CORPORATION CODE

Batas Pambansa Blg. 68

PART 2
FORMATION OF
CORPORATIONS

STEPS IN THE CREATION OF A

CORPORATION

1.
2.
3.
4.

PROMOTION
INCORPORATION
FORMAL ORGANIZATION
COMMENCEMENT OF
BUSINESS OPERATIONS

QUALIFICATIONS OF
INCORPORATORS

1.
2.
3.
4.

1-15 natural persons

Of legal age
Owns at least one share
Majority are residents of the
Philippines and are Filipino citizens
in certain areas of investment

CORPORATE TERM AND MINIMUM

CAPITAL STOCK REQUIREMENT
CORPORATE TERM : 50 years renewable for
like period at any instance; extension filed 5
years prior to expiry date
MINIMUM CAPITAL STOCK REQUIREMENT:
NONE but paid-up capital must not be less
than P5K

MINIMUM REQUIREMENTS FOR

INCORPORATION

ACS
SCS
PUCS

P1M
25% of ACS = P250,000
25% of SCS = P 62,500

FORMATION OF A CORPORATION

The life of a corporation

commences from the issuance of
the Certificate of Registration by the
SEC upon filing of the Articles of
Incorporation and other documents.

ARTICLES OF INCORPORATION
CONTENTS:
1. Name of corporation (with the word
Corporation/Incorporated or abbreviated form
Corp/Inc)
2. Purpose/s: primary and secondary
3. Place of principal office
4. Term , not > 50 years
5. Names, citizenship and residences of
incorporators
6. Names, citizenship and residences of directors

ARTICLES OF INCORPORATION
CONTENTS:
7. If stock corporation, the amount of ACS and number
of shares
8. In par values stock corporations, the par value of
each share
9. Number of shares and amounts of subscription of
subscribers which shall not be less than 25% of the
ACS

ARTICLES OF INCORPORATION
CONTENTS:
10. Amount paid by each subscriber on their
subscription which shall not be less than 25% of
the SC and not less than P5000.00
11. Name of treasurer elected by the subscribers

ARTICLES OF INCORPORATION
CONTENTS:
12. If the corporation engages in a nationalized
industry, a statement that no transfer of stock will be
allowed if it will reduce the stock ownership of Filipinos
to a percentage below the required legal minimum

REQUIRED DOCUMENTS FOR REGISTRATION

WITH THE SEC
FOR STOCK CORPORATION:
1. A/I
2. Treasurers Affidavit certifying that 25% of the ACS has been
subscribed (SC) and 25% of the latter has been paid.
3. Bank Certificate covering the paid-up capital
4. Letter of Authority authorizing SEC to examine the bank
deposit
5. Undertaking to change the corporate name if there is another
entity with similar name previously registered
6. Certificate of Authority from proper government agency
whenever appropriate like BSP for banks and Insurance
Commission for insurance corporations.

LIMITATIONS ON CORPORATE
NAMES
1. Identical, deceptively or confusingly similar
to that of any existing corporation including
internationally known foreign corporation
though NOT used in the Philippines.
2. Names already protected by law
3. Names which are contrary to law, morals or
public policy

AMENDMENT OF A/I
PROCEDURE:
1m Majority vote of directors/trustees and
written assent of the S/Hs representing 2/3 of
outstanding capital or 2/3

AMENDMENT OF A/I
PROCEDURE:
1m Majority vote of directors/trustees and
written assent of the S/Hs representing 2/3 of
outstanding capital or 2/3

GROUNDS FOR A/I TO BE REJECTED

1. Does not comply with the form (Sec 14 and
15 of BP Blg 68)
2. Purposes are patently unconstitutional,
illegal, immoral or contrary to government
rules and regulations
3. Treasurers affidavit is false

GROUNDS FOR A/I TO BE

SUSPENDED/REVOKED
1. Fraud in procuring Certificate of Incorporation
2. Serious misrepresentation as what the corporation
can do
3. Refusal to comply with/defiance of a lawful order
of SEC
4. Continuous inoperation for at least 5 yrs
5. Failure to file by-laws within prescribed period
6. Failure to file reportorial requirements

CERTIFICATE OF INCORPORATION
When issued by the SEC, this signals
the commencement of corporate existence
and juridical personality. After which, the
corporation must organize by electing its
officers and start transacting its businesses.
Failure to do so within 2 years from
incorporation would result in cessation of
corporate powers and shall be deemed
dissolved.

BOARD OF DIRECTORS/TRUSTEES
The BOD/BOT is the governing body of the
corporation.
a. It oversees mgmt and operations of the
corporation
b. Board members are not an agents of the
corporation and cannot bind the corporation by
their own acts
c. It acts as a body and meetings require quorum
(minimum number of persons present required to
transact business)

QUALIFICATIONS
DIRECTORS:
1. Own at least one share; continuing requirement
2. Share must be registered in the books of the
corporation
3. Majority are residents of the Philippines
TRUSTEES:
1. Member
2. Majority must be residents
3. 2/3 must be citizens, if applicable (banks)

ELECTION
1. Held in a S/Hs or members meeting
2. Majority of the corporators are present
personally
proxy
VTA
3. Election is by ballot if requested. Otherwise, voting
viva voces or by roll call (raising of hands) is allowed
4. No delinquent stocks shall be voted

ELECTION
5. Candidates receiving highest votes shall be
declared elected
6. If there is failure of election, the meeting can be
adjourned day to day but not sine die (indefinitely)

7. Notice is given

METHODS OF VOTING
STRAIGHT VOTING: every S/H may vote such
number of shares for as many persons as there are
directors
Ex. X owns 50 shares. If the candidates for
directorship are A,B,C,D,E,F,G,H,I,and J and there are
5 vacancies to be voted, X is entitled to 50 x 5= 250
votes. X can give to 5 candidates 50 votes each

METHODS OF VOTING
CUMULATIVE VOTING FOR ONE CANDIDATE:
every S/H may concentrate his votes and give one
candidate as many votes as he wants.
Ex. X owns 50 shares. If the candidates for
directorship are A,B,C,D,E,F,G,H,I,and J and there are
5 vacancies to be voted, X is entitled to 50 x 5= 250
votes. X can give all 250 votes to A only.

METHODS OF VOTING
CUMULATIVE VOTING BY DISTRIBUTION: every
S/H may concentrate his votes and give two or more
candidate as many votes as he wants.
Ex. X owns 50 shares. If the candidates for
directorship are A,B,C,D,E,F,G,H,I,and J and there are
5 vacancies to be voted, X is entitled to 50 x 5= 250
votes. X can give 100 votes to A and 150 votes to B.

FORMAL ORGANIZATION
CORPORATION OFFICERS:
1. PRESIDENT (required) must be a director
2. TREASURER (required) may or may not be a
director
3. SECRETARY ( required) resident and citizen
4. VICE-PRESIDENT
5. GENERAL MANAGER
6. COMPTROLLER
*CONCURRENT positions which are NOT allowed:
PRES-SEC; PRES-TREASURER

BOARD MEETING
REQUISITES:
1. Personal presence is required; no proxy
allowed
2. Quorum
3. Majority of quorum gives affirmative votes
to transact
4. Meeting in the place/time/manner provided
by law

MEETINGS
STOCKHOLDERS/MEMBERS MEETING
1. REGULAR annually as fixed in the
by-laws; if not fixed then at any date in
April

2. SPECIAL at any time as necessary or

as provided in by-laws
PLACE: city/mun where the principal place of the
corporation is located; if practicable, in the principal
office itself

MEETINGS
DIRECTORS/TRUSTEES MEETING
1. REGULAR held monthly or as fixed in the
by-laws
2. SPECIAL at any time upon call of the President
or as provided in by-laws
PLACE: anywhere even outside the Philippines
unless the by-laws provide otherwise

DISQUALIFICATION OF
DIRECTOR/TRUSTEES/OFFICERS
1. Convicted by final judgment of an offense
punishable by imprisonment of more than 6
years
2. Violation of the Corporation Code within 5
years prior to the date of
election/appointment

REMOVAL OF DIRECTOR/TRUSTEES

By a vote of 2/3 of outstanding

capital stock/members at a
regular/special meeting with prior
notice to stockholders or members

FILLING OF VACANCIES
1.
By the BOD/BOT if there is still a quorum
2.
By the S/Hs or Members if
a. Due to expiration of the term
b. Due to death, resignation, abandonment or
disqualification and there is no quorum
c. If there is quorum but the board refers the matter
to the s/hs or members
d. By reason to the increase in the number of
directors/trustees

COMPENSATION
1. Reasonable per diem
2. Other compensation is granted by a vote of
majority of the S/Hs or members
3. Yearly compensation does NOT exceed
10% of income before tax the previous year

CONTRACTS WITH SELF-DEALING

DIRECTORS
GEN RULE: Voidable at the option of the
corporation, unless:
1. His presence is not required for a quorum
2. His vote is not necessary for the approval
3. The contract is fair and reasonable
4. If he is an officer, that he was previously
authorized

CONTRACTS WITH INTERLOCKING

DIRECTORS
GEN RULE: Valid, except if there is fraud.
*Interlocking directors those who have
interest in two or more corporations who enter
into contracts with each other
*rule applies if stockholdings of director
exceeds 20% of the OCS, otherwise, the rule
on self-dealing directors apply

DISLOYALTY OF DIRECTORS
Basis: Corporate Opportunity Theory- director
shall account for all profits derived even if he
used his own funds, if:
1. Director acquires a business opportunity
for himself
2. The opportunity was by reason of his
position
3. He obtains profits for himself
*acts maybe ratified by 2/3 vote

EXECUTIVE COMMITTEE
Comprises of at least 3 members of the board
who may act except:
1. Approval of any action requiring S/Hs
approval
2. Amendments/repeal/adoption of by-laws
3. Amendment/repeal of resolution of the
board which by its terms are not
amendable/repealable
4. Distribution of cash dividends

REFERENCES
Black's law dictionary (8th ed) (2007). St. Paul, MN. : West Pub.
Commercial laws of the Philippines.]. (2009). Manila: Rex,
Decasa, Lucila M. (2009). Handbook on private corporations:
domestic and foreign. Manila: Rex.
De Leon, Hector S. (2010). (10th ed).The Corporate code of the
Philippines: annotated. Manila: Rex,
De Leon, Hector S. (2010). (2010 ed.).The Philippine negotiable
instruments law and allied laws annotated Manila: Rex,
Torress, Justo P. (2008). The law on business organizations
(partnerships and corporation). Manila: Rex,
Villanueva, Cesar L. (2010).Philippine Corporate law. Manila: Rex,