SEC. 10. Number and Qualifications of Incorporators.

– Any person, partnership, association or corporation, singly

or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or
purposes: Provided, That natural persons who are licensed to practice a profession, and partnerships or associations
organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation unless
otherwise provided under special laws. Incorporators who are natural persons must be of legal age. 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.

The One-person Corporation is governed specifically by specific section. In other words, this specific
section that we will discuss is only applicable if you are an ordinary private corporation. In ordinary private
corporation, you have at least two (2) but not more than 15 incorporators.

SEC Memorandum Circular number 16-19, issued July 30, 2019 which is actually a guideline on the
number and qualifications of incorporators under the Revised Corporation Code.:

 —for the purpose of forming a new domestic corporation under the Revised Corporation Code, two
(2) or more persons, but not more than fifteen (15), may organize themselves and form a
corporation
Foreign corporation can be an incorporator in an ordinary private corporation.

Section 11. SEC. 11. Corporate Term. – A corporation shall have perpetual existence unless its articles of
incorporation provides otherwise.
A corporate term for a specific period may be extended or shortened by amending the articles of
incorporation:

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.
But, please take note of those industries with public interest. The application for revival shall be
made with recommendation. So, you have 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.

IN THE MATTER OF AMENDMENT OF THE ARTICLES OF INCORPORATION AND BY-LAWS OF PAMINTUAN

ENTERPRISES (DAVAO), INC, V. COMPANY REGISTRATION AND MONITORING DEPARTMENT (OCTOBER 19, 2017)

Sometime in October 2014, appellant filed with the Commission’s Davao Extension Office (SEC-DEO) its application
for the amendment of its Articles of Incorporation (AOI) for extension of its corporate term. However, the SEC-DEO
refused to accept appellant’s application on the ground that the latter could not provide a Certificate of No-Intra-
Corporate Dispute because of the presence of the intra-corporate case involving its delinquent stockholders. Since
then, appellant made several attempts to file its amendments, however the same was denied by SEC-DEO.

Issue: Whether or not the appellant’s application for extension of corporate term should be allowed.
Held: Yes. The appellant’s application for extension of corporate term should be allowed.

Section 11 of the Code provides that a corporation shall exist for a period not exceeding fifty (50) years from the date
of incorporation unless sooner dissolved or unless said period is extended. The corporate term as originally stated in
the articles of incorporation may be extended for periods not exceeding fifty (50) years in any single instance by an
amendment of the articles of incorporation, in accordance with this Code; Provided, That no extension can be made
earlier than five (5) 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 Securities and Exchange Commission.

The En Banc is aware that the very recent 2017 decision is not yet final. However, considering that the legal principle
enunciated therein is consistent with the current Commission’s thrust to adopt policies that ‘promote ease of doing
business’ (i.e. the Corporation Code amendment on perpetual corporate term pending in Congress), the En Banc
similarly espouses the liberal approach adopted y the Supreme Court. All previous pronouncements, policies or rules
inconsistent with this latest policy shall be deemed repealed, revoked or amended.

In the light of liberal approach, appellant should now be allowed to file its application for extension of corporate
term before the CRMD. An outright denial of such application will result in the closure of a going concern, which is
the second oldest hotel in the country. As similarly ruled by the Court of Appeals in the HEPI case, there would be
economic implication if we would deny appellants application for extension of corporate term. Also, the State or the
general public will not be prejudiced if we would allow the application for the extension of appellant’s corporate
term.

MAGALING vs ONG

When an officer be held solidarily or jointly liable with the corporation:

1. When DIRECTORS and TRUSTEES or, in appropriate case, the OFFICERS of a corporation:
a. vote for or assent to patently unlawful actsof the corporation;
• act in bad faith OR with gross negligence in directing the corporate affairs;
• are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other
persons;
2. When a DIRECTOR or OFFICER has consented to the issuance of watered down stocks or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto;
3. When a DIRECTOR, TRUSTEE or OFFICER has contractually agreed OR stipulated to hold himself
personally and solidarily liable with the corporation; or
4. When a DIRECTOR, TRUSTEE or OFFICER is made, by specific provision of law, personally liable for
his corporate action

What is DOCTRINE OF CORPORATE OPPORTUNITY?

The doctrine of "corporate opportunity" is precisely a recognition by the courts that the fiduciary standards
could not be upheld where the fiduciary was acting for two entities with competing interests. This doctrine
rests fundamentally on the unfairness, in particular circumstances, of an officer or director taking advantage
of an opportunity for his own personal profit when the interest of the corporation justly calls for protection

The doctrine of Corporate Opportunity was used in the case of Gokongwei v. SEC
Section 31
is there to prevent the situation wherein you abuse your fiduciary duties to the corporation

Section 21 of the Corporation Law expressly provides that a corporation may make by-laws for the
qualifications of directors. Thus, it has been held that an officer of a corporation cannot engage in a
business in direct competition with that of the corporation where he is a director by utilizing information he
has received as such officer, under "the established law that a director or officer of a corporation may not
enter into a competing enterprise which cripples or injures the business of the corporation of which he is an
officer or director.

Prime White Cement Corp vs IAC 220 SCRA 103

A contract of the corporation with one or more of its directors, trustees or officers, [please take note] not
only with the directors but also with their spouses, relatives within their 4th-civil degree of consanguinity or
affinity is voidable [please take note: it is not void but VOIDABLE] at the option of such corporation, unless
the following are present: note the requisites:
a) the presence of such director, trustee in the board meeting which the contract has been approved must
not be necessary to constitute a quorum;
b) the vote of such director was not necessary for approval of the contract; so you have two checks. Hindi
siya kailangan for quorum, and hindi siya kailangan for approval
c) the contract is fair and reasonable under the circumstances, d) in case of corporation vested with public
interest, material contracts are approved by at least 2/3 of the entire membership of the board [this is the
exception to the majority rule], with at least a majority of the independent directors voting to approve the
material contract; e) In case of an officer, the contract has been previously authorized by the board of
directors. Where any of the first three (3) conditions set forth in the preceding paragraph is absent, in the
case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the
members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the
directors or trustees involved is made at such meeting and the contract is fair and reasonable under the
circumstances.

METROHEIGHTS SUBDIVISIONS HOMEOWNERS ASSOCIATIONS, INC. v. CMS CONSTRUCTION

AND DEVELOPMENT CORP. GR NO. 209359. October 17, 2018

Sec. 31. Liability of directors, trustees or officers. — Directors or trustees who willfully and knowingly
vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad
faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with
their duty as such directors or trustees shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members and other persons.

The Business Judgment Rule

The corporate principle recognizing corporate power and competence to be lodged primarily with the Board
of Directors is embodied in the “Business judgment rule,” thus: A resolution or transaction pursued within
the corporate powers and business operations of the corporation, and passed in good faith by the Board of
Directors, is valid and binding; and generally the courts have no authority to review the same or substitute
their own judgment , even when it can be proven that the exercise of such power may cause losses to the
corporation or decreases its profits (Villanueva p. 312-313)

We have another type of director’s contract—a contract between

inter-locking directors contract between two (2) corporations and the director of one is also the director
of another kaya sya nag I inter-locked.
Is it void per se if, let’s say contract involving inter-locking directors? The answer is—NO

FILIPINAS PORT SERVICES, INC. v. GO GR No. 161886. March 16, 2007.

The Board of Directors has the power to create positions not provided for in Filports by-laws since the
board is the corporations governing body, clearly upholding the power of its board to exercise its
prerogatives in managing the business affairs of the corporation

SEC OPINION NO. 43-04 (October 26, 2004) CESSATION OF BUSINESS OPERATION.-
The corporate powers conferred upon the BOD usually involves the ordinary business transaction of the
corporation and do not extend beyond the management of ordinary corporate affairs.

The issue of stoppage of business operation cannot be classified as an ordinary business transaction, such
as to limit the approval to the BOD. Cessation of the business, though temporary, is a fundamental
concern, which should be decided not only by the board, but also by the stockholders themselves, who
would stand to be primarily affected by such changes. So, even temporary stoppage as long as it is not
within the ordinary business of the corporation, requires a ratification or approval by the stockholders.

Q: What do you mean by bonded indebtedness? A: It refers to negotiable corporate bonds, which is
secured by mortgage or corporate property.

CALTEX (PHILS) INC vs. PNOC SHIPPING AND TRANSPORT CORP 498 SCRA 400

While the Corporation Code allows the transfer of all or substantially all the properties and assets of a
corporation, the transfer should not prejudice the creditors of the assignor. The only way the transfer can
proceed without prejudice to the creditors is to hold the assignee liable for the obligations of the assignor.
The acquisition by the assignee of all or substantially all of the assets of the assignor necessarily includes
the assumption of the assignor’s liabilities, unless the creditors who did not consent to the transfer choose
to rescind the transfer on the ground of fraud. To allow an assignor to transfer all its business, properties
and assets without the consent of its creditors and without requiring the assignee to assume the assignor’s
obligations will defraud the creditors. The assignment will place the assignor’s assets beyond the reach of
its creditors.

CLASSIC ULTRA VIRES

MONTELIBANO VS BACOLOD-MURCIA MILLING CO. INC. G.R. No. L-15092 May 18, 1962
It is a well-known rule of law that questions of policy or of management are left solely to the honest decision
of officers and directors of a corporation, and the court is without authority to substitute its judgment of the
board of directors; the board is the business manager of the corporation, and so long as it acts in good faith
its orders are not reviewable by the courts. There can be no doubt that the directors of the Bacolod-Murcia
had authority to modify the proposed terms of the Amended Milling Contract for the purpose of making its
terms more acceptable to the other contracting parties. The rule is that —
It is a question, therefore, in each case of the logical relation of the act to the corporate purpose expressed
in the charter. If that act is one which is lawful in itself, and not otherwise prohibited, is done for the purpose
of serving corporate ends, and is reasonably tributary to the promotion of those ends, in a substantial, and
not in a remote and fanciful sense, it may fairly be considered within charter powers. The test to be applied
is whether the act in question is in direct and immediate furtherance of the corporation's business, fairly
incident to the express powers and reasonably necessary to their exercise. If so, the corporation has the
power to do it; otherwise, not. (Fletcher Cyc. Corp., Vol. 6, Rev. Ed. 1950, pp. 266-268) As the resolution in
question was passed in good faith by the board of directors, it is valid and binding, and whether or not it will
cause losses or decrease the profits of the central, the court has no authority to review them.

ZOMER DEVELOPMENT CORPORATION VS. INTERNATIONAL EXCHANGE BANK G.R. NO. 150694 :
March 13, 2009
Petitioner cannot hide behind the cloak of ultra vires for a defense. x x x x The plea of ultra vires will not be
allowed to prevail, whether interposed for or against a corporation, when it will not advance justice but, on
the contrary, will accomplish a legal wrong to the prejudice of another who acted in good faith
REPUBLIC VS. ACOJE MINING CO. INC. G.R. No. L-18062 February 28, 1963
While as a rule an ultra vires act is one committed outside the object for which a corporation is created as
defined by the law of its organization and therefore beyond the powers conferred upon it by law (19 C.J.S.,
Section 965, p. 419), there are however certain corporate acts that may be performed outside of the scope
of the powers expressly conferred if they are necessary to promote the interest or welfare of the
corporation. Thus, it has been held that "although not expressly authorized to do so a corporation may
become a surety where the particular transaction is reasonably necessary or proper to the conduct of its
business,"1 and here it is undisputed that the establishment of the local post office is a reasonable and
proper adjunct to the conduct of the business of appellant company. Indeed, such post office is a vital
improvement in the living condition of its employees and laborers who came to settle in its mining camp
which is far removed from the postal facilities or means of communication accorded to people living in a city
or municipality.

MAGALLANES WATERCRAFT ASSOCIATION, INC. VS. AUGUIS GR No. 211485 May 30, 2016
The fact alone that neither the articles of incorporation nor the by-laws of MWAI granted its Board the
authority to discipline members does not make the suspension of the rights and privileges of the
respondent’s ultra vires. In National Power Corporation v. Vera, the Court stressed that an act might be
considered within corporate powers, even if it was not among the express powers, if the same served the
corporate ends, to wit: For if that act is one which is lawful in itself and not otherwise prohibited, and is done
for the purpose of serving corporate ends, and reasonably contributes to the promotion of those ends in a
substantial and not in a remote and fanciful sense, it may be fairly considered within the corporation’s
charter powers
This Court is guided by jurisprudence in the application of the above standard. In the 1963 case of Republic
of the Philippines v. Acoje Mining Company, Inc. the Court affirmed the rule that a corporation is not
restricted to the exercise of powers expressly conferred upon it by its charter, but has the power to do what
is reasonably necessary or proper to promote the interest or welfare of the corporation.
In University of Mindanao vs. BSP, the Court wrote that corporations were not limited to the express
powers enumerated in their charters, but might also perform powers necessary or incidental thereto, to wit:
A corporation may exercise its powers only within those definitions. Corporate acts that are outside those
express definitions under the law or articles of incorporation or those “committed outside the object for
which a corporation is created” are ultra vires. The only exception to this rule is when acts are necessary
and incidental to carry out a corporation’s purposes, and to the exercise of powers conferred by the
Corporation Code and under a corporation’s articles of incorporation. . . . Montelibano, et al. v. Bacolod-
Murcia Milling Co., Inc. stated the test to determine if a corporate act is in accordance with its purposes: It
is a question, therefore, in each case, of the logical relation of the act to the corporate purpose expressed
in the charter. If that act is one which is lawful in itself, and not otherwise prohibited, is done for the purpose
of serving corporate ends, and is reasonably tributary to the promotion of those ends, in a substantial, and
not in a remote and fanciful, sense, it may fairly be considered within charter powers. The test to be applied
is whether the act in question is in direct and immediate furtherance of the corporation’s business, fairly
incident to the express powers and reasonably necessary to their exercise. If so, the corporation has the
power to do it; otherwise, not.

LOPEZ REALTY V. SPOUSES TANJANGCO G.R. No. 154291, November 12, 2014
In stock corporations, shareholders may generally transfer their shares. Thus, on the death of a
shareholder, the executor or administrator duly appointed by the Court is vested with the legal title to the
stock and entitled to vote it. Until a settlement and division of the estate is effected, the stocks of the
decedent are held by the administrator or executor.
However, there is a notable disparity between the facts in Dumlao and the instant case. In Dumlao, the
corporate secretary therein recorded, prepared and certified the correctness of the minutes of the meeting
despite the fact that not all directors signed the minutes.

the basis in determining the presence of quorum in nonstock corporations is the numerical equivalent of all
members who are entitled to vote, unless some other basis is provided by the By-Laws of the corporation.
The qualification "with voting rights" simply recognizes the power of a non-stock corporation to limit or deny
the right to vote of any of its members. To include these members without voting rights in the total number
of members for purposes of quorum would be superfluous for although they may attend a particular
meeting, they cannot cast their vote on any matter discussed therein.
others but not more than fifteen (15) in number,