid
a. These requirements are mandatory.
Accordingly, if they are not complied with, no
corporation can be lawfully incorporated even
if a certificate of incorporation has been issued
by SEC in good faith
b. Special laws may require higher paid-up capital
2. Post incorporation
- The 25% subscription and 25% paid-up capital is
required not only during the incorporation period
but also in case of increase of the authorized
capital stock.
a. This is designed to give assurance to the
investing public dealing with the corporation
that it is financially and actually able to operate
and undertake to do business and meet its
obligations as they arise from the start of its
operations
25% minimum paid-up capital requirement
would not apply to subsequent subscriptions
to the unsubscribed shares of corporation since
the evils or risks of insolvency against which
 the law intends to safeguard the public no
longer exist
b. Call by the Board of Directors for the payment
of the balance of subscriptions is required only
when there is no fixed date for payment in the
contract of subscription
c. Not required for purposes of incorporation
that each and every subscriber shall pay 25% of
his subscription. The paid-up requirement is
met as long as 25% of the total subscription is
paid although some subscribes have paid less
than 25% or even have not paid any amount
Computation of the 25% Subscription
1. Where the capital stock consists only of par
value shares
- The minimum subscription should be 25% of the
amount of the authorized capital stock or 25% of
the aggregate value of all the shares of stock the
corporation is authorized to issue
- In par value stock corporations, percentage
subscription requirement shall always based on the
amount of authorized capital stock irrespective of
class, number, and par value of shares
2. Where capital stock consists only of no par
value shares
- The 25% requirement shall be computed on the
basis of the entire number of authorized shares
- Corporation whose shares have no par value have
no authorized capital stock.
- The issued price of no par shares need not be fixed
in the articles of incorporation
3. Where the capital stock is divided into par
value shares and no par value shares
- The requirement as to par value is as indicated
above and for the no par value shares, the 25% is
based on the number of said no par value shares
SECTION 14: Form of Articles of Incorporation
Subscription
- A written contract to purchase newly issued shares
of stock or bonds
- Also known as stock subscription
Paid-up capital
- Portion of the authorized capital stock which has
been both subscribed and paid
Articles of Incorporation
- Defines the charter of corporation and the
contractual relationships between the state and
corporation, stockholders and state, and between
the corporation and stockholders
- The contents of articles binds both the corporation
and shareholders
Three-fold nature of the articles of incorporation
1. Contract between state and corporation
2. Contract between corporation and stockholders
3. Contract between stockholders
Name of the Corporation
- Name is peculiarly important as necessary to the
very existence of a corporation
- It is an attribute, element of its and essential to its
identity
- General rule as to corporations is that each
corporation must have a name by which it is to sue
and be sued and do legal acts
- Name of corporation designates the corporation in
the same manner as the name of an individual
designates the person
- The right to use its corporate name is as much a
part of the corporate franchise as any other
privilege granted
Limitations on the use of corporate name
- Name must not be identical, deceptively confusing
similar to the existing name or to any other name
protected by law, or patently deceptive, confusing
or contrary to law
Change of corporate name
- Corporation can change its name by amending its
articles of incorporation
Purpose Clause
- It will grant and limit the powers which a
corporation may exercise. An act beyond its
powers is known as ultra vires acts
- Where a corporation has more than one stated
purpose, the article shall state which is the primary
and the secondary purpose to determine which
investment of corporate funds require the
authority of both board and stockholders
Note: Private corporation may invest its funds to
another corporation, or for any purpose other than
primary purpose when approved by majority of the
board of directors or trustees and ratified by
stockholders representing at least 2/3 of outstanding
capital stock or at least 2/3 of member for non-stock.
Principal Office of Corporation Purposes
1. To fix the residence of the corporation in a
definite place
2. To determine the venue of the court cases
involving the corporation
3. For purposes of stockholders or members
meeting
4. To determine the place where the books and
record of the corporation are ordinarily kept
Term of Existence
- Perpetual existence unless articles provide
otherwise
Number of Board of Directors or Trustees
- Not more than 15 for directors
- May be more than 15 for trustees
Authorized Capital Stock
- Maximum amount fixed in the articles of
incorporation that may be subscribed and paid by
the stockholders of the corporation
Contents of Articles of Incorporation
- Amount of its authorized capital stock in lawful
money of the PH
- Number of shares into which it is divided
- Par value
- Names
- Nationalities
- Residences of the original subscribers
- Amount subscribed and paid by each on his
subscription
- If some or all of the shares are without par value
SECTION 14: Contents of Articles of Incorporation
Meaning of Articles of Incorporation
- Document prepared by the persons establishing a
corporation and filed with the SEC containing the
matters required by the Code
- A copy of articles filed which is returned with the
certificate of incorporation issued by the SEC under
its official seal become its corporate charter
enabling the corporation to exist and function.
Note: Corporation created by special law has no articles
of incorporation
Contents and Form of articles of Incorporation
1. Matters must be stated in the articles
a. Incorporators may include other matters as are
not inconsistent with the law and which they
may deem necessary and convenient, such as
classes of shares which the corporation may
issue, provisions of pre-emptive rights
b. SEC shall not accept the articles of
incorporation of any stock corporation unless
accompanied by a sworn statement of the
treasurer elected by the subscribers showing
compliance as to the minimum amount o
subscribed and paid-up capital stock
c. Articles of Incorporation may provide other
matters of items (optional provision) as long as
they are not contrary to any provision of the
Code or special law.
d. While under Corporation Code, there is no
general requirement of Philippine citizenship,
there are some areas of business and industry
where ownership is reserved, wholly or
partially, in favor of Filipino citizens by virtue of
Constitution and special laws
In order to safeguard the interest of
transferees of stock who may not be aware of
the citizenship requirement and in order to
secure compliance with the limitation on alien
ownership
Section 15 require the articles of incorporation
to provide the restriction stated Such
restriction serves as notice to all persons who
may be dealing with the stock of the
corporation, and is intended to deter the issue
or transfer of shares in favor of aliens in
violation
2. Form of the articles of incorporation of all
domestic corporations, unless otherwise
prescribed by special law
a. Must include affidavit of the treasurer
concerning the amount of capital stock
subscribed and paid. SEC may reject the
articles of incorporation or any amendment if
the same is substantially in accordance with
the forms prescribed above or treasurer’s
affidavit
b. Articles of Incorporation must be written in any
of the official languages duly signed and
acknowledged by all incorporators
Name of the Corporation
Importance
- Corporation acquires juridical personality under
the name stated in the certificate of incorporation.
- It has the power of succession by its corporate
name.
- Identifies and distinguishes it from other
corporations
- It is authorized to transact business
- A peculiarly essential to its existence
Nature
- Corporate name is regarded as of the nature of a
trademark even though composed of individual
names, and its simulation may be restrained
- Corporation’s rights to use its corporate and
tradename is a property right in rem, meaning it
may assert and protect such right against anybody,
in the same manner as it may protect its tangible
property against trespass or conversion
- It cannot be impaired or defeated by subsequent
appropriation by another corporation in the same
field.
Part of Name
- It is customary to use as part of the name the word
“corporation” or “incorporated” or an abbreviation
to distinguish from partnership to other business
organization
- The character of corporation is not necessarily
determined by its name
Purposes of Corporation
1. Purpose/s must be lawful
- Corporation is organized only for lawful purposes,
otherwise, no corporation may be created even
though some of its purposes are lawful
- Unlawful (unconstitutional, illegal, immoral, or
contrary to government) are one of the grounds for
rejection or disapproval by SEC of articles
- In corporation, the profit motive is the principal
factor. However, the law permits the formation of
partnership for the exercise of profession
Note: Practice of profession is not considered a business
and is open only to persons with necessary
qualifications
2. Purpose/s must be stated with sufficient clarity
- Purposes stated in articles need not set out with
particularity the multitude of activities in which the
corporation may engage
- While the purposes may be stated in broad and
general terms, they should not be so stated
indefinitely, otherwise, articles of incorporation
may be rejected.
3. Primary purpose must be stated
- The purposes for which a corporation is organized,
where it has more than one stated purpose, shall
classify which is the primary or main purpose and
which are secondary/subsidiary
- Main purpose must be specified
- Corporations is prohibited from investing its funds
for any purpose other than the primary purpose for
which it was organized unless it is approved by
both Board of Directors and its stockholders/
members
- A non-stock corporation may not include a purpose
which would change or contradict its nature
4. Purposes must be capable of being lawfully
combined
- Allows formation of corporations for any lawful
purposes where there are more than one, must be
capable of being lawfully combined
- Thus, banks which are governed by General
Banking Law of 2000 are prohibited from directly
engaging in non-banking activities such as
insurance as the insurer
Reasons for statement of purpose/s
1. A person who tends to invest his money will
know where and in what kind of business or
activity his money will be invested
2. Directors and officers will know what scope of
business they are authorized to act
3. Third person who has dealing with corporation
may know the perusal of articles whether the
transaction is within the authority or not (Ultra
vires acts)
Note: Main reason for stating the purpose is to
determine whether the acts performed by corporation
are authorized or beyond its power
Principal Office of the Corporation
1. City or Municipality within the Philippines
- Articles of incorporation must be stated the place
where the principal office of the corporation
established/located, which must be within the PH.
- The place designated is the city or town (not merely
the province) where the principal office is to be
located
- Now required by the SEC that all corporations and
partnership applying for registration
a. Specific address of the principal office which
shall include if feasible, street number, street
name, barangay, city, or municipality
b. Specific residence address of each incorporator,
stockholder, director, trustee, or partner
Note: The indication of general address such as city,
municipality, or Metro Manila is no longer allowed
2. Place where corporate books are ordinarily
kept and its officers meet
- Place of principal of office does not necessarily
mean the place where the business of the
corporation is transacted, but the place where its
books and records are ordinarily kept and its
offices usually meet for the purposes of transacting
for corporation
3. Change of address
- If the change involves a change of city or
municipality, an amended articles of incorporation
stating the new address must be filed with the SEC
- If the new address is located within the same city
or municipality, no corporate document is required
to be filed with the SEC except a notice regarding
the change of address
Incorporating directors or trustee
- Are chosen by incorporators and named in the
articles of incorporation
1. Matter to be specified in the articles of
incorporation
- The articles of incorporation must specify the
names, nationalities, and residences of the
incorporators and must show that at least a
majority of the incorporators are residents of PH
- The statement of the nationalities of the
incorporators will enable the SEC to determine
prima facie compliance with constitutional or legal
requirements regarding ownership by Filipino
citizen of certain percentage of capital stock.
2. Number
- Number of incorporating directors or trustees is
determined by the incorporators but such number
must not be less than 5 nor more than 15

3. Term of Office
- Incorporating directors or trustees shall hold office
until their successors are duly elected and qualified
- They are intended to be replaced by the regularly
elected directors or trustees who shall hold office
for 1 year when the corporation is organized by the
adoption of by-laws at the first meeting of
stockholders or members
Capital stock/ Capital and Subscribers Contributors
1. Stock Corporation
- The article of stock corporation must state the ff:
a. Amount of its authorized capital stock in pesos
b. Number of shares into which is divided
c. Par value in pesos of each share
d. Name, nationalities, and residences of the
original subscribers
e. Amount of capital stock subscribed and paid by
each on his subscription
f. If some or all of the shares are without par
value, such fact
2. Non-stock Corporation
a. Amount of its capital or money or contributed
or donated by specified persons
b. Names, nationalities, residences of the donors
or contributors
c. Respective amount contributed by each
- In case some have par value and some are without,
the article of incorporation must state such fact,
the number of share into which the capital stock is
divided, the number of shares with par value and
their par value, and the number of shares without
par value
Where business of corporation reserved for Filipino
citizens
- Corporations which will engage in any business
reserved for Filipino citizens shall provide in their
articles of incorporation the restriction against the
“transfer of stock or interest which will reduce the
ownership of Filipino citizen to less than the
required percentage of the capital stock as
provided by existing laws”
SECTION 15: Amendment of Articles of Incorporation
- Amendment shall take effect upon their approval
by the Commission or from the date filing with the
said Commission if not acted upon 6 months from
the date of filing for a cause not attributable to the
corporation

Where shares with par value

- Where the share issued by a corporation have only

one par value, the authorized capital stock would
be the number of shares multiplied by the par
value
- If a corporation is authorized to issue different
classes of shares with different par values, the
authorized capital stock would be the total of the
products of the number of shares in each class
multiplied by the par value of such class of shares.

Where shares without par value

- In case the capital stock consists of shares without

par value, the articles of incorporation need only
state such fact together with the number of shares
into which said capital stock is divided
- If they have no par value, no amount of capital
stock is specified in the articles which need only
state the number of shares into which said capital
stock is divided

Reason: Price of no-par value shares may vary from

time to time. Thus. Total amount of the capital stock
cannot be known until all shares are issued.

Where shares with par value and without par value

Type of Majority a. The word corporation, company, incorporated,
Relative (Present and in quorum: any number sufficient limited, limited liability, or an abbreviation of
to transact business) one of such words
Absolute (Present or absent and in quorum)
b. Punctuations, articles, conjunctions,
Qualified (majority determine as may be provided by
law, can be 2/3 or 2/4) contractions, prepositions, abbreviations,
different tenses, spacing or number of the same
word or phrase.
- If the corporation fails to comply with the
SECTION 16: Grounds when articles of incorporation or
amendment may be disapproved

- The commission may disapprove the articles or any

amendment if the same is not compliant with the
requirements of this code provided that the
commission shall give the incorporators, directors,
trustees, or officers a reasonable time from receipt
of disapproval within which to modify the
objectionable portions of the article or amendment

FF are grounds for disapproval

a. Articles or amendments is not substantially in

accordance with the form prescribed
b. The purpose of corporation are patently
unconstitutional, illegal, immoral or contrary to
government rules and regulations
c. Certificate concerning the amount of capital
stock subscribed or paid is false
d. Required percentage of Filipino ownership of
the capital stock under existing laws of the
Constitution has not been complied with

Note: No articles of incorporation or amendment of

corporation govern by special laws shall be approved
unless accompanied by a favorable recommendation of
the appropriate government agency to effect that such
articles or amendment is in accordance with law.

Note: Before disapproving the articles or its

amendments, the SEC should give the incorporators,
directors, trustees, or officers, a reasonable time to
correct or modify the objectionable portions.
SECTION 17: Corporate Name
- No corporate name shall be allowed by the
Commission
o if it is not distinguishable from already
reserved
o registered for the use of another
corporation
o such name is protected by law,
o its use is contrary to existing law, rules and
regulations
A name is not distinguishable even if it contains one or
more of the ff:
Commission’s order, the Commission may hold the
corporation and its responsible directors or officers
in contempt and hold them administratively, civilly
and criminally liable under this Code and other
applicable laws and revoke the registration of
corporation
Note: No corporate name shall be allowed by the
Commission if it is not distinguishable from that already
reserved or registered, protected by law, and contrary
to existing laws
- Name is peculiarly important as necessary to the
very existence of a corporation
- The general rule as to corporations is that each
corporations must have a name by which it is to
sue and be sued and do legal acts
Amended Guidelines and Procedures on the Use of
Corporate Name and Partnership Names
SECTION 18: Registration, Incorporation and
Commencement of Corporate Existence

- A person or group of persons desiring to
incorporate shall submit the intended corporate
name to the Commission for verification
- If the Commission finds that the name is
distinguishable from a name already reserved or
registered for the use of another corporation, not
protected by law and is not contrary to law, the
name shall be reserved in favor of incorporators
- The incorporators shall submit their articles and
bylaws to the Commission
- If the Commission finds the submitted documents
and information are fully compliant with the
requirements of this Code, other relevant laws,
rules and regulations, Commission shall issue the
certificate of incorporation
- Private corporation organized under this code
commences its corporate existence and juridical
personality from the date the Commission issues
the certificate of incorporation under its official
seal and the incorporators, stockholders/members
and their successors shall constitute a body
corporate under the name stated in the articles of
incorporation for the period time mentioned unless
said period is extended or sooner dissolved in
accordance with law
Note: It is the certificate of incorporation that gives
juridical personality to a corporation and places it under
the jurisdiction of the SEC
Note: A corporation commences its corporate existence
and juridical personality and is deemed incorporated
from the date the SEC issues certificate of incorporation
under its official seal
SECTION 19: De Facto Corporation
- The due corporation of any corporation claiming in
good faith to be a corporation under this Code, and
its right to exercise corporate, 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
A De Facto Corporation. It is one which had not
complied with all the requirements necessary to be a de
jure corporation but has complied sufficiently to be
accorded corporate status as against third parties
although not against the state
Requirements before one can qualify as a de facto
corporation
1. The existence of a valid law under which it may
be incorporated
2. An attempt in good faith to incorporate
3. Assumption of corporate powers
Note: The filing of articles of incorporation and the
issuance of certificate of incorporation are essential for
the existence a de facto corporation. The Supreme Court
held that an organization not registered with the SEC
cannot be considered a corporation in any concept, not
even as a corporation de facto
Two conflicting public interest under de facto doctrine
- The de facto doctrine thus effects a compromise
between two conflicting interest:
1. The one opposed to an unauthorized
assumption of corporate privileges
2. The other in favor of doing justice to the parties
and of establishing a general assurance of
security in business dealing with corporations
Note: Generally, the de facto doctrine exists to protect
the public dealing with supposed corporate entities, not
to favor the defective or non-existent corporation
SECTION 20: Corporation by Estoppel
- All persons who assume to act as a corporation
without authority to do shall be liable as general
partners for all debts liabilities and damages
- Provided, however that such ostensible corporation
is sued on any transaction entered by it as a
corporation or on any tort committee by it as such,
it shall not be allowed to use its lack of corporate
personality as a defense. Anyone who assumes an
obligation to an ostensible corporation as such
 cannot resist performance on the ground that incorporation of companies under their special
there was in fact no corporation regulatory jurisdiction

Corporation by Estoppel Failure to formally organize and commence its

business within 5 years from the date of its
- Founded on principles of equity and is designed to
incorporation
prevent injustice and unfairness
- It applies when persons assume to form a - Certificate shall be deemed revoked as of the day
corporation and exercise corporate functions and following the end of the 5 year period
enter into business relations with third persons
- When there is no third person involved and the
conflict arises only among those assuming the form
of a corporation, who therefore know that it has
not been registered, there is no corporation by
estoppel

Doctrine of Corporation by Estoppel

- May apply to the alleged corporation and to a third

party
- An unincorporated association represented itself
to be a corporation will be estopped against third Continuous Inoperation for at least 5 consecutive years
person who relied in good faith on such
representation which cannot be allege lack of - SEC may place the corporation under delinquent
personality to be sued and evade its responsibility status after due notice and hearning
for a contract it entered into by virtue of which it
received advantages and benefits
- Third party who knew association to be
unincorporated, treated it as corporation and
received benefits, may be barred from denying its
corporate existence in a suit brought against the
alleged corporation

SECTION 21: Effects of Non-Use Charter and

Continuous Inoperation

- If a corporation does not formally organize and

commence its business within 5 years from the
date of its incorporation, its certificate of
incorporation shall be deemed revoked as of the
day following the end of the five- year period
- However, if a corporation has commenced its
business but subsequently inoperative for a period
at least 5 consecutive years, the Commission may,
after due notice and hearing, place the corporation
under delinquent status
- Delinquent corporation shall have a period of 2
years to resume operations and comply with all
requirements that the Commission shall prescribe
- Upon compliance, the commission shall issue an
order lifting the delinquent status
- Failure to comply with requirements and resume
operations within the period given by Commission
shall cause the revocation of the corporation’s
certificate of incorporation SECTION 16: Amendment of Articles of Incorporation
- The commission shall give reasonable notice to, Power of stockholders or members to amend the
and coordinate with the regulatory agency prior to articles of incorporation
the suspension or revocation of certificate of
- The authority of stockholders or members to
amend the articles of incorporation which forms
part of the corporate charter is conferred by Section
16, 37, and 38.
Section 37 refers to the extension or shortening of
the corporate term
Section 38, to increase or decrease of capital stock
Section 16 to matters other than foregoing
- Amendment must be approved by a majority vote
of the board of directors
Necessity of stockholders or members meeting for
amendment
- Amendment may also be effect by the written
assent of the stockholders representing a least 2/3
of the outstanding capital stock of the corporation
or 2/3 of its members, meaning such action need
not be taken at a meeting and upon vote
1. If amendment consists of extending/
shortening of corporate term, meeting of
stockholders or members are necessary
2. In a close corporation, if amendment of articles
of incorporation refers to any matters
mentioned in Sec 103, the same shall not be
valid or effective unless approved by the
required vote of the stockholders at a meeting
duly called for the purpose. Mere written
consent would not also be sufficient
Limitation on power of corporation to amend
1. Amendment is not allowed when it will be
contrary to any provision or requirement
prescribed by the Code
2. When it is for illegitimate purposes
3. Must be approved by the required vote of the
board and the stockholders
4. Original articles and amended articles together
shall contain all provisions required by law to
be set out in the articles of incorporation
5. Articles amended shall be indicated by
underscoring the change made, and a copy
duly certified under oath by the corporate
secretary and a majority of the directors or
trustees stating that the amendment have
been duly approved by the required vote of the
stockholders or members shall be submitted to
the SEC
6. Amendment shall take effect only upon their
approval by SEC. They are deemed approved by
the Commission from the date of filing if not
acted upon within six months from said date
for a cause not attributable to the corporation,
assuming that the amendments are not illegal
7. If corporation is governed by a special law such
as banks, banking and quasi-banking
institutions, insurance companies the
amendment must be accompanied by a
favorable recommendation of the appropriate
government agency to the effect that such
amendments are in accordance with law.
8. In case of foreign corporations authorized to
transact business in the PH, they are merely
required to file within 60 days after the
amendment of articles become effective, with
the SEC, and in proper case, with the
appropriate government agency, a duly
authenticated copy of the articles of
incorporation for record purposes
The filing however shall not itself enlarge or
alter the purpose for which such corporation is
authorized under its license to transact
business in the PH
SECTION 17: Grounds when articles of incorporation or
amendment may be rejected or disapproved
Grounds for rejection of articles of incorporation or
amendment
- Section 17 enumerates the grounds for the
rejection of the articles of incorporation or
disapproval of any amendment.
Note: These grounds are not exclusive
1. SEC is required to give the incorporators
reasonable time within which to correct or
modify the objectionable portions of the
articles of incorporation or amendment when
the same is rejected or disapproved for non-
compliance with requirements.
2. In case of corporations governed by special
laws, the articles of incorporation or
amendment shall not be accepted or approved
by the SEC unless accompanied by a favorable
recommendation of the appropriate
government agency that such articles or
amendment is in accordance with law
3. SEC shall not also accept the articles of
incorporation of any stock corporation unless
accompanied by a sworn statement of the
treasurer elected by the subscribers showing
the amount of the capital stock subscribed and
paid
Suspension or revocation of the certificate of
registration of corporation
- SEC may suspend, revoke, after proper notice and
hearing, the franchise or certificate of registration
of corporations, partnerships, or associations upon
any of the grounds provided by law including the ff.
1. Fraud in procuring its certificate of
incorporation
2. Serious misrepresentation as to what the
corporation can do or is doing to the great
prejudice of, or damage to, the general public.
3. Refusal to comply with or defiance of a lawful
order of the Commission restraining the
commission of acts which would amount to a
grave violation of its franchise
4. Continuous inoperation for a period of at least
5 years
 5. Failure to file by-laws within the request period
6. Failure to file required reports in appropriate
forms as determined by the Commission within
the prescribed period
SECTION 18: Corporate Name
Change of Corporate Name
1. Requirements
- Corporation can change the name originally
selected by it after complying with the formalities
prescribed by law: Amendment of articles of
incorporation and filing the amendment with the
SEC.
- Hence, the mere approval by the stockholders of
the amendment of the articles of incorporation
changing the corporate name of the corporation as
of that date
- When a change of name is approved, it is required
that the Commission must issue an amended
certificate of incorporation under amended name
2. Effect
- An authorized change in the name of the
corporation has no more effect upon its identity as
a corporation than a change of name of a natural
person upon his identity
- It does not affect the rights of the corporation or
lessen or add to its obligations
- After a corporation has effected a change in its
name, it should sue and be sued in its new name
Limitation upon use of corporate name
- Incorporators may choose and use any name they
may see fit, provided it is one not identical or
similar to a name which was previously adopted
and which is being used by another corporation or
unincorporated association or a natural person as
trade name, or is contrary to existing law
- If any corporation could adopt at pleasure the name
of another corporation, the practice would cause
confusion, unfair, and fraudulent competitions.
- It would also create difficulties in the
administration and supervision by the government
of corporations.
SECTION 19: Commencement of Corporate Existence
Acquisition of Juridical Personality
1. Issuance of certificate of incorporation
- A corporation commences to have juridical
personality and legal existence only from the
moment the SEC issues to the incorporators a
certificate of incorporation under its official seal
a. Such certificate is a final determination of the
corporation’s right to do business or to enter
into contracts in its name
b. Once issued, certificate becomes the charter or
corporate franchise from which the authority of
the corporation to operate as such flows
c. Issuance of certificate calls the operation into
being but it is not ready to business until it is
organized. Corporation must be formally
organize and commence the transaction of its
business or the construction of its works within
two years from the date of its incorporation,
otherwise, it corporate powers shall cease, and
it is deemed dissolved
2. Filing of articles of incorporation
- In the case of religious corporations, the Code does
not require the SEC to issue a certificate of
incorporation
3. Registration of cooperative
- Cooperative acquires juridical personality upon
registration with the Cooperatives Development
Authority
- It need not again to be registered with the SEC
SECTION 20: De Facto Corporations
De Jure Corporation
- One created in strict or substantial conformity with
the mandatory statutory requirements for
incorporation
- And whose rights to exist as a corporation cannot
be questioned by any party even in direct
proceeding.
De Facto Corporation
- One which actually exists for all practical purposes
as a corporation but which has no legal right to
corporate existence as against the state
- One which had not complied with all the
requirements necessary to be a de jure corporation
but has complied sufficiently to be accorded
corporate status as against third parties
Requisites of de facto corporation
1. Valid law under which a corporation with the
powers assumed might be incorporate
2. Bona fide attempt to organize a corporation
under such law
3. Actual user or exercise in good faith of
corporate powers conferred upon it by law
Note: Stockholders of a de facto corporation enjoy
exemption from personal liability for corporate
obligations as do stockholders of a de jure corporation.
Existence of law
- In order that there can be a de facto corporation,
there must be a law authorizing it to be a
corporation de jure for there cannot be a
corporation de facto where there cannot be one de
jure
1. Ther cannot be a corporation de facto under an
unconstitutional statute for such statute is void
and a void law is no law
2. A corporation cannot be organized as having de
facto existence when its purpose is prohibited
by law or contrary to public policy
3. Neither can there be a corporation for the
practice of a learned profession in the absence
 of law expressly permitting the organization of
such corporations
Bona fide to attempt to incorporate
- When there has been no attempt in good faith to
create a corporation de jure, there can be no de
facto corporation.
- Any other rule might well open the door to fraud
upon the public. Mere intent is not sufficient
- In addition, there must be a bona fide attempt to
comply with the requirements of the law.
1. Creation of corporation
- The ff. are defects which will preclude the creation
of even a de facto corporation
a. Absence of articles of incorporation
b. Failure to file the articles of incorporation with
the SEC
c. Lack of certificate of incorporation from the
SEC.
Note: In above cases, omissions would be fatal to de
facto corporate existence, for even its stockholders may
not probably claim good faith being a corporation
2. Creation of de facto corporation results
- The ff. are defects which do not preclude the
creation of a de facto corporation
a. Name of the corporation closely resembles that
of a pre-existing corporation that it will tend to
deceive the public
b. Incorporators or a certain of them are not
resident of the PH
c. Acknowledgement of the articles of
incorporation or certificate is insufficient or
defective in form, or it was acknowledged
before a person without authority
Note: The above cases may be considered as
inadvertent or minor defects or errors which can be
excused to prevent injustice
User or exercise of corporate powers in good faith
- To create a corporation de facto, it is not sufficient
to show the existence of law under which a
corporation might be formed and an honest
attempt to comply with the requirements.
- It is also necessary to show an actual user or
exercise of corporate powers
1. User contemplated
- Acts relied upon as showing user must be corporate
acts as distinguished from acts which as well be
performed by an incorporated association or
individual
- In other words, the act or business must be
transacted as a corporation under the corporate
forms. Hence, the mere act of engaging in business
is not enough unless the business is such that it can
be carried on by a corporation.
2. Duty to correct defect if discovered
- After incorporation, the incorporators discovered
that they have not complied substantially with the
law and still continued transacting business as a
corporation, without doing anything to correct the
defect, the privilege of de facto existence can no
longer be invoked.
Questioning validity of corporate existence
- Well-settled rule that assuming that a de facto
corporation actually exists, its existence as a
corporation cannot be collaterally attacked or
questioned either by the state or by private
individuals
- State must bring a direct proceeding against the
corporation to oust it from the exercise of
corporate powers usurped by it and to have it
dissolved
Direct Attack of corporate existence
Direck Attack – whereby State, in a proceeding brought
for that purpose, attacks the existence of an association
claiming to be a corporation.
A direct attack can only be instituted by the
government through the Solicitor General by quo
warranto proceedings
Collateral attack of a corporate existence
Collateral Attack – where corporate existence is
questioned in some incidental proceeding not
provided by law for the express purpose of attacking
the corporate existence.
Reason for the rule against collateral attack
1. Individual right is not invaded. It is the state’s
right and authority which are invaded and
usurped. If the state, which alone grants the
authority to incorporate, remains silent, an
individual would not be allowed and permitted
to raise the inquiry
2. It would produce endless confusion, hardship
and probably destroy the corporation if the
legality of its existence no judgment could be
rendered which would finally settle the
question.
3. The rule is in the interest of the public and is
essential to the validity of business
transactions with corporation
SECTION 21: Corporation by Estoppel
Estoppel to deny corporate existence
1. Stockholders or members
- Of pretended or ostensible corporation who
participated in holding it out as a corporation are
generally estopped or precluded to deny its
existence against creditors for the purpose of
escaping liability for corporate debts or for unpaid
part of subscription to stock.
2. Third Persons
- Who deal with such a corporation recognizing it as
such and the pretended corporation itself,
estopped from denying its corporate existence and
raising the defense of its lack of corporate
personality for the purpose of defeating liability
growing out of a contract between them and such
entity.
- But one induced by fraud to deal with an apparent
corporation will not be estopped to deny the
corporate existence
3. All persons not stockholders or members
- Who assume to act as a corporation knowing it to
be without authority to do shall be solidary liable
as general partners with all their properly for all
liabilities, damages, and liabilities incurred.
Corporation by estoppel without de facto existence
- A corporation by estoppel has no real existence, in
law. It is neither de jure nor de facto, but a mere
fiction existing for the particular case where the
element of estoppel is present
- It exists only between persons who misrepresented
their status and parties who relied on
misrepresentation
- Existence of a corporation by estoppel may be
attacked or questioned by any third party except
where the attacking party is estopped to treat the
entity other than as a corporation
SECTION 22: Effects of non-use of corporate charter
and continuous inoperation of a corporation
Statutory requirements before and after incorporation
- Corporation law contains various requirements and
conditions which must be complied with in order
that persons desiring to be so may become a body
corporate. The courts have established between
mandatory and directory conditions.
- The rule is that as to provisions of the statute which
are mandatory, non-compliance will prevent the
creation of a de jure corporation but as to those
provisions which are merely directory, a departure
will not have this consequence
- Strict compliance even with the mandatory
provisions which are conditions precedent to
corporate existence is not required. The law
requires only substantial compliance
Note: Mandatory conditions may be either conditions
precedent or conditions subsequent
Mandatory and directory provisions explained
Mandatory Provisions – Prescribe formalities for
incorporation which are designed to protect the public
Directory Provisions – Relatively inconsequential so
that failure to comply with a directory provision will not
be fatal to valid incorporation
Condition Precedent
- Those conditions non-compliance with which will
prevent the legal existence of a corporation
Examples
1. Filing of the articles of incorporation with the
SEC
2. Issuance of the certificate of incorporation by
the SEC
3. Minimum number of five incorporators
4. Legal requirements that 25% of the authorized
capital stock must be subscribed and 25%
thereof paid
Conditions Subsequent
- Conditions to be complied with after acquiring
corporate existence in order that a corporation may
legally continue
1. Two required acts of organization and
commencement of its business operations are
conditions subsequent failure to comply with
which will result in the automatic cessation of
corporate powers and the dissolution of the
corporation
2. However, non-compliance with a condition
subsequent is mandatory may not affect
corporate existence although it may be a
ground for proceedings by the State to forfeit
its charter
Formal organization and commencement of business
1. Acts constituting formal organization
- Formal organization requires the adoption by-laws
and the election of the board of directors and of the
officers by the board pursuant to the by-laws and
the taking of such other steps as are necessary to
enable the corporation to transact the legitimate
business or accomplish the purpose for which it was
created
2. Substantial compliance sufficient
- Strict compliance with this condition subsequent is
not required
- Thus, in a case, a corporation was deemed to have
formally organized, it appearing that from the day
of its formation, the corporation had a governing
board which directed its affairs, as well as a
treasurer and a clerk, and that through these
instrumentalities, it actually functioned and
engaged in the business for which it was organized,
and thus it could not be held to have forfeited its
charter simply because it had not specifically shown
that it also had a president and a secretary
3. Acts constituting commencement of business
- Corporation shall be considered to have
commenced the transaction of its business when it
has performed preparatory acts geared toward the
fulfillment of the purposes for which it was
established such as but not limited for the ff”
a. entering into contracts or negotiation for lease
or sale properties to be used as business or
factory site
b. making plans for and the construction of the
factory
c. taking steps to expedite the construction of the
corporation’s working equipment
4. Effect of subsequent continuous operation
- Where the corporation has commenced the
transaction of its business but subsequently
becomes continuously inoperative for a period of
 at least five years, such continuous inoperation
shall be a ground for the suspension or revocation
of its corporate franchise or certificate of
incorporation but notice and hearing in such case
are required
- If the non-use of corporation charter or continuous
inoperation of a corporation is due to causes
beyond its control as found by the SEC