QUICKNOTES on the Revised Corporation

Code of the Philippines

It is an artificial being created by operation of law having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence.

Artificial being Operation of law Rights of Powers by Law

Succession
 No moral damages  Created by special  Continues to exist  Express powers – those in
unless the SC said so law through filing despite the death of the Corporation Code
in an Obiter Dictum articles of the founders  Implied/necessary – flow
case incorporation through  Maximum term: from nature
 Doctrine of separate SEC Perpetual unless  Incidental/inherent –
personality  Concession theory – provided by AOI attached at the moment of
 Limited liability rule owes its existence to  Renewal is 5 years creation
 Trust fund doctrine the law prior to the expiration
 Doctrine of piercing date
the veil of corporate
fiction (FADE)
 Favorite ni Marcos: 30 days, 6 months, 5 years
Stock Nonstock Corporation
Corporation Ordinary Educational Sole
# of BOD 5 to 15 5 but may exceed 15 5 or 10 or 15 1 only
Terms of Service 1 year 3 years 5 years n/a

Ipso Facto Dissolved by Law By-Law Rules

 Failure to formally organize within 2 years from  Submission of by-laws – within 30 days from
the date of incorporation issuance of SEC Certificate
 Late renewal of corporation  Inaction of SEC – Upon the lapse of 6 months

De-facto Corporation
 Continuous inoperation at least 5 years after its  Percentage of Filipino ownership is less than what
formal organization is prescribed by law
 Failure to submit by-laws within 30 days  AOI fails to state all matters required by the
 Majority of the incorporators are PH residents Corporation Code
 Types of Corporations
 Municipal – Governance of particular  Eleemosynary – Charitable (LIMOS)
territory or local government unit  Ecclesiastical – Religious
 GOCCs – Public purpose but performs  Lay – other than religious
some commercial functions  Ostensible – Estoppel
 Public Utility – Performs government  Civil/Private – Performs commercial functions or
functions because it’s privatized by Gov’t for private interests

Corporations can now donate to any political party except Foreign Corporations, candidate and
partisan political party

Persons in a Corporation
 Promoters – Take initiative in founding and  Subscribers – Those who agreed to take and pay
receive consideration thereof for original shares
 Underwriters – Persons who guaranteed  Incorporators – Members mentioned in the AOI as
on a firm commitment originally formators.
Executive Committee
 Creation only by virtue of provision in the by-laws
 Consist of at least 3 members of the board of directors. Mandatory corporate officers are the ffg:
o President – must be a director and stockholder
o Secretary – Filipino resident and cannot be a president
o Treasurer – must not be president but must be a resident
How to vote:
1. Personal voting 4. Through a trustee in a voting trust agreement
2. Remote communication or in a. Notarized
absentia: Provided, that the votes are b. Period must not exceed 5 years
received before the corporation finishes 5. Voting by co-owners
the tally of votes. a. Unanimously
3. Through an agent by virtue of proxy Exceptional cases: certificate of stock says “and/or”
a. Written authorization valid for only
the meeting
b. Valid and effective for a period of 5
years at any one time

Management Contract – legal agreement that grants operational control

 Without interlocking directors: major, major for managed and managing.
 With interlocking directors: major, 2/3 for managed and major, major for managing
 Corporations that
Cannot Issue No-Par
(BLTBPIO)
 Building and Loans
Association
 Trust companies
 Bank
 Public utilities
 Insurance companies
 Other Corporations with
access of funds to the
public
Nationality Requirement
(MAPEMO)
 Mass media – 100%
 Advertising – 70%
 Public Utility – 60%
 Educational Inst. – 60%
 Mining – 60%
 Ownership of Land – 60%
Powers that Can’t Be Delegated
by BOD to ExeCom (FAAD)
Filling up of vacancy in BOD
Adoption/amendment of bylaws
Approval of corporate acts requiring
approval or ratification of
stockholders
Distribution of cash dividend

May Vote (I3 AM SAD) Not Allowed to Vote (CRREAD)

 Increase or decrease of capital stock  Compensation of directors
NONVOTING

 Incur, create, increase bond indebtedness  Removal of directors

SHARES

 Investment of corporate funds in another  Ratification of disloyal directors

corporation or another business purpose
 Amendment of Articles of Incorporation
 Merger or consolidation of corporations
 Sale, disposition, pledge of all corporate property
 Adoption or amendment of by-laws
 Dissolution, rehabilitation, or liquidation
 Election of directors
 Approval of Management contract
 Distribution of stock dividends
*Treasury shares and delinquent shares
completely have no voting rights

Majority BOD Alone (VETDD)
 Vacancies in BOD (DResAD)
 Election of officers in executive committee
 Power to acquire own shares (treasury shares)
 Declaration of cash or property dividends
 Delegated power to amend or repeal by-laws to the
board of directors
Majority of Stockholders (CANPER)
 Compensation of directors
 Adoption of pre-incorporation bylaws
 Fixing the issued price of no-par value shares
 Election of Board of Directors
 Revocation of delegated power to BOD
Major BOD 2/3 Stockholders
(I3 AM SDDDE)
 Increase or decrease in capital stock
 Incur, create, increase bond
indebtedness
 Investment of corporate funds in another
corporation or another business purpose
 Amendment of Articles of incorporation
 Merger or consolidation
 Sale, lease, exchange, mortgage,
pledge, dispose all of corporate assets
 Dissolution of corporation
 Adoption of plan of distribution of assets
of nonstock corporation
 Distribution of stock dividends
 Extension or shortening of corporate term
 2/3 of Stockholders (PDeRRS) Major/Major (NPAA)
 Denial of preemptive right  Fixing the issued price of no-par value
 Delegation of power to amend or repeal by-laws to shares (if BOD is delegated in AIC or BL)
the board of directors  Amendment or repeal of bylaws (USE
 Removal of Directors/Trustees THIS IF SILENT: no delegation)
 Ratification of act of disloyal director  Approval of Management contract
 Ratification of act of self-dealing director (without interlocking directors)

BOD Fill up (DResAD) Only Stockholders (REI) Minimum Days

Written Notice
 Death of a director  Removal of a director  Shareholders
 Resignation of a director  Expiration of term o Regular: at least 21
 Abandonment of office by a director  Increase in sits days before the
 Disqualification of a director meeting;
o Special: 1 week
 Board of Directors
o Regular and Special: 2
days
 Articles of Incorporation
 Name of corporation
 Purpose clause including primary
and secondary
 Place of principal office
 Term of existence
 Names, nationalities and
residences of incorporators
 Number of directors of trustees
 Names, nationalities, and
residences of temporary directors
or trustees until election
 In case of stock corporation,
amount of authorized share
capital, par value, issue price of
no par, original subscribers and
amount paid by each
By-laws AOI but NEVER By-Laws
 Time, place, and manner of calling  Classification of shares of stock and
regular and special meetings for preferences granted to preferred shares
BOD  Provisions on founder’s shares
 Time, place, and manner of calling  Provisions on the purposes of the
regular and special meetings for corporation
stockholders  Providing for the corporate term of the
 Required quorum in meetings of existence
stockholders and manner of voting  Capitalization of stock corporations
 Form for proxies of stockholders  Corporate name
and members  Denial of preemptive rights
 Qualifications, duties, and
compensation of directors,
trustees, officers
 Time for holding annual election of
directors
 Penalties for violation of bylaws
 Manner of issuing stock
certificates
 Requirements: Close Corporation CANNOT be a Close Corporation
(ICOMEBSP)
 Stockholders must not exceed 20 persons  Insurance
 Issues stocks are subject to transfer  Corporation with public interest
restrictions such as right of first refusal  Oiling companies
 Corporation shall not be listed in the stock  Mining companies
exchange  Educational institutions
 At least 2/3 of voting rights are not owned by  Banks
another corporation which is not a close corp.  Stock exchange
 Public utilities

Right to Appraisal Right (AIMCSC) Types of Suits

 Amendment to the AIC
 Investment of corporate funds
 Merger or consolidation
 Change the terms
 Sale of all or substantially all
 Close corporation
 Individual – stockholder vs. corporation
 Representative – association of stockholder
vs. corporation
 Derivative – stockholder in behalf of
corporation vs. board of directors
 Other Trivia

Director’s maximum amount to be granted as compensation to board of directors? 10% NIBT

Denial of preemptive right should be in the articles of incorporation.

Preemptive right is available on all issuances (treasury, subscription to existing unsubscribed, increase of
CS) Exceptions: IPO, initially rejected shares,

Treasury shares under SEC are PROPERTY DIVIDENDS

Unrestricted RE not required
 Deadlock in the management of the business
 When a stockholder of a close corporation wants to exercise his appraisal right for no reason
 Redemption of redeemable preference shares

Period of compliance by the corporation of the demand by stockholder for recent FS? 10 days
Minimum paid up capital to be audited by a CPA for corporation: 50,000
Acquisition of 100% capital still separate entities
 COOPERATIVES CORPORATIONS
TAXABILITY (IN GENERAL) Tax Exempt Taxable
SUPERVISION AND REGULATION CDA SEC
FILING OF BY-LAWS Same time with AOC within 30 days after AOI
MINIMUM SUBSCRIBED SHARES 25% of Authorized Share Capital Deleted
PAID UP CAPITAL ↑ of 25% of Subscription or 15,000 ↑ of 25% of Subscription or 5,000
AMENDMENT OF PROVISION OF
2/3 of all regular members MBOD and 2/3 of OSC
AOB
PRESCRIPTIVE PERIOD OF
30 days 6 months
AOC/BL AS DEEMED APPROVED
MEMBER ENTITLED TO ALL
Regular Member Common Stockholder
RIGHTS AND PRIVILEGES
ABSENCE OF MEETING DATE Within 90 days after close of FY Any date after April 15
RATIFICATION OF
 SELF-DEALING DIRECTOR
 ACQUISITION OF
¾ of Regular Members 2/3 of Ordinary Share Capital
OPPORTUNITY
REMOVAL OF AN
OFFICER/DIRECTOR
VOLUNTARY DISSOLUTION Majority of BOD, ¾ of RM Majority of BOD. 2/3 of OSC
MERGER At least ¾ of RM Majority of BOD. 2/3 of OSC
MAXIMUM PERIOD OF
3 years from time it is dissolved
LIQUIDATION
MAXIMUM LIMIT ON
10% of Share Capital No limit
SHAREHOLDERS
MAXIMUM PAR VALUE 1,000 No limit
RIGHT OF DISSENT Right to Withdraw Membership Appraisal Right