Express Powers of a Corporation

Express powers are the powers expressly conferred upon the corporation by law.

Section 35. Corporate Powers and Capacity. - Every corporation incorporated under
this Code has the power and capacity:

a) To sue and be sued in its corporate name;

b) Of succession;
c) To adopt and use a corporate seal;
d) To amend its articles of incorporation;
e) To adopt by-laws;
f) In case of stock corporations, to issue or sell stocks to subscribers and treasury
stocks; for non-stock corporations, to admit members;
g) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage
and otherwise deal with such real and personal property, including securities
and bonds;
h) To enter into merger or consolidation;
i) To make reasonable donations, including those for the public welfare or for
hospital, charitable, cultural, scientific, civic, or similar purposes, provided that
no corporation, domestic or foreign, shall give donations in aid of any political
party or candidate or for purposes of partisan political activity;
j) To establish pension, retirement, and other plans for the benefit of its directors,
trustees, officers and employees; and
k) To exercise such other powers as may be essential or necessary to carry out its
purposes.

Section 36. Power to Extend or Shorten Corporate Term. - A private corporation may
extend or shorten its term when there exists,

1. Approval by a majority vote of the board;

2. Written notice of the proposed action and the time and place of meeting shall be
served to each stockholder or member either by mail or personal service;
 3. Ratification by the stockholders representing at least 2/3 of the OCS or 2/3 of
the members in case of non-stock corporations; and
4. A copy of the amended articles of incorporation shall be submitted to the SEC
for approval.

Any dissenting stockholder may exercise his appraisal right whether the corporate
term is extended or shortened as provided in Sec. 81.

Section 37. Power to increase or Decrease Capital Stock; Incur, Create or Increase
Bonded Indebtedness.

No corporation shall increase or decrease its capital stock or incur, create or increase
any bonded indebtedness unless there is,

1. Written notice of the proposed action and the time and place of meeting shall be
served to each stockholder or member either by mail or personal service;
2. In case of decrease in capital stock, it shall not prejudice the rights of corporate
creditors; and
3. Approval by a majority vote of the board;
4. Ratification by the stockholders representing at least 2/3 of the OCS or 2/3 of
the members in case of non-stock corporations; and
5. Certificate must be signed by a majority of the directors of the corporation and
countersigned by the chairman and the secretary of the stockholders’ meeting;
6. Approval thereof by the SEC;
7. In case of increase in capital stock, there must be a Treasurer’s Affidavit.

Limitations on the power:

 A corporation cannot lawfully decrease its capital stock if such decrease will
have the effect of relieving existing subscribers from the obligation of paying
for their unpaid subscriptions without a valuable consideration for such release.
 Reason: Trust Fund Doctrine
 It cannot issue stock in excess of the amount limited by its articles of
incorporation;
 It must be made in the manner and under the conditions prescribed by law.

An appraisal right is not available to a dissenting stockholder in case of increase or

decrease of the corporation’s capital stock.
Section 38. Power to Deny Preemptive Right.

Pre-emptive right – the preferential right of shareholders to subscribe to all issues or

disposition of shares of any class in proportion to their present shareholdings.

 Purpose: to enable the shareholder to retain his proportionate control in the

corporation and to retain his equity in the surplus.

Pre-emptive right is not available:

1. Shares to be in compliance with laws requiring stock offerings or minimum

stock ownership by the public; and
2. Shares to be issued in good faith with the shareholder’s approval representing
2/3’s of the outstanding capital stock, in exchange for property needed for
corporate purposes or in payment of a previously contracted debit.

Section 39. Sale or Other Disposition of Assets.

When sale or other disposition considered to cover substantially all of corporate

property

 A sale or other disposition shall be deemed to cover substantially all the

corporate property and assets if thereby the corporation would be rendered
incapable of continuing the business or accomplishing the purpose for which it
was incorporated.

Requirements:

1. Written notice of the proposed action and of the time and place of the meeting
shall be addressed to each stockholder or member at his place of residence and
deposited to addressee in the post office, or served personally, or when allowed
by bylaws or the stockholder, electronically.
2. Approval by a majority vote of the board
3. Ratification by stockholders’ vote representing 2/3 of the OCS or 2/3 of
members if non-stock corporation.
4. Any dissenting stockholder may exercise his appraisal right

Ratification is not required:

  When such sale or other disposition is necessary in the usual and regular
course of business of the corporation.

 When the proceeds of such sale or other disposition are to be appropriated

for the conduct of the remaining business of the corporation.

Section 40. Power to Acquire Own Shares. - Provided, That the corporation has
unrestricted retained earnings in its books to cover the shares to be purchased or
acquired, a stock corporation shall have the power to purchased or acquired, a stock
corporation shall have the power to purchase or acquire its own shares for a legitimate
corporate purpose or purposes, including the following cases:

(a) To eliminate fractional shares arising out of stock dividends;

(b) To collect or compromise an indebtedness to the corporation, arising out of unpaid

subscription, in a delinquency sale, and to purchase delinquent shares sold during said
sale; and

(c) To pay dissenting or withdrawing stockholders entitled to payment for their shares
under the provisions of this Code.

Section 41. Power to Invest Corporate Funds in Another Corporation or Business or for
Any Other Purpose. - Subject to the provisions of this Code, a private corporation may
invest its funds in any other corporation, business, or for any purpose other than the
primary purpose for which it was organized, when approved by a majority of the board
of directors or trustees and ratified by the stockholders representing at least two-
thirds (2/3) of the outstanding capital stock, or by at least two-thirds (2/3) of the
outstanding capital stock, or by at least two-thirds (2/3) of the members in the case of
nonstock corporations at a meeting duly called for the purpose. Notice of the proposed
investment and the time place of residence as shown in the books of the corporation
and deposited to the addressee in the post office with the postage prepaid. Served
personally, or sent electronically in accordance with the rules and regulations of the
Commission on the use of electronic data message, when allowed by the bylaws or
done with the consent of the stockholders: Provided, That any dissenting stockholder
shall have appraisal right as provided in this Code: Provided, however, That where the
investment by the corporation is reasonably necessary to accomplish its primary
purpose as stated in the articles of incorporation, the approval of the stockholders or
members shall not be necessary.

Section 42. Power to Declare Dividends. - The board of directors of a stock corporation
may declare dividends out of the unrestricted retained earnings which shall be payable
in cash, property, or in stock to all stockholders on the basis of outstanding stock held
by them: Provided, That any cash dividends due on delinquent stock shall be first be
applied to the unpaid balance on th subscription plus costs and expenses, while stock
holders until their unpaid subscription is fully paid: Provided, further, That no stock
dividend shall be issued without the approval of stockholders representing at least
two-thirds (2/3)of the outstanding capital stock at a regular or special meeting duly
called for the purpose.

Stock corporations are prohibited from restraining surplus profits in excess of one
hundred percent (100%} of their paid-in capital stock, except: (a) when justified by the
definite corporate expansion projects or programs approved by the board of directors;
or (b) when the corporation is prohibited under any loan agreement with financial
institutions or creditors, whether local or foreign, from declaring dividends without
their consent, and such consent has not yet been secured; or (c) when it can be clearly
shown that such retention is necessary under special circumstances obtaining in the
corporation, such as when there is need for special reserve for probable contingencies.

Section 43. Power to Enter into Management Contract. - No corporation shall conclude
a management contract with another corporation unless such contract is approved by
the board of directors and by the stockholders owning at least the majority of the
outstanding capital stock, or by at least a majority of the members in the case of a
nonstock corporation, or both the managing and the managed corporation, at a
meeting duly called for the purpose: Provided, That (a) where a stockholder or
stockholders representing the same interest of both the managing and the managed
corporations own or control more than one-third (1/3) of the total outstanding capital
stock entitled to vote of the managing corporation; or (b) where a majority if the
members of the board of directors of the managing corporation also constitute a
majority of the members of the board of directors of the managed corporation, then
the management contract must be approved by the stockholders of the managed
corporation owning at least two-thirds (2/3) of the total outstanding capital stock
entitled to vote, or by at least two-thirds (2/3) of the members in the case of a
nonstock corporation.

These shall apply to any contract whereby a corporation undertakes to manage or

operate all or substantially all of the called services contracts, operating agreements or
otherwise: Provided, however, That such service contracts or operating agreements
which relate to the exploration, development exploitation or utilization of natural
resources may entered into such periods as may be provided by the pertinent laws or
regulations.

No management contracts shall be entered into for period longer that five (5) years for
any one term.

Section 44. Ultra Vires Acts of the Corporations. - No corporation shall possess or
exercise corporate powers other than those conferred by this Code or by its articles of
incorporation and except as necessary or incidental to the exercise of the powers
conferred.