LIMITATION/REQUISITES/REQUIRMENTS
8 INSTANCES NON VOTING CAN VOTE –
A2S I M I D
Who can be an incorporator?
Qualifications to be an Incorporator:
Instances that SHAREHOLDERS will decide
Instances that BOD will also decide
Instances that BOTH shareholders and bod
will decide
2 new voting requirements under the revised
corporation code
Suspension or Revocation of the Certificate of
Incorporation under 6 instances (Pneumonic
is Fra Se Re Co Fa Fa)
A2– Amendment of the article
-Amendment of the bylaws
S – Sale, lease, exchange, mortgage
I – Incurring, Creating or Increasing
bonded indebtedness
M – Merger of consolidation
I – Increase or decrease of capital stock
D – Dissolution of Corporation.
- ANY PERSONS, Natural or Juridical Person,
Partnership, Corporation, Association (singly
or jointly).
- Natural Person
o Legal capacity, enter into a contract
o Must own shares
- Juridical Person
o Own shares of the corporation
-
 Voting for fixed term – MAJORITY OF THE
OCS
 Voting for ratify – Ultravires act, 2/3 *BIGGER
IN VOTES
 Majority of BOD *BIGGER IN VOTES
o Example is BOD/MAJORITY is 15/8
o 8 BOD attended so majority is 5
 Majority of Quorum of BOD
 Majority + 2/3
 Majority + Majority
 Combines the vote of the BOD then ratified
by the SH
 Unanimous consent of the remaining BOD in
case of emergency board
 Self-dealing director
 Fraud in procuring the certificate of
incorporation
 Serious misrepresentation as what the
corporation can do
 Refusal to comply with the lawful order of
the court
 Continuous in operation of a period in 5 years
 Failure to file by-laws

Instances where SEC can revoke or suspend
the COI
Grounds when AOI are disapproved,
amendments (5)
Instances when Shareholders will be the
one to fill out vacancy: (5) STRICTLY for
number 1, 2, 3.
When can BOD fill out vacancy?
Period to fill out Vacancy
3 Instances of Sol. Liability
5 Instances when ExCom cannot vote
 Failure to file reports
 Fraud in procuring the certificate of
incorporation
 Serious misrepresentation as what the
corporation can do
 Refusal to comply with the lawful order of
the court
 Continuous in operation of a period in 5 years
 Failure to file by-laws
 Failure to file reports
 Not in prescribed form
 Illegal purpose
 Certification is false
 Percentage req. not complied
 No favorable gov’t recommendation
 Expiration of term – 1 year term for BOD
 Removal of BOD
 Increase in number of BOD
 No quorum
 Quorum + Delegation
 Quorum + NO delegation
o Grounds
 Death, Withdrawal of BOD
 Emergency Board
 Term expires – no later than the date of
expiration
 Removal – Same day of removal
 Other grounds – 45 days from the vacancy
30/64/150
 approval of any action for which
shareholders' approval is also required;
 (b) filing of vacancies in the board;
 (c) amendment or repeal of bylaws or the
adoption of new bylaws; (
 d) amendment or term is not amendable or
reapealable
 And (e) distribution of cash dividends to the
shareholders.
 In these instances, its either BOD or SHs

2 Kinds of Juridical Person
Created by OPERATION OF LAW, there
are 2 requirements:
Powers/ Attributes, and Properties expressly
authorized by law or incidental to its
existence.
Restrictions of No par
Qualifications of BOD
Entities not allowed to issue par shares
Nationality of the Corporation, 4 Test
are the ones to decide
 Private JP
o Partnership
o Corporation
 Public JP
o Provinces
o Cities
o Municipalities
o Barangay
 Articles of Corporation filed
 Certificate of Incorporation by SEC
o Express Power
o Implied Power
o Incidental Power/ Inherent Power
 No par – must be fully paid, non-
assessable, not liable for corporate
creditors
 No par – P5.00 minimum
 Entire consideration for no par shares
shall be treated as capital, and they
should not be distributable as dividends.
 All preferred shares have stated par value
 Must own at least 1 share
 The share must be registered under his
name
 Must be continuously registered in his
name
 Banks
 Trust companies
 Insurance companies
 Building and loan association
 Pre-need companies and other
corporation authorized to obtain an
access funds from the public
 Incorporation Test
o Place of Incorporation
  Control Test
o Majority of citizenship of
stockholders, OWNERSHIP
 Business Domicile or Center of Management
Rule
o Based on the place of operation
 Grandfather Rule
o Applied by SEC because it involves
securities
o To determine nationality of the
corporation, stockholders of SH5
shall also be considered OR the
stockholders of the investee (SH5) of
the corporation.

Classes of corporation  Stock – With shares and dividend

 Non stock – Without shares and dividend

Private Corporations are  Corporations created under BP. 68 or under

RA11232
 Government Owned Control Corporation
GOCC, Majority of stock holders are
government
 Quasi-Public

Requisites of De Facto Corporation:  Valid law –RA11232

 Attempt to incorporate/ organize – Has
attempt to file the name verification, articles.
 Actual user of corporate power – Has Elected
the officers, BOD, By-laws. Operating
 Issuance of COI despite of non-compliance w/
legal requirements –

Requisites for board meeting – Board of  Meeting of BOD/BOT duly assembled

trustees are the ones who holds the  Presence of the Quorum
meeting  Decision of Majority of Quorum
 Meeting at the time, place, manned
provided by the by-laws

Dealing of Directors, trustees or officers of (a) The presence of such director or

the corporation trustee in the board meeting in which the
contract was approved was not necessary
5 requisites to constitute a quorum for such meeting;

(b) The vote of such director or trustee was

not necessary for the approval of the

Requisites for EXCOM (4)
Founders Shares
Minimum Capital Stock requirement
Contents of the Articles of Incorporation
contract;
(c) The contract is fair and reasonable
under the circumstances;
(d) In case of corporations vested with
public interest, material contracts are
approved by at least a majority of the
independent directors voting to approved
the material contract; and
(e) In case of an officer, the contract has
been previously authorized by the board of
directors.
 By-laws must provide for it.
 Composed of not less than 3 members of
BOD
 Must be directors from the corporation
 BOD create EXCOM
 Exclusive right - Right to vote and be voted
 5 years limitation
 Approval of SEC Requirement
 Ordinary or One Person Corporation, there
will be NO MINIMUM CAPITAL STOCK
REQUIRED
 Name of the corporation - should have INC,
CORP OR OPC
 Primary purpose and Secondary purposes –
Expressed power of the corporation.
 Principal office is located – important
because,
o This is where meetings of
stockholders
o Where he books of corporation is
 Term of Corporation – SEC 11
 Stock requirements - #7 and #8 of SEC 14,
Certain requirements must be complied
o Authorized capital stock
o Number of shares divided into how
many shares
 Arbitration requirement

Form of the articles of incorporation
Arbitration defined
Voting requirements
Non-amendable provisions
Favorable Recommendation of appropriate
Government Agencies (7)
*For AMENDMENT
Grounds when AOI or Amendment there to
may be disapproved by SEC
 Non-stock corporation requirement
o Arbitration agreement
o Electronic filing is allowed
 First provision – Name of the corporation
should contain INC. Corporation, OPC
o For the public to know
 Fifth – Incorporator
o Name, nationality and residence is a
must
 Sixth – Incorporating directors
 Seventh – Authorized CS requirement
 Eight – Number of Authorized CS
 Ninth – Certificate of Treasurer
 Tenth – Undertaking to change name
 A third person will be the one to decide for
the parties.
 Normally, it is the SEC who decides. But since
there are many filed cases handled by SEC,
Third parties may now be involved.
 STOCK HOLDERS
 BOARD OF DIRECTORS
 Name of the Incorporators
 Date of filing Articles of Incorporation
 Original number of incorporators
 Banks
 Banking and quasi-banking institutions
 Preneed
 Insurance and trust companies
 Non-stock savings and loan associations
(NSSLAs)
 Pawnshops
 Other financial intermediaries
 Not in prescribed form, did not comply with
SEC13 and SEC14
 Illegal Purpose, SEC13
 Certification is false, SEC14, 7th and 8th
provision
 Percentage req. not complied, SEC12
 No favorable Recommendation of
appropriate Government Agencies
Name shall not be allowed by SEC  Already reserved or registered
 Already protected by law
 Or when it is contrary to existing laws, rules
or regulations

Effect of violation (Not distinguishable)  SEC will issue summarily order

o Cease and desist order
o Removal of all visible signage’s
o If 2 orders above fails to comply –
CONTEMPT or liable to damages
amounting to 30k
o Administratively, Civilly or Criminally
liable
o And/or revoke the COI

Power to declare dividend  Unrestricted retained earnings

 BOD resolution

Declaration of Dividend  Expansion project

 Loan agreement
 Special circumstances

Qualification of officers  President – director, needs to attend

meeting
 Secretary – resident and citizen, required to
keep corporate books and calls for meeting.
 Treasurer – resident

Prohibition  Pres and secretary – NO

 Because in a meeting, the president is the
only one who can preside and secretary are
the one to take down the minutes of the
meeting.
 Pres and treasurer – NO
 Because the President authorize the
release of money while treasurer accounts
for it.

Quorum  50% + 1
 To hold the meeting

Majority of Quorum  Based on number of BOD/BOT present

 To decide on the meeting

If within 5 years period prior to the election  Convicted by FINAL judgement (3)
the candidate does the ff. F F F  Offense exceeding 6 years
 Violating corporation code
 Violating RA6799 (Securities RC)
 Found administratively liable for any
offense involving FRAUDLENT acts
 Forging of corporation documents
 By FOREIGN court violating foreign law in a
foreign country.
 Violation of A and B

Evidence required  Criminal case – Proof beyond reasonable

doubt, hardest to prove
 Civil - preponderance of evidence
 Administrative – substantial evidence

3 Fold duties for Bod  Obedient

 Loyal
 Diligent

If any of the 3 is violated, the BOD will be  Effects to D/T/O

LIABLE SOLIDARILY for damages  Liable as trustee
 Account for the profits

Grounds Power to acquire own shares  To eliminate fractional shares

 To collect indebtedness of the
corporation
 To pay the descending SH

Requisites Power to acquire own shares  Must be legitimate purpose

 Presence of unrestricted retained
earnings

Requisites of Certificate of stock –  Signed by the President

 Counter signed by the Secretary
 Sealed with the seal of the corporation

Right to vote  May be limited, denied, broadened into

AOI or by laws
 One vote

Termination of membership  Conflict of interest


Rules of distribution of Assets
Appraisal right
Validity of restrictions
Effects of issuance on transfer of stock in
Breach of qualifying conditions
Secretary will register the transfer if
Withdrawal of SH
Dissolution of corporation
 Resignation
 Loss of confidence
 Nonpayment of dues
 Nonpayment of membership fees
 Creditors are paid first
 Assets held with condition for return
given to the member
 Assets with no conditions for return given
to similar institution
 Other assets – depends in AOI/by laws
 Other cases – can have a plan of
distribution of assets
 Any reason
 Sufficient assets
 Must appear in AOI/By laws/Certificate of
stock
 Restrictions should not be mere onerous
than those given to existing SH in terms
of purchasing the shares of transferring
SH with reasonable terms, conditions or
period stated

 Transferee is a third person
 Exceeds 20 SH
 Restrictions on shares
 Written consent of all SH
 All SH have actual knowledge and no
objection
 Directors are accustomed to take
informal action with consent of all SH
 All directors have express or implied
knowledge
 For any reason
 Sufficient assets
 Mismanagement of the close corporation
 Corporate assets are being wasted or
misapplied
BOT of non-stock
Entities not allowed to be One-person
corporation
Articles of Incorporation
Power of SEC regarding offenses can
only
Under SEC conduct of investigation
SEC can only issue Cease and Desist
orders when
corporations who failed or intentionally
refuses to comply with the order of the
SEC.
Imposition
Unauthorized use of corporate name
Violation of Disqualification
Violation of duty to maintain records or
allow inspection or reproduction
Willful certification of incomplete,
 Not less than 5 not more than 15
 In multiples of 5
 1/5 expiration
 5-year term
 Bank
 Quasi banks
 Preneed
 Trust
 Insurance
 Public listed companies
 Non chartered government owned and
controlled corporations
 If a single SH is a trust or an estate the
name, the nationality, and the residence
of the trustee must be given
 The name, the nationality, and the
residence of the nominee or alternate
nominee must be given.
 Conduct investigations
 Prosecute offenses
 Publish F/O/A/I
 Subpoena duces tecum or produce
documents as court summons
 Person has violated the code
 Person is about to violate the code
Fined with an amount not exceeding P
30,000
Can be fined with minimum to maximum amount.
 (P 5,000 - P 2,000,000)
Corporation can only be fined with minimum to
maximum amount.
 (P 10,000 – P 200,000)
D/T/O can only be fined with minimum to
maximum amount.
 (P 10,000 – P 200,000)
Liable persons are:
 Person/s keeping and maintaining the
records.
Liable persons are:
inaccurate, false or misleading
statements of reports
Independent Auditor Collusion
Acting as intermediaries for Graft and
Corrupt Practices
Failure to install safeguards
Tolerating Graft and Corruption
Retaliating against Whistleblowers
Other violations
(Other than Graft and Corruptions or
retaliation against whistleblowers)
Other violations
Liability of D/T/O/E
Liability of Aiders, Abettors and other
secondary liability
Outstanding Capital Stock
Collection and use of registration,
incorporation and other fees
Reportorial Requirements
Reportorial Requirements, Censorship
and Privacy
NEDA’s function
 Generic, violation of ANY person.
Liable persons are:
 Pertains only to a single person (CPA)
Liable persons are:
 Leader
 D/T/O/E
Prima facie evidence of corporate liability
Liable persons are:
 Directors
 Trustees and
 Officers
Persons guilty of this act are those who retaliate
to the whistleblower of businesses who practice
graft and corruption.
Consequences:
 Dissolution + Separate action can be filed
against other violations.
Liability shall be separate from any civil,
administrative or criminal liability.
If the offender is a corporation penalty is
imposable to its D/T/O/E
If the offender is assisting the main principal in
second degree, penalty is imposed as secondary
liability
Right to vote is limited only to OCS which are
stocks fully or not fully paid, while treasury
shares cannot. (only sold and reissued TS)
Limited to SEC for their daily operational
expenses.
Reportorial Requirements:
Audited Financial Statements audited by CPA
General Information Sheet
Corporation Vested with public interest (2)
 D or T compensation report
 D or T appraisal or performance report
and standards
Reportorial requirements are filtered and only
limited to its non-confidential information.
Confidential information must be redacted
From time to time, determine if the corporate
vehicle has been used by any
 corporation, business, or industry to frustrate the
provisions of this Code or applicable laws
The Congress of the Philippines
Arbitration for Corporations, Arbitrable
Arbitration for Corporations, Non-
Arbitrable
Appointment of Arbitrators
Applicability of Code, Not amended
institutions
 May set maximum limits for stock
ownership of individuals or groups of
individuals related to each other by:
o Consanguinity
o Affinity, or
o By close business interests
o or whenever necessary to prevent
anti-competitive practices
 The articles of incorporation or bylaws of a
corporation
 Intra-corporate relations
 Criminal offenses
 Interests of third parties
 Independent Third person
 Appointed by SEC
 Banks (BSP)
 Non-bank, financial institution (BSP)
 Insurance Company (Insurance
Commisions)
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