Title II

INCORPORATION AND ORGANIZATION OF 8. Is there a minimum capital stock required of

PRIVATE CORPORATIONS stock corporation?
 No minimum authorized capital stock, except if
1. How many incorporators should there be in a provided by special law.
private corporation?
 Not more than 15 persons 9. Define subscription, paid-up capital
 Subscription – a written contract to purchase
2. What are the qualifications of incorporators? newly issued shares of stock or bonds.
i. Must be a natural person  Paid-up capital – portion of the authorized
ii. Must be of legal age capital stock which has been both subscribed
iii. Must own or be a subscriber to at least 1 share and paid
of capital stock
10. Articles of Incorporation (AOI)
3. What is a one-person corporation?  Defines the charter of the corporation and
 A corporation with a single stockholder. Only a the contractual relationships
natural person, trust, or an estate may form a a. 3 fold nature – A contract between the…
OPC.  State and the corporation
 Corporation and its stockholders
4. Incorporator vs. Corporator
 Stockholders inter se
Incorporator Corporator
Mentioned in the AOI b. Corporate name, limitation and change
as originally forming Who compose a General rule: Each corporation must have a
and composing the corporation as stockholders name by which it is to sue and be sued and do
corporation and who or as members all legal acts.
are signatories thereof. Limitation: Must not be identical; deceptively or
May or may not be a confusingly similar to that of any existing
Signatory of the AOI
signatory of AOI corporation
Does not cease to be Ceases to be a corporator Change: A corporation can change its name by
an incorporator upon by sale of his shares; amending its AOI.
sale of his shares. ceases to be a member
Not more than 15 No restriction except for a c. Purpose clause
persons. close corporation. If there is more than one stated purpose, AOI
shall state which is the primary and secondary
5. Steps in the creation of corporation
purpose/s to determine which investment of
i. Promotion – activities done by promoter for the
corporate funds require the authority of both
founding and organizing of the business
BOD and stockholders.
ii. Incorporation
 Ultra vires acts - any acts that lie
Steps of incorporation
beyond the authority of a corporation to
a. Execution of AOI by the incorporators and
perform
other documents
b. Filing of AOI with the SEC together with the
d. Principal office
treasurer’s affidavit.
A corporation is a resident of the place where its
In case the corporation is governed by
principal office is located as stated in the AOI.
special law, a favorable recommendation of
Purpose:
appropriate govt agency that such AOI and
i. To fix the residence of the corporation in a
by-laws is in accordance with the law.
definite place
iii. Formal organization and commencement of
ii. To determine the venue of court cases
business transactions
involving corporation
a. Adoption of by-laws and filing with SEC
iii. For purposes of stockholders or members
b. Election of BOD or BOT and officers
meeting; and
c. Payment of shares
iv. To determine the place where the books and
records of the corporation are ordinarily kept
6. How long is the corporate term of a corporation?
 General rule: Perpetual existence
e. Term of existence
 Exception: If the AOI provides otherwise or if it A corporation shall have perpetual existence
provides for a specific period. unless its AOI provides otherwise.

7. Can an expired corporation be revived? f. Number of BOD or BOT

 General rule: Yes.  BOD shall not be more than 15
i. Upon approval by the Commission
 BOT may be more than 15
ii. Certificate of revival of existence shall be
issued
g. Authorized capital stock – maximum
 Exception: If its application for revival provides amount fixed in the AOI that may be
otherwise or provides for a specific period.
 subscribed and paid by the stockholders  Requirements before one can qualify as de facto
of the corporation corporation:
i. Existence of a valid law under which it may
AOI should contain: be incorporated
i. Amount of authorized capital stock ii. An attempt in good faith to incorporate
ii. Number of shares iii. Assumption of corporate powers
iii. Par value of each share
iv. Names, nationalities and residences of the  Two conflicting public interest:
original subscribers i. Opposed to an unauthorized assumption of
v. Amount subscribed and paid by each on his corporate privileges
subscription ii. In favor of doing justice to the parties and of
vi. State if some or all of the shares are without establishing a general assurance of security
par value in business dealing with corporations.

11. May the AOI be amended? Limitations
 Yes.
i. Must be for legitimate purposes and must
not be contrary to the Corporation Code and
special laws;
ii. Must be approved by a majority of the BOD
or BOT;
iii. Requires vote or written assent of
stockholders’ representing 2/3 of the
outstanding capital stock or of non-stock
corporation
iv. Original and amended articles together shall
contain all provisions required by law to be
set out in AOI
v. Certification under oath by the corporate
secretary and a majority of the BOD or BOT
shall be submitted to the SEC
vi. Must be approved by SEC
vii. Must be accompanied by a favorable
recommendation of govt agency in cases of:
a. Banks
b. Banking and quasi-banking institutions
c. Preneed
d. Insurance and trust companies
e. Nonstock savings and loan associations
(NSSLAs)
f. Pawnshops
g. Other financial intermediaries
15. What is the effect of non-use of the corporate
charter?
 Failure to formally organize and commence its
business within 5 years from the date of its
incorporation, the certificate shall be deemed
revoked as of the day following the end of the 5
year period.
16. What is the effect if the corporation has
organized but subsequently becomes inactive?
 If a corporation has commenced its business but
subsequently becomes inoperative for at least 5
consecutive years, the SEC may, after due
notice and hearing, place the corporation under
delinquent status.
Note: A delinquent corporation shall have 2 years to
resume operations and comply with all requirements.
Failure to comply, the certificate of incorporation
shall be revoked.

12. What are the grounds which the SEC may reject
or disapprove any amendment thereto?
i. Not substantially in accordance with the form
prescribed
ii. Purpose/s of the corporation are patently
unconstitutional, illegal, immoral, or contrary to
government rules and regulations
iii. Certification concerning the amount of capital
stock subscribed and/or paid is false
iv. Required percentage of Filipino ownership of the
capital stock has not been complied with

13. When does a corporation commence to have

corporate existence and juridical personality?
 From the date the SEC issues a certificate of
incorporation under its official seal.

14. De facto corporation