CORPORATION LAW: REVISED
(R.A. 11232; EFFECTIVE ON: May 1, 1980)
- OLD: BP 68
 GR: any person (of legal age)/partnership/association/
corporation, singly or jointly with others, not less than 5 but
not more than 15 in number, may organize a corporation
for any lawful purpose or purposes.
 EXC: natural persons/partnertships/associations licensed or
organized for the purpose of practicing a profession
A. FOUR (4) ATTRIBUTES:
1. An artificial being with a separate and distinct juridical
personality;
2. Created by operation of law; (require special authority from the
State)
 By General Law – by compliance with Corp. Code
o PRIVATE CORPORATION – E.g. SMDC,
Ayala, San Miguel, GOCCs (GOCCs is
considered a private corp. though created by
special laws)
 By Special Law – E.g. controlled corporations
o PUBLIC CORPORATION - if the corporation is
created for a political/public purpose connected
with the administration of the government;
o NOTE: corporations created by special laws shall
be governed by said law; Corporation Code will
only apply suppletorily
3. Enjoys the right of succession; AND
 GR: perpetual existence
 EXC: unless otherwise provided by its AoI
 NOTE:
o For those with a specific term, its period may be
extended/shortened by amending the AoI.
However, no extension may be made earlier than
3 years prior to the original/subsequent expiry
date.
o Corporations with certificates of incorporation
issued prior to this code, and which continues to
exist, shall have perpetual existence UNLESS the
corporation (upon a vote of its stockholders
representing a majority of its outstanding CS)
notifies the SEC that it elects to retain its specific
corporate term pursuant to its AOI.
4. Has powers, attributes and properties expressly authorized by
law or incident to its existence.
 Has constitutional rights.
o Due Process (right to be heard)
o Equal Protection Clause (all persons similarly
situated must be treated alike)
o Protection against unreasonable searches and
seizures
 Moral Damages.
o GR: is not entitled to damages because it has no
feelings
o EXC: if it’s good reputation has been tarnished
 Liability for torts/quasi-delict (there is negligence that
resulted to damage).
o Is liable for acts committed by its officer or agent
 Liability for crimes.
o GR: may be sued but it cannot be held liable for a
crime since it cannot be imprisoned.
o EXC: unless otherwise expressly provided by law
o NOTE: the guilty officers themselves may be
liable, and/or the corporation may be made to pay
a fine
B. CLASSES OF CORPORATION
1. STOCK:
 Has capital stock divided into shares.
 Is authorized to distribute to holders of such shares,
dividends.
 Not required to have a minimum CS, unless otherwise
provided by law.
2. NONSTOCK - no part of its income is distributable as
dividends to its members
TERMS:
 SERIES OF SHARES - subdivision of a class of shares.
 ONE PERSON CORPORATION - corporation with a
single stockholder
 CORPORATORS – those who compose the corporation
 INCORPORATORS – those in the AoI
 STOCK/SHAREHOLDERS – corporators in a stock
corporation, whether natural or juridical persons
 MEMBERS – corporators in a non-stock corporation
NOTE:
 Shares may be: common shares, or preferred shares.
 Shares of stock corporations may be divided into
classes/series of shares, or both.
 A corporation may issue only 1 class/kind of share.
 There must be at least 1 class of stock with voting rights.
 Each incorporator of a stock corporation must own/be a
subscriber to at least 1 share of the CS.
C. CAPITAL STOCK/AUTHORIZED CS – represents the
equity of the stockholders in the corporate asset; amount fixed in the
AoI to be subscribed and paid in by the shareholders (in
money/property/labor/service)
TERMS:
 SUBSCRIBED CAPITAL STOCK - amount of the
capital stock subscribed (whether fully paid or not);
connotes an original subscription contract for the
acquisition by a subscriber of unissued shares in a
corporation
 OUTSTANDING CAPITAL STOCK - portion of the
capital stock which is issued and held by persons other than
the corporation itself.
 PAID UP CAPITAL STOCK – paid portion of the
subscribed or outstanding capital stock
 UNISSUED CAPITAL STOCK – unissued or
unsubscribed portion of the capital stock; it does not vote
and draws no dividents
 LEGAL CAPITAL - amount equal to the aggregate par
value and/or issued value of the outstanding capital stock.
 FOUNDER’S SHARE - shares issued to the organizers or
promoters of a corporation in consideration of some
supposed right or property
 REDEEMABLE/CALLABLE SHARES - shares (usually
preferred) which may be bought back at a fixed date or at
the option of either the issuing coporation, or the
stockholder, or both at a certain redemption price; may be
issued by the corporation when expressly provided in the
AOI
 TREASURY SHARES - shares which have been issued
and fully paid for, but subsequently reacquired by the
issuing corporation (by redemption, purchase, donation,
etc.); may be disposed of for a reasonable price fixed by the
BoD
D. CAPITAL STOCK VS CAPITAL
 CAPITAL - concrete (actual corporate property); fluctuates
depending on the P/L of the corporate assets; entire
property or assets of the corporation
 CAPITAL STOCK – abstract (it’s just an amount); fixed
E. ARTICLE OF INCORPORATION
CONTENT: name of the corporation, purpose, principal office,
term of existence, incorporators, directors/trustees, capitalization,
contribution, contents of Treasurer’s affidavit
MAY BE AMENDED BY:
 Resolution by the BoD/BoT – majority vote
 Vote/Written assent of the:
o STOCK CORPORATION: stockholders
representing 2/3rds of the CS
o NON-STOCK: 2/3rds of the members
FOUR (4) GROUNDS WHEN AoI/AMENDMENT MAY BE
REJECTED:
1. Non-compliance with the form prescribed by the Code.
2. Purpose is illegal/Immoral.
3. Treasurer’s Affidavit is false.
4. Ownership of CS to be owned by Filipino citizens has not
been complied with.
F. CORPORATE NAME
PROPOSED NAME MUST:
 End with the word “Incorporated”, “Inc.”, or “Corporation”
NOT BE:
 Identical; OR
 Deceptively/Confusingly similar to that of any existing
corporation/name protected by law
G. COMMENCEMENT OF CORPORATE EXISTENCE
AND JURIDICAL PERSONALITY
 Only from the moment the SEC issues to the incorporators
a certificate of incorporation under its official seal.
H. DE FACTO CORPORATION VS CORPORATION
BY ESTOPPEL
 DE FACTO CORPORATION - a corporation which
actually exists but which has no legal right to corporate
existence (E.g. has not complied with all the requirements
but nonetheless has complied substantially with the
requirements of the SEC and was issued a Certificate of
Incorporation); treated as if it were a valid corporation
 CORPORATION BY ESTOPPEL - all persons who
assume to act as a corporation knowing it to be without
authority to do so shall be (personally) liable as a general
partner
I. EFFECTS OF NON-USE OF CORPORATE
CHARTER
 CORPORATION DOES NOT FORMALLY ORGANIZE
AND COMMENCE TRANSACTION OF ITS BUSINESS
OR THE CONSTRUCTION OF ITS WORKS W/IN 5
YEARS FROM DATE OF INCORPORATION: deemed
revoked as of the day following the end of the 5-year
period
 CORPORATION COMMENCED BUSINESS BUT
BECAME INOPERATIVE FOR 5 YEARS: SEC may,
after due notice and hearing, place the corporation under
delinquent status
NOTE:
 A delinquent corporation shall have a period of 2 years to
resume operations and comply with all the requirements
that SEC shall prescribe.
 Upon compliance, SEC shall issue an order lifting the
delinquent status.
 Failure to comply with the requirements/resume operations
within the period given by SEC shall cause the revocation
of the corporations Certificate of Incorporation.
J. BoD/BoT
 GR: BoD/BoT shall exercise the corporate powers of all
corporations
 EXC: unless otherwise expressly provided by law
NUMBER: not less than 5 but not more than 15
QUALIFICATIONS:
1. BoD: must own at least 1 share of stock, and must
continuously own at least a share of stock during his term;
BoT: must be a member; OTHERWISE, he shall
automatically cease to be a Director/Trustee;
2. Of legal age;
3. Must not have been convicted of a violation of the
Corporation Code within 5 years prior to his election, or an
offense punishable by imprisonment for more than 6 years;
4. Majority of the Directors/Trustees must be residents of the
Philippines.
GROUND FOR DISQUALIFICATION: [if w/in 5 years prior to
the election/appointment, the person was…]
1. Convicted by final judgment of an offense punishable by
imprisonment for more than 6 years, for violating the Code
and for violating RA 8799 ("The Securities Regulation
Code);
2. Found administratively liable for any offense involving
fraudulent;
3. Found by a foreign court or equivalent foreign regulatory
authority for acts, violations, or misconduct similar to those
enumerated in paragraphs 1 and 2 above.
REQUISITES FOR REMOVAL:
1. Must take place during a meeting of the corporation
(regular or special);
2. There must be previous notice to the stockholders/members
of the corporation of the intention to propose such removal
at the meeting,
3. Must be by a vote of:
o STOCK CORP: Stockholders holding 2/3rds of
the outstanding CS
o NON-STOCK: 2/3rds members entitled to vote
NOTE:
 SEC shall motu proprio (upon verified complaint), and
after due notice and hearing, order the removal of a
Director or Trustee elected despite the
disqualification, or whose disqualification arose or is
discovered subsequent to an election.
 The removal of a disqualified Director/Trustee shall
be without prejudice to other sanctions that the SEC
may impose on the BoD/BoT who, with knowledge of
the disqualification, failed to remove the Director or
Trustee.
ELECTION:
 At any meeting called for the election of Directors or
Trustees, there must be owners of majority of the
outstanding CS, or majority of members entitled to vote.
o A representative may vote provided he is
authorised to act by written proxy.
 Voting by raising of hands is valid, except when there is a
request that the election must be by ballot.
 If a quorum is present, the candidates receiving the highest
number of votes shall be declared valid.
o QUORUM - minimum number of persons
belonging to a legislative assembly, a
corporation, society, or other body required in
order to conduct business; number of
membership of a collective body which is
competent to transact its business, or do any other
corporate act
 STOCK CORP: based on the number
of outstanding voting stocks; OR 50%
+ 1 of the number of Directors as fixed
in the AoI
 This does not change even
though there may be
vacancies.
 NON-STOCK: based on the actual, and
living members with voting rights
REPORT OF ELECTION:
 Submit to the SEC the names, nationalities and residence of
the Directors, Trustees, and officers elected w/in 30 days
after their election.
 Death, resignation, or cessation to hold office for any
reason shall be reported in writing to the SEC within 7 days
from knowledge thereof.
 The non-holding of elections and the reasons therefor shall
be reported to the SEC w/in 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 60) days from the
scheduled date.
 If no new date has been designated, or if the rescheduled
election is likewise not held, the SEC 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.
VANCANCY IN THE OFFICE OF DIRECTOR/TRUSTEE:
 OTHER THAN BY REMOVAL OR BY EXPIRATION
OF TERM: may be filled by the vote of at least a majority
of the remaining Directors/Trustees if still constituting a
quorum; OTHERWISE, it must be filled by the
stockholders/members in a regular or special meeting
called for that purpose
 DUE TO TERM EXPIRATION: election shall be held no
later than the day of such expiration at a meeting called for
that purpose
 DUE TO REMOVAL: election may be held on the same
day of the meeting authorizing the removal; this fact must
be so stated in the agenda and notice of said meeting
 IN ALL OTHER CASES: election must be held no later
than 45 days from the time the vacancy arose
o A Director/Trustee elected to fill a vacancy shall
be referred to as Replacement Director/Trustee,
and shall serve only for the unexpired term of the
predecessor in office.
o The action by the designated Director/Trustee
shall be limited to the emergency action
necessary, and the term shall cease w/in a
reasonable time from the termination of the
emergency or upon election of the Replacement
Director/Trustee, whichever comes earlier.
o The Corporation must notify the SEC w/in 3 days
from the creation of the Emergency Board,
stating therein the reason for its creation.
COMPENSATION OF DIRECTORS/MEMBERS:
 GR: not entitled to receive any compensation, except for
reasonable per diems
 EXC: when a compensation is fixed in the by-laws, or
when granted by the vote of stockholders during a meeting
NOTE:
 The total yearly compensation of Directors shall not
exceed 10% of the EBIT of the corporation during the
preceding year.
 Directors/Trustees shall not participate in the
determination of their own per diems/compensation.
 Corporations vested with public interest shall submit
to their shareholders and the SEC an annual report of
the total compensation of each of their
Directors/Trustees.
LIABILITY OF DIRECTORS/TRUSTEES/OFFICERS:
 GR: not liable for business losses incurred because of
honest bad judgment as long as there was good faith the
exercise of his function
 EXC: arises from their gross negligence, or unauthorized
acts, or violation of their duties
DEALINGS OF DIRECTORS/TRUSTEES/OFFICERS:
- when the Director/Trustee, Officer, or their spouses and relatives
within the 4th civil degree of consanguinity/affinity personally
contracts with the same corporation wherein he is a
Director/Trustee/Officer
 GR: contract is voidable, at the option of the corporation
 EXC: when all the following requirements are present:
o Presence of such DTO in the board meeting was
not necessary to constitute a quorum;
o Vote of such DTO was not necessary for the
approval of the contract;
o Contract is fair and reasonable; AND
 o If in case of an officer, the contract has been L. MANDATORY CORPORATE OFFICERS
previously authorized by the BOD; OR 1. PRESIDENT – must be a Director
o If in case of corporations vested with public 2. TREASURER - may not be a Director; must be a resident
interest, material contracts are approved by at 3. SECRETARY - may not be a Director; must be a resident
least 2/3rds of the entire membership of the citizen of the Philippines
board, with at least a majority of the independent 4. Such other officers as may be provided in the bylaws
directors voting to approve the material contract. 5. COMPLIANCE OFFICER - required only if the
CONTRACTS BETWEEN CORPORATIONS WITH corporation is vested with public interest
INTERLOCKING DIRECTORS:
- when some/all of the Directors of a corporation are also Directors of NOTE:
another corporation, and they entered into a contract with each other  GR: any 2 positions may be held concurrently by the same
 GR: contract is valid person
 EXC:  EXC: no one shall act as:
o Contact is not fair and reasonable. o President and Treasurer at the same time; OR
o There is fraud. o President and Secretary at the same time
NOTE: M. EXECUTIVE COMMITTEE (optional)
 If the interest of the interlocking director in one (1)  May be created by the By-Laws of the corporation.
corporation is substantial and the interest in the other COMPOSITION: 3 Directors
corporation, or corporation is merely nominal, the AUTHORITY: to the extent provided in the By-Laws
contract shall be subject to the provisions of the  GR: may be delegated any power by virtue of the By-Laws,
preceding section insofar as the latter corporation or or by majority vote of the Board
corporations are concerned.  EXC:
 Stockholdings exceeding 20% of the outstanding CS o Approval of any action for which shareholders'
shall be considered substantial for purposes of approval is also required;
interlocking directors. o Filling of vacancies in the Board;
DISLOYALTY OF A DIRECTOR: o Amendment/Repeal of By-Laws, or the adoption
- when he acquires for himself a business opportunity which should of new By-Laws;
belong to the corporation o Amendment/Repeal of any resolution of the
 CONSEQUENCE: he must refund to the corporation all the Board which by its express terms is not
profits he realized from the said business opportunity; this amendable/repealable; AND
rule is notwithstanding the fact that the director risked his o Distribution of cash dividends to the
own funds in the venture
shareholders.
NOTE:
 BoD: shall be elected for a term of 1 year from among the
N. CORPORATE POWERS AND CAPACITY
1. EXPRESS POWERS – expressly authorized by the Code, and
holders of stocks registered in the corporation's books
the AoI
 BoT: shall be elected for a term not exceeding 3 years from
2. INCIDENTAL POWERS
among the members of the corporation
 Right to succession
 BoD/BoT: shall hold office for 1 year until the successors
 Right to corporate name
are elected and qualified
 Right to make By-Laws for its government
o If the 1 year period had already lapsed but the
 Right to sue, and be sued
successor has not yet been elected, the Director
 Right to acquire and hold properties for the purposes
will still function as a Director until his
authorized by the charter
replacement is ready.
 Right to contract
ADDITIONAL CONCEPT:
3. IMPLIED POWERS - those that can be inferred from, or
 INDEPENDENT DIRECTOR - a person who, apart from
necessary for the exercise of the express powers
shareholdings and fees received from the corporation, is
 Acts in the usual course of business. - includes borrowing
independent of management and free from any business or
money, making ordinary contracts, executing promissory
other relationship which could, or could reasonably be
notes, etc.
perceived to materially interfere with the exercise of
 Acts to protect its employees
independent judgment in carrying out the responsibilities as
 Acts to increase business
a director
A. GENERAL POWERS
The Board of the following corporations vested with public interest
 To sue, and be sued
shall have Independent Directors constituting at least 20% of such
 Of succession
Board:
 Adopt a corporate seal
 Corporations covered by Section 17.2 of RA 8799 (“The
 Amend AoI
Securities Regulation Code"): those whose securities are
 Adopt By-Laws
registered with the SEC; corporations listed with an
 Sell stocks
exchange; or with assets of at least P50M, and having 200
 Sell, lease, and mortgage property
or more holders of shares, each holding at least 100 shares
 Enter into merger, or consolidation
of a class of its equity shares;
 Make reasonable donations
 Banks and quasi-banks, non-stock savings and loan
 Establish pension/retirement plan
associations, pawnshops, corporations engaged in money
 Exercise other powers necessary to carry out its purpose
service business, preneed, trust and insurance companies,
B. SPECIFIC POWERS
and other financial intermediaries; and
 Power to extend, or shorten corporate term
 Other corporations engaged in businesses vested with
 Power to increase, or decrease CS
public interest similar to the above, as may be determined
 Power to deny pre-emptive right
by SEC.
 Sale/Disposition of all or substantially all of its assets
K. METHODS OF VOTING  Power to acquire own shares
STOCK CORPORATION:  Power to invest corporate funds in another corp./business
1. STRAIGHT VOTING - every stockholder may vote such  Power to declare dividends
number of shares for as many persons as there are directors  Power to enter into a management contract
to be elected (E.g. 100 shares x 5 directors to be chosen =  Ultra vires acts of corporations
500 votes; 100 each director)
O. POWER TO EXTEND, OR SHORTEN CORPORATE
2. CUMULATIVE VOTING FOR ONE CANDIDATE -
(E.g. 100 shares x 5 directors to be chosen = 500 votes; he TERM
can use all 500 of his votes and vote a single candidate) HOW TO AMEND AoI:
3. CUMULATIVE VOTING BY DISTRIBUTION - a  Majority vote of the BoD; AND
stockholder may distribute his votes among as many  Vote of stockholders representing 2/3rds of the Outstanding
candidates he shall see fit (E.g. 100 shares x 5 directors to CS
be chosen = 500 votes; he can use the 500 votes distributed NOTE:
to only 3 candidates)  In the event of an extension, dissenting stockholders are
NON-STOCK CORPORATION: granted an appraisal right (right to demand payment of the
 GR: members may cast as many votes as there are trustees FV of his shares).
to be elected P. POWER TO INCREASE, OR DECREASE CS
 EXC: he can only cast 1 vote per candidate REASONS FOR INCREASING CS:
 To generate more working capital.
 To have more shares to acquire more assets.
REQUISITES:
 Majority vote of the BoD; AND W. ULTRA VIRES ACTS OF CORPORATIONS
 Vote of stockholders representing 2/3rds of the Outstanding ULTRA VIRES - acts done beyong the powers of the corporation as
CS provided by law/in its AoI, or entered into in behalf of a corporation
o IN CASE OF INCREASE IN CS: Treasurer’s by persons who have no corporate authority, or which are per se
Affidavit is required (at least 25% of the illegal as being contrary to law
approved increase in the capital must be  EFFECT: cannot be enforced by either party.
subscribed, and at least 25% has been paid in o IF THE CONTRACT WAS ALREADY
cash/property ENFORCED BY BOTH: there can be no
o IN CASE OF DECREASE OF CS: the same nullification of the contract
must not prejudice the right of the creditors o IF THE CONTRACT HAS BEEN
 Filing with the SEC PERFORMED ON ONE SIDE, AND THE
 Approval of the SEC OTHER HAS ALREADY RECEIVED
Q. POWER TO DENY PRE-EMPTIVE RIGHT BENEFITS BY REASON OF SUCH
PRE-EMPTIVE RIGHT - preferential right of a shareholder to PERFORMANCE: recovery is permitted on
subscribe to all issue of shares in proportion to their present behalf of the former (principle of unjust
shareholding; (E.g. A owns 500 shares in Corporation X. CS is enrichment)
increased. A must be given a right to subscribe to 500 of the new X. ADOPTION OF BY-LAWS
shares before they are offered to others. However, If A is allowed to AoI:
subscribe to a lesser amount, his voting control right, right to  Fundamental law of the corporation.
dividends, and/or right to net corporate assets after liquidation will be  Executed before incorporation.
reduced.)  Filing is a condition precedent to corporate existence.
 PURPOSE: to enable the shareholder to retain his  Power to amend cannot be delegated by the
proportionate control in the corporation, and his equity in stockholders/members to the BoD/BoT.
the surplus 
 MAY BE DENIED BY: BY-LAWS:
o AoI; OR  Merely rules and regulations adopted by the corporation.
o Amendment of the AoI  May be executed after incorporation.
R. SALE/DISPOSITION OF ALL OR  Filing is a condition subsequent. - its absence merely
SUBSTANTIALLY ALL OF ITS ASSETS furnishes a ground for the revocation/suspension of the
REQUISITES: certificate of incorporation
 Majority vote of the BoD; AND  Power to amend may be delegated by the
 Vote of stockholders representing 2/3rds of the Outstanding stockholders/members to the BoD by the stockholders
CS owning 2/3rds of the outstanding CS
 Dissenting stockholder shall have the option to exercise his  Rules of action adopted by a corporation:
appraisal right o for its internal government;
o REASON: stockholders have common law o for the regulation of conduct;
proprietary interest on the corporate business o which prescribe the rights and duties of
enterprise stockholders or members toward itself and among
 VOID: if effected by the BoD w/o the themselves in reference to the management of its
stockholder’s approval affairs;
S. POWER TO ACQUIRE OWN SHARES o to supplement the articles of incorporation.
INSTANCES: PROCEDURE:
 To eliminate fractional shares  BEFORE INCORPORATION:
o FRACTIONAL SHARES - shares which are less o Must be signed, and approved by all the
than one corporate share (E.g. ½ share) incorporators; AND
 To collect/compromise an indebtedness to the corporation o Filed with the SEC, together with the AoI
arising out of an unpaid subscription  AFTER:
 To pay dissenting/withdrawing stockholders entitled to o Must be filed after 1 month from the issuance of
payment for their shares the certificate of incorporation;
T. POWER TO INVEST CORPORATE FUNDS IN o Vote of the stockholders representing at least a
ANOTHER CORPORATION/BUSINESS majority of the outstanding CS, or a majority of
 GR: investment of funds is limited to the primary purpose the members; AND
 EXC: o Signed by the stockholders/members voting for
o PRIMARY PURPOSE: approval of the BoD them
o SECONDARY PURPOSE: approval of the BoD, REQUISITES FOR VALIDITY: [must…]
AND vote of stockholders representing 2/3rds of  Not be contrary to law/Code;
the Outstanding CS  Not be contrary to morals and public policy;
U. POWER TO DECLARE DIVIDENDS  Not impair obligations and contracts;
DIVIDEND - part of the profit/net earnings that the corporation has  Be general and uniform in their operation, and not directed
set aside for distribution to the stockholders against particular individuals;
 GR: BoD may, after a majority vote, issue cash/property  Be consistent with the AoI; AND
dividends  Be reasonable (not arbitrary/oppressive).
 EXC: issuance of stock dividends requires the vote of CONTENT:
stockholders representing 2/3rds of the Outstanding CS  Time, place, and manner of special meetings
 KINDS: o of Directors/Trustees
1. Cash Dividends o of stockholders/members
2. Property Dividends  Time for holding the annual election
3. Stock Dividends  Required quorum of stockholders/members
 Taken from the unrestricted retained earnings, or simply  Form for proxies of stockholders/members
profits  On Directors/Trustees:
PROFITS - not dividend, until declared by the corp; all profits are o Qualifications
part of the assets of the corporation, and do not belong to the o Disqualifications
stockholders individually o Election
UNRESTRICTED RETAINED EARNINGS/ACCUMULATED o Term of office
PROFITS - realized out of normal operations of the business which o Compensation
have not been reserved/set aside by the BoD for some corporate  Penal Clause - penalty for violation of the By-Laws
purpose  Manner of issuing stock corporations
V. POWER TO ENTER INTO A MANAGEMENT TWO (2) WAYS TO AMEND BY-LAWS:
CONTRACT 1. Majority of the BoD, and vote of shareholders owning a
MANAGEMENT CONTRACT - any contract whereby a corporation majority outstanding CS; OR
undertakes to manage/operate all or substantially all of the business 2. Delegation by the shareholders owning 2/3rds of the
of another corporation outstanding CS (not just a majority) the right to amend the
REQUISITES: By-Laws to the BoD
 Approval of majority of the BoD; AND
 Ratification of the stockholders

Y. MEETINGS - meetings of Directors/Trustees, or
stockholders/members
WHO SHALL PRESIDE:
 GR: President
 EXC: unless otherwise provided by the By-Laws
A. MEETINGS OF STOCKHOLDERS/MEMBERS
KINDS:
1. REGULAR – once a year
 Annually, on a date fixed in the By-Laws; OR
 IF NOT FIXED: on any date after April 15 of every year
 Written notice of the regular meeting must be sent to all
stockholders/members:
o At least 21 days prior to the meeting; OR
o IF FIXED IN THE BY-LAWS: a different period
2. SPECIAL – held any time
 As may be deemed necessary; OR
 As provided by the By-Laws.
 Written notice of the special meeting must be sent to all
stockholders/members:
o At least 1 week prior to the meeting; OR
o IF FIXED IN THE BY-LAWS: a different period
PLACE:
 In the city/municipality (E.g. Metro Manila) where the
principal office of the corporation is located.
 IF PRACTICABLE: in the principal office of the
corporation
QUORUM IN MEETINGS:
 GR: shall consist of the stockholders representing:
o STOCK: majority of the outstanding CS
o NON-STOCK: majority of the members
 EXC: unless otherwise provided by the By-Laws
NOTE:
 Notice of meetings shall: be sent through the means of
communication provided in the By-Laws; state the time,
place, and purpose of the meetings; and accompanied by:
o Agenda for the meeting;
o Proxy Form which shall be submitted to the
corporate secretary within a reasonable time prior
to the meeting;
o WHEN ATTENDANCE, PARTICIPATION,
AND VOTING ARE ALLOWED BY REMOTE
COMMUNICATION/IN ABSENTIA:
requirements and procedures to be followed when
a stockholder/member elects either option; AND
o WHEN THE MEETING IS FOR THE
ELECTION OF DIRECTORS/TRUSTEES:
requirements and procedure for nomination and
election
B. MEETINGS OF DIRECTORS/TRUSTEES
KINDS:
1. REGULAR
 GR: monthly
 EXC: unless otherwise provided by the By-Laws
2. SPECIAL
 GR: held any time called by the President
 EXC: unless otherwise provided by the By-Laws
PLACE:
 GR: anywhere
 EXC: unless otherwise provided for in the By-Laws that
certain meetings should be limited to certain places
NOTE:
 GR: a majority of the Directors/Trustees as stated in the
AoI shall constitute a quorum to transact corporate
business, and every decision reached by at least a majority
of the Directors/Trustees constituting a quorum (except for
the election of officers which shall require the vote of a
majority of all the members of the board) shall be valid as a
corporate act
 EXC: unless the AoI/By-Law provides for greater majority
 Directors/Trustees who cannot physically attend/vote at
Board Meetings can participate and vote through Remote
Communication (E.g. videoconferencing, teleconferencing,
or other alternative modes of communication that allow
them reasonable opportunities to participate).
 Directors/Trustees cannot attend/vote by proxy at Board
Meetings.
 A Director/Trustee who has a potential interest in any
related party transaction must recuse from voting on the
approval of the related party transaction without prejudice
to compliance with the requirements of Section 31 of this
Code.
Z. RIGHT TO VOTE OF SECURED CREDITORS AND
ADMINISTRATORS
 GR: [in case of pledged/mortgaged shares]
pledgor/mortgagor shall have the right to attend and to vote
at meetings of stockholders
 EXC: pledgee/mortgagee is expressly given by the
pledgor/mortgagor such right, in writing, and recorded in
the corporate books
NOTE:
 Executors/Administrators/Receivers/Other legal
representatives duly appointed by the Court may attend and
vote in behalf of the stockholders/members w/o need of any
written proxy.
AA. VOTING IN CASE OF JOINT OWNERSHIP OF
STOCK
 GR: consent of all the co-owners is necessary
 EXC:
o There is a written proxy signed by all the co-
owners, authorizing an individual to vote on their
behalf.
o If the shares are owned in an “and/or” capacity,
any one of the joint owners can vote.
BB. VOTING RIGHT FOR TREASURY SHARES
 GR: no right to vote, and no right to dividends
 EXC: treasury shares regain whatever dividends and voting
rights to which they were originally entitled after
reissuance
CC. PROXIES - designates the formal written authority given by
the owner of the stock to another person, to exercise his right to vote
 GR: may be revoked any time
 EXC: unless made irrevocable by the giver
REQUISITES: [must be…]
 In writing;
 Filed before the scheduled hearing; AND
 Signed by the Stockholder/Member.
VALIDITY:
 Only for the meeting which it was intended.
 A continuing proxy may be made, but it shall only be for a
maximum period of 5 years.
NOTE:
 When so authorized in the By-Laws/by a majority of the
BoD, the stockholders/members of corporations may also
vote through remote communication/in absentia.
o Provided that the votes are received before the
corporation finishes the tally of votes.
 A stockholder/member who participates through remote
communication/in absentia shall be deemed present for
purposes of quorum.
 The corporation shall establish the appropriate
requirements and procedures for voting through remote
communication/in absentia, taking into account the
company's scale, number of shareholders/members,
structure, and other factors consistent with the basic right of
corporate suffrage.
DD. VOTING TRUST
VOTING TRUST AGREEMENT (VTA) - an agreement whereby a
stockholder of a stock corporation confers upon a Trustee/s the right
to vote and other rights pertaining to the shares for a period not
exceeding 5 years
REQUISITES: [must be…]
 In writing;
 Notarized; AND
 Submitted to SEC
NOTE:
 The Certificate/s of Stock covered by the VTA shall be
cancelled, and new ones shall be issued in the name of the
Trustee/s, stating that they are issued pursuant to said
agreement.
 The books of the corporation shall state that the transfer in
the name of the Trustee/s is made pursuant to the VTA.
 The trustee/s shall execute and deliver to the transferors,
voting trust certificates, which shall be transferable in the
same manner and with the same effect as Certificates of
Stock.
EE. SUBSCRIPTION CONTRACT
THREE (3) WAYS TO BECOME A SHAREHOLDER:
1. By subscription;
2. By purchase of treasury shares from the corporation;
3. By transfer from a previous stockholder through either:
 Deed of Sale;
 Donation; OR
 Succession
SUBSCRIPTION CONTRACT – any contract for the acquisition of
unissued stock in:
 An existing corporation; OR
 A corporation still to be formed
NOTE:
 This is notwithstanding the fact that the parties refer to
is as a purchase or some other contract..

PRE-INCORPORATION SUBSCRIPTION - subscription for shares
of stock of a corporation still to be formed
 GR: irrevocable for a period of 6 months from the date of
subscription
 EXC:
o All the other subscribers consent to the
revocation; OR
o Incorporation fails to materialize.
NOTE:
 After the submission of the AOI with the SEC,
pre-incorporation subscription is absolutely
irrevocable.
INTEREST ON UNPAID SUBSCRIPTION: [subscribers for stock
shall pay to the corporation interest on all unpaid subscriptions from
the date of subscription…]
 If required by the By-Laws
o At the interest rate provided by the By-
Laws; OR
o IF SILENT: legal interest rate
WHEN TO PAY THE BALANCE OF UNPAID
SUBSCRIPTION:
 On the date specified in the Subscription
Contract; OR
 IF SILENT: on the date stated in the call made by
the BoD
o CALL - an official declaration made by
a corporation, expressed in the form of
a Board Resolution, requiring the
payment of all of a subscriber’s stock
subscription
FAILURE TO PAY THE BALANCE OF UNPAID
SUBSCRIPTION:
 Due and payable; AND
 All stocks covered by the said subscriptions will be
considered delinquent.
o GR: said delinquent shares of stock will be
subject to sale at a public auction,
o EXC: unless the BoD orders otherwise
EFFECT OF DELINQUENCY:
 HOLDER CANNOT:
o Vote; OR
o Be voted for.
 HOLDER CAN:
o Receive dividends.
ENTIRE PROCEDURE FOR SALE OF DELINQUENT
STOCKS:
 BoD passes a Resolution declaring payable the unpaid
subscription, stating the date fixed for payment.
 Stockholders are given Notice of the Board Resolution.
 BOARD RESOLUTION: if stockholders do not pay w/in
30 days from the date specified for payment, the shares will
be declared delinquent through another Board Resolution
 NOTICE: BoD orders the sale of the delinquent stocks in
an auction. A mail will be sent to the delinquent
stockholder.
 PUBLICATION - once a week for 2 consecutive weeks
 SALE: stocks will be sold in the auction to the highest
bidder. Proceeds will be applied to the amount due on
subscription, interest, advertisement, and expenses of the
sale.
QUESTION: Can the previous owner still question the sale of
the delinquent stocks?
ANSWER: Yes, but ON THE FOLLOWING GROUNDS:
 Irregularity in the notice of sale; OR
 Irregularity in the sale itself.
COURT ACTION TO RECOVER UNPAID SUBSCRIPTION:
 Through a delinquency sale at a public auction; AND
 Through Court of Action for specific performance.
RIGHT OF HOLDERS OF SUBSCRIBED SHARES NOT
FULLY PAID WHICH ARE NOT DELINQUENT: have all the
rights of a stockholder
 Right to vote;
 Be voted for; AND
 To receive dividends.
FF. CONSIDERATION FOR STOCKS
MAY BE ANY, OR A COMBINATION OF ANY 2 OR MORE
OF THE FF:
 Cash, actually received
 Property, actually received
 TANGIBLE: cars, buildings, lands, etc.
 INTANGIBLE: copyright, patents, trademarks, etc.
 Labor, actually rendered to the corporation
 Previously incurred indebtedness of the corporation - set-
off
 Amounts transferred from URE to stated capital
 Outstanding shares exchanged for stocks in the event of
reclassification/conversion
 Shares of stock in another corporation; AND/OR
 Other generallyaccepted form of consideration
NOTE:
 Shares of stock shall not be issued for a consideration less
than the par, or issued price thereof.
 Shares of stock shall not be issued in exchange for:
o Promissory notes; OR
o Future services
 WHEN THE CONSIDERATION IS OTHER THAN
ACTUAL: value thereof shall be initially determined by the
incorporators, or the BoD; subject to approval by the SEC
GG. CERTIFICATE OF STOCK – paper representation when
CS of stock corporations is divided into shares
 Expresses the contract between the corporation and the
stockholder.
 Not essential to the ownership and/or existence of the share
of stock.
 A prima facie evidence that the holder is a shareholder in a
corporation.
 Absent of Certificate of Stock, ownership of stocks may be
verified in the corporate books.
ISSUANCE:
 Shall not be issued to a subscriber until the full amount of
his subscription (together with interest and expenses if any)
has been paid.
 2 OPTIONS IN CASE OF PARTIAL PAYMENTS:
o Apply payment pro-rata among all the shares
subscribed, hence no issuance of Certificate of
Stocks; OR
o Issue Certificate of Stocks only in relation to the
amount paid.
NOTE:
 Mere inclusion in the Common Stock (GIS) Quote does not
prove ownership of a stock.
 Corporate Books is controlling as b/w the Common Stock
(GIS) Quote, and the Corporate Books.
LOSS/DESTROYED CERTIFICATES:
 AFFIDAVIT: Affidavit of Loss
 VERIFICATION: by the corporation in its Corporate
Books of the existence of the shares
 PUBLICATION: once a week for 3 consecutive weeks
 1 YEAR WAITING PERIOD: from the last publication,
wherein any one can challenge the application for new
Certificate of Stock
HH. TRANSFER OF SHARES
NOTE:
 Shares of Stock are personal property.
o Its owner may sell and transfer the same at will.
 To bind the corporation, the transfer must be registered in
the Corporate Books.
o FAILURE TO REGISTER:
 Sale is valid as b/w the transferor and
transferee.
 Sale is invalid as to third persons.
II. LIABILITY OF DIRECTORS FOR WATERED
STOCKS
WATERED STOCK - stock issued for no value at all, or for a value
less than its equivalent; (E.g. par value of the share is P100, only P80
was issued to the corporation, but the corporation issued the share as
fully paid; So, the share is considered “watered/fictitiously paid up”
to the extent of P20.)
 INCLUDES:
o Issued without consideration - Bonus Shares
o Issued as fully paid when the corporation has
received a lesser sum of money than its par value
- Discount Share
o Issued for a consideration other than actual cash,
such as property or services, the fair valuation of
which is less than its par value; OR
o Issued as stock dividend when there are no
sufficient RE/Surplus.
LIABILITY OF A DIRECTOR WHO ISSUED THE CERTIFICATE
OF STOCK, KNOWING THAT THE SUBSCRIBER PAID FOR
LESS THAN THE PAR VALUE: he is solidarily liable with the
stockholder concerned to the corporation and its creditors for the
difference between the amount received and the par value (E.g. P20)
JJ. CORPORATE BOOKS TO BE KEPT AT ITS
CORPORATE OFFICE
 AoI, By-Laws, and all their amendments;
 Current ownership structure, voting rights of the
corporation, lists of stockholders/members, group
structures, intra-group relations, ownership data, and
beneficial ownership;
 Names, and addresses of all the members of the BoD/BoT,
and the executive officers;
  A record of all business transactions;
 A record of the resolutions of the BoD/BoT, and of the
stockholders/members;
 Copies of the latest reportorial requirements submitted to
the SEC; and
 The minutes of all meetings of stockholders/members, or of
the BoD/BoT.
RIGHT TO INSPECT CORPORATE BOOKS:
 GR: directors, or stockholders’ right
o Must be done at a reasonable hours on a business
day.
 EXC:
o Must be for a legitimate purpose.
o Trade Secrets may not be disclosed.
NOTE:
 A requesting party who is not a stockholder/member of
record, or is a competitor, director, officer, controlling
stockholder or otherwise represents the interests of a
competitor shall have no right to inspect, or demand
reproduction of corporate records.
 Any stockholder who shall abuse the rights granted under
this section shall be penalized under Section 158 of this
Code, without prejudice to the provisions of RA 8293
("Intellectual Property Code of the Philippines) as
amended, and RA 10173 ("Data Privacy Act of 2012").
 Any officer or agent of the corporation who shall refuse to
allow the inspection and/or reproduction of records in
accordance with the provisions of this Code shall be liable
to such director, trustee, stockholder or member for
damages, and in addition, shall be guilty of an offense
which shall be punishable under Section 161 of this Code
 Any officer/agent of the corporation who shall refuse to
allow the inspection and/or reproduction of records in
accordance with the provisions of this Code shall be liable
to such Director/Trustee/Stockholder/Member for damages,
and in addition, shall be guilty of an offense which shall be
punishable under Section 161 of this Code.
 If the corporation denies or does not act on a demand for
inspection and/or reproduction, the aggrieved party may
report such denial or inaction to the SEC.
o W/in 5 days from receipt of such report, the SEC
shall conduct a summary investigation, and issue
an order directing the inspection/reproduction of
the requested records.
 Stock corporations must also keep a Stock and Transfer
Book.
o Shall contain a record of all stocks in the names
of the stockholders. - alphabetically arranged
o Installments paid and unpaid on all stocks for
which subscription has been made, and the date
of payment of any installment.
o Statement of every alienation/sale/transfer of
stock made, the date thereof, by and to whom
made.
o Such other entries as the By-Laws may prescribe.
STOCK TRANSFER AGENT - one engaged principally in the
business of registering transfers of stocks in behalf of a Stock
Corporation
 Allowed to operate in the Philippines upon securing a
license from the Commission.
KK. MERGER AND CONSOLIDATION
MERGER:
 CORP. A absorbs CORP. B.
o CORP A exists;
o CORP B is dissolved.
CONSOLIDATION:
 A new Corporation is created.
o CORP A and CORP B is dissolved;
o CORP C is born.
LL. APPRAISAL RIGHT - right of the stockholder to demand
payment of the FV of his shares
 Made only when after he dissented to a proposed corporate
action (involving a fundamental change in the corporation);
However, his dissent was over ruled by the majority.
WHEN CAN A STOCKHOLDER EXERCISE HIS APPRAISAL
RIGHT AGAIN:
 Amendment in the AOI.
o Changing the rights of the stockholders
o Changing Term of Corporate existence
 Sale/Lease/Mortgage/Pledge/Transfer of substantially all of
the corporate property .
 Investment in another corporation in a purpose other than
the primary purpose. – Sec. 42
 Merger/Consolidation. – Sec. 81
 IN A CLOSE CORPORATION: a stockholder may compel
the corporation to purchase his shares if the corporation has
sufficient assets in its books.
MM. HOW RIGHT IS EXERCISED
 Dissenting stockholder who votes against a proposed
corporate action may exercise the Right of Appraisal by
making a written demand on the corporation for the
payment of the FV of shares held w/in 30 days from the
date on which the vote was taken.
o WAIVER OF THE APPRAISAL RIGHT: failure
to make the demand within such period
NN. NON-STOCK CORPORATIONS - one where no part of
its income is distributable as dividends to its members
 Any profit it may obtain as an incident to its operations
shall be used for furtherance of the purposes for which the
corporation was organized.
 MAY BE USED FOR THE FOLLOWING PURPOSES:
o Charitable;
o Religious;
o Educational;
o Professional;
o Cultural;
o Scientific;
o Literary;
o Fraternal, Etc.
OO. CLOSE CORPORATIONS - a corporation in which the
stock is held in few hands, or in few families
ALL ITS ISSUED STOCK:
 Shall be held by not more than 20 persons.
 Shall be subject to transfer restrictions.
o Right of first refusal; AND
o Right of pre-emption by other stockholders.
 Shall not be listed in any stock exchange, or offered to the
public.
CANNOT BE CLOSE CORPORATIONS:
 Mining companies;
 Oil companies;
 Stock exchanges;
 Banks;
 Insurance companies;
 Public utilities;
 Educational institutions; AND
 Other corporations declared to be vested with public
interest
PP. SPECIAL CORPORATIONS
1. EDUCATIONAL CORPORATION
 May either be Stock, or Non-stock.
 PURPOSE: to provide facilities for teaching/instruction
 5-15 Trustees.
o Must be in multiples of 5.
 REQUISITE: prior favourable recommendation of DECS
2. RELIGIOUS CORPORATION
 A corporation composed entirely of spiritual persons.
 PURPOSE:
o For the furtherance of a religion;
o For perpetuating the rights of the Church; OR
o For the administration of the Church/religious
work/property.
 The Code does not require any religious group to be
registered as a corporation, but if it wants to acquire legal
personality, its members should incorporate under the
Code.
o CORPORATION SOLE - may be formed by the
Chief Archbishop/Bishop/Priest/Minister/Rabbi/
Other presiding elder for the purpose of
administering and managing, as Trustee, the
affairs, property and temporalities of any
religious denomination/sect/Church
QQ. ONE PERSON CORPORATIONS - a corporation with a
single stockholder
 May only be formed by a natural person/Trust/Estate.
 Not required to have minimum CS.
 Not required to have minimum Authorized CS, except as
otherwise provided by Special Law.
 Not required to submit, and file Corporate By-Laws.
MAY NOT INCORPORATE AS ONE PERSON CORP:
 Banks and quasi-banks, preneed, trust, insurance, public
and publicly-listed companies, and non-chartered GOCCs;
 A natural person who is licensed to exercise a profession,
except as otherwise provided under special laws.
AoI:
 Shall be filed in accordance with the requirements under
Section 14 of this Code, AND SHALL LIKEWISE
SUBSTANTIALLY CONTAIN:
 IF THE SINGLE STOCKHOLDER IS A
TRUST/ESTATE:
o Name, nationality, and residence of the
Trustee/Administrator/Executor/Guardian/Conser
vator/Custodian/Other person exercising
fiduciary duties, together with the proof of such
authority to act on behalf of the Trust/Estate;
 oName, nationality, residence of the nominee and
alternate nominee, and the extent, coverage and
limitation of the authority.
DISPLAY OF CORPORATE NAME:
 Indicate the letters "OPC" either below/at the end of its
corporate name.
SINGLE STOCKHOLDER AS DIRECTOR AND PRESIDENT:
 He shall be the sole Director and President.
TREASURER, CORPORATE SECRETARY, AND OTHER
OFFICERS:
 Appoint w/in 15 days from the issuance of its Certificate of
Incorporation; AND
o Notify the SEC thereof within 5 days from
appointment.
 A Single Stockholder may not be appointed as the
Corporate Secretary.
o A Single Stockholder, who is likewise the self-
appointed Treasurer, shall give a Bond to the
SEC in such a sum as may be required:
o Provided, that he shall undertake in writing to
faithfully administer the OPC funds to be
received Treasurer, and to disburse and invest the
same according to the AoI as approved by the
SEC.
o The Bond shall be renewed every 2 years, or as
often as may be required.
SPECIAL FUNCTIONS OF THE CORPORATE SECRETARY:
 Be responsible for maintaining the Minutes Book and/or
Records of the corporation;
 Notify the Nominee/Alternate nominee of the
death/incapacity of the Single Stockholder no later than 5
days from such occurrence;
 Notify the SEC of the death of the Single Stockholder w/in
5 days from such occurrence.
o State the names, residence addresses, and contact
details of all known legal heirs.
 Call the Nominee/Alternate nominee and the known legal
heirs to a meeting, and advise the legal heirs with regard to,
among others, the election of a new Director, amendment
of the AoI, and other ancillary and/or consequential
matters.
NOMINEE AND ALTERNATE NOMINEE:
 Designated by the single stockholder.
 In the event of the Single Stockholder's death/incapacity, he
takes the place of the Single Stockholder as Director, and
shall manage the corporation's affairs.
 TERM:
o WHEN THE INCAPACITY IS TEMPORARY:
until the stockholder, by self determination,
regains the capacity to assume such duties
o IN CASE OF DEATH OR PERMANENT
INCAPACITY: until the legal heirs of the single
stockholder have been lawfully determined, and
the heirs have designate one of them/have agreed
that the Estate shall be the Single Stockholder of
the OPC
LIABILITY OF SINGLE SHAREHOLDER:
 A Single Shareholder claiming Limited Liability has the
burden of affirmatively showing that the corporation was
adequately financed.
o WHERE HE CANNOT PROVE THAT THE
PROPERTY OF THE OPC IS INDEPENDENT
OF THE STOCKHOLDER'S PERSONAL
PROPERTY: he shall be jointly, and severally
liable for the debts and other liabilities of the
OPC
 “Principles of Piercing the Corporate Veil” applies with
equal force to OPC as with other corporations.
CONVERSION FROM AN ORDINARY CORP. TO OPC:
 ALLOWED ONLY:
o When a Single Shareholder acquires all the
stocks of an Ordinary Stock Corporation; AND
o After due notice to the SEC of such fact, and of
the circumstances leading to the conversion.
TWO (2) STEPS IN DISSOLUTION:
1. TERMINATION OF CORPORATE EXISTENCE
 Voluntary - shortening of corporate term by amending the
AoI; OR
 Involuntary – dissolved motu proprio/upon filing of a
verified complaint by interested party.
2. LIQUIDATION/WINDING UP OF ITS AFFAIRS
 Payment of its debts;
 Distribution of its assets;
 AFTER WINDING UP: the existence of the Corp. is
terminated for all purposes
APPLICATION FOR VOLUNTARY DISSOLUTION WITH
THE SEC:
 WHERE NO CREDITORS ARE AFFECTED: mere vote
of the BoD, and Stockholders
 WHERE CREDITORS ARE AFFECTED: SEC rules after
hearing of a petition for Voluntary Dissolution
GROUNDS FOR INVOLUNTARY DISSOLUTION:
 Non-use of Corporate Charter;
 Continuous in-operation;
 Upon receipt of a Lawful Court order dissolving the Corp;
 Upon finding by final judgment that the Corp. procure its
incorporation through fraud;
 Upon finding by final judgment that the corporation:
o Was created for the purpose of
committing/concealing/aiding the SEC of
securities violations/smuggling/tax
evasion/money laundering/graft and corrupt
practices;
o Committed/Aided in the SEC of securities
violations/smuggling/tax evasion/money
laundering/graft and corrupt practices, and its
stockholders knew of the same; AND
 Repeatedly and knowingly tolerated the SEC of graft and
corrupt practices/other fraudulent/illegal acts by its
Directors/Trustees/Officers/Employees.
RR. FOREIGN CORPORATION - formed/organized/existing
under the laws of another country
 Have the right to transact business in the Philippines after it
obtained a license to transact business from the SEC.
 Have Resident Agents (natural/juridical person) who may
receive in behalf of the Corp. notices, summons, and other
legal processes from the Court in case the Foreign Corp.
sues, or is sued.
LICENSE IS NECESSARY:
 To place them under the jurisdiction of the Courts;
 To place them in the same footing as Domestic Corps;
 To protect the public in dealing with said Corps.
SS. INVESTIGATIONS, OFFENSES, AND PENALTIES
IVESTIGATION AND PROSECUTION OF OFFENSES:
 SEC may investigate an alleged violation of the Code, or of
a rule/regulation/order of the Sec.
 SEC may publish its findings/orders/opinions/advisories/
information concerning any such violation, as may be
relevant to the general public/parties concerned, subject to
the provisions of RA 10173 ("Data Privacy Act of 2012”),
and other pertinent laws.
ADMNISTRATION OF OATHS, SUBPOENA OF WITNESSES,
AND DOCUMENTS:
 SEC, through its designated officer, may administer oaths
and affirmations, issue subpoena and subpoena duces
tecum, take testimony in any inquiry/investigation, and
may perform other acts necessary to the proceedings/to the
investigation.
CEASE AND DESIST ORDERS:
 Whenever the SEC has reasonable basis to believe that a
person has violated/is about to violate the
Code/rule/regulation/order of the SEC, it may direct such
person to desist from committing the act constituting the
violation.
 SEC may issue a cease and desist order ex parte to enjoin
an act/practice which is fraudulent/can be reasonably
expected to cause significant, imminent, and irreparable
danger/injury to public safety or welfare.
o EX PARTE ORDER: valid for a maximum of 20
days, without prejudice to the order being made
permanent after due notice and hearing
CONTEMPT:
 Any person who, without justifiable cause, fails/refuses to
comply with any lawful order/decision/subpoena issued by
the SEC shall, after due notice and hearing, be held in
contempt and fined in an amount not exceeding
P30,000.00.
ADMINISTRATIVE SANCTIONS:
 If, after due notice and hearing, the SEC finds that any
provision of the Code/rules/regulations/any of the SEC’s
orders has been violated, the SEC may impose any/all of
the following sanctions, taking into consideration the extent
of participation, nature, effects, frequency and seriousness
of the violation:
o Imposition of a fine ranging from P5,000.00 to
P2,000,000.00, and not more than PI,000.00 for
each day of continuing violation.
 In no case to exceed P2,000,000.00.
o Issuance of a permanent C&D order;
o Suspension/Revocation of the Certificate of
Incorporation; AND
 oDissolution of the Corp, and forfeiture of its
assets.
PENALTY FOR UNAUTHORIZED USE OF CORPORATE
NAME:
 Fine ranging from P10,000.00 to P200,000.00.