Part 2

BATAS
BILANG
CORPORATION Classifications of a
corporation(sec.3)
68(Sec. 1) Basic
Definition of
classifications
corporation(sec. :
2) 1 . stock Other classifications:
2. non-stock  According to no. of members:
1. Corporation aggregate
Corporation Special Law
2. Corporation sole
Code (sec 4)  Religious or not:
  1. Ecclesiastical
  Is an artificial being 2. Lay
For the Government Attributes of
created by operation of  Charitable or not:
law , having the right Tests to 1. Eleemosynary
Brief owned corporations corporation
of succession and the determine 2. Civil
history nationality of a  Country of creation:
powers, attributes and
corporation: 1. Domestic
properties expressly 2. Foreign
May 1 , 1980-known authorized by law or 1.Incorporation  Legal right to corporate existence:
as Distinction between corporation
incident to its existence test 1. De jure
“Corporation law” and partnership: 2. De facto
April 1, 1906- known 2.Control test  Open to public or not:
1. Manner of creation 1. Close
as
“Corporation code of 3.Business 2. Open
2. Number of incorporators
domiciliary test  Relation to other corp.:
the
1. Parent corp.
Philippines” 3. Commencement and juridical 1. Artificial being
  2. Subsidiary corp.
personality 2. Created by operation  True or limited sense:
of law 1. True corp.
For private 4. Powers 2. Quasi corp.:
corporations 3. The right of
a. Corp. by prescription
5. Management succession
b. Corp. by estoppels
4. Has only powers,  Public or private:
6. Effect of mismanagement attributes and 1. Public corp.
properties expressly 2. Private corp.
7. Right of succession
authorized by law or  Going public or not:
8. Transferability of interest incident to its 1. Going public
existence 2. Going private
9. Term of existence  
 
10. Firm name  
Doctrine of piercing the  veil – when the veil of
11. Dissolution
corporate fiction is used as a shield to perpetuate
12. Laws which govern fraud, to defeat public convenience, justify wrong or
defend crime , this fiction shall be disregarded and the
  individuals composing it will be treated identically.
 
 
 CORPORATION CODE OF
THE PHILIPPINES

Other
terms: Classifications of
Components of a share
corporation(sec. 5):

Capital stocks: Classes of Share:

1. Share of stock- is a
type of security that 1. Authorized capital stock-is the maximum 1. Par value share
signifies proportionate number of shares that a corporation is
ownership in the 1. Corporators- those who legally allowed to issue 2. No par value
issuing corporation. composed the corporation
This entitles the 2. Subscribed capital stock-are shares that 3. Votingshare
2. Incorporators- corporators investors have promised to buy
stockholder to that 4. Non voting share
mentioned in the articles of
proportion of the
incorporation 3. Outstanding capital stock-  refer to a
corporation's assets and 5. Common stock
company's stock currently held by all its
earnings. 3. Stockholders-owners of share
shareholders.formula: outstanding 6. Preferred stock
of stock in a stock corporation
2. Stock certificate-is a shares=issued stock - treasury stock
written instrument 4. Members- corporators of a 7. Promotion stock
non-stock corporation 4. Paid up capital stock-is the amount of
signed by the proper
money a company has received from 8. Share in escrow
officers of the
5. Others: shareholders in exchange for shares of
corporation certifying 9. Convertible stock
stock. 
that the person named a. Promoters-those who
therein is the registered discovers a prospective 10. Founders share
5. Unissued share-
owned of a designated business and brings persons Corporate capital stock that has been authori
interested to invest 11. Redeemable share
number of shares of zed but not yet issued.
stock in the corporation.  
b. Subscribers-are the first 
6. Issued share = treasury
  shareholders in a limited by
shares company share+outstanding

c. Underwriter-helps companies 7. Legal capital-refers to the portion of

introduce their new securities owner’s equity and assets that cannot be
to the market. distributed, and is therefore permanent in
nature.formula: LC=issued shares xpar
  value
   

 
 Section 8 Redeemable Section 7 Founder's Share
Share

Where Corporation is  As share issued to the organizers and promoters of a

 issued by Corporation provided by in the Insolvent corporation in consideration of some supposed right
article of incorporation. or property.
Redeemable or Callable share- at fixed term or at 1. Special Rights and Privilages- not enjoyed by the
the option of either the issuing corporation or 5 Voting Rights may not be made when owners of other stocks, such as preference in the
stock holder or both redemption price. the corporation is payment of dividends.
insolvent 2. Exclusive Rights to Vote and to be Voted- right
must be for a limited period not exceeding five (5)
years and must approved by the SEC.
1. Issued- 2. Regardless of > In the articles of
expressly so existence of incorporation unless
provided in the unrestricted otherwise provided in the
article of retained earnings code.
incorporation and  Section 7 provides the exemption of
by-laws. chapter 6 part 1 “no share may be derived
Terms and Conditions of voting rights except those classified
Section 9 Treasury Share and rescued as “preferred or redeemable”
> Upon expiration of a fixed term
-They may be taken up or
purchased by the corporation.
A.) Conferred the rights of a shall be stated not only in
creditor to attract corporate the article of incorporation  share of stock which have been Declaration as Property
financing but also to a certificate of issued and fully paid for, but Right
B.) Issuance of share stock representing said reacquired by the issuing retained earning
- since the terms and conditions shares. classified as property
corporation by purchase
of the purchases are stated in the redemption, donation, some dividend
articles of incorporation and as
unlaw means.
well as in corresponding
certificates of stock, corporate Voting Right
creditors, and other share holders, treasury shares have
are supposed to be aware of the no voting rights (SEC
same. Status
Qualified Bidder Resale 57)
Resold at any price
by corporation. The
board of directors
Right to Dividends sees fit to accept,
- corporation cannot be declared by a even than PAR
corporation to itself
- it should distributed as share or
stock or taking money
 Section 10 Number and SECTION 16:
Qualification of Incorporation AMENDMENT OF
ARTICLES OF
INCPORPORATION

 Natural Person GENERAL RULE:

- any number but not less than five (5) but not more than fifteen (15) COMMENCEMENT:
AIC may be amend by: The amendment shall take effect upon their approval
 All legal Age 1.) Majority vote of BOD
 Majority are Residents of the Philippines by the SEC or from the date of filing with the said
and written assent of commission if not acted within six months,
 May form a private corporation for any lawful purpose or purposes stockholders representing
 Each of the incorporators of a stock corporation must own or be a 2/3 of outstanding capital
subscriber to at least one (1) share of the capital stock of the corporation. stocks.
2.)2/3 of the members if
non-stock corporations.

Steps in Creating or in the Creation of a LIMITATIONS ON AMENDMENT

Corporation The amendments shall not be contrary to law,
must be for legitimate purpose, approved by
vote of board, stockholders and members.
2. Incorporation ( sec 10) Shall contain all provisions required by law
1. Promotion 3. Formal Organization and and etc.
- the formation and Commencement of Business
organization of a 1. Drafting and Execution Operations
corporation under the of the articles if > Number and Qualifications
supervision of one or incorporation by the 1. Natural Person
more so called incoporator. 2. Capacity to contract SECTION 17: GROUNDS
“promoters” 2. Filling with the SEC 3. Resident of the Philippines FOR REJECTION OF
- there cannot be an with requirements, A and B 4. Citizen of the Philippines AMENDMENT OF
agency unless there is a 3. (Residents of the 5. Owners of or subscribers to at least
principal. one share
ARTICLES OF
Philippines) payments of
filling
INCORPORATION
4. (Citizen of the
Philippines) issuance of GROUNDS FOR REJECTION:
certificate GENERAL RULE: The SEC may 1.) That the AIC or any amendment is not
5. (Owners of or reject the AIC or dis-approve any substantially in accordance with the form
subsidiaries to at least one amendment in non compliance with prescribed.
share.) the requirements with this code. 2.) The purpose is unconstitutional.
3.) The treasurer’s affidavit is false
4.) The percentage of ownership of the capital
stocks to be owned by citizens of phil. has not
1. Drafting and execution of the acrticle of incorporation been complied.
2. Filling with SEC
3. Payment of the filling
4. Issuance by SEC of certificate of incorporation

SECTION 18:
CORPORATE NAME
GENERAL RULE: A corporation
can change its name with
formalities presented by law with
amendment with the SEC.
NOTE: approval of stockholders
does not automatically change the
corp. name.
EXCEPTION: No corporate name
may be allowed by SEC if it is
identical or deceptively similar to that
any existing corporation.
SECTION 20: DE FACTO
CORPORATIONS
GENERAL RULE: There can be no de
facto corporation without attemp in good
faith to create de jure corp.
REQUISITES:
1.) A valid law under which a
corporation with powers assumed
might be incorporated.
2.) A bona fide attempt to organize a
corp.
3.) Actual use or exercise in good faith
of corporate powers.
SECTION 19:
COMMENCEMENT OF
CORPORATE
EXISTENCE
GENERAL RULE: A
corporation commences to have
juridical personality only upon
the issuance of Certificate of
Incorporators by the SEC.
EXCEPTION: In case of religious corporations, the
code does not require the SEC to issue a certificate of
incorporation.
NOT A DE FACTO CORPORATION:
1.) Under an unconstitutional statute for
such statute is void and a void law is no
law.
2.) When its purpose is contrary to law.
3.) Practice of a learned profession the
absence of a law permitting it.
SECTION 21:
CORPORATION BY
ESTOPPEL
NOTE: A cooperative acquires
juridical personality upon
registration with the cooperative
development authority. CORPORATION BY
ESTOPPEL WITHOUT DE
FACTO EXISTENCE:
Has no real existence in law. It is
neither de jure or de facto, but it
GENERAL RULE: All persons is a ,ere fiction existing for the
who assume to act as a corporation particular cases,
knowing it to be without authority
shall be liable as general partners for
all debts, liabilities and damages
caused by it.
It shall not be allowed to use as a
defense of lack of corporate
personality when it is sued on any of
its transactions.
SECTION 22: Effects of non-use of
corporate charter and continuous
inoperation of a corporation
GENERAL RULE: if a corporation EXCEPTIONS: These provisions shall
does not formally commence its not apply if the failure to organize and
business within two years from the commence the operation is due to causes
date of incorporation, its corporate beyond the control of the corporation as
powers ceases and the corporation is may be determined by the SEC.
dissolved. And if it commenced
operation then becomes inoperative
for at least 5 years, the same shall be a
ground for suspension of its franchise.
 Section 24
Section 23
Election of directors
Board of Directors
Power may be delegated or trustees
only to ministerial duties
connected therewith
Governing Body Methods of voting
of Corporation General Rule for stock
The corporate corporation
powers of all Exemption: Unless Methods of voting
corporation under otherwise stipulated for non-stock
this code shall be - members may cast
Limitations exercised Limitations and Conditions many votes as there
1. Must be serve 1. At any meeting of are trustees to be
1. Straight voting-
limitations by the stockholders or members may vote such elected but may not
constitution, statutes called for the election, there number of shares as cease more than one
and regulations must be to act by written many persons as there vote for one
2. It cannot perform All business Binding effect of proxy either: are directors to be candidate
constituent acts such conducted and all shareholder’s action a. owners of the majority 2. Cumulative
property of such - Elect BOD to of the outstanding capital voting for one
as major changes
corporations oversee b. majority of the candidate- allowed
3. Cannot exercised controlled and held of management and members entitled to vote to concentrate his
power not possessed B.O.D or
operation of 2. Must be by ballot if votes and give one
by the corporation trusteesfrom among requested by any voting
corporation candidate as many
members of stockholder votes Exemption:
corporation 3. A stockholder cannot 3. Cumulative Unless provided
deprive by the Articles of voting by in the Articles of
Incorporation for the method distribution- may Incorporation
he wants in voting cumulate his shares
- Shall hold 1 year and until
Qualifications 4. No delinquent stock shall by multiplying the
their successor are elected
  be voted no. of shares by the
and qualified for stock
5. If quorum is presented, no. of directors
- hold office for 5 years but
1. Must own at candidates receiving the
1 third is elected annually
least 1 share of highest number of votes shall
for non-stock
capital stock be declared elected
for stock 6. Meeting may be adjourned
  from day to day but it cannot
- Must own at least 1 share of capital for stock be adjourned indefinitely
2. Majority must be corporation 7. Requisite notice must be
a resident of the given
- Must own or continuously own at least a  
Philippines
  share of stock during his term
 Section 25 Can also be an officer Section 26: Report of
Corporate officers, of another corporation election of directors,
quorum for the same purpose trustees and officers

Shall perform the

duties enjoined on
A majority of
General Rule them by law and the General Rule: Within 30
number of director or Immediately after by-laws of the days after the election of the In case of death, resign
trustees as fixed in the election of directors of a corporation directors, trustees and officers or any cease to hold the
Article of Incorporation corporation must any of the them shall submit office shall immediately
shall constitute a formally organize by the to the SEC the names, report to the SEC
quorum for transaction election of officers nationalities and residences
of corporate business
and be valid as Exemption: Unless the
corporate act Article of Incorporation
on the by-laws provide
for a greater majority
Any two or more Filing of vacancies I the
positions may be held office of director or
Cannot vote by Section 27
concurrently trustee which is
proxy at board Disqualification of governed by Section 29
meetings Directors, Trustees or
Officers
Exemption: No one
should act as president
Rationale: and secretary or Anyone who convicted
Anyone who convicted by
- Each director or president and treasurer by final judgment of an
final judgment of an offense
trustee is required to at the same time General Rule offense punishable by
punishable by imprisonment for
  imprisonment for period
exercise his personal period exceeding 6 years
exceeding 6 years
judgment
- Cannot delegate his
duties or assign his
powers to another The rule applies regardless
Regardless of the years of
of the nature or classification of
imprisonment
the offense as long as
punishable for more than 6
years
 MANNER OF MANNER OF WHEN DO WHO ARE FILLING UP
REMOVAL OF REMOVAL OF REMOVAL TAKES ENTITLED TO CALL VACANCY (SEC. 29)
DIRECTOR/TRUSTE DIRECTORS & PLACE? (SEC 28) A MEETING?
ES (W/OUT CAUSE) TRUSTEES (w/cause)
(SEC 28) (SEC 28)
STOCK CORP. Requisites:As long as By the vote of Take place during Written demand of the Can be filled up by the
it does not deprive stockholders or regular meeting or stockholders holding a stockholdersor
minority of the representing 2/3 of special meetings majority of capital members of the
stockholders and authorized capital stock; &The secretary corporation:A. if
membersof the right to stock of the president of the removal take place
representation to whicj corporation because of the vote of
they may entitled to stockholders and
Sec 24 of the Code. expiration of the
NON-STOCK CORP. *Section 24: election 2/3 of member After previous notice Written demand of the term.B. If vacancy
of directors/trustees. authorized to vote to members of the member holding the occurs because of
intention of the right to vote death, resignation,
removal. abandonment or
disqualification;C. If
vacancy can be filled
up by the remaining
dstockholdersD. If
vacancy is created to
increase the number of
directors/ trustees.

Power of the BOD to remove a
member
Power of court to remove
Directors/trustees
No power Note: There is an Abandonment of position in the
following situations:
With power A. When the elected director is incapable of
holding the position;
B. When director is always absent in the regular
meeting of the corporation;
C. Refusal has been announced by the elected
officer.
 Section 45: Ultra vires acts
Section 46
of corporations
Adoption of by-laws

Ratification
Definition
1.When contract is -One not within
May be filed prior The affirmative vote of
illegal- it cannot be express, implied, and
to Incorporation the stockholders
ratified or validated General Rule incidental powers of General Rule:
with approval and representing at least
2. Not illegal but merely Corporation under this the corporation.
beyond the power of signed by all Within one (1) majority of the outstanding
Code shall possess or  
corporation- merely month after receipt of capital stock or members for
exercise corporate powers -Impliedly incorporators non-stock is necessary
voidable and may be
conferred by this Code or by forbidden official notice of the
enforced by performance, issuance of its
ratification, or estoppel its Articles of Incorporation
  Certificate of
Incorporation by the
SEC shall adopt by-
Duly certified to by laws for its government Shall be signed by the
a majority of consistent with this stockholders or members
Effects of not illegal directors or trustees Code voting for them
1. Executory on both and countersigned
sides, cannot be by the secretary
enforced by both Section 47 and attached to
parties thereto Contents of by-laws original Articles of
2. Fully performed by incorporation Must be kept in the
both sides, neither principal office of the
party can lawfully set corp. subject to
aside inspection
3. Recovery is
permitted when one Content
side only performed 1. The time, place and manner of calling and conducting regular or special meetings of the directors or trustees
2. The time and manner of calling and conducting regular or special meetings of the stockholders or members
3. The required quorum in meetings of stockholders or members and the manner if voting therein
4. The form of proxies of stockholders and members and the manner of voting them
5. The qualifications, duties and compensation of directors or trustees, officers and employees
6. The time for holding the annual election of directors or trustees and the mode or manner of giving notice thereof
7. The manner of election or appointment and the term of office of all officers other than directors or trustees
8. The penalties for violation of the by-laws
9. In the case of stock corporations, the manner of issuing certificates
10. Such other matters as may be necessary for the proper or convenient transaction of its corporate business and
affairs

Section 48: Amendments to
by-laws
General Rule
The BOD or trustees by
majority vote, and owners of
at least a majority of the
outstanding capital stock, or
at least majority of the
members of a non-stock
corp. at a regular or special
meeting may amend or
repeal any by-laws or adopt
new by-laws
Section 49: Kinds of
For amendment or new
by-laws
- shall be attached to
original by-laws duly
certified and shall be
filed with the Securities
and Exchange
Commission
The amended or new by-
laws shall only be effective
upon the issuance by the
SEC of a certification that
the same is consistent with
this code
Regular and special
meetings of directors or
trustees (SEC 53)
Regular meetings
Shall be held monthly
unless the by-laws
provided
meetings
Requisites for a valid meeting
Regular and special 1. It must be held at the proper
place
meetings of stockholders or
2. It must be held at the stated
members (SEC 50) date and at the appointed
time or at reasonable time
thereafter
3. It must be called by the
proper person
Regular meetings Special meetings 4. There must be a previous
-shall be held annually on -may be held anytime notice
a date fixed, if not fixed deemed necessary or as 5. There must be a quorum
on any date in April provided in by-laws
provided that written provide that at least one
notice shall be given at week written notice shall
least two weeks prior to be sent to all stockholders
the meeting or members
 
When there is no person
Special meetings authorized to call a
May be held at any meeting, SEC will have
time upon the call of petition
the president or as  
provided in the by-  
laws
Place
May be held anywhere in or
outside the Philippines
 Section 51: Place and
Section 52: Quorum in Section 54: Who shall
time of meetings of
meetings preside at meetings
stockholders

General Rule
General Rule: General Rule
Either regular or special, meeting shall be
A quorum shall consist of the The president shall preside
held in the city or municipality where the
stockholders representing a at all meetings of the
principal office of the corp. is located if
majority of the outstanding directors or trustees as well
practicable in the principal office of the
capital stock or majority of the as of the stockholders or
corporation
members for non-stock members
 

Proper person to call meeting Exemption

1.
Quorum required in stockholders and members’ meetings
- in which the law determines the number of shareholders or
members whose concurring votes are necessary to make their 2.
action
 
-the by law may validly provide for the holding of meetings with
the presence of any number of stockholders 3.
 
-majority of the outstanding capital stock or majority of
members for non-stock shall constitute quorum
  4.
- once quorum is present, a majority vote is needed
The person or persons designated in the by-laws - By-laws provide that the chairman will preside
have authority to call stockholders’ or members - If the officer to preside is absent, a stockholder
of meeting or member may be
In the absence of such provision in the by-laws, - When there is no person authorized to call
it may be called by a director or trustee meeting, the petitioning stockholder or member
entrusted with the management unless otherwise may be
stipulated
Section 50 states that a stockholder or member
may make the call on order of the SEC
whenever for any cause, there is no person SECTION 55: RIGHT TO
authorized to call a meeting VOTE OF PLEDGORS,
Special meeting for the removal of directors or MORTGAGORS, AND
trustees may be called by the secretary or by a
stockholder or member
ADMINISTRATOR.

Manner of Voting
GENERAL RULE: In case of pledged or A stockholder or member
mortgaged shares in stock corporations, the may vote:
pledgor or mortgagor shall have the right to 1.) Directly
attend and vote at meetings of stockholders. 2.) Indirectly, through a
UNLESS: The pledgee or mortgagee is representative: a.)Proxy,
expressly given by the pledgor or b.)Trustee, and c.)By
mortgagor such right in writing. executor’s administrators
and etc.
 SECTION 56: VOTING SECTION 58:
IN CASE OF JOINT PROXIES
OWNERSHIP
DEFINITION: A REVOCATION OF
proxy designates PROXY Proxies
GENERAL RULE: In case LIMITATIONS ON are revocable at any
SUCH CONTENT is not the formal written
of shares of stock owned authority given by PROXY: time unless made
NECESSARY WHERE:
jointly by two or more the owner or holder 1. Proxy must be in written irrevocable by the
1.) There is a written proxy
persons, section 56 requires of stock who has signed by the stockholder and giver. It may be
executed by the joint owners.
the consent of all the co- the right to vote to filled before the scheduled made by notifying
2.) the shares are owned in an
meeting. the holder or signing
owners in order to vote such and/or capacity by the holders. it as agent to
exercise the voting 2. It is valid only for the a new proxy in favor
stock.
rights of the former. meeting which it is intended. of another.

3. Must be a period not

GENERAL RULE:
One or more
stockholders of a
corporation may create
a voting trust for the
purpose of conferring
upon a trustee or
trustees the right to
vote and other rights
pertaining to shares.
SECTION 59: exceed 5 years
VOTING TRUST
SECTION 60: SECTION 61:
SUBSCRIPTION PRE-INCORPORATION
PURPOSE OF LIMITATIONS: CONTRACT SUBSCRIPTION
VOTING TRUST: 1. For
The ultimate control period exceeds five
of the corporation years at any one time
depends upon the GENERAL RULE: General Rule: A subscription for
votes of the 2. Must not be Any contract for the shares of stock of a corporation
stockholders. Voting used for fraud. acquisition of still to be formed shall be
trust agreement are 3. unissued stock in an irrevocable for a period of at least
a device that may e Must be in writing or existing corporation or six (6) months subscription.
used to control notarized a corporation still to
these votes 4. Must be be formed shall be Exception: That no pre
filed in SEC deemed subscription. incorporation subscription may be
5. Subject to revoked after the submission of the
examination by the articles of incorporation to the
stockholders. SEC

SUBSCRIPTION CONTRACT: If the acquisition of

unissued shares from a corporation is made after its
incorporation, the contract is either subscription or a
purchase of stock depending upon its terms and intention
of the parties.
 SECTION 62.
Consideration for stocks
GENERAL RULE - Stocks
shall not be issued Tor a
consideration less th
the par or issued price
thereof.
Section 64 Issuance of
stock certificates.
GENERAL RULE:
No certificate of stock
shall be issued to a
sub-
scriber until the full
amount of his
subscription
together with interest
and expenses
Section 63. Certificate of MODES OF STOCK
CONSIDERATION FOR
stock and transfer off TRANSFER:
THE ISSUANCE OF THE shares Shares of stock so issued are
STOCK per-
-combination of any two or more Sonal property and may be
of the following: GENERAL RULE: The capital transferred by deliv
(1) Actual cash paid to the stock of stock corpora- ery of the certificate or
tions shall be divided into shares for certificates endorsed by
corporation
(2) Property, tangible or intangible which the owner or his attorney-in-
fact or other person
(3) Labor performed certificates signed by the officers
(4) Previously lncurred with the seal of the legally authorized to make the
indebtedness corporation shall be issued in transfer.
(5) Amounts transferred from accordance with
unrestricted the by-laws.
(6) Outstanding shares exchanged EXCEPTION:
for stocks No transfer, however, shall be valid,
Section 65: Liability of except as between
Directors for Watered the parties, until the transfer is
Stocks recorded in the books of the
corporation.
Definition:
WATERED STOCK is stock issued for no value at all or for a value
less than its equivalent either in cash, property, services or stock
dividend.

INCASE OF PARTIAL PAYMENT: ISSUE OF WATERED STOCK
In case of partial payments on a subscription,
PROHIBITED:
said pay
ments should be deemed pro-rated among all The issuance of watered stock is
the shares subscribed and therefore NO
prohibited to protect persons who
CERTIFICATE OF STOCKS CAN BE
ISSUED. may acquire stock and those may
become creditors of the corporation
on the faith of its outstanding
capital stock being fully paid.
LIABILITY FOR
WATERED STOCK:
EFFECT OF ISSUE WATERED STOCK: The liability of the consenting
1. As to corporation, the issuance is not merely director or officer for the
ultra vires but is illegal per se as it is a violation. “water” in the stock is solidary
with the stockholder
2. As to creditors, the law make no distinction
concerned. This means either
between those who became such prior and
of them can be held liable for
subsequent to the issuance of watered stock
the whole amount of the
difference.
 SECTION 66: Interest on Unpaid Section 68: Delinquency
Subscriptions Sale

On the date of the sale,

The Board of directors may, by resolution, order the so many shares of the
Liability of stockholder for interest By the virtue of
sale of delinquent stock and shall be specifically state stock as may be
on unpaid subscription: Central Bank, the legal
the amount due on each subscription plus all the necessary to pay the
In the meantime that the entire rate now is 12% per
accrued interest, and the date, time and place of the sale amount due on
amount of the stock subscription annum. If the rate of
which shall not be less than 30 days nor more than 60 subscription, with
has not been paid, subscribers for interest is fixed in the
days from the date the stocks become delinquent. accrued interest, cost o
stock shall be liable to the by-laws, then such rate
advertisement and
corporation for interest from the shall be paid
expenses of sale, will be
date of subscription, but only if so otherwise, such rate
sold at public auction to
required by the by-laws. shall be deemed to be
Purchase by the corporation of the HIGHEST BIDDER.
the legal rate.
delinquent stock:
In the absence of bidders, the
corporation may purchase for itself the
delinquent stock. In such case, it shall
Section 67: Payment of Balance of also be released from liability with
Subscription regards to his subscription which is deem
fully paid.
Subject to the provision of the
contract of subscription, the
WHEN TO BE MADE:
board of directors of any
stock corporation may at any a) On the date specified in the contract of Section 69: When Sale May Be
time declare due and payable subscription Questioned
to the corporation unpaid
subscriptions to the capital b) In the absence of any specified date in
stock and may collect the the contract, on the date stated in the No action to recover delinquent stock sold
same or such percentage of call made by the board of directors. can be sustained upon the ground of RECOVERY OF
said unpaid subscriptions, in irregularity or defect in the notice of sale, or STOCK UNLAWFULLY
either case with interest in the sale itself of the delinquent stock, SOLD:
accrued, if any, as it may unless the party seeking to maintain such The grounds for the
deem necessary. EFFECT OF FAILURE TO PAY: action first pays or tenders to the party recovery of stock
Failure to pay on such date shall render the entire holding the stock the sum for which the unlawfully sold for
balance due and payable and make all the stock same was sold. delinquency are
covered by said subscriptions delinquent and
subject to sale at public auction. The stockholder
shall be liable for interest at the legal rate on such
balance.
 Section 71: Effect of
Delinquency Section 72: Rights of Unpaid Shares

Stock delinquency does not deprive the holder of all
his rights as a stockholder except the right to be
voted for or be entitled to representation at any
Section 70: Court Action to stockholders meeting and as provided above in
Recover Unpaid Subscriptions Section 24. He shall still be entitled to receive
dividends subject to the provision of Section 43. But
delinquent stocks shall be subject to delinquency
sale as provided by section 68.
Before unpaid shares become delinquent,
the holder thereof is not considered to
have violated any contract with the
corporation and, therefore, he has all the
rights of a stockholder which rights
include the right to vote.
However, he is liable for interest on his
unpaid subscription if so required by the
by-laws.

Nothing in this code shall prevent the corporation from

collecting by action in a court of proper jurisdiction Section 73: Lost or Destroyed
the amount due on any unpaid subscription, with Certificates
accrued interest, cost and expenses.
The following procedure shall be followed for the
issuance by a corporation of new certificates of stock
in lieu of those which have been lost, stolen or
REMEDY BY JUDICIAL ACTION: destroyed:
As a general rule, a corporation may not
maintain a suit for the enforcement of
unpaid subscription without first making a
1.certificate of stock in a 2. after verifying the affidavit
call as provided by law.
corporation or his legal and evidence with the books of
representative shall file an the corporation, said
affidavit in triplicate setting corporation shall publish a
forth, if possible the notice in the newspaper of
circumstances as how the general circulation published
certificate was lost stolen or in the place where the
destroyed. corporation has its principal
office.

*The corporation is not liable to any person prejudiced by the

issuance of new certificate of stock pursuant to the procedure
described except in case of Fraud, Bad faith or Negligence on
the part of the corporation
 Section 74: Corporate Books and
Records
BOOKS AND RECORDS TO
BE KEPT BY
CORPORATION
Every private corporation,
stock, or non-stock, to keep
books and records at its
principal office as follows:
1.Record of all business
transaction
2.Minutes of all meetings of
stockholder or member
3.Minutes of all meetings of
director
Stock and transfer
RIGHTS TO FINANCIAL
STATEMENTS
(SECTION 75)
RIGHT OF A
STOCKHOLDER OR
MEMBER
Within ten days from receipt of any
stockholder or member, the
corporation shall furnish to him the
most recent FS which include the ff.:
a. Balance sheet
b. Profit or loss statement
RIGHT TO INSPECT
CORPORATE BOOKS
It is granted by express
provision of our corporation
law. It states that “the record
of all business transaction of
the corporation and the
minutes of any meeting shall
be open to the inspection of
director, stockholder or
member at any reasonable
hour.
DUTY OF THE DIRECTORS OR
TRUSTEES TO PRESENT
FINANCIAL REPORT TO
STOCKHOLDER OR MEMBERS
BASIS AND PURPOSE OF
RIGHT TO INSPECT REMEDIES AND SACTION
CORPORATE BOOK FOR ENFORCEMENT OF
1.Beneficial ownership of RIGHT:
corporate asset 1.Action for Mandamus
2.Protection of stockholders and 2.Civil and criminal liability
general public from
mismanagement.
What to be When
presented? presented?
Financial report of the operations of the preceding At every annual
year which includes the ff: regular meeting of
the stockholders or
1. Financial statement members
 Duly signed and certified by certified public
accountant
 FS may be certified under oath of the treasurer
or any responsible officer in case the paid up
capital of the corp. is less than 50000php.
 PROCEDURES FOR EFFECTING A
PLAN OF MERGER OR
CONSOLIDATIONS
(SEC 76- SEC 76)

2. APPROVAL OF PLAN 6. Issuance of

1. Submission to (SEC 76) 3. Execution of formal 5. Conduct of certificate by SEC
4. Submission to SEC
stockholder or contract (SEC 78) hearing by SEC
 The board of for approval (SEC 79)  The commission
members for (SEC 79)
approval(SEC 77) directors trustees of  After the approval, shall issue a
 The articles shall
each corporation articles of merger or of  The SEC shall certificate of
then be submitted
 The plan shall be shall approve a plan consolidation shall be conduct a merger or of
executed by each of the
for approval to
submitted for of merger of hearing with consolidation as
constituent corporation, SEC in
approval by the consolidation proper notice. the case may be,
to be signed by the quadruplicate for If upon
stockholders or setting forth the ff.: at which time
president or vice its approval , investigation it
members of each of the merger or
a. The names of the president and certified provided that in has reason to
such corporations. consolidation
by the secretary or the case of merger believe that the
Even holders of constituents shall be
assistant secretary of or consolidation proposed
non-voting shares corporations effective.
each corporation setting of corporation merger or
or non-voting forth: consolidation is
b. The terms governed by
members are entitle contrary to or
a. The plan of the merger special laws the
to vote. The c. a statement of the inconsistent
or consolidation favorable
affirmative vote of changes with the
recommendation provisions of
atleast 2/3 of the b. As to stock corp.,the no.
d. other provisions of the appropriate the code or
outstanding capital of shares outstanding, or
in the case of non-stock government existing laws, it
stock or members  
corp. The no. of agency shall first shall give the
is required for the
members be obtained. corp. concerned
approval.
the opportunity
c. As to each corp., the   to be heard.
 
member of shares or
members voting for and  
 
against such plan,
respectively.

 
 EFFECTS OF MERGER OR
CONSOLIDATION (SEC 80)
1. Constituent corporation shall be a
single corporation, surviving
corporation in case of merger and
consolidated corporation in case
of consolidation.
2. Separate existence shall ceased,
except the surviving and the
consolidated corporation
3. The surviving or the consolidated
corporation shall possessed all
the rights, privilege, franchise,
property and all interest of the
constituent corporations
4. The surviving or consolidated
corporation possess all the rights,
privilege, immunities and powers
and shall be subject to all duties
and responsibilities.
5. The surviving or consolidated
corporation shall be liable for all
the liabilities of each of the
constituent corporations.
INSTANCES OF APPRAISAL EXERCISE OF APPRAISAL
RIGHT (SEC. 81) RIGHT (SEC. 82)
1.Any stockholder who have voted
DEFINITION OF 1.Amendment to the articles of against the proposed corporate action
APPRAISAL RIGHT incorporation 2.Written demand on the corporation
Any stockholder of a 2.Sale, lease, exchange, transfer, within 30 days after the date of which
corporation shall have the mortgage, pledge, or disposition of the vote was taken for payment of the
right to dissent sand corporate property fair value of his shares
demand to the fair value 3.Merger or consolidation 3.Surrender of the certificate or
of his shares 4.Investment of corporate funds in certificates of stock representing his
another corporation or business or shares
any other purpose 4.If within 60 days from the date the
corporate action was approve by the
stockholders, the withdrawing
stockholders and the corporation cannot
agree on the fair value of the shares, the
fair value of the shares shall be
EFFECT OF DEMAND AND determined and appraised by 3
TERMINATION OF RIGHT disinterested persons.
(SEC. 83) 5.The corporation has unrestricted
retained earnings in its books to cover
such payment.
From the time of demand for payment of the fair value of a 6.Upon payment by the corporation of
stockholders shares until either the abandonment of the the agreed or awarded price the
corporate action involved or the purchase of the said shares by stockholders shall forthwith transfer his
the corporation, all rights accruing to such shares , including shares to the corporation.
voting and dividends right, shall be suspended, except the right
of such stockholders to receive payment of the fair value
thereof: provided, that if the dissenting stockholder is not paid
the value of his shares within 30 days after the award, his
voting and dividend rights shall immediately be restored.
 APPRAISAL RIGHT Sec.86

Sec.85 1 NOTATION ON
Sec.84
CERTIFICATE(S);RIGHT OF
WHEN RIGHT TO WHO BEARS THE COST TRANSFEREE
PAYMENT CEASES OF APRAISAL

Within ten (10) days after demanding payment

No demand for payment under this
Title may be withdrawn unless the
corporation consents
The costs and
expenses of appraisal
shall be borne by the
corporation
for his shares, a dissenting stockholder shall
submit the certificate(s) of stock representing
his shares to the corporation for notation
thereon that such shares are dissenting shares

However, if the proposed

corporate action is abandoned or Failure to do: His
rescinded by the corporation or Unless, fair value ascertained failure to do so shall,
disapproved by the Securities and by the appraisers is at the option of the
Exchange Commission where such approximately the same as corporation, terminate
approval is necessary the price which the his
corporation may have offered rights under this Title
to pay the stockholder, in
which case they shall be borne
by the latter.

if the Securities and Exchange Commission

determines that such stockholder is If shares represented by the certificate(s)
not bearing such notation are transferred, and
entitled to the appraisal right, then the right the certificate(s) consequently cancelled,
In case of an action to recover such
of said stockholder to be paid the fair value the rights of the transferor as a dissenting
fair value, all costs and expenses
of his shares shall cease, his status as a stockholder under this Title shall cease and
shall be assessed against the
stockholder shall thereupon be restored, the transferee shall
corporation, unless the refusal of
and all dividend distributions which have all the rights of a regular
the stockholder to receive payment
would stockholder
was unjustified
have accrued on his shares shall be paid and all dividend distributions which would
to him have accrued on such shares shall be paid
to the transferee
 NON STOCK CORPORATION

Sec.89
Sec.87 Sec.88
RIGHT TO VOTE
PURPOSE

Definition The right of the members of any class or

For the purposes of this Code, a non Non-stock corporations may be formed or
organized for classes to vote may be limited,
-stock corporation is one where no part of its broadened or denied to the extent
income is distributable as dividends to its - charitable,
-religious, specified in the articles of
members, trustees, or officers incorporation or the by-laws
- educational,
- professional,
-cultural
- fraternal
Profided that: - literary Unless:
any profit which a non-stock corporation - scientific, -so limited, broadened or denied, each
may obtain as an incident to its operation - social member, regardless of class, shall
shall, whenever necessary or proper, be used - civic service be entitled to one vote
for the furtherance of the purpose or purposes for or similar purposes, like -otherwise provided by the articles of
which the corporation was organized - trade, industry incorporation or the
agricultural by-laws, a member may vote by
- chambers, or any combination thereof, subject proxy in accordance with the provisions
to the special provisions of this Title of this Code
governing particular classes of non-stock
corporations

Voting by mail or other similar means

by members of non-stock corporations may
be authorized by the by-laws of non-
stock
corporations with the approval of
under such conditions which may
be, prescribed by, the Securities and
Exchange Commission
 NON STOCK CORPORATION

Section 90 NON-TRANSFERABILITY OF Section 91 Section 92

MEMEBERSHIP TERMINATION OF ELECTION AND TERM OF
MEMEBERSHIP TRUSTESS

Membership in a non-stock Effect: Membership shall be terminated in the manner Unless otherwise provided in the articles of
corporation and all rights arising and for the causes provided in the articles of incorporation or the by-laws, the board of trustees
therefromare personal and non- incorporation or the by-laws of non-stock corporations
transferable extinguishing all rights of a member in the -which may be more than fifteen (15) in number
Unless: the articles of incorporation corporation or in its property, unless otherwise as may be fixed in their articles of
or the by-laws otherwise provide provided in the articles of incorporation or the by-laws incorporation or by-laws, shall, as soon as
organized ,so classify themselves that the
term of office of one-third (1/3) of their number
Section 93 shall expire every year
PLACE OF MEETING Section 94 -subsequent elections of trustees comprising one-
RULES OF DISTRIBUTION third (1/3)of the board of trustees shall be held
annually and trustees so elected shall have a
term of three (3) years. Trustees thereafter
The by-laws may provide that the elected to fill vacancies occurring before the
In case dissolution of a non-stock corporation in accordance
members of a non-stock corporation may expiration of a particular term shall hold office
with the provisions of this Code, its assets shall be applied and
hold their regular or special meetings at only for the unexpired period
distributed as follows:
any place even outside -No person shall be elected as trustee unless he is a
ORDER OF PAYMENT:
the place where the principal office of the member of the corporation
A . liabilities and obligations
corporation is located UNLESS: Unless otherwise provided in the articles
B . Assets held by the corporation upon a condition requiring
PROVIDED: That proper notice is sent of incorporation or the by-laws, officers of a
return, transfer or conveyance, and which condition occurs by
to all members indicating the date, time non-stock corporation may be directly
reason of the dissolution, shall be returned, transferred
and place of the meeting: and Provided, elected by the members
or conveyed in accordance with such requirements
further, That the place of meeting shall NOTE: The term of trustees in non-
be within the Philippines stock corporation is three (3) years
C. Assets received and held by the corporation subject to
Supporting papers required to be educational corporations where the term is five(5)
limitations permitting their use only for charitable, religious,
submitted to the Securities and years
benevolent, educational or similar purposes
ExchangeCommission:
D. Asset provide for distribution to members in acc. With their
1.LETTER OF UNDERTAKING
distribution right
2.MODUS OPERANDI
E. Assets may be distributed to such persons, societies,
3.RESOLUTION
organizations or corporations, whether or not organized for
profit
 Section 95
PLAN OF DISTRIBUTION OS
ASSET
DISTRIBUTI
ON TO DISTRIBUTION
MEMBERS TO PERSON
ORGANIZED FOR
PROFIT
is not forbidden,
unless it holds its assets
upon some trust, public or Assets received
private, in which case and held by the
the claims of the corporation subject to
state, the beneficiaries, limitations permitting
or of the founder and their use only for
his successors may have charitable, religious,
to be considered. benevolent,
educational or
similar purposes
XII. CLOSE CORPORATION
A special kind of Stock Corporation:
1. Whose articles of incorporation should provide that:
a. The number of stockholders shall not exceed 20;
b. Issued stocks are subject to transfer restrictions, with a right of
preemption in favor of the stockholders or the corporation; and
c. The corporation shall not be listed in the stock exchange or its stocks
should not be publicly offered; and
2. Whose at least 2/3 of the voting stocks or voting rights should not be
owned or controlled by another corporation which is not a close
corporation. (Sec. 96)
Characteristics: The following cannot be a close
1. Stockholders may act as directors without need of election and corporation:
therefore are liable as directors. a)mining companies;
2.Stockholders who are involved in the management of the b)oil companies;
corporation are liable in the same manner as directors are. c)stock exchanges;
3.Quorum may be greater than mere majority; d)banks;
4.Transfers of stocks to others, which would increase the number e)insurance companies;
of stockholders to more than the maximum, are invalid. f)public utilities;
5.Corporate actuations may be binding even without a formal g)education institutions;
board meeting, if the stockholder had knowledge or ratified the h)Other corporations declared to be
informal action of the others; vested with public interest. (Sec.
6.Preemptive right extends to all stock issues; 96)
7. Deadlocks in board are settled by the SEC, on the written
petition by any stockholder;
8.Stockholder may withdraw and avail of his right of appraisal.
Note: Special rules are provided for close corporations because it
is essentially an incorporated partnership. (The Corporation Code
of the Philippines Annotated, Hector de Leon, 2002 Ed.)
 ORDINARY STOCKCORPORATION
Its articles of incorporation need only contain the general matters
enumerated in Sec.14 of the Code.
Its status as an ordinary stock corporation is not affected by the
ownership of its voting stock or voting rights.
Its articles cannot classify its directors.
Business of the corporation is managed by the board of directors.
The corporate officers and employees are elected by a majority
vote of all the members of the board of directors.
The pre-emptive right is subject to the exceptions found in Sec. 39.
The appraisal right may be exercised by a stockholder only in the
cases provided in Secs.81 and 42 of the Code.
Except as regards redeemable shares, the purchase by the
corporation of its own stock must always be made from the
unrestricted retained earnings.
CLOSECORPORATION
Its articles must contain the special matters prescribed by Sec. 97,
aside from the general matters in Sec. 14. Failure to do so
precludes a de jure close corporation status
2/3 of its voting stock or voting rights must not be owned or
controlled by another corporation which is not a close corporation.
Its articles may classify its directors.
Business of the corporation may be managed by the stockholders if
the articles so provide, but they are liable as directors.
Its articles may provide that any or all of the corporate officers or
employees may be elected or appointed by the stockholders.
The pre-emptive right is subject to no exceptions unless denied in
the articles.
The appraisal right may be exercised and compelled against the
corporation by a stockholder for any reason.
In case of an arbitration of an intra-corporate deadlock by the SEC,
the corporation may be ordered to purchase its own shares from
the stockholders regardless of the availability of unrestricted
retained earnings.

Arbitration of intra-corporate deadlock by the SEC is not a remedy Arbitration of intra-corporate deadlock by the SEC is an available
in case the directors or stockholders are so divided respecting the remedy in case the directors or stockholders are sodivided
management of the corporation. respecting the management of the corporation.

POWERS OF THE SEC IN CASE OF DEADLOCK IN CLOSE CORPORATIONS

1.Cancel or alter any provision in the articles of incorporation or bylaws

2.Cancel, alter or enjoin any resolution of the corporation
3.Direct or prohibit any act of the corporation
4.Require the purchase at their fair value of shares of any stockholder either by any stockholder or by the corporation regardless of
the availability of unrestricted retained earnings.
5.Appoint a provisional director
6.Dissolve the corporation
7.Granting such other relief as the circumstances may warrant.
 SECTION 105:

WITHDRAWAL OF
STOCKHOLDER OF
DISSOLUTION OF THE EDUCATIONAL CORPORATION
CORPORATION.

SECTION 106: SECTION 107: SECTION 108:

INCORPORATIO PRE-REQUISITES BOARD OF
Stockholder’s N TO TRUSTEES
Right to INCORPORATIO
Compel N
Dissolution of
Close EDUCATIONAL Favorable NON-STOCK STOCK
Corporation. CORPORATION endorsements are EDUCATIONAL EDUCATIONAL
 Is a stock or non-stock needed of the CORPORATION CORPORATION
corporation organized following Government
to provide facilities Agencies.
By written position to the SEC, for teaching or
compel the dissolution of such  Number of  Number of
instruction.
corporation whenever a certain members of members of
employee acts in bad faith. Board of Trustees Board of Trustees
DEPT. OF must not less must not less
EDUCATION than 5 but not than 5 but not
Laws Governing Educ. Corp. (Elementary to High more than 15, but more than 15.
school) the number
Stockholder’s Trustees shall
 SPECIAL LAWS should be in

Right to COMMISSION ON hold office for
Withdraw  GEN. PROVISION OF HIGHER multiple of 5.
one year and
from Close THE CORPORATION EDUCATION  Term of office of until their
Corporation. CODE. trustees shall be successors is
(College or Tertiary
Course) 5 years. 1/5 of elected and
their number qualified.
TESDA shall expire every
May compel the corporation to
year.
purchase his shares at their fair (Technical Vocational
value not less than par or issued Course)
values.
 RELIGIOUS CORPORATION
SECTION 109: SECTION 113:
CLASSES OF SECTION 110: SECTION 111: SECTION 112: ACQUISITION AND
RELIGIOUS CORPORATION ARTICLES OF SUBMISSION OF ALIENATION OF
CORPORATION SOLE INCORPORATION ARTICLES OF PROPERTY
INCORPORATION

CONCEPT CONTENTS OF ARTICLES OF ACQUISITION OF

EFFECTS OF FILING THE
INCORPORATION IN ORDER PROPERTY
 Formed by the chief ARTICLES OF
RELIGIOUS TO BECOME A
archbishop, bishop, INCORPORATION >  Corporation Sole
CORPORATION CORPORATION SOLE
priest for the purpose may purchase and
 Accompanied with a
 Formed for the of administering and  The leader of his hold real estate and
copy of his
service and managing as trustee denomination and he desires personal property
appointment.
worship of God. of such religious to become a corporation sole. and may receive
denomination.  Shall become a bequests or gifts
 For the proper  The rules of his religious for such purposes.
corporation sole.
management of  Consist of one person denomination do not prohibit
its properties and only, and his his becoming a corporation  The law does not
affairs. successors in some sole. require issuance of
particular station. certification of
   That he is charged with the
incorporation by the
denomination of the
SEC for a corporation
temporalities of his
sole to acquire juridical
denomination within his
personality.
territorial jurisdiction.
ALIENATION OF
 Manner of filing any
PROPERTY
vacancy in the office of the >
chief archbishop.  Corporation Sole
Kinds of Religious may mortgage or
 The principal office of the
Corporation sell its real property
corporation.
by obtaining an
 Corporation Sole order from the
 Other provisions not contrary
 Religious Society to law. Regional Trial Court
for the purpose.

FILING OF
VACANCY
After becoming a corporation
sole. The leader shall be
permitted to transact business
as such upon the filing with
the SEC.
SECTION 114:
FILING OF
VACANCIES
Before such vacancy is filled,
the person authorized and
empowered by the rules of the
religious denomination shall in
the meantime exercise all the
powers and authority of the
corporation sole.
SECTION 115:
DISSOLUTION
EFFECT OF DEATH OF
INCUMBENT ON
PROPERTIES ACQUIRED BY
HIM
The declaration of dissolution shall set forth:
Through legal fiction of a corporation sole 1. The name of the corporation
properties acquired by the incumbent shall
2. The reason for dissolution and winding up
pass by operation of law upon his death not
to his personal heirs but to his succession in 3. The authorization for dissolution
office.
4. The names and addresses of the persons supervising
the dissolution

SECTION 116: RELIGIOUS

SOCIETIES

Any religious society or religious order shall set

forth the following:

1.That the diocese, 4.That the religious

synod or district
organization of some
religious
denomination, sect or
church.
5.That the principal 6.The names, nationalities and
2.That 2/3 of its 3.That its society desires to
office of the residences of the trustees
membership have incorporation is not incorporate for the
corporation must be elected to serve for the period
given their written forbidden by administration of its
established within the prescribed. The board to be not
consent. competent authority. affairs, property and
Philippines. less than 5 nor more than 15
estate.

 
 SECTION 117: SECTION 118:

METHODS OF VOLUNTARY DISSOLUTION

DISSOLUTION WHERE CREDITORS ARE
AFFECTED

Kinds of Dissolution

Requisites of voluntary dissolution where no creditors are

affected:

1.directors or trustees

2.Resolution of 2/3 of the outstanding capital stock, or 2/3 of the members

Voluntary Dissolution
1. Where no creditors are
affected
2. Where creditors are
affected
3. Amending the articles of
incorporation to shorten
corporate term
4. Submitting to the
Securities and Exchange
Commission a verified
declaration of solution, in
case of corporation sole.
in a meeting called for a purpose
Involuntary Dissolution
3. A copy of the resolution authorizing dissolution duly certified by a
1. By the expiration of term majority of the board of directors of trustees countersigned by the
provided in the articles of corporate secretary is filed with the SEC
incorporation
4. Thereupon, the Securities of Exchange Commission shall issue the
2. By its failure to formally certificate of dissolution
organize and commence the
transaction of its business or
the construction of its work
within two years from its
incorporation
3. By order of the Securities and
Exchange Commission
4. By legislative dissolution
 SECTION 120:
SECTION 121: SECTION 122:
DISSOLUTION BY
INVOLUNTARY CORPORATE
SHORTENING
DISSOLUTION LIQUIDATION
CORPORATE TERM

Liquidation means getting the assets of the corporation,

Voluntary dissolution by shortening
corporate term:
a.This effected by amending the articles of
incorporation to shorten the corporate term
b.A copy of the amended articles of
incorporation is submitted to the Securities
and Exchange Commission
c.The amended articles of incorporation or
the expiration of the shortened term shall
deemed the corporation dissolved without
further proceedings.
Kinds of involuntary dissolution: settling with creditors and debtors and apportioning amount
of profit and loss
a.Involuntary dissolution by the expiration
of corporate term
b. Involuntary dissolution by non-use of
corporate charter
c. Involuntary dissolution by order of the
Securities and Exchange Commission Who may effect the liquidation of the
corporation:
d. Involuntary dissolution by legislative
enactment a.By corporation itself through the board of
directors or trustees or by stockholders or
members who have been given the
authority to liquidate

b.By a receiver

c.By a trustee
 SECTION 123:

DEFINITION AND
RIGHTS FOREIGN
CORPORATION

What doing business “Doing Business” however does not

constitutes include
Foreign corporation is one formed,
organized or existing under any laws
other than those of the Philippines.
a.Soliciting order a.Mere investment as a shareholder in domestic corporation;

b.Servicing contracts b.Having a nominee director or officer to represent its interest

in such corporation;
c.Opening offices license is required before a foreign
corporation can transact in the c.Appoiniting representatives in the Philippines which
d.Appointing representatives or distributors who are residents
Philippines, otherwise a foreign transacts business in its own name;
of the Philippines.
corporation is doing business
illegally because of its refusal to d.The publication of a genera advertisement through any print
e.Participating in the management of any domestic business in or broadcast media;
the Philippines obtain license
e.Maintaining a stock goods in the Philippines
f.Any other act or acts that imply continuity of commercial
dealings. f.Consignment by a foreign entity of equipment;

g.Collecting information in the Philippines;

h.Performing services auxiliary to an existing isolated

contract

 
 SECTION 124: Section 125 - Applying for
license of a Foreign Section 126 - Issuance Applicant may
APPLICATION OF Corporation transact business in
of License if the SEC
EXISTING has been satisfied with the Philippines for
CORPORATION the requirements the purpose stated in
the license as long as
Submit to the SEC a copy of its submitted by the
it retains its
articles of incorporation and by- applicant. authority to act as
Foreign corporations authorized to do business in the laws, certified in accordance with corporation. Unless
Philippines on the date of the effectivity of the Corporation law, and their translation to an it was revoked by
Code under a license previously issued to it, shall continue to official language of the Philippines, the Code or special
if necessary. 60 days laws.
have such authority without securing new license, subject to
the provisions of the Code and other special laws.
Republic Act No.
Application shall consiat the following: Foreign Corporation, 5455: 'doing
1. The date and term of incorporation. EXCEPT foreign banks & business's includes:
2. The address, including the street number, of the principal office of the insurance corporations, shall A. Soliciting orders,
corporation in the country or state of incorporation. deposit to SEC securities purchases, service
3. The name and address of its resident agent authorized to accept satisfactory consisting of contracts, opening
6 months after
summons and process in all legal proceedings and, pending the SEC shall bonds & other evidence of offices whether
each fiscal year
establishment of a local office, all notices affecting the corporation require licensee indebtedness with an actaul called liaison offices
4. The place in the Philippines where thecorporation intends to operate. to deposit market value of P100,000. or branches.
5. The specific purpose or purposes which the corporation intends to additional B. Appount
pursue in the transaction of its business in the Philippines: Provided, securities representatives or
That said purpose or purposes are those specifically stated in the equivalent in SEC shall also require distributors who
certificate of authority issued by the appropriate government agency. the actual deposit of securities if domiciled in the
6. The names and addresses of the present directors and officers of the market value to the actual market value Philippines
corporation. 2% of the Of the securities has C. Participate in
7. A statement of its authorized capital stock and the aggregate number amount by decreased by 10% of management,
of shares which the corporation has authority to issue, itemized by which their actual market value supervision, or
classes, par value of shares, shares without par value, and series, if any. licensee's gross control of any
8. A statement of its outstanding capital stock and the aggregate number income for that domestic business
of shares which the corporation has issued, itemized by classes, par fiscal year firm.
value of shares, shares without par value, and series, if any. exceeds D. Any other acts
9. A statement of the amount actually paid in. P5000000 If ever there is a decrease in net income of that imply a
10. Such additional information as may be necessary or appropriate in the corporation or increase in actual market continuity of
order to enable the Securities and Exchange Commission to determine value of the total securities, the SEC may commercial dealings
whether such corporation is entitled to a license to transact business in release part from its additional deposits. or arrangements.
the Philippines, and to determine and assess the fees payable.
 Section 127 & 128
A foreign corporation must have a
resident agent who may summon legal
process & serve legal proceedings
against corporation.
Section 129 Licensed foreign corporations
lawfully doing business in the Philippines
shall be subject to our laws just like domestic
corporations.
EXCEPTION: Philippine law does not apply
to the creation, formation, organization or
dissolution of corporation.

Process to admit such resident Characteristics of a

agent: resident agent: Section 131
1. Written power of attorney 1. Must be either domestic DOING BUSINESS WITHOUT LICENSE CAN AND
designating such person or corporation lawfully CAN'TS:
corporation as resident agent transacting business in the 1.Unlicensed foreign corporations doing business in the
filed to SEC. Philippines or an Philippine do not have the capacity to sue before the local court
2. Other process shall be made individual resident in the is well-established.
by the SEC. Philippines. 2.A foreign corporation which is not licensed to transact business
3. Within 10 days after the 2. Must be of good moral. therein can maintain an action in the courts of the Philippines for
approval, the SEC shall transmit 3. Must have a sound the purpose of protecting its reputation, corporate name and
copy through mail of such financial standing. goodwill.
summon to the corporation. 3.A foreign corporation doing business in the Philippines
without a license may maintain suit in the Philippines against a
domestic corporation or person who is party to a contract as the
domestic corporation or person is deemed estopped from
challenging the personality of the foreign corporation.
Amendment to Articles of
incorporation or by-laws of
foreign corporations. Section
130
After 60 days, the corporation
shall file to SEC a duly
authenticated copy of the The filing shall not of itself
Articles of Incorporation enlagrge or alter the purspose of
indicating clearly in capital which such corporation is
letters the changes made. licensed to.
Section 134

Revocation of license shall rounds:

take place upon the
following grounds. 1. Failure to file its annual report or pay any fees as required by this Code.
2. Failure to appoint and maintain a resident agent in the Philippines as required by this
Title.
3. Failure, after change of its resident agent or of his address, to submit to the Securities
and Exchange Commission a statement of such change as required by this Title.
4. Failure to submit to the Securities and Exchange Commission an authenticated copy
of any amendment to its articles of incorporation
5. A misrepresentation of any material matter in any application, report, affidavit or
other document submitted by such corporation pursuant to this Title.
6. 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.
7. Transacting business in the Philippines outside of the purpose or purposes for which
such corporation is authorized under its license.
8. Transacting business in the Philippines as agent of or acting for and in behalf of any
foreign corporation or entity not duly licensed to do business in the Philippines.
9. Any other ground as would render it unfit to transact business in the Philippines.
 Section 135 Miscellaneous Provision
Grounds are without prejudice to other grounds provided by
special laws. After revolation, the sue is required to issue a
correspoding certificate government agency in the proper cases
and mailing a notice of such revocation accompanied with a copy
of the certificate to the foreign corporation.
Section 137 Section 138
Includes all shares of stock issued Designated of Governing boards.
to sibscribers or stockholders of a Authority given to this section,
Effects:
stock corporation which are fully covers only non-stock
• Revocation of the license, cannot affect the validity of contract entered paid and even if they are unpaid corporations or special
into by the foreign corporation before the revocation nor its right to or only partially paid, as long as corporations. Through their
maintain an action to enforce them.s there is a binding subscription articles of incorporation or their
• (Section 133) Doing business without a license, such foreign agreement between the subscriber by-laws, designate their gverning
corporation can no longer transact at business in the Philippines and it or stockholder of the corporation boards by any name than as board
cannot maintain any suit or action in any court or administrative agency of trustees. Thus, “board of
in the Philippines although it may be sued on valid cause of action. directors” may be used, or “board
of regents” in the case of
educational corporations, whether
Section 139 stock or non-stock.
SEC is authorized to collect and
receive fees as authorized by laws
and by rules and regulations
Section 136
promulgated by it.
Prescribes rules for the withdrawal of a foreign corporation from
business in the Philippines.

Commission is authorized to recommend to the President the revision,

• All claims which have occurred in the Philippines have been paid, alteration, amendment, or adjustment of the charges fees which by laws it
compromised or settled; is authorized to collect.
• All taxes, imposts, assessments, and penalties, if any, lawfully due to
the Philippine Government or any of its agencies or political
subdivisions have been paid; and
• The petition for withdrawal of license has been published once a
week for three (3) consecutive weeks in a newpaper of general
circulation in the Philippines.
 Section 141
Makes submission of the annual report
Miscellaneous Provision obligations

Section 140
National Economic and Development Authority shall, from time to time,
make a determination of whether the corporate vehicle has been used by
any corporation or by business or industry to frustrate the provision of the
constitution and other applicable laws, and shall submit to the congress of
the Philippines, wherever deemed necessary, a report of its findings
including recommendations for their prevention or correction.
Corporation lawfully doing business in the Philippines
whether domestic or foreign, shall submit to the SEC the
following:
• Annual report of its operations
• Financial statement of its assets and liabilities
• Other requirements as the SEC may require

Recommendations:
• setting by the congress of the
Philippines of the maximum units for
stockholdings in corporations declared
by it to be vested with public interest,
belonging in individuals or groups of
individuals related to each other by
consanguinity or affinity or by close
business interest, or whenever it is
necessary to achieve national
objectives
• Prevent illegal monopolies or
combinations in restraint of trade
• Implement national economic policies
designed to promote the general
welfare and foster economic
development.
Limitations:
• Applies only to stock
Limitations: corporations, whether
• congress may set maximum limits for they actually declares and
stockholdings in corporation declared distribute dividents or not,
by it to be with public interesr upon the and not to non stock
recommendation of the National corporation.
Economic and Development Authority • Limits its application to
by consanguinity or affinity, or by corporation “lawfully
close business interest, or whenever doing business in the
necessary to achieve national Philippines”
objectives, prevent illegal monopolies
or combinations in restraint of trade or
to implement national economies.
 Section 142
The results of any examination conducted by the commission or any
other official authorized by law to make an examination of
operations, books and records of any corporation shall be kept
strictly confidencial.
Exception:
• When the law requires that such results
be made public
• when such results are necessary to be
presented as evidence before any court.
Section 143
Rule-making power of the Securities and Exchange Commission
The securities and Exchange Commission shall have power and
authority:
• To implement the provisions of the Corporation Code, and
• To promulgate rules and regulations reasonably necessary to enable
it to perform its duties, particularly in the prevention of fraud and
abuses on the part of the controlling stockholders, members,
directors, trustees or officers.

In case of Violations of the Code ( Section 144)

Penalty:
• If the violation is committed by a director, trustees, officer, stockholder,
member or other individual, a fine of not less than one thousand pesos
(1,000) but not more than ten thousand (10,000) or by imprisonment for not
less than thirty (30) days but nor more the five (5) years, or both, in the
discretion of the court, shall be imposed if the offender is a director, trustee,
stockholder, member or other individual.
• If the violation is committed by a corporation, the same may, after notice and
hearing, be dissolved in appropriate proceedings before the Securities and
Exchange Commission, without prejudice to the institution of appropriate
action against the director, trustees or officer of the corporation responsible for
said violation.
 Section 144 Section 145
Violations of the Code Amendment or Appeal

Limitations on
Penalty for violation if
legislative to amend
it is committed by:
or appeal

The same may, after

notice and hearing, be Right against
Director, trustee, Right survives Right to compensation
dissolved in appropriate impairment of
officer, stockholder, dissolution of for property taken
Corporation proceedings before SEC. obligation of contracts
member or other corporation
and vested rights
individual

The reserved power

1. FINE a) That such dissolution shall The right to amend
of:
not preclude the institution of Any remedy or right acquired by  does not also
“amendment
-not less than (P1000) but not more appropriate action against the or against, or any liability  authorize the taking of
alteration or
than (P10,000) offender responsible for said already incurred shall not be  corporation’s property
repeal by the
violation removed or impaired by: w/out just
Congress”
2. IMPRISONMENT b) That nothing in this section a. dissolution of said corporation compensation.
is subject to the
shall be construed to repeal b. subsequent amendment or provision of the
- not less than (30) days but not the other causes for repeal of the Code or of any part Constitution against
more than (5) years dissolution of a corporation thereof impairing the
provided in this Code. obligation of
3. BOTH are imposed in the discretion
contracts.
of the court provided:  
 Section 146 Section 147
Repealing Clause Separability of Provisions

Art. No. 1459 (as

amended) All other
-  laws - Should any provision of this Code
The old - Other provisions, so far as they are
 decrees or any part thereof be declared
corporation law separable, shall remain in force.
 executive orders invalid or unconstitutional.
shall be repealed
 rules
by the code for
 regulations
the latter is
  
“intended to
supplant” the or parts thereof contrary to or
former. inconsistent with any provision of
the Code shall also be redeemed Section 148
REPEALED.
Applicability of Code to
 
Existing Corporations

To any corporation that is

affected by new requirements of
the Code:
 of not more than two (2) years
To ALL lawfully existing corporations from the effectivity of the Code
including foreign corp. licensed by the within w/c to comply with the
SEC (before the effectivity of the Code): same, unless otherwise stated.
 licensed under the provisions of the
Code
 It shall continue to have such authority
under the terms and conditions of their
licenses (subj. to provisions of the Code)