NON-AMENDABLE ITEMS

Non-amendable items in the AOI

Those matters referring to accomplished facts, except to correct mistakes, such as:
1. Names of incorporators;
2. Names of original subscribers to the capital stock of the corporation and their subscribed and paid up capital;
3. Names of the original directors;
4. Treasurer elected by the original subscribers;
5. Members who contributed to the initial capital of the non‐stock corporation; or
6. Witnesses to and acknowledgment with AOI.

Grounds for the rejection or disapproval of the AOI or amendment thereto

1. If such is not substantially in accordance with the form prescribed by the CC.
2. The purpose/s of the corporation is/are patently unconstitutional, illegal, immoral, or contrary to government
rules and regulations.
3. The treasurer’s affidavit concerning the amount of capital stock subscribed and/or paid is false.
4. The required percentage of ownership of the capital stock to be owned by Filipino citizens has not been complied
with.

Other grounds as provided by PD No. 902‐A are:

1. Fraud in procuring its certificate of incorporation;

2. Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of, or damage to,
the general public;
3. Refusal to comply with, or defiance or a lawful order of the SEC restraining the commission of acts which would
amount to a grave violation of its franchise;
4. Continuous inoperation for a period of at least five (5) years after commencing the transaction of its business;
5. Failure to file the by‐laws

No automatic rejection of the AOI or any amendment thereto

There is no automatic rejection of the AOI or any amendment thereto. The SEC shall give the incorporators a
reasonable time within which to correct or modify the objectionable portions of the AOI or amendment.

Effect of non-use of corporate charter and continuous inoperation of a corporation

1. Failure to organize and commence business within 2 years from incorporation – its corporate powers ceases and
the corporation shall be deemed dissolved.

Note: The 2 year period is now modified by the RCC Under such law, the failure of a corporation to organize and
commence its business should be within five (5) years from the date of its incorporation. In effect, its certificate of
incorporation shall be deemed revoked as of the day following the end of the five (5)-year period.
2. Continuous inoperation for at least 5 years – ground for the suspension or revocation of corporate franchise or
certificate of incorporation
Suspension or revocation of the certificate of registration due to failure to operate or continuous inoperation is
not automatic

Under PD No. 902-A, SEC should afford due process or proper notice and hearing before the suspension or revocation
of certificate of registration. The suspension or revocation of the certificate of registration due to failure to operate
or continuous inoperation is not automatic.

REGISTRATION AND ISSUANCE OF CERTIFICATE OF INCORPORATION

Basic requirements for the registration and issuance of a certificate of incorporation of a stock corporation

1. Name verification slip

2. AOI and by-laws
3. Treasurer’s affidavit

The articles of incorporation and applications for amendments thereto may be filed with the Commission in the form
of an electronic document, in accordance with the Commission’s rules and regulations on electronic filing.

Contents of a treasurer’s affidavit

That at least 25% of the authorized capital stock of the corporation has been subscribed, and at least 25% of the
total subscription has been fully paid in actual cash and/or property; such paid-up capital being not less than P5,000

The documents to be submitted for the issuance of a certificate of incorporation

a. Articles of Incorporation
b. Treasurer’s Affidavit
c. Certificate of Authority by the Monetary Board of BSP
d. Verification slip from the records of the SEC whether or not the proposed name has already been registered under
a different entity
e. An undertaking stating the proposed name shall be changed in case another entity has been registered under the
proposed name
f. Registration sheet
g. Bank certificate of deposit covering the paid-up capital
h. Letter containing authorization to the SEC or Monetary Board or any of its duly authorized representative to
inspect bank records concerning the paid-up capital
i. Favorable endorsement from proper government agency in case of special corporations

Doctrine of corporate entity

GR: A corporation comes into existence upon the issuance of the certificate of incorporation by the SEC under its
official seal. Then and only then will it acquire a juridical personality.
XPN: In case of a corporation sole, the corporation sole commences existence upon the filing of the articles of
incorporation.

ADOPTION OF BY-LAWS

Sec. 46. Adoption of by-laws. - Every corporation formed under this Code must, within one (1) month after
receipt of official notice of the issuance of its certificate of incorporation by the Securities and Exchange
Commission, adopt a code of by-laws for its government not inconsistent with this Code. For the adoption
of by-laws by the corporation the affirmative vote of the stockholders representing at least a majority of
the outstanding capital stock, or of at least a majority of the members in case of non-stock corporations,
shall be necessary. The by-laws shall be signed by the stockholders or members voting for them and shall
be kept in the principal office of the corporation, subject to the inspection of the stockholders or members
during office hours. A copy thereof, duly certified to by a majority of the directors or trustees countersigned
by the secretary of the corporation, shall be filed with the Securities and Exchange Commission which shall
be attached to the original articles of incorporation.

Notwithstanding the provisions of the preceding paragraph, by-laws may be adopted and filed prior to
incorporation; in such case, such by-laws shall be approved and signed by all the incorporators and
submitted to the Securities and Exchange Commission, together with the articles of incorporation.

In all cases, by-laws shall be effective only upon the issuance by the Securities and Exchange Commission
of a certification that the by-laws are not inconsistent with this Code.

The Securities and Exchange Commission shall not accept for filing the by-laws or any amendment thereto
of any bank, banking institution, building and loan association, trust company, insurance company, public
utility, educational institution or other special corporations governed by special laws, unless accompanied
by a certificate of the appropriate government agency to the effect that such by-laws or amendments are
in accordance with law.

According to Valley Golf and Country Club vs Vda. Caram, By-laws are rules and regulations or private laws enacted
by the corporation to regulate, govern and control its own actions, affairs and concerns and of its stockholders or
members and directors and officers in relation thereto and among themselves in their relation to it

By-laws are relatively permanent and continuing rules of action adopted by the corporation for its for its own
government and that of individuals composing of it and those having the direction, management, and control of its
affairs, in whole or in part, in the management and control of its affairs and activities

Nature and Function of by Laws

The corporate power to adopt by-laws is inherent in every corporation. To give emphasis to such necessary corporate
incident, said power is expressed in Sec. 36(5) and Sec. 46 of the Civil Code.
The by-laws supplement the AOI. The function of by-laws is to define the rights and duties of corporate officers and
directors or trustees, and of stockholders or members towards the corporation and among themselves with
reference to the management of corporate affairs and to regulate transaction of the business of the corporation in
a particular way.

Requisites of a valid by-laws

The following are the requisites for the validity of by-laws:

1. Must be consistent with the corporation Code, other pertinent laws and regulations;
2. Must not be contrary to morals and public policy;
3. Must not impair obligations and contracts or property rights of stockholders;
4. Must be reasonable;
5. Must be consistent with the charter or AOI; and
6. Must be of General application and not directed against a particular individual.

Contents of by-laws

1. Time, place and manner of calling and conducting regular or special meetings of directors or trustees.
2. Time and manner of calling and conducting regular or special meetings of the stockholder or members.
3. The required quorum in meeting of stockholders or members and the manner of voting therein.
4. The form for proxies of stockholders and members and the manner of voting them.
5. The qualification, duties and compensation of directors or trustees, officers and employees.
6. Time for holding the annual election of directors or trustees and the mode or manner of giving notice thereof.
7. Manner of election or appointment and the term of office of all officers other than directors or trustees.
8. Penalties for violation of the by-laws.
9. In 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 for the promotion of good governance and anti-graft and corruption measures.

There are additional contents mentioned under the Revised Corporation Code:

1. The modes by which a stockholder, member, director, or trustee may attend meetings and cast their votes;
2. The directors’ or trustees’ qualifications, duties and responsibilities, the guidelines for setting the compensation
of directors or trustees and officers, and the maximum number of other board representations that an independent
director or trustee may have which shall, in no case, be more than the number prescribed by the Commission

Adoption of the Original By-laws

GR: It must be filed within one (1) month from notice of issuance of certificate of incorporation.

XPN: By- laws may be adopted and filed prior to the incorporation. Such shall be approved and signed by all the
incorporators and submitted to the SEC together with the AOI.

Procedures in adopting by-laws

The by-laws may be adopted before or after incorporation. In all cases, the by-laws shall be effective only upon the
issuance by the SEC of a certification that the by-laws are not inconsistent with the AOI.
1. Pre - incorporation – It shall be approved and signed by all the incorporators and submitted to the SEC, together
with AOI.
2. Post – incorporation:
a. Vote of the majority of the stockholders representing the outstanding capital stock or members;

Binding Effects
The following are the binding effects of by-laws:
1. As to members/ stockholders, officers, trustees/ directors and corporation
They are bound by and must comply with it. They are presumed to know the provisions of the by-laws.
2. As to third persons:

GR: They are not bound.

XPN: They have knowledge or notice of the by-laws at the time the contract was executed.

Effect of non-filing of the by-laws within the required period

Failure to submit the by-laws within 30 days from incorporation does not automatically dissolve the corporation. It
is merely a ground for suspension or revocation of its charter after proper notice and hearing, under Section 6(I) of
PD 902-A. The corporation is, at the very least, a de facto corporation whose existence may not be collaterally
attacked.

Amendment or Revision
Ways of amending, repealing or adopting new by-laws:

1. Amendment may be made by stockholders together with the Board – by majority vote of directors and owners of
at least a majority of the outstanding capital stock/members; or

2. By the board only after due delegation by the stockholders owning 2/3 of the outstanding capital stock/members.
Provided, that such power delegated to the board shall be considered as revoked whenever stockholders owning at
least majority of the outstanding capital stock or members, shall vote at a regular or special meeting