Comparison of Corporation Code and Revised Corporation Code DM

2/20/2021
Comparison of BP 168: Corporation

Code (1980) and RA No. 11232: Revised
Corporation Code (2019)
Annotated by: Dannah Mantuano
References
• Ladia, R. C. (2015). The Corporation Code of the Philippines (annotated) (3rd ed.). Arellano Law
Foundation.
• Santiago, J. S., Valdez, E. J., & Gonzales, C. P. (2019). Revised Corporation Code of The Philippines:
Republic Act No. 11232: Commentaries and cases. Ateneo de Manila University Press.
• (2019). SEC ‐ Securities and Exchange Commission. https://www.sec.gov.ph/wp‐
content/uploads/2019/11/2019Legislation_Revised‐Corporation‐Code‐Comparative‐Matrix_as‐of‐
March‐22‐2019.pdf
Section 1
Batas Pambansa Bilang 68 Republic Act. No. 11232
Section 1. Title of the Code. – This SEC. 1. Title of the Code. – This
Code shall be known as "The Code shall be known as the
Corporation Code of the “Revised Corporation Code of the
Philippines." (n) Philippines”.
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Section 2
Section 2. Corporation defined. – SEC. 2. Corporation Defined. – A

A corporation is an artificial being corporation is an artificial being
created by operation of law, created by operation of law,
having the right of succession and having the right of succession and
the powers, attributes and the powers, attributes, and
properties expressly authorized by properties expressly authorized by
law or incident to its existence. (2) law or incidental to its existence.
Section 3
Section 3. Classes of corporations. – SEC. 3. Classes of Corporations. –

Corporations formed or organized Corporations formed or organized under
under this Code may be stock or non‐ this Code may be stock or nonstock
stock corporations. Corporations which corporations. Stock corporations are
have capital stock divided into shares those which have capital stock divided
and are authorized to distribute to the into shares and are authorized to
holders of such shares dividends or distribute to the holders of such
allotments of the surplus profits on the shares, dividends, or allotments of the
basis of the shares held are stock surplus profits on the basis of the
corporations. All other corporations are shares held. All other corporations are
non‐stock corporations. (3a) nonstock corporations.
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Section 3
• For a corporation to be considered “stock corporation”, two requisites
must concur: (1) that it has capital stock divided into shares and (2)
that it is authorized to distribute to the holders of such shares,
dividends or allotments of the surplus profits on the basis of the
shares held.
• Non‐stock corporations do not have capital stock, but what they have
is capital. They are organized mainly for non‐profit purposes but they
are nonetheless, allowed to earn income. Provided, no part of their
income may be distributed as dividends to their members. Examples
of non‐stock corporations are associations and foundations.
Section 4
Section 4. Corporations created by SEC. 4. Corporations Created by

special laws or charters. – Corporations
created by special laws or charters shall Special Laws or Charters. –
be governed primarily by the provisions Corporations created by special laws
of the special law or charter creating or charters shall be governed
them or applicable to them, primarily by the provisions of the
supplemented by the provisions of this
Code, insofar as they are applicable. (n) special law or charter creating them
or applicable to them, supplemented
by the provisions of this Code,
insofar as they are applicable.
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Section 5
Section 5. Corporators and incorporators, SEC.5. Corporators and Incorporators,

stockholders and members. – Corporators Stockholders and Members. – Corporators
are those who compose a corporation, are those who compose a corporation,
whether as stockholders or as members. whether as stockholders or shareholders in
Incorporators are those stockholders or a stock corporation or as members in a
members mentioned in the articles of nonstock corporation. Incorporators are
incorporation as originally forming and those stockholders or members mentioned
composing the corporation and who are in the articles of incorporation as originally
signatories thereof. forming and composing the corporation and
who are signatories thereof.
Corporators in a stock corporation are
called stockholders or shareholders.
Corporators in a non‐stock corporation are
called members. (4a)
Section 6
• SEC. 6. Classification of Shares. – The
classification of shares, their corresponding
Section 6. Classification of shares. – The shares rights, privileges, or restrictions, and their
of stock of stock corporations may be divided stated par value, if any, must be indicated in
into classes or series of shares, or both, any of the articles of incorporation. Each share shall
which classes or series of shares may have such be equal in all respects to every other share,
rights, privileges or restrictions as may be except as otherwise provided in the articles of
stated in the articles of incorporation: Provided, incorporation and in the certificate of stock.
That no share may be deprived of voting rights • The shares in stock corporations may be
except those classified and issued as divided into classes or series of shares, or both.
"preferred" or "redeemable" shares, unless No share may be deprived of voting rights
otherwise provided in this Code: Provided, except those classified and issued as
further, That there shall always be a class or “preferred” or “redeemable” shares, unless
series of shares which have complete voting otherwise provided in this Code: Provided, That
rights. there shall always be a class or series of shares
with complete voting rights.
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Section 6
Any or all of the shares or series of Holders of nonvoting shares shall
shares may have a par value or have nevertheless be entitled to vote on the
following matters:
no par value as may be provided for
in the articles of incorporation: (a)Amendment of the articles of
Provided, however, That banks, trust incorporation;
companies, insurance companies, (b)Adoption and amendment of bylaws;
public utilities, and building and loan (c)Sale, lease, exchange, mortgage, pledge, or
associations shall not be permitted other disposition of all or substantially all of
to issue no‐par value shares of stock. the corporate property;
(d)Incurring, creating, or increasing bonded
indebtedness;
(e)Increase or decrease of authorized capital
stock;
Section 6
Preferred shares of stock issued by any (f)Merger or consolidation of the
corporation may be given preference in the corporation with another corporation or
distribution of the assets of the corporation in other corporations;
case of liquidation and in the distribution of
dividends, or such other preferences as may be (g)Investment of corporate funds in another
stated in the articles of incorporation which are corporation or business in accordance with
not violative of the provisions of this Code: this Code; and
Provided, That preferred shares of stock may be
issued only with a stated par value. The board (h)Dissolution of the corporation.
of directors, where authorized in the articles of Except as provided in the immediately
incorporation, may fix the terms and conditions
of preferred shares of stock or any series preceding paragraph, the vote required
thereof: Provided, That such terms and under this Code to approve a particular
conditions shall be effective upon the filing of a corporate act shall be deemed to refer
certificate thereof with the Securities and only to stocks with voting rights.
Exchange Commission.
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Section 6
Shares of capital stock issued without The shares or series of shares may
par value shall be deemed fully paid or may not have a par value:
and non‐assessable and the holder of
such shares shall not be liable to the Provided, That banks, trust,
corporation or to its creditors in respect insurance, and preneed companies,
thereto: Provided; That shares without public utilities, building and loan
par value may not be issued for a associations, and other corporations
consideration less than the value of five
(P5.00) pesos per share: Provided, authorized to obtain or access funds
further, That the entire consideration from the public, whether publicly
received by the corporation for its no‐ listed or not, shall not be permitted
par value shares shall be treated as to issue no‐par value shares of
capital and shall not be available for stock.
distribution as dividends.
Section 6
Preferred shares of stock issued by a
corporation may be given preference in the
A corporation may, furthermore, distribution of dividends and in the distribution
classify its shares for the purpose of of corporate assets in case of liquidation, or
insuring compliance with constitutional such other preferences: Provided, That
or legal requirements. preferred shares of stock may be issued only
with a stated par value. The board of directors,
Except as otherwise provided in the where authorized in the articles of
articles of incorporation and stated in incorporation, may fix the terms and
conditions of preferred shares of stock or any
the certificate of stock, each share shall series thereof: Provided, further, That such
be equal in all respects to every other terms and conditions shall be effective upon
share. filing of a certificate thereof with the Securities
and Exchange Commission, hereinafter
referred to as “Commission”.
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Section 6
Where the articles of incorporation provide Shares of capital stock issued without
for non‐voting shares in the cases allowed par value shall be deemed fully paid
by this Code, the holders of such shares and non‐assessable and the holder of
shall nevertheless be entitled to vote on such shares shall not be liable to the
the following matters: corporation or to its creditors in
1. Amendment of the articles of respect thereto: Provided, That no‐par
incorporation; value shares must be issued for a
2. Adoption and amendment of by‐ consideration of at least Five pesos
laws; (P5.00) per share: Provided, further,
That the entire consideration received
3. Sale, lease, exchange, mortgage, by the corporation for its no‐par value
pledge or other disposition of all or shares shall be treated as capital and
substantially all of the corporate property; shall not be available for distribution as
dividends.
Section 6
4. Incurring, creating or increasing bonded
indebtedness;
A corporation may further
5. Increase or decrease of capital stock; classify its shares for the purpose
6. Merger or consolidation of the corporation with of ensuring compliance with
another corporation or other corporations; constitutional or legal
7. Investment of corporate funds in another corporation
or business in accordance with this Code; and
requirements .
8. Dissolution of the corporation.
Except as provided in the immediately preceding
paragraph, the vote necessary to approve a particular
corporate act as provided in this Code shall be deemed
to refer only to stocks with voting rights. (5a)
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Section 6
• Shares that may be deprived of voting rights:
1. Preferred shares
2. Redeemable shares
3. Founders’ shares (See Sec. 7)‐ Founders’ shares may be deprived of voting
rights especially if it violates the Anti‐Dummy Law, Foreign Investments Act
of 1991 and other pertinent laws.
Section 6
• Purpose of classification of shares:
1. To specify and define the rights and privileges of the stockholders
2. For regulation and control of the issuance of sale of corporate securities for the
protection of purchases and stockholders.
3. As a management control device.
4. To comply with statutory requirements particularly those which provide for certain
limitations on foreign ownership of shares.
5. To better insure return on investment which can be affected through the issuance of
redeemable shares or preferred shares.
6. For flexibility in price.
• Common shares cannot be denied the right to vote by doctrine of limited
capacity.
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Section 6
• Par value shares: those whose value are fixed in the articles of
incorporation whose primary function is to fix a minimum
subscription. It cannot be issued nor sold for less than par. To do so
would violate the provisions on “watered stocks” which are shares
issued at less than par where the stockholders will remain liable for
the difference between what he paid and the actual par value
• No par value shares
• Limitations
• Deemed fully paid and non‐assessable
Section 6
• 60% minimum Filipino ownership only pertains to shares with voting
rights.
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Section 7
Section 7. Founders’ shares. – Founders’ SEC. 7. Founders’ Shares. – Founders’ shares
shares classified as such in the articles may be given certain rights and privileges
of incorporation may be given certain not enjoyed by the owners of other stocks.
rights and privileges not enjoyed by the Where the exclusive right to vote and be
owners of other stocks, provided that voted for in the election of directors is
where the exclusive right to vote and be granted, it must be for a limited period not
to exceed five (5) years from the date of
voted for in the election of directors is incorporation: Provided, That such
granted, it must be for a limited period exclusive right shall not be allowed if its
not to exceed five (5) years subject to exercise will violate Commonwealth Act
the approval of the Securities and No. 108, otherwise known as the “Anti‐
Exchange Commission. The five‐year Dummy Law”; Republic Act No. 7042,
period shall commence from the date of otherwise known as the “Foreign
the aforesaid approval by the Securities Investments Act of 1991”; and other
and Exchange Commission. (n) pertinent laws.
Section 7
• Although the Code does not define Founders’ shares, they are presumed
to be shares of stock which are issued to the founders of the corporation.
• The period of 5 years fixed by law is non‐extendible (cannot be renewed)
because it may result in the almost perpetual disqualification of other
stockholders to elect or be elected as members of the board of directors
resulting to the lack of proper representation thereat.
• In the deliberation of the Batasang Pambansa, it was the consensus of the
lawmakers that the SEC will have to take into account whether those
persons to whom the prerogative or right is given have contributed
substantially in the organization of the corporation or whether the business
of the corporation is of a character that is necessary for its control to be
given to a certain group of individuals for a period of time.
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Section 7
• The Revised Code modified the reckoning period from “date of approval by the SEC” to
the “date of incorporation” and removed the portion stating that the exclusive right to
vote and be voted for in the election of directors is “subject to the approval of the SEC”.
• This connotes that founders’ shares may or may not be granted the exclusive right to
vote and be voted for in the election of the directors and that such grant of exclusive
right no longer needs SEC approval. If it is granted such exclusive right, it shall be subject
to the condition that a)it must be for a limited period not to exceed 5 years from the
date of incorporation and; b) it should not violate the “Anti‐Dummy Law”, “Foreign
Investments Act of 1991”, and other pertinent laws. The Revised Code no longer
mentioned that the grant of the aforementioned right is still subject to approval of the
SEC. Further, the 5 year limitation is now reckoned from date of incorporation and no
longer from the date of approval by the SEC. [personal opinion]
• The condition abovementioned can be presumed to be connected to the proscription on
or limiting of foreign nationals’ control or management of nationalized businesses such
as the exploitation of natural resources e.g., mining companies.
Section 8
Section 8. Redeemable shares. – Redeemable SEC. 8. Redeemable Shares. – Redeemable
shares may be issued by the corporation when shares may be issued by the corporation
expressly so provided in the articles of when expressly provided in the articles of
incorporation. They are shares which may
incorporation. They may be purchased or taken be purchased by the corporation from the
up by the corporation upon the expiration of a holders of such shares upon the expiration
fixed period, regardless of the existence of of a fixed period, regardless of the existence
unrestricted retained earnings in the books of of unrestricted retained earnings in the
the corporation, and upon such other terms books of the corporation, and upon such
and conditions as may be stated in the articles other terms and conditions stated in the
articles of incorporation and the certificate
of incorporation, which terms and conditions of stock representing the shares, subject to
must also be stated in the certificate of stock rules and regulations issued by the
representing said shares. (n) Commission.
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Section 9
Section 9. Treasury shares. – SEC. 9. Treasury Shares. – Treasury
Treasury shares are shares of stock shares are shares of stock which
which have been issued and fully have been issued and fully paid
paid for, but subsequently for, but subsequently reacquired
reacquired by the issuing by the issuing corporation through
corporation by purchase, purchase, redemption, donation,
redemption, donation or through or some other lawful means. Such
some other lawful means. Such
shares may again be disposed of for shares may again be disposed of
a reasonable price fixed by the board for a reasonable price fixed by the
of directors. (n) board of directors.
TITLE II
INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS
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Section 10
Section 10. Number and qualifications SEC. 10. Number and Qualifications of Incorporators.
of incorporators. – Any number of – Any person, partnership, association or
natural persons not less than five (5) corporation, singly or jointly with others but not
but not more than fifteen (15), all of more than fifteen (15) in number, may organize a
legal age and a majority of whom are corporation for any lawful purpose or purposes:
residents of the Philippines, may form Provided, That natural persons who are licensed to
practice a profession, and partnerships or
a private corporation for any lawful
associations organized for the purpose of practicing
purpose or purposes. Each of the a profession, shall not be allowed to organize as a
incorporators of a stock corporation corporation unless otherwise provided under special
must own or be a subscriber to at least laws. Incorporators who are natural persons must be
one (1) share of the capital stock of the of legal age.
corporation. (6a)
Section 10
Each incorporator of a stock
corporation must own or be a
subscriber to at least one (1) share
of the capital stock.
A corporation with a single
stockholder is considered a One
Person Corporation as described
in Title XIII, Chapter III of this
Code.
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Section 10
• First, under the Old Code, only natural persons of legal age may form
a private corporation and majority of whom should be residents of
the Philippines. Under the Revised Code, however, it allows any
person, partnership, association or corporation either by themselves
(singly) or with others (jointly) to organize a corporation.
• Second, the Old Code requires a minimum of 5 incorporators but not
more than 15. The Revised Code removed the minimum requirement
but retained the maximum requirement.
• Third, the Revised Code does not mention any residency
requirements for incorporators.
Section 10
• Another significant change is the introduction of the one‐person
corporation (OPC) concept i.e., a corporation having only a single
stockholder.
• Section 116 of the Revised Code provides that only a natural person,
trust, or an estate may form one‐person corporations and that “banks
and quasi‐banks, pre‐need, trust, insurance, public and publicly listed
companies, and non‐chartered government‐owned‐and‐controlled
corporations” cannot be organized as one person corporations.
• Moreover, in Sec. 131, ordinary stock corporations can apply for
conversion to a one‐person corporation when a single stockholder
acquires all the stocks of the corporation applying for conversion.
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Section 11
Section 11. Corporate term. – A corporation shall exist SEC. 11. Corporate Term. – A corporation shall
for a period not exceeding fifty (50) years from the have perpetual existence unless its articles of
incorporation provides otherwise.
date of incorporation unless sooner dissolved or
unless said period is extended. The corporate term as Corporations with certificates of incorporation
issued prior to the effectivity of this Code, and
originally stated in the articles of incorporation may be which continue to exist, shall have perpetual
extended for periods not exceeding fifty (50) years in existence, unless the corporation, upon a vote
any single instance by an amendment of the articles of of its stockholders representing a majority of
incorporation, in accordance with this Code; Provided, its outstanding capital stock, notifies the
Commission that it elects to retain its specific
That no extension can be made earlier than five (5) corporate term pursuant to its articles of
years prior to the original or subsequent expiry date(s) incorporation: Provided, That any change in
unless there are justifiable reasons for an earlier the corporate term under this section is
extension as may be determined by the Securities and without prejudice to the appraisal right of
dissenting stockholders in accordance with the
Exchange Commission. (6) provisions of this Code.
Section 11
A corporate term for a specific period
may be extended or shortened by
amending the articles of incorporation:
Provided, That no extension may be
made earlier than three (3) years prior
to the original or subsequent expiry
date(s) unless there are justifiable
reasons for an earlier extension as may
be determined by the Commission:
Provided, further, That such extension
of the corporate term shall take effect
only on the day following the original
or subsequent expiry date(s).
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Section 11
A corporation whose term has expired
may, apply for a revival of its corporate
existence, together with all the rights
and privileges under its certificate of
incorporation and subject to all of its
duties, debts and liabilities existing
prior to its revival. Upon approval by
the Commission, the corporation shall
be deemed revived and a certificate of
revival of corporate existence shall be
issued, giving it perpetual existence,
unless its application for revival
provides otherwise.
Section 11
No application for revival of certificate
of incorporation of banks, banking and
quasi‐banking institutions, preneed,
insurance and trust companies, non‐
stock savings and loan associations
(NSSLAs)1, pawnshops, corporations
engaged in money service business,
and other financial intermediaries shall
be approved by the Commission unless
accompanied by a favorable
recommendation of the appropriate
government agency.
1 Non‐Stock Savings and Loan Associations
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Section 11
• Unlike the Old Code that limited a corporation’s term to a maximum of 50 years
(renewable for a term of up to 50 years per renewal), the Revised Code now provides for
a perpetual period unless the articles of incorporation provides otherwise.
• The Revised Code extended this perpetual existence to corporations with certificates of
incorporation issued prior to effectivity of the Revised Corporation Code unless the
corporation, upon a vote of its stockholders representing a majority of its outstanding
capital stock, notifies the Commission that it elects to retain its specific corporate term
without prejudice to the appraisal right of dissenting stockholders.
• Any change in the corporate term, whether extension, cutting short, or revival gives rise
to the right of a stockholder who dissents from the decision of the stockholders
approving such change to invoke his or her appraisal right.
• Appraisal right‐ the right to make a demand on the corporation for the payment of the
fair value of shares owned by the dissenting stockholder who wants to withdraw from
the corporation.
Section 11
• A corporation may, nonetheless, still choose to have a limited period of
existence, subject to extending or shortening the corporate term by
amending the articles of incorporation.
• As opposed to the Revised Code, the Old Code provides that an
amendment may be done to extend the corporate term but did not
mention amendment to shorten the term.
• The Revised Code also modified the application for extension from 5 years
to 3 years reckoned prior to the original or subsequent expiry date(s),
unless there are justifiable reasons for an earlier extension as may be
determined by the SEC.
• The Revised Code also makes it clear that the extension of the corporate
term shall take effect only on the day following the original or subsequent
expiry date(s).
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Section 11
• Under the Old Code, a corporation whose term has expired cannot apply for a renewal of
its license and is limited to the winding up of its activities within a period of 3 years for
the liquidation of the company.
• However, a significant change introduced by the Revised Code is the right of a
corporation whose term has expired to apply for a revival of its corporate existence
together with all the rights and privileges under its certificate of incorporation and
subject to all duties, debts, and liabilities existing prior to is revival.
• Upon approval by the SEC, the corporation shall be deemed revived and a certificate of
revival of corporate existence shall be issued, giving it a perpetual existence, unless its
application for revival provides otherwise.
• The application for revival of certificate of incorporation is subject to certain conditions
for businesses like banks, banking and quasi‐banking institutions, preneed, insurance and
trust companies, non‐stock savings and loan associations (NSSLAs), pawnshops,
corporations engaged in money service business, and other financial intermediaries
which need to obtain a favorable recommendation from the appropriate government
agency e.g., BSP in the case of banks.
Section 12
Section 12. Minimum capital stock SEC. 12. Minimum Capital Stock
required of stock corporations. – Not Required of Stock
Stock corporations incorporated Corporations. – Stock
under this Code shall not be corporations shall not be
required to have any minimum
authorized capital stock except as required to have a minimum
otherwise specifically provided for capital stock, except as otherwise
by special law, and subject to the specifically provided by special
provisions of the following law.
section.
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Section 12
• Unless required by specific laws for certain businesses like banking
and quasi‐banking and lending, no minimum capital stock is required
for corporations in general.
• RA 8791 or The General Banking Law provides for the minimum
capital stock for banks and quasi‐banks
• RA 9474 or Lending Company Regulation Act of 2007 prescribes the
minimum capital stock required for lending companies.
• RA 10607 or the Insurance Code prescribes the minimum capital
stock requirement for insurance companies.
Section 13
Section 13. Amount of capital stock to be
subscribed and paid for the purposes of
incorporation. – At least twenty‐five percent
(25%) of the authorized capital stock as stated
in the articles of incorporation must be
subscribed at the time of incorporation, and at
least twentyfive (25%) per cent of the total
subscription must be paid upon subscription,
the balance to be payable on a date or dates
fixed in the contract of subscription without
need of call, or in the absence of a fixed date
or dates, upon call for payment by the board of
directors: Provided, however, That in no case
shall the paid‐up capital be less than five
Thousand (P5,000.00) pesos. (n)
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Section 13
• Revised Code now removed the requirement under Section 13 of the Old Code
that at least 25% of the authorized capital stock as stated in the AOI must be
subscribed at the time of incorporation, and at least 25% of that total
subscription be paid.
• The Revised Code also removed requiring paid‐up capital of not less than 5,000.
• In any case, however, Section 13(h) of the Revised Code requires that the articles
of incorporation in case of stock corporations, contain the amount of its
authorized capital stock, number of shares into which it is divided, the par value
of each, names, nationalities, and residence addresses of the original subscribers,
amount subscribed and paid by each on the subscription, and a statement that
some or all of the shares are without par value, if applicable.
• On the other hand, the AOI should contain in case of non‐stock corporations, “the
amount of its capital, the names, nationalities, and residence addresses of the
contributors, and amount contributed by each.”
Section 13
• There are businesses that have nationality requirement as mandated by
the 1987 Philippine Constitution.
• Mass media‐ 100% (ownership and management are limited to citizens of
the Philippines or to corporations, cooperatives or associations, wholly‐
owned and managed by such citizens)
• Exploration, development, and utilization of natural resources‐ 60%
• Operation of public utility‐ 60%
• Educational institutions, other than those established by religious groups
and mission boards‐ shall be owned solely by citizens of the Philippines
(100%) or corporations or associations at least 60% of the capital of which
is owned by such citizens.
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Section 13
• There are exceptions to the rule that there must be no more than 15
directors for a stock corporation or more than 15 trustees for a non‐stock
corporation. Among them are:
[1] educational corporations registered as non‐stock corporations whose
number of trustees, though may be more than 15 should be divisible by 5;
[2] in close corporations where all the stockholders are considered as
members of the board of directors thereby effectively allowing 20 members
in the board (Sec 95).
[3] corporation sole (Sec 108)
[4] One person corporations (Sec. 115)
Section 14 (13)
Section 14. Contents of the articles SEC. 13. Contents of the Articles of
of incorporation. – All corporations Incorporation. – All corporations
organized under this code shall file shall file with the Commission
with the Securities and Exchange articles of incorporation in any of the
official languages, duly signed and
Commission articles of incorporation acknowledged or authenticated, in
in any of the official languages duly such form and manner as may be
signed and acknowledged by all of allowed by the Commission,
the incorporators, containing containing substantially the following
substantially the following matters, matters, except as otherwise
except as otherwise prescribed by prescribed by this Code or by special
this Code or by special law: law:
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Section 14 (13)
1. The name of the corporation; (a)The name of the corporation;
2. The specific purpose or purposes for (b)The specific purpose or purposes for
which the corporation is being which the corporation is being formed.
incorporated. Where a corporation has Where a corporation has more than one
more than one stated purpose, the articles stated purpose, the articles of incorporation
of incorporation shall state which is the shall indicate the primary purpose and the
primary purpose and which is/are the secondary purpose or purposes: Provided,
secondary purpose or purposes: Provided, That a non‐stock corporation may not
That a non‐stock corporation may not include a purpose which would change or
include a purpose which would change or contradict its nature as such;
contradict its nature as such; (c)The place where the principal office of
3. The place where the principal office of the corporation is to be located, which must
the corporation is to be located, which be within the Philippines;
must be within the Philippines;
Section 14 (13)
4. The term for which the (d)The term for which the
corporation is to exist, if the
corporation is to exist; corporation has not elected
5. The names, nationalities and perpetual existence;
residences of the incorporators; (e)The names, nationalities, and
residence addresses of the
6. The number of directors or incorporators;
trustees, which shall not be less (f)The number of directors, which
shall not be more than fifteen (15)
than five (5) nor more than fifteen or the number of trustees which
(15); may be more than fifteen (15);
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Section 14 (13)
7. The names, nationalities and residences of (g)The names, nationalities, and residence
persons who shall act as directors or trustees addresses of persons who shall act as
until the first regular directors or trustees are directors or trustees until the first regular
duly elected and qualified in accordance with directors or trustees are duly elected and
this Code; qualified in accordance with this Code;
8. If it be a stock corporation, the amount of its (h)If it be a stock corporation, the amount
authorized capital stock in lawful money of the
Philippines, the number of shares into which it of its authorized capital stock, number of
is divided, and in case the share are par value shares into which it is divided, the par value
shares, the par value of each, the names, of each, names, nationalities, and residence
nationalities and residences of the original addresses of the original subscribers,
subscribers, and the amount subscribed and amount subscribed and paid by each on the
paid by each on his subscription, and if some or subscription, and a statement that some or
all of the shares are without par value, such fact all of the shares are without par value, if
must be stated; applicable;
Section 14 (13)
9. If it be a non‐stock corporation, (i)If it be a nonstock corporation,
the amount of its capital, the the amount of its capital, the
names, nationalities and names, nationalities, and
residences of the contributors and residence addresses of the
the amount contributed by each; contributors, and amount
and contributed by each; and
10. Such other matters as are not (j)Such other matters consistent
inconsistent with law and which with law and which the
the incorporators may deem incorporators may deem
necessary and convenient. necessary and convenient.
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Section
The Securities and Exchange Commission shall An arbitration agreement may be
not accept the articles of incorporation of any provided in the articles of
stock corporation unless accompanied by a incorporation pursuant to Section 181
sworn statement of the Treasurer elected by
the subscribers showing that at least of this Code.
twentyfive (25%) percent of the authorized
capital stock of the corporation has been
subscribed, and at least twenty‐five (25%) of The articles of incorporation and
the total subscription has been fully paid to applications for amendments thereto
him in actual cash and/or in property the fair
valuation of which is equal to at least twenty‐ may be filed with the Commission in
five (25%) percent of the said subscription, the form of an electronic document, in
such paid‐up capital being not less than five accordance with the Commission’s
thousand (P5,000.00) pesos. rules and regulations on electronic
filing.
Section 14 (13)
• Consistent with the revision under Section 10 which removed the minimum
and retained the maximum number of incorporators i.e., not less than 5
but not more than 15, Section 13(f) made a distinction as to the number of
directors (for stock corporations) or trustees (for nonstock corporations). It
now indicates that the AOI shall contain the number of directors which
shall not be more than fifteen (15) or the number of trustees which may be
more than fifteen (15). The Old Code provides that the number of directors
or trustees shall not be less than 5 nor more than 15 which seem to be in
conflict with the provision under Sec. 92 which indicates that the board of
trustees may be more than 15 in number.
• This means that stock corporations shall not have more than 15 directors
whereas non‐stock corporations may have more than 15 trustees.
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Section 14 (13)
• Consistent with the removal of the minimum amount of capital to be
subscribed and paid for purposes of incorporation, the last paragraph
of the Old Code stating that the SEC “shall not accept the AOI of any
stock corporation unless accompanied by a sworn statement of the
Treasurer elected by the subscribers showing that at least twenty‐five
(25%) percent of the authorized capital stock of the corporation has
been subscribed, and at least twenty‐five (25%) of the total
subscription has been fully paid to him in actual cash and/or in
property the fair valuation of which is equal to at least twenty‐five
(25%) percent of the said subscription, such paid‐up capital being not
less than five thousand (P5,000.00) pesos” was also deleted in the
Revised Code.
Section 14 (13)
• The Revised Code introduced a new paragraph which allows including
in the AOI an arbitration agreement pursuant to Section 181:
Arbitration for Corporations of the Revised Code.
• It also added that “the articles of incorporation and applications for
amendments 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.”
• This means that the Revised Code now allows the articles of
incorporation and amendments thereto to be electronically filed.
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Section 15 (14)
Section 15. Forms of Articles of SEC. 14. Form of Articles of
Incorporation. – Unless otherwise Incorporation. – Unless otherwise
prescribed by special law, articles prescribed by special law, the
of incorporation of all domestic articles of incorporation of all
corporations shall comply domestic corporations shall
substantially with the following comply substantially with the
form: following form:
ARTICLES OF INCORPORATION OF Articles of Incorporation of
__________________________ __________________________
(Name of Corporation) (Name of Corporation)
Section 15 (14)
KNOW ALL MEN BY THESE PRESENTS: The undersigned incorporators, all of
The undersigned incorporators, all of
legal age and a majority of whom are legal age, have voluntarily agreed to
residents of the Philippines, have this form a (stock) (nonstock) corporation
day voluntarily agreed to form a (stock) under the laws of the Republic of the
(non‐stock) corporation under the laws
of the Republic of the Philippines; Philippines and certify the following:
AND WE HEREBY CERTIFY: First: That the name of said
FIRST: That the name of said corporation shall be
corporation shall be “_______________, Inc.,
"_____________________, INC. or
CORPORATION"; Corporation or OPC”;
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Section 15 (14)
SECOND: That the purpose or Second: That the purpose or
purposes for which such purposes for which such
corporation is incorporated are: (If corporation is incorporated are:
there is more than one purpose, (If there is more than one
indicate primary and secondary purpose, indicate primary and
purposes); secondary purposes);
Section 15 (14)
THIRD: That the principal office of Third: That the principal office of the
the corporation is located in the corporation is located in the
City/Municipality of City/Municipality of
________________________, ______________________, Province
Province of of _______________________,
_______________________, Philippines;
Philippines; Fourth: That the corporation shall
FOURTH: That the term for which have perpetual existence or a term
said corporation is to exist is of ______________ years from the
_____________ years from and after date of issuance of the certificate of
the date of issuance of the incorporation;
certificate of incorporation;
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Section 15 (14)
FIFTH: That the names, Fifth: That the names,
nationalities and residences of the nationalities, and residence
incorporators of the corporation addresses of the incorporators of
are as follows: the corporation are as follows:
Name Nationality Residence Name Nationality Residence
________ _________ _________ _________ _________ _________
_________ _________ _________ _________ _________ _________
_________ _________ _________ _________ ________ _________
_________ _________ _________ _________ _________ _________
_________ _________ _________ _________ _________ _________
Section 15 (14)
SIXTH: That the number of directors Sixth: That the number of directors or
or trustees of the corporation shall trustees of the corporation shall be
be _______; and the names, _________________; and the names,
nationalities and residences of the nationalities, and residence addresses
first directors or trustees of the of the first directors or trustees of the
corporation are as follows: corporation are as follows:
Name Nationality Residence Name Nationality Residence
_________ _________ _________ _________ _________ _________
_________ _________ _________ _________ _________ _________
_________ _________ _________ _________ _________ _________
_________ _________ _________ _________ _________ _________
_________ _________ _________ _________ _________ ________
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Section 15 (14)
SEVENTH: That the authorized capital stock of the Seventh: That the authorized capital stock of the
corporation is ______________________ corporation is ______________ PESOS (P________),
(P___________) PESOS in lawful money of the divided into _____ shares with the par value of
Philippines, divided into __________ shares with the ____________ PESOS (P_______________) per
par value of ____________________ share. (In case all the shares are without par value)
(P_____________) Pesos per share. (In case all the
share are without par value) : That the capital stock of the corporation is
__________________________ shares without par
: That the capital stock of the corporation is value. (In case some shares have par value and some
______________ shares without par value. (In case are without par value)
some shares have par value and some are without
par value) : That the capital stock of said corporation consists of
__________________________ shares, of which
: That the capital stock of said corporation consists of _______________________ shares have a par value
_____________ shares of which ______________ of _________________ PESOS (P____________)
shares are of the par value of _________________ each, and of which _______________________
(P____________) PESOS each, and of which shares are without par value.
_________________ shares are without par value.
Section 15 (14)
EIGHTH: That at least twenty five Eighth: That the number of
(25%) per cent of the authorized shares of the authorized capital
capital stock above stated has stock above stated has been
been subscribed as follows: subscribed as follows:
Name of Nationality No. of Amount Amount Name of Nationality No. of Amount Amount
Subscriber Shares Subscribed Paid Subscriber Shares Subscribed Paid
Subscribed
Subscribed
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Section 15 (14)
(Modify No. 8 if shares are with no
par value. In case the corporation is
nonstock, Nos. 7 and 8 of the above
articles may be modified
accordingly, and it is sufficient if the
articles state the amount of capital
or money contributed or donated
by specified persons, stating the
names, nationalities, and residence
addresses of the contributors or
donors and the respective amount
given by each.)
Section 15 (14)
NINTH: That the above‐named subscribers have paid
at least twenty‐five (25%) percent of the total
subscription as follows:
Name of Subscriber Amount Subscribed Total Paid‐In
______________ ______________ __________
_____________ ____________ __________
(Modify Nos. 8 and 9 if shares are with no par value.

In case the corporation is non‐stock, Nos. 7, 8 and 9
of the above articles may be modified accordingly,
and it is sufficient if the articles state the amount of
capital or money contributed or donated by
specified persons, stating the names, nationalities
and residences of the contributors or donors and
the respective amount given by each.)
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Section 15 (14)
TENTH: That _____________________ Ninth: That _____________________ has
has been elected by the subscribers as been elected by the subscribers as
Treasurer of the Corporation to act as such
Treasurer of the Corporation to act as until after the successor is duly elected and
such until his successor is duly elected qualified in accordance with the bylaws,
and qualified in accordance with the by‐ that as Treasurer, authority has been given
laws, and that as such Treasurer, he has to receive in the name and for the benefit
of the corporation, all subscriptions,
been authorized to receive for and in contributions or donations paid or given by
the name and for the benefit of the the subscribers or members, who certifies
corporation, all subscription (or fees) or the information set forth in the seventh
contributions or donations paid or given and eighth clauses above, and that the
paid‐up portion of the subscription in cash
by the subscribers or members. and/or property for the benefit and credit
of the corporation has been duly received.
Section 15 (14)
Tenth: That the incorporators
undertake to change the name of the
corporation immediately upon receipt
of notice from the Commission that
another corporation, partnership or
person has acquired a prior right to the
use of such name, that the name has
been declared not distinguishable from
a name already registered or reserved
for the use of another corporation, or
that it is contrary to law, public morals,
good customs or public policy.
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Section 15 (14)
ELEVENTH: (Corporations which will engage Eleventh: (Corporations which will
in any business or activity reserved for engage in any business or activity
Filipino citizens shall provide the following) reserved for Filipino citizens shall
: "No transfer of stock or interest which provide the following)
shall reduce the ownership of Filipino : “No transfer of stock or interest which
citizens to less than the required shall reduce the ownership of Filipino
percentage of the capital stock as provided
by existing laws shall be allowed or citizens to less than the required
permitted to be recorded in the proper percentage of capital stock as provided
books of the corporation and this by existing laws shall be allowed or
restriction shall be indicated in all stock permitted to be recorded in the proper
certificates issued by the corporation." books of the corporation, and this
restriction shall be indicated in all stock
certificates issued by the corporation.”
Section 15 (14)
IN WITNESS WHEREOF, we have hereunto signed IN WITNESS WHEREOF, we have hereunto
these Articles of Incorporation, this __________ day signed these Articles of Incorporation, this
of ________________, 19 ______ in the ................... day of .............................., 20...........
City/Municipality of ____________________, in the City/Municipality of
Province of ________________________, Republic ........................................, Province of
of the Philippines.
................................................., Republic of the
___________________ ___________________ Philippines.
___________________ ___________________ _______________________________________
_______________________ _________ ___________________ _______________
(Names and signatures of the incorporators) __________________ _________________
(Names and signatures of the incorporators)
SIGNED IN THE PRESENCE OF:
___________________ ___________________
(Name and signature of Treasurer)
(Notarial Acknowledgment)
__________________________
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Section 15 (14)
TREASURER’S AFFIDAVIT
REPUBLIC OF THE PHILIPPINES)
CITY/MUNICIPALITY OF ) S.S. PROVINCE OF )
I, ____________________, being duly sworn, depose and say:
That I have been elected by the subscribers of the corporation
as Treasurer thereof, to act as such until my successor has
been duly elected and qualified in accordance with the by‐laws
of the corporation, and that as such Treasurer, I hereby certify
under oath 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 paid, and received by me, in cash
or property, in the amount of not less than P5,000.00, in
accordance with the Corporation Code.
____________________
(Signature of Treasurer)
Section 15 (14)
SUBSCRIBED AND SWORN to before me, a Notary
Public, for and in the City/Municipality
of________________Province of
_____________________, this _______ day of
___________, 19 _____; by __________________
with Res. Cert. No. ___________ issued at
_______________________ on ____________, 19
______
NOTARY PUBLIC
My commission expires on _________, 19 _____
Doc. No. _________;
Page No. _________;
Book No. ________;
Series of 19____ (7a)
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Section 15 (14)
• The 9th clause of Section 14 under the Revised Code (10th under the Old Code) added the
requirement that the elected Treasurer or acting Treasurer certifies the information set
forth in the 7th (authorized capital stock of the corporation) and 8th (subscribers,
nationality, number of shares subscribed and amount paid by each), and that the paid‐
up portion of the subscription in cash and/or property for the benefit and credit of the
corporation has been duly received.
• A new clause was added wherein the incorporators undertake to change the name of the
corporation immediately upon
1. receipt of notice from the Commission that another corporation, partnership or person
has acquired a prior right to the use of such name,
2. that the name has been declared not distinguishable from a name already registered or
reserved for the use of another corporation, or
3. that it is contrary to law, public morals, good customs or public policy.
• The AOI under the Revised Code has a portion for name and signature of the Treasurer
but there is neither a notarial acknowledgment nor a treasurer’s affidavit.
Section 16 (15)
Section 16. Amendment of Articles of SEC. 15. Amendment of Articles of
Incorporation. – Unless otherwise prescribed by Incorporation. – Unless otherwise prescribed by
this Code or by special law, and for legitimate this Code or by special law, and for legitimate
purposes, any provision or matter stated in the purposes, any provision or matter stated in the
articles of incorporation may be amended by a articles of incorporation may be amended by a
majority vote of the board of directors or majority vote of the board of directors or
trustees and the vote or written assent of the trustees and the vote or written assent of the
stockholders representing at least two‐thirds stockholders representing at least two‐thirds
(2/3) of the outstanding capital stock, without (2/3) of the outstanding capital stock, without
prejudice to the appraisal right of dissenting prejudice to the appraisal right of dissenting
stockholders in accordance with the provisions stockholders in accordance with the provisions
of this Code, or the vote or written assent of at of this Code. The articles of incorporation of a
least two thirds (2/3) of the members if it be a nonstock corporation may be amended by the
nonstock corporation. vote or written assent of majority of the
trustees and at least two‐thirds (2/3) of the
members.
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Section 16 (15)
The original and amended articles together The original and amended articles
shall contain all provisions required by law together shall contain all provisions
to be set out in the articles of required by law to be set out in the
incorporation. Such articles, as amended articles of incorporation. Amendments
shall be indicated by underscoring the to the articles shall be indicated by
change or changes made, and a copy underscoring the change or changes
thereof duly certified under oath by the
corporate secretary and a majority of the made, and a copy thereof duly certified
directors or trustees stating the fact that under oath by the corporate secretary
said amendment or amendments have and a majority of the directors or
been duly approved by the required vote of trustees, with a statement that the
the stockholders or members, shall be amendments have been duly approved
submitted to the Securities and Exchange by the required vote of the stockholders
Commission. or members, shall be submitted to the
Commission.
Section 16 (15)
The amendments shall take effect The amendments shall take effect
upon their approval by the upon their approval by the
Securities and Exchange Commission or from the date of
Commission or from the date of filing with the said Commission if
filing with the said Commission if not acted upon within six (6)
not acted upon within six (6) months from the date of filing for
months from the date of filing for a cause not attributable to the
a cause not attributable to the corporation.
corporation.
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Section 16 (15)
• The steps to be followed for an effective amendment of the articles of
incorporation would thus be:
1. Resolution by at least majority of the board of directors or trustees.
2. Vote or written assent of the stockholders representing at least 2/3 of the
outstanding capital stock or 2/3 of the members in case of non‐stock corporation.
3. Submission and filing of the amendments with the SEC as follows:
a. The original and amended articles together shall contain all the provisions
required by law to be set out in the AOI. Such articles, as amended, shall be indicated,
by underscoring the change or changes made.
b. A copy thereof, duly certified under oath by the corporate secretary and a
majority of the directors or trustees stating the fact that such amendments have been
duly approved by the required vote of the stockholders or members.
c. Favorable recommendation of the appropriate government agency concerned in
the case where the corporation is under its supervision such as banking and insurance
companies, etc.
Section 16 (15)
• Section 15 of Revised Code provides for the general requirements and procedure for ordinary
amendment(s) of the articles of incorporation such as change of name, purpose(s) and/or
principal office.
• There are, however, special provisions of the Revised Code governing special amendments such
as increase or decrease in capital stock or incur, create or increase bonded indebtedness (Section
37) and shortening or extending the corporate term (Section 36).
• Explicit from the provisions of Sec. 15 is that unless otherwise provided by the Code or by special
law, any provision or matter stated in the AOI is/are subject to amendment. This is not, however,
all encompassing because those matters which are fait accompli (irreversible) are beyond the
powers or authority of the corporation to change, alter, or modify.
• Among those that cannot be amended would include: the names of the incorporators and the
incorporating directors or trustees, the name of the treasurer originally or first elected by the
subscribers or members to act as such until his successor has been duly elected and qualified, the
number of shares and amount originally subscribed and paid out of the original authorized capital
stock of the corporation, the date and place of execution of the AOI, the signatories and
acknowledgement thereof.
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Section 17 (16)
Section 17. Grounds when articles of SEC. 16. Grounds When Articles of
incorporation or amendment may be Incorporation or Amendment may be
rejected or disapproved. – The Securities Disapproved. – The Commission may
and Exchange Commission may reject the disapprove the articles of incorporation or
articles of incorporation or disapprove any any amendment thereto if the same is not
amendment thereto if the same is not in compliant with the requirements of this
compliance with the requirements of this Code: Provided, That the Commission shall
Code: Provided, That the Commission shall give the incorporators, directors, trustees,
give the incorporators a reasonable time or officers a reasonable time from receipt
within which to correct or modify the of the disapproval within which to modify
objectionable portions of the articles or the objectionable portions of the articles or
amendment. The following are grounds for amendment. The following are grounds for
such rejection or disapproval: such disapproval:
D1
D2
Section 17 (16)
1. That the articles of incorporation or any (a)The articles of incorporation or any
amendment thereto is not substantially in amendment thereto is not substantially in
accordance with the form prescribed herein; accordance with the form prescribed herein2;
2. That the purpose or purposes of the (b)The purpose or purposes of the corporation
corporation are patently unconstitutional, are patently unconstitutional, illegal, immoral or
illegal, immoral, or contrary to government contrary to government rules and regulations;
rules and regulations;
(c)The certification concerning the amount of
3. That the Treasurer’s Affidavit concerning the capital stock subscribed and/or paid is false; and
amount of capital stock subscribed and/or paid (d)The required percentage of Filipino
is false; ownership of the capital stock under existing
4. That the percentage of ownership of the laws or the Constitution has not been complied
capital stock to be owned by citizens of the with.
Philippines has not been complied with as
required by existing laws or the Constitution.
2 See Sec. 14: Form of Articles of Incorporation
37
Slide 74
D1 DM, 11/14/2020
D2 DM, 11/14/2020
2/20/2021
Section 17 (16)
No articles of incorporation or amendment No articles of incorporation or
to articles of incorporation of banks, amendment to articles of incorporation
banking and quasi‐banking institutions,
building and loan associations, trust of banks, banking and quasi‐banking
companies and other financial institutions, preneed, insurance and
intermediaries, insurance companies, trust companies, NSSLAS3, pawnshops,
public utilities, educational institutions, and other financial intermediaries shall
and other corporations governed by
special laws shall be accepted or approved be approved by the Commission unless
by the Commission unless accompanied by accompanied by a favorable
a favorable recommendation of the recommendation of the appropriate
appropriate government agency to the government agency to the effect that
effect that such articles or amendment is in
accordance with law. (n) such articles or amendment is in
accordance with law.
3 Non‐Stock Savings and Loan Associations
Section 17 (16)
• In line with Section 11 of the Revised Code which requires banks,
banking and quasi‐banking institutions and the likes to obtain a
favorable recommendation from the appropriate government agency
when filing an application for revival of its certificate of incorporation,
the last paragraph of Section 16 of the Revised Code also reiterated
the need for banks, banking and quasi‐banking institutions, preneed,
insurance and trust companies, NSSLAS, pawnshops, and other
financial intermediaries to secure a favorable recommendation from
the appropriate government agency to the effect that such articles or
amendment is in accordance with law before their articles of
incorporation or amendment thereto can be approved by the
Commission.
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Section 17 (16)
• The purpose clause in the AOI indicates what acts the corporation
may or may not legally do. A corporation may only be formed for a
legitimate business concern or any purpose not contrary to law,
morals, public policy or good customs. Therefore, an illegal purpose
may not be included in the purpose clause.
• The SEC shall give the incorporators a reasonable time within which
to correct or modify the objectionable portions of the articles or the
proposed amendment/s. The amendment shall take effect either: 1)
upon its approval by the SEC; or 2) from the date of filing with the SEC
if the amendments submitted are not acted upon within 6 months
from the date of filing for reasons not attributable to the corporation.
Section 18 (17)
Section 18. Corporate name. – No SEC. 17. Corporate Name. – No
corporate name may be allowed by the corporate name shall be allowed
Securities and Exchange Commission if
the proposed name is identical or by the Commission if it is not
deceptively or confusingly similar to distinguishable from that already
that of any existing corporation or to reserved or registered for the use
any other name already protected by
law or is patently deceptive, confusing of another corporation, or if such
or contrary to existing laws. When a name is already protected by law,
change in the corporate name is or when its use is contrary to
approved, the Commission shall issue
an amended certificate of existing law, rules and
incorporation under the amended regulations.
name. (n)
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Section 18 (17)
A name is not distinguishable even if it
contains one or more of the following:
(a) The word “corporation”, “company”,
“incorporated”, “limited”, “limited
liability”, or an abbreviation of one of
such words; and
(b) Punctuations, articles, conjunctions,
contractions, prepositions,
abbreviations, different tenses,
spacing, or number of the same word
or phrase.
Section 18 (17)
The Commission, upon determination that the
corporate name is: (1) not distinguishable from
a name already reserved or registered for the
use of another corporation; (2) already
protected by law; or (3) contrary to law, rules
and regulations, may summarily order the
corporation to immediately cease and desist
from using such name and require the
corporation to register a new one. The
Commission shall also cause the removal of all
visible signages, marks, advertisements, labels,
prints and other effects bearing such corporate
name. Upon the approval of the new corporate
name, the Commission shall issue a certificate
of incorporation under the amended name.
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Section 18 (17)
If the corporation fails to comply
with the Commission’s order, the
Commission may hold the
corporation and its responsible
directors or officers in contempt
and/or hold them administratively,
civilly and/or criminally liable under
this Code and other applicable laws
and/or revoke the registration of
the corporation.
Section 18 (17)
• The Revised Code made significant changes to the Old Code in terms of corporate
name such that it will not allow the use of a corporate name that is:
a) not distinguishable from that already reserved or registered for the use of
another corporation, or
b) the name is already protected by law, or
c) when its use is contrary to existing law, rules and regulations.
• If the Commission determined that the corporate name have met any of
the 3 grounds abovementioned, it may summarily order the corporation
to immediately cease and desist from using such name and require the
corporation to register a new one.
• The Commission shall also cause the removal of all visible signages,
marks, advertisements, labels, prints and other effects bearing such
corporate name.
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Section 18 (17)
• It may be recalled under Section 14 of the Revised Code that a new
clause was added wherein the incorporators undertake to change the
name of the corporation immediately upon receipt of notice from the
Commission that:
a) another corporation, partnership or person has acquired a
prior right to the use of such name,
b) that the name has been declared not distinguishable from a
name already registered or reserved for the use of another
corporation, or
c) that it is contrary to law, public morals, good customs or public
policy.
Section 18 (17)
• The same section also provides that a name is not considered distinguishable
even if it contains one or more of the following:
(a) The word “corporation”, “company”, “incorporated”, “limited”, “limited
liability”, or an abbreviation of one of such words; and
(b) Punctuations, articles, conjunctions, contractions, prepositions,
abbreviations, different tenses, spacing, or number of the same word or phrase.
• Under the Old Code, when a change in the corporate name is approved, the
Commission shall issue an amended certificate of incorporation under the
amended name. Whereas, under the Revised Code, upon the approval of the
new corporate name, the Commission shall issue a certificate of incorporation
under the amended name.
• Should a corporation wish to change its corporate name,it can do so by amending
its AOI and following the requirements for a valid amendment (Sec. 15)
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Section 18 (17)
• The Revised Code further provides that failure of a corporation to
comply with the Commission’s order to cease and desist from using a
corporate name, the Commission may:
a) hold the corporation and its responsible directors or officers in
contempt and/or
b) hold them administratively, civilly and/or criminally liable
under this Code and other applicable laws and/or
c) revoke the registration of the corporation.
Section 18 (17)
• Doctrine of secondary meaning (Lyceum of the Philippines Inc vs
Court of Appeals)
‐a word or phrase originally incapable of exclusive appropriation [usually
generic] with reference to an article in
• Philips Export BV vs CA: In determining the existence of confusing
similarity in corporate names, the test is whether the similarity is such
as to mislead a person using ordinary care and administration.
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Section 19 (18)
Section 19. Commencement of corporate SEC. 18. Registration, Incorporation and
existence. – A private corporation formed or Commencement of Corporate Existence. –
organized under this Code commences to have A person or group of persons desiring to
corporate existence and juridical personality incorporate shall submit the intended
and is deemed incorporated from the date the corporate name to the Commission for
Securities and Exchange Commission issues a verification. If the Commission finds that
certificate of incorporation under its official
seal; and thereupon the incorporators, the name is distinguishable from a name
stockholders/members and their successors already reserved or registered for the use
shall constitute a body politic and corporate of another corporation, not protected by
under the name stated in the articles of law and not contrary to law, rules and
incorporation for the period of time mentioned regulations, the name shall be reserved in
therein, unless said period is extended or the favor of the incorporators. The
corporation is sooner dissolved in accordance incorporators shall then submit their
with law. (n) articles of incorporation and bylaws to the
Commission.
Section 19 (18)
If the Commission finds that the submitted
documents and information are fully compliant with
the requirements of this Code, other relevant laws,
rules and regulations, the Commission shall issue the
certificate of incorporation.
A private corporation organized under this Code
commences its corporate existence and juridical
personality from the date the Commission issues the
certificate of incorporation under its official seal and
thereupon the incorporators, stockholders/members
and their successors shall constitute a body
corporate under the name stated in the articles of
incorporation for the period of time mentioned
therein, unless said period is extended or the
corporation is sooner dissolved in accordance with
law.
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Section 19 (18)
• This Section under the Revised Code added the requirement that a
person or group of persons desiring to incorporate shall first submit
the intended corporate name to the Commission for verification. If
the name is allowed (see Sec. 17), such name shall be reserved in
favor of the incorporators who shall then submit their articles and
bylaws to the Commission.
• If the Commission finds that the submitted documents and
information are fully compliant with the requirements of the Revised
Code, other relevant laws, rules and regulations, the Commission
shall issue the certificate of incorporation.
Section 19 (18)
• NOTE: A private corporation commences its corporate existence and
juridical personality from the date the Commission issues the
certificate of incorporation under its official seal.
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Section 20 (19)
Section 20. De facto corporations. – SEC. 19. De facto Corporations. – The
The due incorporation of any due incorporation of any corporation
corporation claiming in good faith to claiming in good faith to be a
be a corporation under this Code, corporation under this Code, and its
and its right to exercise corporate right to exercise corporate powers,
powers, shall not be inquired into shall not be inquired into collaterally
collaterally in any private suit to in any private suit to which such
which such corporation may be a corporation may be a party. Such
party. Such inquiry may be made by inquiry may be made by the Solicitor
the Solicitor General in a quo General in a quo warranto
warranto proceeding. (n) proceeding.
Section 21 (20)
Section 21. Corporation by estoppel. – All SEC. 20. Corporation by Estoppel. – All persons
persons who assume to act as a corporation who assume to act as a corporation knowing it
knowing it to be without authority to do so shall to be without authority to do so shall be liable
be liable as general partners for all debts, as general partners for all debts, liabilities and
liabilities and damages incurred or arising as a damages incurred or arising as a result thereof:
result thereof: Provided, however, That when Provided, however, That when any such
any such ostensible corporation is sued on any ostensible corporation is sued on any
transaction entered by it as a corporation or on transaction entered by it as a corporation or on
any tort committed by it as such, it shall not be any tort committed by it as such, it shall not be
allowed to use as a defense its lack of corporate allowed to use its lack of corporate personality
personality. On who assumes an obligation to as a defense. Anyone who assumes an
an ostensible corporation as such, cannot resist obligation to an ostensible corporation as such
performance thereof on the ground that there cannot resist performance thereof on the
was in fact no corporation. (n) ground that there was in fact no corporation.
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Section 21 (20)
DE JURE CORPORATIONS DE FACTO CORPORATIONS CORPORATION BY ESTOPPEL
Juridical entities created or organized in Those entities which exist by the virtue of an Those entities which are so
strict or substantial compliance with the irregularity or defect in the organization or defectively formed as not to be
statutory requirements of incorporation. In constitution or from some omission to comply either de jure or de facto
effect, incorporated by strict adherence to with the conditions precedent by which corporations but which are
the provisions of the law of their creation. corporations de jure are created, but there was a considered as corporations in
colorable compliance with the requirements of relation only to those who cannot
the law under which they might be lawfully deny their corporate existence due
incorporated for the purposes and powers to their agreement, admission, or
assumed and user of the rights claimed to be conduct.
conferred by law
Rights to exist cannot be successfully Existence can only be attacked by a direct action when any such ostensible
attacked even by the State in a quo of quo warranto made by the Solicitor General corporation is sued on any
warranto proceeding transaction entered by it or on any
tort committed, it shall not be
allowed to use its lack of corporate
personality as a defense. Anyone
who assumes an obligation to an
ostensible corporation as such
cannot resist performance thereof
on the ground that there was in fact
no corporation.
Section 22 (21)
Section 22. Effects on non‐use of corporate SEC. 21. Effects of Non‐Use of Corporate
charter and continuous inoperation of a Charter and Continuous Inoperation. – If a
corporation. – If a corporation does not corporation does not formally organize and
formally organize and commence the commence its business within five (5) years
transaction of its business or the construction from the date of its incorporation, its
of its works within two (2) years from the date certificate of incorporation shall be
of its incorporation, its corporate powers cease
and the corporation shall be deemed deemed revoked as of the day following
dissolved. However, if a corporation has the end of the five‐year period.
commenced the transaction of its business but However, if a corporation has commenced
subsequently becomes continuously inoperative its business but subsequently becomes
for a period of at least five (5) years, the same
shall be a ground for the suspension or inoperative for a period of at least five (5)
revocation of its corporate franchise or consecutive years, the Commission may,
certificate of incorporation. (19a) after due notice and hearing, place the
corporation under delinquent status.
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Section 22 (21)
This provision shall not apply if A delinquent corporation shall have a
period of two (2) years to resume
the failure to organize, commence operations and comply with all
the transaction of its businesses requirements that the Commission
shall prescribe. Upon compliance by
or the construction of its works, the corporation, the Commission shall
or to continuously operate is due issue an order lifting the delinquent
status. Failure to comply with the
to causes beyond the control of requirements and resume operations
the corporation as may be within the period given by the
Commission shall cause the revocation
determined by the Securities and of the corporation’s certificate of
Exchange Commission. incorporation.
Section 22 (21)
The Commission shall give
reasonable notice to, and
coordinate with the appropriate
regulatory agency prior to the
suspension or revocation of the
certificate of incorporation of
companies under their special
regulatory jurisdiction.
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Section 22 (21)
• Under the Old Code, failure of a corporation to formally organize and commence
business within 2 years from the date of incorporation, it shall be deemed dissolved. The
Revised Code lengthened the period from 2 years to 5 years and provided that the failure
to organize and commence business within 5 years from date of incorporation is a
ground for automatic revocation of its certificate of incorporation as of the day following
the end of the 5‐day period.
• In addition, the inoperation of a corporation for 5 consecutive years after commencing
business is no longer a ground for suspension or revocation of the corporate franchise or
certificate of incorporation as mandated by the Old Code. Instead, the legal consequence
of such inoperation is the possibility of SEC placing the corporation under delinquent
status (after due notice and hearing).
• Failure of the delinquent corporation to resume operations within 2 years and comply
with all the SEC’s requirements will lead to revocation of the corporation’s certificate of
incorporation. The Commission shall give reasonable notice to, and coordinate with the
appropriate regulatory agency prior to the suspension or revocation of the certificate of
incorporation of companies under their special regulatory jurisdiction.
Section 22 (21)
• The provision under the Old Code that the certificate of incorporation will not be
suspended or revoked if a corporation fails to commence business within 2 years
from date of incorporation provided that the “failure to organize, commence the
transaction of its businesses or the construction of its works, or to continuously
operate is due to causes beyond the control of the corporation as may be
determined by the Securities and Exchange Commission.” was removed under the
Revised Code. However, the possibility of invoking fortuitous event and other
situations beyond the corporation’s control as a reason for its inoperation for 5
years exists since the SEC is mandated by the Revised Code to conduct a hearing
before placing the corporation under delinquent status.
• Thus, it is suggested that, the hearing may lead to at least 2 possible results: 1)
non‐declaration of the corporation as delinquent or 2) declaration of the
corporation as delinquent but allowing it to resume operations within a certain
period that may be shorter or longer than 2 years, but not the revocation of its
registration.
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Section 22 (21)
• The provision under the Old Code that the certificate of
incorporation will not be suspended or revoked if a corporation fails
to commence business within 2 years from date of incorporation
provided that the “failure to organize, commence the transaction of
its businesses or the construction of its works, or to continuously
operate is due to causes beyond the control of the corporation as may
be determined by the Securities and Exchange Commission.” was
removed under the Revised Code. However, the possibility of invoking
fortuitous event and other situations beyond the corporation’s
control as a reason for its inoperation for 5 years exists since the SEC
is mandated by the Revised Code to conduct a hearing before placing
the corporation under delinquent status.
TITLE III
BOARD OF DIRECTORS/TRUSTEES AND OFFICERS
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Section
Section 23. The board of directors or SEC. 22. The Board of Directors or
trustees. – Unless otherwise provided in
this Code, the corporate powers of all Trustees of a Corporation;
corporations formed under this Code Qualification and Term. – Unless
shall be exercised, all business
conducted and all property of such otherwise provided in this Code,
corporations controlled and held by the the board of directors or trustees
board of directors or trustees to be
elected from among the holders of shall exercise the corporate
stocks, or where there is no stock, from powers, conduct all business, and
among the members of the corporation,
who shall hold office for one (1) year control all properties of the
until their successors are elected and corporation.
qualified. (28a)
Section 23 (22)
Every director must own at least one (1) Directors shall be elected for a term of
share of the capital stock of the corporation one (1) year from among the holders of
of which he is a director, which share shall stocks registered in the corporation’s
stand in his name on the books of the books, while trustees shall be elected
corporation. Any director who ceases to be for a term not exceeding three (3)
the owner of at least one (1) share of the years from among the members of the
capital stock of the corporation of which he
is a director shall thereby cease to be a corporation. Each director and trustee
director. Trustees of non‐stock corporations shall hold office until the successor is
must be members thereof. A majority of elected and qualified. A director who
the directors or trustees of all corporations ceases to own at least one (1) share of
organized under this Code must be stock or a trustee who ceases to be a
residents of the Philippines. member of the corporation shall cease
to be such.
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Section 23 (22)
The board of the following corporations
vested with public interest shall have
independent directors constituting at least
twenty percent (20%) of such board:
a. Corporations covered by Section 17.2 of
Republic Act No. 8799, otherwise known as
“The Securities Regulation Code”, namely
those whose securities are registered with
the Commission, corporations listed with an
exchange or with assets of at least Fifty
million pesos (P50,000,000.00) and having
two hundred (200) or more holders of
shares, each holding at least one hundred
(100) shares of a class of its equity shares;
Section 23 (22)
b. Banks and quasi‐banks, NSSLAs, pawnshops,
corporations engaged in money service
business, pre‐need, trust and insurance
companies, and other financial intermediaries;
and
c. Other corporations engaged in business
vested with public interest similar to the above,
as may be determined by the Commission, after
taking into account relevant factors which are
germane to the objective and purpose of
requiring the election of an independent
director, such as the extent of minority
ownership, type of financial products or
securities issued or offered to investors, public
interest involved in the nature of business
operations, and other analogous factors.
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Section 23 (22)
An independent director is a person
who, apart from shareholdings and
fees received from the corporation,
is independent of management and
free from any business or other
relationship which could, or could
reasonably be perceived to
materially interfere with the exercise
of independent judgment in carrying
out the responsibilities as a director.
Section 23 (22)
Independent directors must be elected
by the shareholders present or entitled
to vote in absentia during the election
of directors. Independent directors shall
be subject to rules and regulations
governing their qualifications,
disqualifications, voting requirements,
duration of term and term limit,
maximum number of board
memberships and other requirements
that the Commission will prescribe to
strengthen their independence and
align with international best practices.
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Section 23 (22)
• Unlike the Old Code, the Revised Code does not require that majority
of the directors or trustees be residents of the Philippines.
• Nonetheless, a director must be a natural person of legal age and
must be a stockholder of record, owning at least one share in his own
name. If the director ceases to be an owner of a share of stock in the
corporation, he shall be disqualified as a director. The articles of
incorporation or bylaws cannot be amended to allow a non‐
stockholder to become director in the board4.
• Both the Old Code and the Revised Code expressly empower the
corporation to provide in its bylaws other qualifications (and
disqualifications) of its directors.
4 SEC Opinion dated 21 September 1984
Section 23 (22)
• To be consistent with Section 91 (Sec. 92 under the Old Code), another
change is the term of office of directors or trustees wherein the Revised
Code made a distinction. Under the Old Code, directors or trustees shall
hold office for 1 year until their successors are elected and qualified. In the
Revised Code, however, directors shall be elected for a term of 1 year while
trustees shall be elected for a term not exceeding 3 years. This is more
consistent with Sec. 92 which provides that trustees so elected shall hold
office for not more than 3 years until their successors are elected and
qualified.
• In any case, however, each director and trustee shall hold office until the
successor is elected and qualified. This means that if no election is
conducted or no qualified candidate is elected, the incumbent director or
trustee shall continue to act as such in a hold‐over capacity until an
election is held and a qualified candidate is so elected.
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Section 23 (22)
• Term: time during which the officer may claim to hold office as a matter of
right, and fixes the interval after which the several incumbent shall succeed
as one another. The term of office is not affected by the holdover. The term
is fixed by statute and it does not change simply because the office may
have become vacant, nor the incumbent holdover in office beyond the end
of the term due to the fact that a successor has not been elected and/or
has failed to qualify.
• Tenure: may be a shorter or longer duration e.g., resignation before the
term expire or acts as such in a holdover capacity (Detective and Protective
Bureau vs Cloribel, 1968).
• The holdover period is not part of the term of office but constitutes part of
tenure.
Section 23 (22)
• A significant change introduced in this Section is the requirement for the board of
corporations vested with public interest to have independent directors
constituting at least 20% of such board.
• The Revised Code also defined an independent director as “a person who, apart
from shareholdings and fees received from the corporation, is independent of
management and free from any business or other relationship which could, or
could reasonably be perceived to materially interfere with the exercise of
independent judgment in carrying out the responsibilities as a director. “
• Independent directors, nonetheless, shall also be subject to rules and regulations
governing other directors such as their qualifications, disqualifications, voting
requirements, duration of term and term limit, maximum number of board
memberships and other requirements that the Commission will prescribe to
strengthen their independence and align with international best practices
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Section 23 (22)
• Section 22 of the Revised Code also enumerates which corporations should have independent
directors:
1. Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as “The
Securities Regulation Code”, namely
a) those whose securities are registered with the Commission,
b) corporations listed with an exchange or
c) corporations with assets of at least P50,000,000.00 and having 200 or more holders of
shares, each holding at least 100 shares of a class of its equity shares;
2. Banks and quasi‐banks, NSSLAs, pawnshops, corporations engaged in money service business,
pre‐need, trust and insurance companies, and other financial intermediaries; and
c. Other corporations engaged in business vested with public interest similar to those in nos. 1 and 2
as may be determined by the Commission, after taking into account relevant factors which are
germane to the objective and purpose of requiring the election of an independent director, such as
the extent of minority ownership, type of financial products or securities issued or offered to
investors, public interest involved in the nature of business operations, and other analogous factors.
Section 24 (23)
Section 24. Election of directors or trustees. SEC. 23. Election of Directors or
– At all elections of directors or trustees,
there must be present, either in person or Trustees. – Except when the
by representative authorized to act by exclusive right is reserved for
written proxy, the owners of a majority of holders of founders’ shares under
the outstanding capital stock, or if there be
no capital stock, a majority of the members Section 7 of this Code, each
entitled to vote. The election must be by stockholder or member shall have
ballot if requested by any voting the right to nominate any director
stockholder or member. In stock
corporations, every stockholder entitled to or trustee who possesses all of the
vote shall have the right to vote in person qualifications and none of the
or by proxy the number of shares of stock disqualifications set forth in this
standing, at the time fixed in the by‐laws, in
his own name on the stock books of the Code.
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Section 24 (23)
corporation, or where the bylaws are At all elections of directors or trustees,
silent, at the time of the election; and there must be present, either in person
said stockholder may vote such number or through a representative authorized
of shares for as many persons as there to act by written proxy, the owners of
are directors to be elected or he may majority of the outstanding capital
cumulate said shares and give one stock, or if there be no capital stock, a
candidate as many votes as the number majority of the members entitled to
of directors to be elected multiplied by vote. When so authorized in the bylaws
the number of his shares shall equal, or or by a majority of the board of
he may distribute them on the same directors, the stockholders or members
principle among as many candidates as may also vote through remote
he shall see fit: Provided, That the total communication or in absentia:
Section 24 (23)
number of votes cast by him shall not A stockholder or member who
exceed the number of shares owned by him
as shown in the books of the corporation participates through remote
multiplied by the whole number of
directors to be elected: Provided, however, communication or in absentia,
That no delinquent stock shall be voted. shall be deemed present for
Unless otherwise provided in the articles of
incorporation or in the by‐laws, members purposes of quorum.
of corporations which have no capital stock
may cast as many votes as there are The election must be by ballot if
trustees to be elected but may not cast
more than one vote for one candidate. requested by any voting
Candidates receiving the highest number of stockholder or member.
votes shall be declared elected. Any
meeting of the stockholders or members
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Section 24 (23)
called for an election may adjourn In stock corporations, stockholders entitled to
vote shall have the right to vote the number of
from day to day or from time to time shares of stock standing in their own names in
the stock books of the corporation at the time
but not sine die or indefinitely if, for fixed in the bylaws or where the bylaws are
any reason, no election is held, or if silent, at the time of the election. The said
stockholder may: (a) vote such number of
there are not present or represented shares for as many persons as there are
directors to be elected; (b) cumulate said shares
by proxy, at the meeting, the owners and give one (1) candidate as many votes as the
of a majority of the outstanding number of directors to be elected multiplied by
the number of the shares owned; or (c)
capital stock, or if there be no capital distribute them on the same principle among as
many candidates as may be seen fit:
stock, a majority of the members
entitled to vote. (31a)
Section 24 (23)
Provided, That the total number of votes
cast shall not exceed the number of shares
owned by the stockholders as shown in the
books of the corporation multiplied by the
whole number of directors to be elected:
Provided, however, That no delinquent
stock shall be voted. Unless otherwise
provided in the articles of incorporation or
in the bylaws, members of nonstock
corporations may cast as many votes as
there are trustees to be elected but may
not cast more than one (1) vote for one (1)
candidate. Nominees for directors or
trustees receiving the highest number of
votes shall be declared elected.
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Section 24 (23)
If no election is held, or the owners of
majority of the outstanding capital stock or
majority of the members entitled to vote
are not present in person, by proxy, or
through remote communication or not
voting in absentia at the meeting, such
meeting may be adjourned and the
corporation shall proceed in accordance
with Section 25 of this Code.
The directors or trustees elected shall
perform their duties as prescribed by law,
rules of good corporate governance, and
by‐laws of the corporation.
Section 24 (23)
• In consonance with Sec. 7: Founder’s Shares, the Revised Code explicitly mentioned that each
stockholder or member shall have the right to nominate any director or trustee who possesses all
of the qualifications and none of the disqualifications except when the exclusive right is reserved
for holders of founder’s shares.
• The right to elect members of the board of directors/trustees is vested in the
stockholders/members of the corporation through an election. Mere designation without an
election is not legally feasible. Automatic membership in the board is not allowed.
• At the election for directors of stock corportions, stockholders representing the majority of the
outstanding capital stock must be present in person or by their duly authorized representative as
such by written proxy. In the case election of trustees of non‐stock corporations, a majority of the
members entitled to vote, in person or proxy, must be present during the election.
• Unlike the Old Code, the Revised Code explicitly added in this Section that when so authorized in
the bylaws or by a majority of the board of directors, the stockholders or members may also
vote through remote communication or in absentia. In case of corporations vested with public
interest, the right to vote though remote communication or absentia may be exercised
notwithstanding the absence of a provision in the bylaws of such corporations.
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Section 24 (23)
• The Revised Code further added that a stockholder or member who participates through
remote communication or in absentia, shall be deemed present for purposes of quorum.
• Voting may be done by acclamation (viva‐voce) or by show of hands5 unless any
stockholder or member requests that voting be done by ballot.
• Voting in the election of directors is determined on the basis of the number of shares
subscribed, which shares must form part of the outstanding capital stock6. For stock
corporations, a stockholder who has one share of stock is given a number equivalent to
the number of elective positions. If there are 5 directors to be elected, one share will
give him 5 votes. However, delinquent stocks shall not be entitled to vote.
• For non‐stock corporations, a member entitled to vote shall be given votes equivalent to
the number of trustees to be elected and may not cast more than 1 vote for 1 candidate,
unless otherwise provided in the AOI or in the bylaws. Meaning, cumulative voting is
generally not available unless allowed by the AOI or bylaws.
• Nominees for directors or trustees receiving the highest number of votes shall be
declared elected.
5 Sec Opinion dated 5 March 1992
6 Sec Opinion dated 19 March 1992
Section 24 (23)
Methods of Voting
STRAIGHT VOTING CUMULATIVE VOTING MIXED VOTING
Votes are distributed equally among Gives the stockholder entitled to vote, the right to The stockholder entitled to vote
the candidates without preference. give a candidate as many votes as the number of can distribute the votes among his
directors to be elected multiplied by the number of candidates of choice in any
his shares shall equal. manner he pleases.
Ex: If stockholder Z has 2 shares and Ex. If stockholder Z has 1,000 shares and there are Ex. If stockholder Z has 2 shares
there are 5 directors to be elected, 10 directors to be elected, he would be entitled to and there are 5 directors to be
then he has 10 votes he can equally 10,000 votes and he may cast all his 10,000 votes in elected, then he has 10 votes
give to all candidates. favor of only one candidate or may apportion his which he can give to the
vote to any number of candidate that he may wish. candidates of her choice e.g., 2
votes to candidate B and 8 votes to
candidate C.
This is a matter of right granted by law to
stockholders of stock corporations to allow the
minority to have a rightful representation in the
board of directors. This right is generally not
available to non‐stock corporations, unless allowed
by the AOI or bylaws, since each member is entitled
to only one vote for 1 candidate.
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Section 24 (23)
• If no election is held, or the owners of majority of the outstanding
capital stock (stock corporations) or majority of the members entitled
to vote (non‐stock corporations) are not present in person, by proxy,
or through remote communication or not voting in absentia at the
meeting, such meeting may be adjourned and the corporation shall
proceed in accordance with Section 25 of the Revised Code.
Section 25 (24)
Section 25. Corporate officers, quorum. – SEC. 24. Corporate Officers. – Immediately after
Immediately after their election, the their election, the directors of a corporation
directors of a corporation must formally must formally organize and elect: (a) a
organize by the election of a president, who president, who must be a director; (b) a
shall be a director, a treasurer who may or treasurer, who must be a resident; (c) a
may not be a director, a secretary who shall secretary, who must be a citizen and resident of
the Philippines; and (d) such other officers as
be a resident and citizen of the Philippines, may be provided in the bylaws. If the
and such other officers as may be provided corporation is vested with public interest, the
for in the bylaws. Any two (2) or more board shall also elect a compliance officer. The
positions may be held concurrently by the same person may hold two (2) or more
same person, except that no one shall act positions concurrently, except that no one shall
as president and secretary or as president act as president and secretary or as president
and treasurer at the same time. and treasurer at the same time, unless
otherwise allowed in this Code
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Section 25 (24)
The directors or trustees and officers to be elected
shall perform the duties enjoined on them by law The officers shall manage the
and the by‐laws of the corporation. Unless the
articles of incorporation or the by‐laws provide for a corporation and perform such
greater majority, a majority of the number of
directors or trustees as fixed in the articles of duties as may be provided in the
incorporation shall constitute a quorum for the
transaction of corporate business, and every bylaws and/or as resolved by the
decision of at least a majority of the directors or
trustees present at a meeting at which there is a board of directors.
quorum shall be valid as a corporate act, except for
the election of officers which shall require the vote
of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy
at board meetings. (33a)
Section 25 (24)
• GR: Both the Old Code and the Revised Code requires the board of
directors to elect the president, treasurer, secretary, and such other
officers as may be provided in the bylaws.
• XPN: a) close corporations where other corporate officers may be
elected directly by the stockholders and b) non‐stock corporations
where Sec. 91 provides that, “unless otherwise provided in the AOI or
bylaws, the members may directly elect officers of a non‐stock
corporation.”
• The Revised Code added in this Section that in cases of corporations
vested with public interest, the board shall also elect a compliance
officer.
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Section 25 (24)
• The Revised Code retained the requirement that the President be a
director, the prohibition on the President being either a secretary or
a treasurer at the same time, the treasurer who may or may not be a
director, any 2 or more positions being held concurrently by the same
person (except President and Secretary or President and Treasurer),
and the secretary who must be a citizen and resident of the
Philippines.
• Under the Revised Code, however, the treasurer is now required to be
a resident of the Philippines.
Section 25 (24)
• In sum, the officers to be elected by the board of directors under the
Revised Code are the following:
1) president who must be a director;
2) treasurer who must be a resident;
3) secretary who should be a resident and a citizen of the Philippines;
4) compliance officer if the corporation is vested with public interest; and
5) such other officers as may be provided in the bylaws.
• In the 2nd and 3rd paragraph of Sec 25 of the Old Code, references to
quorum and the prohibition against directors or trustees attending or
voting by proxy at board meetings were removed and transferred to
Sections 51 and 52 of the Revised Code, respectively.
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Section 26 (25)
Section 26. Report of election of directors, SEC. 25. Report of Election of Directors,
trustees and officers. – Within thirty (30) days
after the election of the directors, trustees and Trustees and Officers, Non‐holding of
officers of the corporation, the secretary, or any Election and Cessation from Office. –
other officer of the corporation, shall submit to Within thirty (30) days after the election
the Securities and Exchange Commission, the
names, nationalities and residences of the of the directors, trustees and officers of
directors, trustees, and officers elected. Should the corporation, the secretary, or any
a director, trustee or officer die, resign or in any other officer of the corporation, shall
manner cease to hold office, his heirs in case of
his death, the secretary, or any other officer of submit to the Commission, the names,
the corporation, or the director, trustee or nationalities, shareholdings, and
officer himself, shall immediately report such
fact to the Securities and Exchange residence addresses of the directors,
Commission. (n) trustees, and officers elected.
Section 26 (25)
The non‐holding of elections and
the reasons therefor shall be
reported to the Commission
within thirty (30) days from the
date of the scheduled election.
The report shall specify a new
date for the election, which shall
not be later than sixty (60) days
from the scheduled date.
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Section 26 (25)
If no new date has been designated, or if
the rescheduled election is likewise not
held, the Commission may, upon the
application of a stockholder, member,
director or trustee, and after verification
of the unjustified non‐holding of the
election, summarily order that an election
be held. The Commission shall have the
power to issue such orders as may be
appropriate, including orders directing the
issuance of a notice stating the time and
place of the election, designated presiding
officer, and the record date or dates for
the determination of stockholders or
members entitled to vote.
Section 26 (25)
Notwithstanding any provision of the
articles of incorporation or bylaws to the
contrary, the shares of stock or
membership represented at such meeting
and entitled to vote shall constitute a
quorum for purposes of conducting an
election under this section.
Should a director, trustee or officer die,
resign or in any manner cease to hold
office, the secretary, or the director,
trustee or officer of the corporation, shall,
within seven (7) days from knowledge
thereof, report in writing such fact to the
Commission.
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Section 26 (25)
Section 26 (25)
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Section 27 (26)
Section 27 (26)
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Section
Section
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TITLE V
BYLAWS
Section 46 (45)
Section 46. Adoption of by‐laws. – Every corporation formed SEC. 45. Adoption of Bylaws. – For the adoption
under this Code must, within one (1) month after receipt of of bylaws by the corporation, the affirmative
official notice of the issuance of its certificate of vote of the stockholders representing at least a
incorporation by the Securities and Exchange Commission, majority of the outstanding capital stock, or of
adopt a code of by‐laws for its government not inconsistent at least a majority of the members in case of
with this Code. For the adoption of by‐laws by the nonstock corporations, shall be necessary. The
corporation the affirmative vote of the stockholders bylaws shall be signed by the stockholders or
representing at least a majority of the outstanding capital members voting for them and shall be kept in
stock, or of at least a majority of the members in case of the principal office of the corporation, subject
non‐stock corporations, shall be necessary. The by‐laws shall to the inspection of the stockholders or
be signed by the stockholders or members voting for them members during office hours. A copy thereof,
and shall be kept in the principal office of the corporation, duly certified by a majority of the directors or
subject to the inspection of the stockholders or members trustees and countersigned by the secretary of
during office hours. A copy thereof, duly certified to by a the corporation, shall be filed with the
majority of the directors or trustees countersigned by the Commission and attached to the original articles
secretary of the corporation, shall be filed with the Securities of incorporation.
and Exchange Commission which shall be attached to the
original articles of incorporation.
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Section 46 (45)
Notwithstanding the provisions of the Notwithstanding the provisions of the
preceding paragraph, by‐laws may be preceding paragraph, bylaws may be
adopted and filed prior to adopted and filed prior to
incorporation; in such case, such by‐ incorporation; in such case, such bylaws
laws shall be approved and signed by
all the incorporators and submitted to shall be approved and signed by all the
the Securities and Exchange incorporators and submitted to the
Commission, together with the articles Commission, together with the articles
of incorporation. In all cases, by‐laws of incorporation. In all cases, bylaws
shall be effective only upon the shall be effective only upon the issuance
issuance by the Securities and Exchange by the Commission of a certification
Commission of a certification that the that the bylaws are in accordance with
by‐laws are not inconsistent with this
Code. this Code.
Section 46 (45)
The Securities and Exchange The Commission shall not accept for
Commission shall not accept for filing filing the bylaws or any amendment
the by‐laws or any amendment thereto thereto of any bank, banking institution,
of any bank, banking institution, building and loan association, trust
building and loan association, trust
company, insurance company, public company, insurance company, public
utility, educational institution or other utility, educational institution, or other
special corporations governed by special corporations governed by special
special laws, unless accompanied by a laws, unless accompanied by a
certificate of the appropriate certificate of the appropriate
government agency to the effect that government agency to the effect that
such by‐laws or amendments are in such bylaws or amendments are in
accordance with law. (20a)
accordance with law.
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Section 46 (45)
• The following are the elements of a valid bylaws:
1. It must not be contrary to law, public policy or morals;
2. It must not be inconsistent with the articles of incorporation;
3. It must be general and uniform in its effect or applicable to all
alike or those similarly situated;
4. It must not impair obligations and contracts or vested rights;
and
5. It must be reasonable.
Section 46 (45)
• A corporation’s by laws are valid if “they are reasonable and
calculated to carry into effect the objects of the corporation, and are
not contradictory to the general policy of the laws of the land.”
(Fleischer vs. Botica Nolasco Co. Inc)
• The bylaws of a corporation and any amendments made should be (3
legal parameters):
1. consistent with the Revised Code;
2. in accord with law, morals, and public policy;
3. consistent with the articles of incorporation.
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Section 46 (45)
• The Revised Code does not require the adoption of bylaws “within 1
month after receipt of official notice of the issuance of its certificate of
incorporation by the Securities and Exchange Commission”– a
requirement under the Old Code.
• However, even if nothing is provided under Section 45 as to the
period to adopt and file by laws, the same must be adopted and filed
within 5 years from date of incorporation (see Section 21) because
organization includes creation of bylaws, otherwise, the corporation
is deemed revoked as of the day following the end of the 5‐year
period.
Section 46 (45)
• Bylaws may be adopted and filed prior to incorporation or after incorporation.
• If adopted prior to incorporation, the same must be signed by all incorporators and submitted
to the SEC together with the AOI.
• If the bylaws, however, are adopted and filed after incorporation, 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 would be required and shall be signed by the stockholders or
members voting for them.
• Once effective (by virtue of SEC approval), bylaws are binding upon all stockholders or
members, whether existing or joining the corporation on a later date. They are conclusively
presumed to know the contents or provisions of the bylaws, thus, it is binding upon them even
if they have no actual knowledge of its contents.
• However, they cannot bind, effect or prejudice third persons unless they have knowledge of its
existence and contents since they are merely internal rules of the corporation.
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Section 47 (46)
Section 47. Contents of by‐laws. – Subject to SEC. 46. Contents of Bylaws. – A private
the provisions of the Constitution, this Code, corporation may provide the following
other special laws, and the articles of in its bylaws:
incorporation, a private corporation may
provide in its by‐laws for: (a) The time, place and manner of
1. The time, place and manner of calling and calling and conducting regular or special
conducting regular or special meetings of the meetings of the directors or trustees;
directors or trustees; (b) The time and manner of calling and
2. The time and manner of calling and conducting regular or special meetings
conducting regular or special meetings of the and mode of notifying the stockholders
stockholders or members; or members thereof;
3. The required quorum in meetings of (c) The required quorum in meetings of
stockholders or members and the manner of
voting therein; stockholders or members and the
manner of voting therein;
Section 47 (46)
4. The form for proxies of stockholders and (d) The modes by which a stockholder,
members and the manner of voting them; member, director, or trustee may attend
5. The qualifications, duties and meetings and cast their votes;
compensation of directors or trustees, (e) The form for proxies of stockholders and
officers and employees; members and the manner of voting them;
6. The time for holding the annual election f)The directors’ or trustees’ qualifications,
of directors of trustees and the mode or duties and responsibilities, the guidelines
manner of giving notice thereof; for setting the compensation of directors or
7. The manner of election or appointment trustees and officers, and the maximum
and the term of office of all officers other number of other board representations that
than directors or trustees; an independent director or trustee may
have which shall, in no case, be more than
the number prescribed by the Commission;
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Section 47 (46)
8. The penalties for violation of the (g) The time for holding the annual
election of directors or trustees and the
by‐laws; mode or manner of giving notice
9. In the case of stock corporations, thereof;
the manner of issuing stock (h) The manner of election or
appointment and the term of office of
certificates; and all officers other than directors or
trustees;
10. Such other matters as may be
(i) The penalties for violation of the
necessary for the proper or bylaws;
convenient transaction of its (j)In the case of stock corporations, the
corporate business and affairs. (21a) manner of issuing stock certificates; and
Section 47 (46)
(k) Such other matters as may be
necessary for the proper or
convenient transaction of its
corporate affairs for the
promotion of good governance
and anti‐graft and corruption
measures.
An arbitration agreement may be
provided in the bylaws pursuant
to Section 181 of this Code.
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Section 47 (46)
• The Revised Code has added the following to the possible contents of
by laws:
1. The modes by which a stockholder, member, director, or trustee may attend
meetings and cast their votes, which can include remote communication;
2. An arbitration agreement may be provided in the bylaw pursuant to Section
181 of the Revised Corporation Code.
• If the bylaws are consistent with the 3 basic legal parameters, then it
can include any provision such as certain disqualifications against
stockholders who run for directorship in the corporation, these in
addition to the basic disqualifications laid down by the Code
(Gokongwei vs SEC)
Section 47 (46)
• Amendment of the bylaws will not become valid and effective unless
and until the SEC gives its stamp of approval or certification that it is
not contrary to law.
• This is different from amendment of the articles of incorporation
where it provides that amendment of AOI will become valid on the
date of its filing if not acted upon by the SEC within 6 months from
the date of its filing without fault attributable to the applicant.
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Section 48 (47)
Section 48. Amendments to by‐laws. – The board of SEC. 47. Amendment to Bylaws. – A majority of
directors or trustees, by a majority vote thereof, and the the board of directors or trustees, and the
owners of at least a majority of the outstanding capital owners of at least a majority of the outstanding
stock, or at least a majority of the members of a nonstock capital stock, or at least a majority of the
corporation, at a regular or special meeting duly called for members of a nonstock corporation, at a regular
the purpose, may amend or repeal any by‐laws or adopt or special meeting duly called for the purpose,
new by‐laws. The owners of two‐thirds (2/3) of the may amend or repeal the bylaws or adopt new
outstanding capital stock or two‐thirds (2/3) of the bylaws. The owners of twothirds (2/3) of the
members in a non‐stock corporation may delegate to the outstanding capital stock or twothirds (2/3) of
board of directors or trustees the power to amend or repeal the members in a non‐stock corporation may
any by‐laws or adopt new by‐laws: Provided, That any delegate to the board of directors or trustees
power delegated to the board of directors or trustees to the power to amend or repeal the bylaws or
amend or repeal any by‐laws or adopt new by‐laws shall be adopt new bylaws: Provided, That any power
considered as revoked whenever stockholders owning or delegated to the board of directors or trustees
representing a majority of the outstanding capital stock or a to amend or repeal the bylaws or adopt new
majority of the members in non‐stock corporations, shall so bylaws shall be considered as revoked whenever
vote at a regular or special meeting.
stockholders owning or representing a majority
of the outstanding capital stock or majority of
Section 48 (47)
the members shall so vote at a regular or special
meeting.
Whenever the bylaws are amended or new
bylaws are adopted, the corporation shall file
with the Commission such amended or new
bylaws and, if applicable, the stockholders’ or
members’ resolution authorizing the delegation
of the power to amend and/or adopt new
bylaws, duly certified under oath by the
corporate secretary and a majority of the
directors or trustees.
The amended or new bylaws shall only be
effective upon the issuance by the Commission
of a certification that the same is in accordance
with this Code and other relevant laws.
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Section 47 (46)
• 2 modes of amending or repealing bylaws or adopting a new one:
1. majority vote of the directors or trustees and the majority
vote of the outstanding capital stock or members in a nonstock
corporation at a regular or special meeting called for that purpose
2. by the board of directors alone when delegated by 2/3 of the
outstanding capital stock or 2/3 of the members in a non‐stock
corporation. This delegated power, however, shall be considered
revoked whenever a majority of the outstanding capital stock or
members shall so vote at a regular or special meeting.
TITLE VI
MEETINGS
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Section 49 (48)
Section 49. Kinds of meetings. – SEC. 48. Kinds of Meetings. –
Meetings of directors, trustees, Meetings of directors, trustees,
stockholders, or members may be stockholders, or members may be
regular or special. (n) regular or special.
Section 49 (48)
Section 50. Regular and special meetings of SEC. 49. Regular and Special Meetings of
stockholders or members. ‐ Regular Stockholders or Members. – Regular meetings
meetings of stockholders or members shall of stockholders or members shall be held
be held annually on a date fixed in the annually on a date fixed in the bylaws, or if not
bylaws, or if not so fixed, on any date in so fixed, on any date after April 15 of every
April of every year as determined by the year as determined by the board of directors or
trustees: Provided, That written notice of
board of directors or trustees: Provided, regular meetings shall be sent to all
That written notice of regular meetings stockholders or members of record at least
shall be sent to all stockholders or twenty one (21) days prior to the meeting,
members of record at least two (2) weeks unless a different period is required in the
prior to the meeting, unless a different bylaws, law, or regulation: Provided further,
period is required by the by‐laws. Special That written notice of regular meetings may be
meetings of stockholders or members shall sent to all stockholders or members of record
be held at any time deemed necessary or through
as provided in the by‐laws:
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Section 49 (48)
Provided, however, That at least electronic mail or such other
one (1) week written notice shall manner as the Commission shall
be sent to all stockholders or allow under its guidelines.
members, unless otherwise At each regular meeting of
provided in the by‐laws. Notice of stockholders or members, the
any meeting may be waived, board of directors or trustees shall
expressly or impliedly, by any endeavor to present to
stockholder or member. stockholders or members the
following:
Section 49 (48)
Whenever, for any cause, there is no person a) The minutes of the most recent regular
authorized to call a meeting, the Securities meeting which shall include, among others:
and Exchange Commission, upon petition of (1) A description of the voting and vote
a stockholder or member on a showing of tabulation procedures used in the previous
good cause therefor, may issue an order to meeting;
the petitioning stockholder or member
directing him to call a meeting of the (2) A description of the opportunity given to
corporation by giving proper notice stockholders or members to ask questions
required by this Code or by the by‐laws. and a record of the questions asked and
The petitioning stockholder or member answers given;
shall preside thereat until at least a
majority of the stockholders or members (3) The matters discussed and resolutions
present have chosen one of their number reached;
as presiding officer. (24, 26) (4) A record of the voting results for each
agenda item;
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Section 49 (48)
(5) A list of the directors or trustees,
officers and stockholders or members
who attended the meeting; and
(6) Such other items that the
Commission may require in the interest
of good corporate governance and the
protection of minority stockholders.
b) A members’ list for non‐stock
corporations and, for stock
corporations, material information on
the current stockholders, and their
voting rights;
Section 49 (48)
c) A detailed, descriptive,
balanced and comprehensible
assessment of the corporation’s
performance, which shall include
information on any material
change in the corporation’s
business, strategy, and other
affairs;
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Section 49 (48)
d) A financial report for the
preceding year, which shall include
financial statements duly signed and
certified in accordance with this
Code and the rules the Commission
may prescribe, a statement on the
adequacy of the corporation’s
internal controls or risk management
systems, and a statement of all
external audit and non‐audit fees;
Section 49 (48)
e) An explanation of the dividend
policy and the fact of payment of
dividends or the reasons for
nonpayment thereof;
f) Director or trustee profiles which
shall include, among others, their
qualifications and relevant
experience, length of service in the
corporation, trainings and continuing
education attended, and their board
representations in other
corporations;
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Section 49 (48)
g) A director or trustee attendance
report, indicating the attendance of
each director or trustee at each of the
meetings of the board and its
committees and in regular or special
stockholder meetings;
h) Appraisals and performance reports
for the board and the criteria and
procedure for assessment;
i) A director or trustee compensation
report prepared in accordance with this
Code and the rules the Commission may
prescribe;
Section 49 (48)
j) Director disclosures on self‐dealings
and related party transactions; and/or
k) The profiles of directors nominated or
seeking election or reelection.
A director, trustee, stockholder, or

member may propose any other matter
for inclusion in the agenda at any
regular meeting of stockholders or
members.
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Section 49 (48)
Special meetings of stockholders
or members shall be held at any
time deemed necessary or as
provided in the bylaws: Provided,
however, That at least one (1)
week written notice shall be sent
to all stockholders or members,
unless a different period is
provided in the bylaws, law or
regulation.
Section 49 (48)
A stockholder or member may propose the
holding of a special meeting and items to be
included in the agenda.
Notice of any meeting may be waived, expressly
or impliedly, by any stockholder or member:
Provided, That general waivers of notice in the
articles of incorporation or the bylaws shall not
be allowed: Provided, further, That attendance
at a meeting shall constitute a waiver of notice
of such meeting, except when the person
attends a meeting for the express purpose of
objecting to the transaction of any business
because the meeting is not lawfully called or
convened.
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Section 49 (48)
Whenever for any cause, there is no person
authorized or the person authorized
unjustly refuses to call a meeting, the
Commission, upon petition of a stockholder
or member on a showing of good cause
therefor, may issue an order directing the
petitioning stockholder or member to call a
meeting of the corporation by giving proper
notice required by this Code or the bylaws.
The petitioning stockholder or member
shall preside thereat until at least a majority
of the stockholders or members present
have chosen from among themselves, a
presiding officer.
Section 49 (48)
Unless the bylaws provide for a longer
period, the stock and transfer book or
membership book shall be closed at least
twenty (20) days for regular meetings and
seven (7) days for special meetings before
the scheduled date of the meeting.
In case of postponement of stockholders’ or
members’ regular meetings, written notice
thereof and the reason therefor shall be
sent to all stockholders or members of
record at least two (2) weeks prior to the
date of the meeting, unless a different
period is required under the bylaws, law or
regulation.
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Section 49 (48)
The right to vote of stockholders or
members may be exercised in person,
through a proxy, or when so authorized
in the bylaws, through remote
communication or in absentia. The
Commission shall issue the rules and
regulations governing participation and
voting through remote communication
or in absentia, taking into account the
company’s scale, number of
shareholders or members, structure,
and other factors consistent with the
protection and promotion of
shareholders’ or member’s meetings.
TITLE VII
STOCKS AND STOCKHOLDERS
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Section 60 (59)
Section 60. Subscription contract. SEC. 59. Subscription Contract. –
– Any contract for the acquisition Any contract for the acquisition of
of unissued stock in an existing unissued stock in an existing
corporation or a corporation still corporation or a corporation still
to be formed shall be deemed a
subscription within the meaning to be formed shall be deemed a
of this Title, notwithstanding the subscription within the meaning
fact that the parties refer to it as a of this Title, notwithstanding the
purchase or some other contract. fact that the parties refer to it as a
(n) purchase or some other contract.
Section 60 (59)
• A person may become a stockholder in a corporation in either of the 3 ways:
1. by a contract of subscription with the corporation;
2. by purchase of treasury shares from the corporation; and
3. by purchase or acquisition of shares from existing stockholders.
• Subscription‐ mutual agreement of the subscribers to take and pay for the stocks of a corporation.
• So long as the shares to be acquired from the corporation are “unissued stocks”, the contract will be deemed
a subscription contract.
• Thus, a person whether deemed a purchaser or a subscriber of the unissued stocks of an existing
corporation or a corporation still to be formed becomes entitled to all the rights of a stockholder and
subjected to all liabilities that attach thereunder upon execution and effectivity of the contract or upon
acceptance and creation of the corporation.
• A subscription contract need not be in writing to be valid and enforceable.
• Sale of shares of stock, however, need to be in writing (if 500 or more) to be valid and enforceable (See Art.
1403(2)(d), NCC)
• Subscriptions may be made upon a condition precedent or upon special terms (condition subsequent).
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Section 60 (59)
• A conditional subscription or one made upon a condition precedent, does not
make the subscriber a stockholder, or render him to pay the amount of his
subscription, until performance or fulfillment of the condition.
• A subscription upon special terms, on the other hand, is an absolute subscription
making the subscriber a stockholder, and rendering him liable as such, as soon as
the subscription is accepted the special term being an independent stipulation.
• Whether a subscription is conditional or merely upon special terms depends on
the agreement or intention of the parties. In case of doubt as to their intentions,
a subscription should be considered as an absolute subscription upon special
terms.
• Conditional subscriptions are valid provided there is nothing in the charter or
enabling act prohibiting the same and provided the conditions are not such as to
render their performance beyond the powers of the corporation or in violation of
law or contrary to public policy.
Section 61 (60)
Section 61. Pre‐incorporation subscription. SEC. 60. Pre‐incorporation Subscription.
– A subscription for shares of stock of a – A subscription of shares in a
corporation still to be formed shall be corporation still to be formed shall be
irrevocable for a period of at least six (6) irrevocable for a period of at least six (6)
months from the date of subscription, months from the date of subscription,
unless all of the other subscribers consent unless all of the other subscribers
to the revocation, or unless the
incorporation of said corporation fails to consent to the revocation, or the
materialize within said period or within a corporation fails to incorporate within
longer period as may be stipulated in the the same period or within a longer
contract of subscription: Provided, That no period stipulated in the contract of
pre‐incorporation subscription may be subscription. No preincorporation
revoked after the submission of the articles subscription may be revoked after the
of incorporation to the Securities and articles of incorporation is submitted to
Exchange Commission. (n) the Commission.
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Section 61 (60)
• Subscription contract may either be those made or executed prior to
incorporation or after incorporation.
• Prior to effectivity of the Corporation Code, questions have been raised
regarding the validity and binding effect of pre‐incorporation subscriptions.
The validity and binding effect of a pre‐incorporation subscription is now
recognized at least by analogy of Section 60 of the Revised Corporation
Code.
• Stock issuance is generally the initial and primary source of corporate
capital. Other sources may include corporate borrowings, loans and
advances from creditors or stockholders.
• Corporate earnings may also be a source of corporate funds if it is
reinvested or ploughed back to the company.
Section 61 (60)
• Pre‐incorporation subscriptions are considered by law to be
irrevocable for a specified period of time provided for in Section 60 of
the Revised Corporation Code. Thus:
1. They shall be irrevocable for a period of at least 6 months from
date of subscription unless a) all the subscribers consent to the
revocation; or b) the incorporation fails to materialize within said
period or within a longer period as may be stipulated in the contract of
subscription.
2. They are irrevocable after the submission of the AOI to SEC.
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Section 62 (61)
Section 62. Consideration for stocks. – Stocks shall SEC. 61. Consideration for Stocks. – Stocks shall
not be issued for a consideration less than the par or not be issued for a consideration less than the
issued price thereof. Consideration for the issuance par or issued price thereof. Consideration for
of stock may be any or a combination of any two or the issuance of stock may be:
more of the following:
1. Actual cash paid to the corporation; (a) Actual cash paid to the corporation;
2. Property, tangible or intangible, actually received (b) Property, tangible or intangible, actually
by the corporation and necessary or convenient for received by the corporation and necessary or
its use and lawful purposes at a fair valuation equal convenient for its use and lawful purposes at a
to the par or issued value of the stock issued; fair valuation equal to the par or issued value of
3. Labor performed for or services actually rendered the stock issued;
to the corporation; (c) Labor performed for or services actually
4. Previously incurred indebtedness of the rendered to the corporation;
corporation; (d) Previously incurred indebtedness of the
corporation;
Section 62 (61)
5. Amounts transferred from (e) Amounts transferred from
unrestricted retained earnings to unrestricted retained earnings to
stated capital;
stated capital; and
(f) Outstanding shares exchanged for
6. Outstanding shares exchanged stocks in the event of reclassification
for stocks in the event of or conversion;
reclassification or conversion. (g) Shares of stock in another
corporation; and/or
(h) Other generally accepted form of
consideration.
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Section 62 (61)
Where the consideration is other than actual Where the consideration is other than
cash, or consists of intangible property such as actual cash, or consists of intangible
patents of copyrights, the valuation thereof property such as patents or copyrights, the
shall initially be determined by the valuation thereof shall initially be
incorporators or the board of directors, subject determined by the stockholders or the
to approval by the Securities and Exchange board of directors, subject to the approval
Commission.
of the Commission.
Shares of stock shall not be issued in exchange
for promissory notes or future service.
Shares of stock shall not be issued in
The same considerations provided for in this
exchange for promissory notes or future
section, insofar as they may be applicable, may service. The same considerations provided
be used for the issuance of bonds by the in this section, insofar as applicable, may be
corporation. used for the issuance of bonds by the
corporation.
Section 62 (61)
The issued price of no‐par value The issued price of no‐par value
shares may be fixed in the articles of shares may be fixed in the articles of
incorporation or by the board of incorporation or by the board of
directors pursuant to authority directors pursuant to authority
conferred upon it by the articles of
incorporation or the by‐laws, or in conferred by the articles of
the absence thereof, by the incorporation or the bylaws, or if not
stockholders representing at least a so fixed, by the stockholders
majority of the outstanding capital representing at least a majority of
stock at a meeting duly called for the the outstanding capital stock at a
purpose. (5 and 16) meeting duly called for the purpose.
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Section 62 (61)
• Property: value of property should at least be equal to the par or issued value of
the stocks
• Value of tangible properties i.e., real properties: determined either by means of an appraisal report of
an independent appraiser; the zonal valuation as certified by the BIR; or the market value indicated in
the Real Estate Declaration.
• Value of intangible properties: initially determined by the incorporators or the board of directors
subject to the approval of the SEC. The SEC is not precluded from requiring the corporation to submit an
appraisal report of an independent appraiser to determine the true value of the said property.
• Labor/Services actually rendered: as long as capable of valuation and in fact are
fairly valued.
• True Value Rule: The motives or intent of those making the valuation are disregarded and the sole and
decisive factor or question is whether or not the property or services are in fact worth the value placed
on them.
• Good Faith Rule: Based on the proposition that the value of the property or services is a matter about
which there can be an honest difference of opinion. Therefore, if the parties have acted in good faith
without fraud or intentional overvaluation, the transaction cannot be overturned even if it later becomes
evident that the property or services were in fact worth much less than the value fixed on them initially.
Section 61 (60)
• Setoff: A set‐off of the debt without going through the unnecessary formality is
equivalent to payment for the stock in cash.
• Amounts transferred from unrestricted RE: Refers to the declaration and distribution of
stock dividend where corporate earnings are capitalized rather than being distributed as
cash dividend. It merely converts income into capital, the consideration being the RE
which would have accrued to the stockholders in proportion to their respective
stockholdings.
• Outstanding shares exchanged for stocks in the event of reclassification or conversion:
Speaks of shares of stock surrendered to the corporation in exchange for new or
different type of shares. This may take place by amendment of the AOI in the event that
the corporation may wish to provide for a classification of its shares by virtue of existing
provisions thereof for conversion of existing shares. Founder’s shares, for example, may
be converted into common or other type of shares upon expiration of the period agreed
upon or as may be fixed in the AOI or bylaws.
• Promissory notes or future services are not allowed to be used as consideration for the
issuance of shares as their realization are not certain.
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Section 63 (62)
Section 63. Certificate of stock and transfer SEC. 62. Certificate of Stock and Transfer of
of shares. – The capital stock of stock Shares. – The capital stock of corporations
corporations shall be divided into shares for shall be divided into shares for which
which certificates signed by the president certificates signed by the president or vice
or vice president, countersigned by the president, countersigned by the secretary
secretary or assistant secretary, and sealed or assistant secretary, and sealed with the
with the seal of the corporation shall be seal of the corporation shall be issued in
issued in accordance with the by‐laws. accordance with the bylaws. Shares of stock
Shares of stock so issued are personal so issued are personal property and may be
property and may be transferred by transferred by delivery of the certificate or
delivery of the certificate or certificates certificates indorsed by the owner, his
indorsed by the owner or his attorney‐in‐ attorney‐infact, or any other person legally
fact or other person legally authorized to authorized to make the transfer. No
make the transfer. No transfer, however, transfer, however, shall be valid, except as
shall be valid except as between the between the
Section 63 (62)
parties, until the transfer is recorded parties, until the transfer is recorded in the
books of the corporation showing the names of
in the books of the corporation the parties to the transaction, the date of the
showing the names of the parties to transfer, the number of the certificate or
certificates, and the number of shares
the transaction, the date of the transferred. The Commission may require
transfer, the number of the corporations whose securities are traded in
trading markets and which can reasonably
certificate or certificates and the demonstrate their capability to do so to issue
number of shares transferred. No their securities or shares of stocks in
uncertificated or scripless form in accordance
shares of stock against which the with the rules of the Commission.
corporation holds any unpaid claim No shares of stock against which the
shall be transferable in the books of corporation holds any unpaid claim shall be
transferable in the books of the corporation.
the corporation. (35)
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Section 63 (62)
• Share of stock: a profit sharing contract, a series of units of interest and participation in a
corporation in consideration of a proportionate right to participate in dividend and other
distributions.
• Certificate of stock: piece of paper or document which evidences the ownership of
shares and a convenient instrument for the transfer of the title.
• Requisites for the issuance of a certificate of stock:
1. It must be signed by the president or vice president and countersigned by the
secretary or assistant secretary;
2. It must be sealed with the corporate seal and the entire value thereof (together
with the interest or expenses, if any) should have been paid.
• While it appears that a subscriber to shares of stock cannot be entitled to the issuance of
a certificate of stock until the full amount of his subscription together with interest and
expenses (in case of delinquent shares) if any is due, has been paid, a subscriber to
shares of stock even if not yet fully paid, is entitled to exercise all the rights of a
stockholder and the corresponding liability that attach thereunder.
Section 63 (62)
• The issuance of a stock certificate is not a condition sine quanon to
consider a subscriber as a stockholder.
• The moment his subscription becomes effective, he becomes a
stockholder for all intents and purposes except only that he cannot be
entitled to be issued a certificate of stock until the full amount of his
subscription has been paid. The only other instance when he may not
be able to exercise his rights as such stockholder is when his shares
are declared delinquent or when he exercises his appraisal right.
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Section 64 (63)
Section 64. Issuance of stock SEC. 63. Issuance of Stock
certificates. – No certificate of Certificates. – No certificate of
stock shall be issued to a stock shall be issued to a
subscriber until the full amount of subscriber until the full amount of
his subscription together with the subscription together with
interest and expenses (in case of interest and expenses (in case of
delinquent shares), if any is due, delinquent shares), if any is due,
has been paid. (37) has been paid.
Section 64 (63)
• Shares of stock may be transferred by delivery of the certificate,
indorsed by the owner or his attorney‐in‐fact or any other person
legally authorized to make the transfer.
• To be valid as to the corporation and to third persons, it must be
recorded in the books of the corporation. Its non‐registration will not,
however, affect the validity thereof at least insofar as the contracting
parties are concerned.
• As regards the corporation, transferee will not be recognized as such
stockholder and could not exercise his rights until the transfer has
been duly recorded in the stock and transfer book.
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Section 64 (63)
• Registration is necessary for the following reasons:
1. To enable the corporation to know who its stockholders are;
2. To enable the transferee to exercise his rights as stockholder;
3. To afford the corporation an opportunity to object or refuse registrationof
the transfer in case allowed by law (as when it has unpaid claims on the shares
transferred);
4. To avoid fictitious and fraudulent transfers; and
5. To protect creditors who have the right to look upon stockholders, in case of
non‐payment of watered shares, for the satisfaction of their claims.
• A certificate of stock is only quasi‐negotiable
Section
• Section 1. Form of negotiable instruments. ‐ An instrument to be
negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in
money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.
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99
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Dissolution and Winding Up
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Comparison of Corporation Code and Revised Corporation Code DM

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Comparison of Corporation Code and Revised Corporation Code DM

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2/20/2021

Comparison of BP 168: Corporation

Section 2. Corporation defined. – SEC. 2. Corporation Defined. – A

Section 3. Classes of corporations. – SEC. 3. Classes of Corporations. –

Section 4. Corporations created by SEC. 4. Corporations Created by

Section 5. Corporators and incorporators, SEC.5. Corporators and Incorporators,

(Modify Nos. 8 and 9 if shares are with no par value.

A director, trustee, stockholder, or

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