Law on Business Organizatons Reviewer

PARTNERSHIP failure to comply with the requirements of 

Arcle 1772, rst paragraph.
Ar
Ar. 1767. By the contract of partnership
. 1767.
two or more persons bind themselves to Parnership, a juridical person
contribute money, property, or industry to As an indeindepe
pend
nden
entt juri
juridi
dica
call pers
person
on,, a
a comm
common on fund
fund wi
with
th the
the inte
inten
non
on of  pa
part
rtne
ners
rshi
hipp may
may enter
enter into
into cont
contra
ract
cts,
s,
dividing the prots among themselves. acquire and possess property of all kinds in
its name, as well as incur obligaons and
Defniton brin
bringg civi
civill or cr
crim
imin
inal
al aco
aconsns.. Thus
Thus,, a
Partnership is a contract whereby two or
more persons bind themselves to partnership mayare
if the partners be declared insolvent
not. It may enter even
into
contribute money, property or industry to a contracts and may sue and be sued in its
common fund with the intenon of dividing rm
rm nameame or by its its duly
duly auth
uthor
oriized
zed
prots among themselves. representav
repres entave.
e. It is suc
sucient
ient that service
service
of summons be served on any partner.
Elemens
1. Intenon to form a contract of   Pa
Part
rtne
ners
rs cann
cannot
ot be held
held liab
liable
le fo
forr the
the
partnership obliga
obl igaon
onss of the partner
partnershishipp unless
unless it is
2. Parci
Parcipa
paon
on in
in bo
both
th p
pro
rots
ts and
and losse
lossess shown that the legal con of a dierent
3. Co
Comm
mmununit
ity
y of inte
intere
rest
stss  juridical personality is being used for a
fraudulent, unfair or illegal purpose.
Basic Feaures
1. Vo
Volu
lunt
ntar
ary
y agree
agreeme
mentnt Eec o ailure o comply wih sauory
2. Asso
Associ
cia
aon
on for
for pro
prot
t requiremens
3. Mutual
Mutual contri
contribu
buon
on tto
o a ccomm
ommon
on fund
fund Under Art 1772
4. Lawf
Lawful
ul pu
purp
rpos
ose
e or
or oobj
bject
ect Partnership sll acquires personality despite
5. Mutu
Mutual
al ag
agen
ency
cy of
of pa
part
rtne
ners
rs failure to comply with the requirements of 
6. Ar
Arc
cle
less must
must not
not bbe
e kept
kept secr
secret
et ex
exec
ecu
uon
on of publicblic instr
nstru
ume
ment
nt and
and
7. Separa
Separate
te juridi
juridical
cal per
person
sonali
ality
ty registraon of name in SEC.

Characeristcs Under Arts 1773 and 1775

1. Consensual – perfected by mere Part
Partner
nersh
ship
ip with
with imimmo
movavabl
ble
e prprop
opert
ertyy
consent. contributed, if without requisite inventory,
2. Bilateral – formed by two or more signed and aached to public instrument,
person
per sonss crea
creang
ng rec
recipr
iproca
ocall rights
rights and
and shalll not acqui
shal acquire
re any juridical personality
personality
obligaons. because the contract itself is void. This is
3. Prep
Prepar
arat
ator
ory
y - enter
entered
ed into
into as a me mean
anss also true for secret associaons or sociees.
to an end.
4. Nominate – has a specia cial name or To organize a parnership no an absolue
designaon. righ
5. Onero
Onerousus – contr
contrib
ibu
uon
onss in the form
form of 
either money, property and/or industry It is but a privilege which may be enjoyed
only under such terms as the State may
must be made. deem necessary to impose.
6. Commu
Commutavtavee – the
the unde
underta
rtakin
kingg of each
partner is considered as the equivalent Ar. 1769. In detedeterm
rmininin
ing
g whet
whetheherr a
of that of the others. partnership exists, these rules shall apply:
7. Pri
Princi
ncipal
pal – iits
ts existe
existence
nce or vali
validit
dityy does
does
not depend on some other contract. 1. Exc
xcep
eptt as provi
provide
ded
d by ArArc
cle
le 182
825,
5,
person
personss who are
are not partne
partners
rs as to
Princi
Principle
ple o Del
Delect
ectus
us Person ae (choice o 
Personae each other are not partners as to third
ons)  – a person has the right to select
persons)
pers persons.
persons with whom he wants to be
associated with in partnership. 2. Co
Co-o
-own
wnerersh
ship
ip or co
co-p
-pos
osse
sess
ssio
ion
n dodoes
es
no
nott of itself
itself establ
establish
ish a par
partne
tnersh
rship,
ip,
Ar
Ar.
. 1768.
1768. The partnership has a juridical whet
wh ethe
herr susuch
ch co-o
co-own
wner
ersh
ship
ip or co-
co-
personality separate and disnct from that poss
osses
esso
sorsrs do or do not shar share
e any
any
of each of the partners even in case
c ase of  prots made by the use of the property.

1
 

3. The
The sh
shar
arin
ing
g of gros
grosss re
retu
turn
rnss does
does not part
partne
ners
rshi
hip,
p, they
they beco
becomeme su subj
bjec
ectt to
of itsel
tselff esesttabl
ablis
ish
h a par artn
tner
ersh
shiip, liabilies of partners
ers (doctr
ctrine of 
whet
wh ether
her or no nott the
the pe
pers
rson
onss shar
sharin
ingg estopp
est oppel)
el).Wh
.Wheth
ether
er or nonott the par
pares
es call
call
them have a joint or common right or thei
theirr re
rela
lao
ons
nshi
hip
p or beli
believeve
e it to be a
interest in any property from which the partne
par tnersh
rship
ip is immater
immaterial
ial.. Thus,
Thus, with
with the
returns are derived. excep
excepoon n of pa part
rtne
ners
rshi
hip
p by estoestopp
ppel
el,, a
partnership cannot exist as to third persons
4. The
The recei
receipt
pt by
by a per
perso
sonn of a shar
sharee of  if no cont
contraract
ct of papart
rtne
nersrshi
hip
p hahass be
beenen
the prots
prots of a busine
businessss is  prima entered into between the pares
 facie evidence that he is a partner in the
business, but no such inference shall be themselves.
drawn if such prots were received in Co-ownership or co-possession
payment: Ther
There
e is co-o
co-own
wner
ersh
ship
ip when
whenev
ever
er the
the
owners
own ership
hip of an und
undivi
ivided
ded thing
thing or right
right
a. A s a d e b t by installments or belongs to dierent persons.
otherwise.
Cle
Clear inne
en o deriverive
e prof
rofss r
room
b. As wwag
ages
es of
of an emp
emplo
loye
yee
e or rent
rent to
to operaton o business
a landlord. Co-own
Co- owners
ership
hip does
does not of itself
itself establ
establish
ish
the existence of a partnership, although it is
c. As an annuity to a widow or one of its essenal elements. This is true
rep
repre
rese
sent
nta
ave
ve of a dec
ecea
ease
sed
d even if prots are derived from the joint
partner. owne
ow ners
rshi
hip.
p. Th
The
e pr
pro
ots
ts must
must be de deri
rive
ved d
from the operaon of business by
d. As in
inte
tere
rest
st on a loan,
loan, thou
though
gh th
the
e the member
memberss of the associaon
associaon and
amount of paymen
amount paymentt vary
vary wit
with
h the
the not merely from property ownership. The
prots of the business. law does not imply a partnership between
co-own
co-owners
ers becau
because
se of the fac
factt tha
thatt the
they
y
e. As the
the consi
conside
dera
rao
onn for the
the sal
sale
e of  develo
dev elop
p or operat
operatee a com
common
mon proper
property,
ty,
a goodwill of a business or other since they may righully do this by virtue of 
proper
ertty by installments or their respecve tles. There must be a clear
otherwise. intent to form a partnership.

In general, to establish the existence of a Exisence o fduciary relatonship

partnership
partne rship,, all of its essenal
essenal features or
char
charac
acte
teri
ris
scs
cs must
must be show
shown n as bebein
ing
g Part
Partne
ners
rs ha
have
ve a well-
well-de
den
ned
ed dduc
ucia
iary
ry
presen
pre sent.
t. In case
case of dou
doubt,
bt, art
art.17
.1769
69 shall
shall relaonship between them. Co-owners do
apply. This arcle seeks to exclude from the not. Should there be dispute; the remedy of 
category
categor y of partn
partnershi
ership
p certain
certain part
partne
ners
rs is an aco
aconn fo
forr diss
dissol
olu
uon
on,,
fe
feat
atur
ures
es enum
enumer erat
ated
ed heherei
rein
n whic
which,
h, by terminaon and accounng. For co-owners
them
themseselv
lves
es,, are
are not
not indi
indica
cav
vee of the
the
existence of a partnership. it woul
wo
perf
perforuld
ormad nce
manc be
e on
one,
ofe, cont
fo
forntra
co r ract
inst
inct.
stan
.ance,
ce,
Pe
Peopfo
for
r no
ople
le non-
can-
cann
become co-owners without a contract but
Persons no parners as o each oher they cannot become partners without one.
Persons who are partners as between
themselves are partners as to third persons. Persons living ogeher wihou benef
Generally, the converse is true: if they are o marriage
not partners between themselves, they Property acquired governed by rules on co-
cannot be partners as to third persons. ownership.
Partnership is a maer of intenon, each
partner giving his consent to become Sharing o gross reurns no even
a partner. However, whether a partnership presumptve evidence o parnership
exists between the pares is a factual The mer
mere
e shari
sharing
ng of gross
gross return
returnss alo
alone
ne
maer. Where pares declare they are not does not even constute  prima facie
partners, this, as a rule, seles the queson
evi
evidence of partn
tner
ersship, since in a
between them. But where a person
misleads third persons into believing that partnership, the partners share prots aer
they are partners in a non-existent sasfying all of the partnership’s liabilies.
 

Reason or he rule asserng its terminaon. One who alleges
Pa
Part
rtne
nerr in
inte
teres
reste
ted
d in bo
both
th fa
fail
ilur
ures
es an
and
d pa
part
rtne
ners
rshi
hip
p ca
cann
nnot
ot pr
provove
e it mere
merely
ly by
successes; it is the chance of loss or gain evidence of an agreement using the term
that characterizes
characterizes a business.
business. Where “partner”. Non-use of the term, however,
the contra
contract
ct requir
requires
es a given
given poron
poron of  is ent
entle
led
d to weig
weight
ht.. The
The ques
queso
onn of 
gross returns to be paid over, the poron is whether a partnership exists is not always
paid over as commission, wages, rent, etc. dependent upon the personal arrangement
or unders
understan
tandin
ding
g of the par pares
es.. Pares
Pares
Where
Wher e h
he
ere is evid
eviden
ence
ce o mu uu
ual inten
ntendi
din
ng to do a thin thingg wh
whiich in law
law
managemen
Where there is further evidence of mutual constutes partnership are partners.
management and control, partnership may Legal intenon is the crux of partnership.
result. Pares
Par es may call
call themse
themselve lvess partne
partners
rs but
their contract may be adjudged something
Re
Receceip
ip o shar
share
e in h
he e prof
profs
s s
sro
rong
ng quite
qui te dieren
dierent.
t. Conver
Converselsely,
y, par
pares
es may
presumptve evidence o parnership exp
express
essly state that theirs in not a
An agreement
agreement to share both prots prots pa
part
rtne
ners
rshi
hip
p yet
yet the
the law
law ma may y de
dete
term
rmin
ine
e
and losses tends strongly to establish the ot
othe
herwrwis
ise
e on the
the babasi
siss of lega
legall inte
intent
nt..
ex
exiisten
stence
ce of a partpartne
ners
rsh
hip.
ip. It is not
not However, courts will be inuenced to some
conclu
con clusiv
sive,
e, however
however,, jus
justt prima
prima facie
facie and ex
exttent
ent by wh what
at the par pareses cal
call thei
theirr
may
ma y be rebued by other circumstances. contract.

When no such inerence will be drawn Tess and incidens o parnership

Under par. 4 of art. 1769, sharing of prots In dedeter
termimini
ning
ng whet
whethe herr a pa part
rtne
ners
rshi
hip
p
is not prima facie evidence of partnership in exis
exists
ts,, it is impoimport
rtan
antt to dis
disng
ngui
uish
sh
the cases enumerated under subsecons (a) between tests or indicia and incidents of 
 – (e). In these cases, the prots are not partnership. Only those terms of a contract
sh
shar
ared
ed as part
partne
nerr but
but in sosome
me ot othe
herr upon
upo n which
which the pare
paress have
have rea
reache
chedd an
respects
respec ts or pu purp
rpos
ose.
e. The basic
bas ic test actual understanding,
understanding, eithe eitherr expressly
expressly or
of partnership is whether the business is implie
imp liedly
dly,, may aord a test test by whi
whichch to
carried on in behalf of the person sought to ascertain the legal nature of the contract.
be held liable. Some of the typical incidents of a
partnership are:
Sharing o profs as owner 1. ThThee partne
partnersrs sh
share
are iinn prot
protss and
and los
losses
ses..
It is not merely the sharing of prots, but 2. ThThey
ey have
have eq
equa
uall ri
righ
ghts
ts in the
the mgt
mgt and
th
thee shar
sharin
ing
g of them
them as co co-o
-own
wner
er of the
the conduct of the partnership business.
busine
bus iness
ss or und
underta
ertakin
king
g tha
thatt makes
makes one 3. Every partner is an agent of the
partner. Test: Does the recipient have an partner
par tnershi
ship,
p, and enentle
tled
d to bin
bindd the
the
equal voice as proprietor in the conduct and others by his acts. He may also be liable
cont
controroll of the
the busi
busines
ness?
s? Do
Does
es he ownown a for the enre partnership obligaons.
share
sha re of the prots
prots as propri
proprieto
etorr of the
business producing them? One must have 4. All
All par
partn
tner
erss are
are pepers
rson
onal
ally
ly liab
liable
le foforr
the debts of the partnership
partnership with theirtheir
an interest with another in the prots of a separate
separ ate prope
property
rty except that limi limited
ted
business as prots. pa
part
rtner
nerss ar
aree no
nott bo
boun
und
d beyo
beyondnd the
the
amount of their investment.
Burden o proo and presumpton 5. A duci
duciarary
y rela
relaonon exexis
ists
ts be betw
tween
een
The burden of proving the existence of a the partners.
partnership rests on the party having the 6. On diss
dissol
olu
uon
on,, the partn
partners
ershi
hipp is not
armave of that issue. The existence of  term
termininat
ated
ed,, but
but co con
nnu
nues
es un unl
l the
the
a partnership must be proved and will not winding up of partnership is completed.
be presumed. The law presumes that those Su
Such
ch inci
incide
dent
ntss ma
mayy be modi
modieded by
acng
ac ng as papart
rtne
ners
rs ha
have
ve enter
entered
ed into
into a spulaon of the partners.
cont
contra
ract
ct of pa
part
rtne
ners
rshi
hip.
p. Wh
Where
ere the
the lawlaw
presumes
presum es the existence of partnership
partnership,, the Similarites
Similarites bew
beween
een a parnersh
parnershipip and a
burden of proof is on the party denying its corporaton
existence. When a partnership is shown to 1. Both
Both have
have juridic
juridical
al person
personali
ality
ty separ
separate
ate
exist, the presumpon is that it connues and disnct from that of the individuals
and the burden of proof is on the person composing it;
 

2. Both
Both can
can only
only aact
ct thro
through
ugh its a
agen
gents;
ts; Righ
Righ o re
reu
urn
rn o co
con
nri
ribu
buto
ton
n wh
wher
ere
e
3. Both
Both are
are organ
organiza
izaon
onss co
compo
mposed
sed of an
an parnership is unlawul
aggregate of individuals; Partners must be reimbursed the amount of 
4. Both
Both distr
distribu
ibute
te pro
prots
ts to
to thos
those
e who their respecve contribuons. The partner
contribute capital to the business; who limits himself to demanding only the
5. Both
Both can
can only
only b
bee organi
organized
zed where
where ththere
ere amount contributed by him need not resort
is a law authorizing is organizaon; to the par
partne
tnersh
rship
ip con
contra
tract
ct on which
which to
6. Partnerships are taxable base his claim or acon. Since the purpose
as corporaons. for which the contribuon was made has

Ar. 1770. A partnership must have a lawful not come intomust

administrator existence,
returnthe manager
it, and he who or
object or purpose, and must be established has paid his share is entled to recover it.
for the common benet or interest of the
partners.
partners. When an unlawful
unlawful partnersh
partnership
ip is Righ o receive profs where parnership
dissolved
dissolved by a judicial
judicial decree, the prots
prots
is unlawul
Law does not permit acon for obtaining
shall be conscated
conscated in favor
favor of the
earn
earninings
gs frfrom
om an un unlalawf
wful
ul pa
part
rtne
ners
rshi
hip
p
State, without
without prejudice
prejudice to the provisions
provisions because for that purpose, the partner will
of the Penal Code governing the have to base his acon upon the
conscaon of the instruments and eects pa
part
rtne
ners
rshi
hip
p cont
contraract,
ct, whic
which h is nu
nullll an
andd
of a crime. Object or purpose of partnership with
withououtt lega
legall exis
existen
tencece by reas
reason
on of its its
unlawful object; and it is self-evident that
The provision o he 1s  paragraph what does not exist cannot be a cause
re
rei
ier
era
aes
es 2 es esse
sent
ntal
al elem
elemen ens
s o a of acon. Prots earned do not constute
conrac o parnership: or represent
represent the partner’s
partner’s contribuo
contribuon. n. He
1. Lega
Legali
lity
ty o
off the
the objec
object;
t; and
and must base his claim on the contract which is
2. Commu
Communit nity
y of benet
benet or iinte
nteres
restt of the void. It would be immoral and unjust for the
partners.
partn ers. The pares possess
possess absol
absolute
ute law
law to pe perm
rmitit a pr
pro
ott frfrom
om an indu
induststry
ry
freedom to choose the transacon or prohibited by it. T he courts will refuse to
transacons they must engage in. The recogni
reco gnize
ze its existence
existence,, and will not lend
only limitaon is that the object must thei
theirr aid
aid to assi
assist
st eith
either
er of the
the papar
res
es
be lawful and for the common benet thereto
the reto in an aconacon agaagains
instt eac
each
h oth
other.
er.
of the members.
members. The illegali
illegality
ty of the Therefore, there cannot be no accounng
object
object wil
willl not be pre
presum
sumed;
ed; it mus
mustt demanded of a partner for the prots which
ap
appe
pear
ar to be of the the esse
essenc
ncee of the
the may be in his hands, nor can recovery be
relaonship. had.

Eecs o an unlawul parnership Eec o partal

Eec partal ill
illeg
egali
aliy
y o parne
parnersh
rship
ip
1. The
The con
contra
tract
ct is void
void an
and
d th
the
e par
partne
tnersh
rship
ip business
never existed in the eyes of the law; Where a part of the business is legal and

2. The
The pro
prots
ts shal
shalll be ccon
onsca
scated
ted in
in fav
favor
or part illegal, a n account of that which is
of the government; legal may be had. Where, w/o the
3. Th
Thee instru
instrume
ment
ntss or tools
tools and proc
proceeeeds
ds knowledge or parcipaon of the partners,
of the crime shall also be forfeited in the rm’s prots in a lawful business has
favor of the government; been
been incr
increa
ease
sedd by wrwron
ongfgful
ul acts
acts,, the
the
4. Th
Thee co
cont
ntri
ribu
buo
onsns of the par
partn
tner
erss shall
shall inno
innocen
centt pa
part
rtne
ners
rs ar
are
e nonott pr
precl
eclud
uded
ed as
no
nott be cocon
nsc
scat
ated
ed ununle
less
ss they
they fafall
ll against the guilty partners from recovering
under #3. their share of the prots.

A partnership is dissolved by operaon of  Eec o subsequen illegaliy o 

law upon the happening of an event which parnership business
makes it unlawful. A judicial decree is Contra
Con tract
ct will
will not be nul
nulli
lied.
ed. Where
Where the
no
nott ne
neces
cessa
sary
ry to diss
dissol
olve
ve an un unla
lawf
wful
ul busi
busine
ness
ss fo
forr whic
which
h the
the part
partne
ners
rshi
hip
p is
part
partne
ners
rsh
hip.
ip. Howev
oweverer,, advi
advisa
sabl
ble
e that fo
form
rmed
ed is legal
legal when
when the
the pa
partrtne
ners
rshi
hip
p is
rd
 judicial decree be secured. 3  persons who entered into, but aerward becomes illegal,
deal
deal w/ pa part
rtne
ners
rshi
hip
p w/w/oo know
knowle
ledg
dge
e of  an acccco
ounng may be had as to the the
illegal purpose are protected. business transacted prior to such me.
 

Comm
Commun uniiy
y o ine inereres
s bew
bewee
eenn h hee is in wring or at least evidenced by some
parners or business purposes note or memorandum.
Th
Thee sal aliien
entt fea eattures
ures of an ord rdiinar
aryy
partnership are a community of interest in Parnership implied rom conduc
prots and losses, a community of interest Binding eect
in the capital employed, and a community Exi
Existe
stence
nce of partner
partnershi
ship
p may be implie
implied
d
of power in administraon. This community from the acts or conduct of the pares, as
of interest is the basis of the partnership well as from other declaraons, and such
rel
elaaon. Howev eveer, although ever
eryy implied contract would be as binding as a
partnership is founded on a community of 
interest, e very community of interest does wrien and express contract.
not necess
necessariarily
ly const
constuteute a par
partner
tnershi
ship.
p. Ascerainmen o inenton o partes
Property used in the business may belong In det eter
ermi
mini
ning
ng whet
wheth her a parparcul
cular
ar
to one or more partners, so that there is no transa
transaco
conn const
constute
utess a partne
partnersh
rship,
ip, as
 joint property, other than joint earnings. betw
betweeeen
n the
the par
pares
es,, the
the inte
inten
non
on as
To state that partners are co-owners of a disclosed by the enre transacon, and
bu
busi
sines
nesss is to st stat
ate
e that
that they
they ha
have
ve the
the as gathered from the facts and from the
power if ulmate control. But partners may language employed by the pares as well
agree upon concentraon
concentraon of management,
management, as their conduct, should be ascertained.
le
leav
avin
ing
g sosome
me of thei theirr memb
membersers enr
enrel ely
y
in
inac
acveve or do dormrmanant.
t. On
Onlyly one
one of thes
these e Conic beween
Conic beween inenton
inenton and ermermss
fe
feat
atur
ures
es,, prpro
ot-t-sh
shar
arin
ing,
g, seem
seemss to be o conrac
absolutely essenal. But a mere sharing of  If the pares intend a general partnership,
pro
protsts of itseitself
lf does
does not not of nece
necess ssit
ity
y they
the y are gen
general
eral partne
partners
rs althou
although
gh their
their
const
con stute
ute a partne
partnershrship.
ip. The court
court must
must purpose is to avoid the creaon of such a
consider all the essenal elements in light relaon.
of the facts of the parcular case before
deciding whether a partnership exists. Ar
r.. 1772.
772. Every
Every con
contra
tract
ct of partne
partnersh
rship
ip
having a capital of three thousand pesos or
Ar. 1771. A partnership may be constuted more, in money or property, shall appear in
in an
anyy foform
rm,, excep
exceptt where
where im
immo
mova
vabl
ble
e a publpublic
ic inst
instru
rume
mennt, wh
whiich must ust be
pr
prop
opererty
ty or real
real righ
rights
ts ar
are
e con
contr
trib
ibut
uted
ed recorded in the Oce of the Securies and
thereto, in which case a public instrument Exchan
Exc hange
ge Commis
Commissio
sion.
n. Fai
Failur
lure
e to comply
comply
shall
shall be necess
necessary
ary .Form
.Form of partne
partnersh
rship
ip with
wit h the requir
requireme
ements
nts of the preced
preceding
ing
contract paragraph shall not aect the liability of the
partne
par tnersh
rshipip and the mem
memberberss the
thereo
reoff to
General rule third persons. Registraon of partnership
No specia
speciall form
form requir
required
ed for validi
validity
ty or
existe
existence
nce of the con
contra
tract
ct of partner
partnershi
ship.
p. Parnership wih capial o P3, 000 or more
Contract maybe made orally or in wring Requirements:
regardless of the value of the contribuons.
1. The
The cont
contra
ract
ct must
must appe
appear
ar in a publ public
ic
instrument;
Where immovable propery or real righs 2. It mus
mustt be rec
recor
orde
ded d or re
regi
gist
ster
ereded w/
are conribued the SEC. However, failure to comply w/
Execuon
Execu on of public
public instr
instrument
ument necessary
necessary the
the abov
abovee rerequ
quir
irem
emen
entsts does
does not not
for validity of contract
contract of partnershi
partnership.
p. To prevent the formaon of the
rd
a
aec
ectt 3   pe
pers
rson
ons,
s, the
the tran
transf
sfer
er of rereal
al pa
part
rtner
nersh
ship
ip or aect
aect itsits liab
liabil
ilit
ity
y an
andd
property to the partnership must be duly rd
that of the partners to 3  persons. But
registered in the Registry of Property. any partner is granted the right bylaw
to compel each other to execute the
When parnership
parnership agreemen
agreemen covered
covered by contract in a public instrument.
he Saue o Frauds
An agreement to enter in a partnership at a Purpose o regisraton
future me, which by its terms is not to be Registraon is necessary as a condion for
perfor
performed
med w/in a year
year from
from the making
making the
the issu
issuan
ance
ce of lice
licens
nses
es to enga
engagege in
thereof is covered by the Statute of Frauds. bu
busi
sines
nesss an
and
d tr
trad
ade.
e. In this
this wa
way,
y, the
the tax
tax
Such agreement is unenforceable unless it liab
liabil
ili
ies
es of big
big pa
partrtne
ners
rshi
hips
ps ca
cann
nnot
ot be
evaded and the public can determine more
 

accurately
accurately their
their member
membershi
ship
p and cap
capita
itall inventory of immovable property
before dealing with them. contributed because w/o its descripon and
de
desi
sign
gna
aon
on,, the
the inst
instru
rume
ment
nt ca
cann
nnot
ot be
When parnership considered regisered subject to inscripon iin n the Registry
The objecve of the law is to make the of Proper
Property,
ty, and the con
contri
tribu
buon
on cannot
cannot
recorded instrument open to all and to give rd
prejudice 3  persons.
noce thereof to interested pares. This
objecve is achieved from the date the Ar. 1774. Any immovable property or an
Ar. 1774.
partnership papers are presented to and inte
intere
rest
st there
therein
in ma
may
y be acqu
acquir
ired
ed in the
the
le for record in the Commission. This is the
eecve date of registraon. If the partnership name. Title so acquired can be
cercate of recording is issued on a convey
conveyed
ed onl
only
y in the partne
partnersh
rship
ip name.
name.
subsequent date, its eecvely retroacts to Acquision
Acquision or conveyance
conveyance of property
property by
date of presentaon. partnership

Ar. 1773. A contract of partnership is void, Since partnership has juridical personality of 
whenever immovable property is its own, it may acquire immovable property
contributed
contr ibuted thereto,
thereto, if an inventory
inventory of said in its own name. Title
Title so acquired
acquired can
property is not made, signed by the pares, be conveyed only in the partnership name.
an
and
d aac
aache
hed
d to the
the pupubl
blic
ic inst
instru
rume
ment
nt..
Partnership with contribuon of immovable Ar. 1775. Associaons and sociees, whose
property arcl
cle
es are kept ept secrcre
et among the
memb
me mberers,
s, and
and wh
wher
erei
ein
n any
any on
one
e of the
the
Where immovab
Where immovable
le propery
propery conribu
conribued,
ed, member
mem berss may contract
contract in his own name
name
a
aiilu
lure
re o compl
omply y w/ h he
e oll
ollow
owin
ing
g with third persons, shall have no juridical
re
requ
quis
isi
ies
es wi will
ll rend
render
er he
he par
parne
ners
rshi
hip
p personality, and shall be governed by the
conrac void: provisions relang to co-ownership. Secret
1. The contract must be in a public partnerships without juridical personality
instrument;
2. An inventory of the property Partnership relaon is created only by the
contributed must be made, signed by voluntary agreement of the partners. It is
the pares, and aached to the public es
esssen
ena
all that
hat the
the par
artn
tner
erss ar
are
e full
fully
y
inst
instru
rume
ment nt.. Art.
Art. 1773
1773 is inte intend
nded
ed informed not only of the agreement but of 
pr
prim
imar
aril
ily
y to pr prot
otect rd
ect 3   pepers
rson
ons.s. W/ all maers aecng the partnership. Secret
re
rega
gard
rd to 3r 3rdp
dper
erssons
ons, a de fa fact
ctoo partnerships are not by nature
partnership or partnership by estoppel partnershi
partn erships.
ps. Secret partnershi
partnerships
ps shall be
may exist. There is nothing to prevent governed by the provisions relang to co-
the co cou urt from considering the ownership.
pa
partrtne
ners
rshi
hip
p ag agre
reem
emenentt an ordin rdinar
aryy
contract from which the pares’ rights Imporance o giving publiciy o artcles
o parnership
and obligaons
inferred to each other may be
and enforced. It is essenal that the arts of partnership be
given publicity for the protecon not only of 
When invenory is no required the
the me membmber
erss them
themse sellves also 3rd
ves but also
An inven
inventor
tory
y is requir
required
ed onl
only
y whenev
whenever
er persons from fraud and deceit. A member
immovable property is contributed. If not who
wh o tran
transa
sact
ctss busi
businenessss fo
forr the
the sesecr
cret
et
cont
contri
ribu
buted
ted or if pepers
rson
onal
al pr
prop
opert
erty,
y, no pa
partrtne
ners
rshi
hip
p in hishis owown n name
name becobecome
mess
rd
inventory required. personally bound to 3  persons unaware of 
the existence of such associ cia
aon.
Impor
Imporan
ance
ce o making
making inven
invenory
ory o real
real Partnership liability may sll
propery in a p a r  n e r s h i p result, however, in cases of estoppel.
e stoppel.
An inventory is very important in
a partnership to how much is due from each Ar. 1776. As to its object, a partnership is
part
partne
nerr to cocomp
mpllet
ete
e his
his sh shar
are
e in the
the either universal or parcular. As regards the
common fund and how much is due to each liability of the partners, a partnership may
of them in ca casse of liquidaon. The be gene
generarall or limi
limited
ted.. Cl
Clas
assi
sic
ca
aon
onss of 
ex
exec
ecu
uon
on of a public blic ins
nstrtru
ume
mennt of  partnership
partnership would be useless if there is no
 

As o exen o is subjec maer not avowed or made known to the public by
1. Univer
Universal
sal par
partne
tnersh
rship.
ip. (Ar
(Art.
t. 17
1777)
77) any of the partners.
a. Uni
Univer
versal
sal part
partner
nershi
shipp of all
all pres
present
ent Open or notorious partnership: one whose
property. (Art. 1778) existence is avowed or made known to the
b. Uni
Univer
versal
sal par
partne
tnersh
rship
ip of
of pr
prot
ots.
s. public by the members of the rm.
(Art. 1780)
2. Parcu
Parcular
lar partner
partnershi
ship.
p. (Art
(Art.. 1783)
1783) As o purpose
Commercial or trading partnership: one
As o liabiliy o he parners formed or the transacon of business.
Gene
Genera
rall pa
part
rtne
ners
rshi
hip:
p: on
one
e co
cons
nsis
isn
ng
g of 
general partners who are liable pro rata and Professional or non-trading partnership:
subsidiary and somemes solidarily w/ their one formed for the exercise of a profession.
separate property for partnership debts.
Kinds o parners
Limied parnership: one formed by two or Under the Civil Code
more persons having as members one or 1. Capita
Capitalilist
st pa
partn
rtner:
er: onone e who contr
contribu
ibutes
tes
more
mor e gen
general
eral partners
partners and one or mormoree money
mo ney or pr prop
oper
ertyty to thethe cocomm
mmon on
limi
limite
ted
d pa
part
rtne
ners
rs,, the
the lae
laerr not
not bein
being
g fund.
personally liable for the obligaons of the 2. Indust
Industria
riall par
partne
tner:
r: on
one e who cont
contrib
ribute
utess
partnership. only his industry or personal service.
3. Ge
Genenera
rall partn
partner:
er: on
onee whos
whose e liab
liabil
ilit
ity
y to
As o duraton rd
3   pers
person onss exte
extendndss to his his sepa
separa rate
te
Partnership at will: one in w/c no me is property.
specied and is not formed for a parcular 4. Li
Limi
mited
ted partn
partner:
er: on
one e whos
whose e liab
liabil
ilit
ity
y to
undert
und ertaki
aking
ng or ventur
venturee and w/c may be rd
3   pers
person onss is limi
limite
ted d to his
his capi
capita tall
terminated at any me by mutual contribuon.
agreement of the partners, or by the will of  5. Mana
Managi ging
ng par
partn
tner
er:: on
one e who
who mana
manage gess
any one partner alone; or one for a xed the enty.
te
term
rm or pa par
rcu
cula
larr unde
undert
rtak
akin
ing
g w/
w/cc is 6. Liquidang partner: one who takes
con
connu
nued
ed aer
aer the
the end
end of the
the term
term or charge of the winding up of partnership
undertaking w/o express agreement. aairs upon dissoluon.
Partnership with a xed term: one w/c the 7. Par
artn
tner
er by estoestopp
ppelel:: one whwho o is notnot
term for w/c the partnership is to exist is really a partner but is liable as a partner
xed or agreed upon or one formed for fo
forr the
the protprotec
eco
on n of innoinnoce
cent
nt 3r 3rdd
a parcular undertaking. persons. He is one represented as being
a partner
partner but but who is not not so between
between
As o he legaliy o is exisence the partners themselves.
De jure partnership: one w/c has complied 8. Co
Connnu
nuining
g part
partne
ner:
r: one who con connu nueses
w/ all the legal requirements for the busines
businesss of a par partners
tnership
hip a
aerer it
its establishment. has been dissolve
dissolved d by reason
reason of the
De facto partnership: one w/c has failed to
comply w/ all the legal requirements for its admi
admissssio
ion
n of a new
new part
partne
ner,
r, or the
rerement,
rerem ent, death
death or exp
expulsio
ulsion
n of one
establishment. or more partners.
9. Su
Surv
rviivin
ving par
artn
tner
er:: one wh
whoo re
rem
main
ains
As o represenaton o ohers aer a partnership has been dissolved
Or
Ordi
dina
nary
ry or re real
al part
partne
ners
rshi
hip:
p: one
one w/c
w/c by the death of any partner.
actually exists among the partners and also 10. Subpartner:
Subpartner: one who, not being
as to 3rd persons. a member of the partnership, contracts
Ostens
Ost ensibl
ible
e partne
partnersh
rship
ip or par
partne
tnersh
rship
ip or w/ a partner w/reference to the laer’s
partnership by estoppel: one w/c in reality share in the partnership.
is not a partne
partnersh
rship,
ip, but is consid
considere
ered
d a
partnership only in relaon to those who, Oher classifcatons
by their conduct or admission, are 1. Osten
tensible partner: one who who takes
precluded to deny or disprove its existence. acve part and known to the public as a
partner.
As o publiciy 2. Se
Secr
cret
et partn
partner
er:: on
one
e who
who take
takess acv
acve
e
Secr
Secret
et pa
part
rtne
ners
rshi
hip:
p: on
one
e whwhererei
ein
n the
the part in the business but is not known to
existence of certain persons as partners is be a partner by outside pares nor held
 

out as a partner by the other partners. Property w/c belonged to each of them at
He is an actual partner. the me of the constuon of the
3. Sile
Silent
nt part
partne
ner:
r: one
one who do doeses no
nott take
take partnership;
any acve part in the business although Pr
Pro
ots
ts w/c
w/c they
they ma
mayy ac
acqu
quir
ire
e fr
from
om the
the
he may be known to be a partner. property contributed.
4. Dor
Dorman
mant part
partnener:
r: one who does not not
take acve part in the business and is Conributon o uure propery
not known or held out as a partner. He Generall rule: future properes cannot be
Genera
woul
wo uld
d be boboth
th a si sile
lent
nt an
andd a secr
secret
et cont
contri
ribu
bute
ted.
d. The
The very
very esse
essenc
nce
e of the
the
partner.
5. Or
Orig
igin
inal
al part
partne
ner:r: one
one who is is a memb
member er contract
contributed of partnership
be includedthat thepartnership
in the properes
of the partnership from the me of its re
requ
quiire
ress thethe contcontri
ribu
buo
onn of thin things
gs
organizaon. determ
det ermina
inate.
te. ThThe
e posi
posion
on of a partne
partnerr is
6. In
Inco
comiming
ng partn
partnerer:: a pers
person
on latel
lately,
y, or lik
like
e that
that of a donor, donor, and don donao
aonsns
ab
abou
outt to be,
be, tatake
kenn into
into an exisexis
ng cannot comprehend future property. Thus,
partnership as a member. pro
propert
pertyy subseq
bsequ uen
entl
tly
y acqu
acquiire
red
d by
7. Re
Rer
rin
ing
g partne
partner:r: one
one withdr
withdraw
awn n fro
fromm 1.i
1.inhe
nherit
ritanc
ance;
e; 2. Legacy;
Legacy; or 3. Donao
Donaon n
the partnership; a withdrawing partner. cannot
can not be includ
includeded by sp
spula
ulaon
on except
except
Art. 1777. A universal partnership may the fru
fruits
its the
thereo
reof.
f. Hence,
Hence, any spula
spulaon
on
refer to all the present property or to incl
includ
udin
ingg pr
propopert
erty
y so ac acqu
quirired
ed is vovoid
id..
all the prots. Pr
Pro
ots
ts fr from
om ot othe
herr so
sour
urce
cess (not
(not frfrom
om
prop
properere
ess cont contri
ribu
bute
ted)
d) willwill beco
become
me
Ar. 177
1778. A papart
rtne
ners
rshi
hip
p of al
alll pr
pres
esen
entt co
commmon property only is there’s e’s a
prop
proper
erty
ty is that
that in whic
whichh the
the part
partne
ners
rs spulaon.
contribute
contribute all the property
property which actual
actually
ly
belongs to them to a common fund, with Ar. 1780. A universal partnership of prots
the intenon of dividing the same among comprises all that the partners may acquire
themselves, as well as all the prots they by their industry
industry or work during during
may acquire therewith. the existence of the partnership. Movable
or immovable property which each of the
Ar. 1779. In a universal partnership of all
Ar. partne
partners
rs may posses
possesss at the me of the
pres
presen
entt pr
prop
oper
erty
ty,, the
the prop
proper
erty
ty whi
which celebraon of the contract shall connue to
belongs to each of the partners at the me pert
pertai
ain
n excl
exclus
usiv
ivel
ely
y to each
each,, on
only
ly the
the
of the
the cons
const
tu
uon
on of the
the part
partne
ners
rshi
hip
p usufruct passing to the partnership.
becomes the common property of all the
partners, as well as all the prots which Universal parnership o profs explained
they may acquire there with. A spulaon A universal partnership of prots is one w/c
for the common enjoyment of any other comprises all that the partners may acquire
protss may also be made; but the property
prot by th
their industry or work during the
which the partners may acquire existence of the partnership and the

su
subs
bseq
dona
do eque
uent
naon ntly
on lynnot
cann
ca by
ot inhe
inheri
be rita
tanc
nce,
incl
in e,ed le
clud
uded lega
gacy
in cysu or
such
ch usufruct of movable or immovable property
w/c each of the partners may possess at the
spulaon, except the fruits thereof. me of the celebraon of the contract.

Univer
Univ ersa
sall pa
par rne
ners
rshi
hipp o al alll pr
pres
esen
en Ownership o presen and uure propery
propery explained The partners retain their ownership over
A universal partnership of prots is one w/c their present and future property. What
comp
compri rises
ses al
alll that
that the
the pa part
rtne
ners
rs maymay passes to the partnership are the prots or
acquire by their industry or work during the income and the use or usufruct of the same.
ex
exiisten
stence
ce of the the part
partn
ner
ersh
shiip and
and the Consequently, upon dissoluon, such
usufruct of movable or immovable property property is returned to the partners who
w/c each of the partners may possess at the own it.
me of the celebraon of the contract. In
th
this
is kind
kind of pa part
rtne
ners
rshi
hip,
p, the
the fofoll
llow
owin
ing
g Profs acquired hrough chance
become
bec ome the common
common prope
property
rty of all the Since the law only speaks
speaks o
off prots
prots w/c
partners: the partners may acquire by their industry
or work, prots acquired purely by chance
are not included.
 

Ar. 1783. A parcular partnership has for

Ar.
Fruis o propery subsequenly acquired its object determinate things, their use or
Fruits of property subsequently acquired by fr
frui
uits
ts,, or a speci
specic
c un
unde
dert
rtak
akin
ing,
g, or the
the
the partners do not belong to exercise of a profession or vocaon.
the partnership. Such prots, however, may
be included by express spulaon. Partcular parnership explained
A par
parcucula
larr part
partne
ners
rshi
hip
p is on onee w/cw/c is
Art. 1781. Arcles of universal parnership, neither a universal partnership of present
entered
entered int
into
o withou
withoutt speci
specica
caon
on of its proper
pro perty
ty nor a univer
universal
sal par
partnetnersh
rship
ip of 
nature, only constute a universal pro
prots.
ts. The fund
fundam
amenenta
tall die
diererenc
nce
e
partnership of prots. be
betw
tween
een a un univ
ivers
ersal
al pa
part
rtne
ners rshi
hip
p and
and a
parcular partnership lies in the scope of 
Presumpton in avor o universal thei
theirr su
subj
bjec
ectt mae
maerr or ob obje ject
ct.. In the
the
parnership o profs fo
form
rmerer,, the
the ob
obje
ject
ct is vagu
vague e and
and
Reason for presumpon: universal indenite, contemplang a general business
part
partne
ners
rsh
hip of pro prots
ts impo
imposses les esss w/ some degree of connuity, while in the
ob
obli
liga
gaon
onss on the
the pa
part
rtne
ners
rs,, si
sinc
nce
e they
they laer, it is limited and well-dened, being
preserve
preser ve the ownership of their separate
separate conne
con ned d to an undert undertaki
akingng of a
property. single, temporary, or ad hoc nature.

Ar. 1782. Persons who are prohibited from Busi

Busine
ness
ss o par
parne
ners
rshi
hip
p ne
need
ed nono be
giving ea
each
ch othther
er any donaon or contnuing in naure
advant
adv antage
age cannot
cannot enter
enter int
into
o a univer
universal
sal The carrying on of a business of a
partnership. Limitaons upon the right to co
con
nnu
nuin
ing
g nat
natur
ure
e is not
not es
esssen
ena
all to
form a partnership constute a partnership. An agreement to
undertake a parcular piece of work or a
Persons who are prohibited by law to give single transacon or a limited number of 
donao
don aons
ns cannot
cannot ententer
er int
into
o a univer
universal
sal transa
transaco
cons
ns and immimmedi
ediate
ately
ly divid
divide
e the
partnership for the reason that each of the resulng prots would seemt o fall w/in the
partne
par tners
rs virtua
virtually
lly makes
makes a donao
donaon.
n. To meaning
meani ng of the term “partnershi
“partnership”
p” as used
allow it would be perming them to do in the law.
indirectly what the law expressly prohibits.
A partne
partnersh
rship
ip formed
formed in viola
violaon
on of this
this Rule under American law
arcle
ar cle is null
null and voi
void.
d. Con
Conseq
sequen
uently
tly,, no The above is not true under the Uniform
legal personality is acquired. A husband and Partnership Act w/c does not include joint
wife, however, may enter into a parcular ventures w/c exists for a single transacon
part
partne
ners
rsh
hip or be membe embers rs ther
thereoeof.
f. or a limited number of transacons.
Relevant provisions:
Join venure
Art. 87: Donaons between spouses during Whiile a joi
Wh joint ven
entu
ture
re is not a fo
form
rmal
al

mar
marria
riage
occasion
occasi ge of
on void,
voifamily
d, except
exc
famil ept moderat
mod
y rrejoicing. erate
ejoicing. e gis
Also gis ies
on
applies
appl partnership
both
both areare go invern
govethe legal
rned
ed,
, suorbjec
subjtechnical sense,
ectt to cert
ce rtai
ain
n
to those
those living
living tog
togeth
ether
er as husban
husbandd and qualicaons, praccally by the same rules
wife w/o valid marriage. or principles of partnership. This is logical
Art. 739: The following donaons are void: since in a joint venture, like in
Those made between persons who are a pa
part
rtne
ners
rshi
hip,
p, there
there is a co comm
mmun
unit
ity
y of 
guilty of adultery or concubinage at the interest in the business and a mutual right
me of the donaon (no need for of control and an agreement to share jointly
convicon; preponderance of evidence only in prots and losses.
required);
Those made between persons found guilty Corporaton as a parner
of the same criminal oense, While
Whi le under
under the Phi
Philip
lippin
pine
e Civ
Civil
il Code,
Code, a
inconsideraon thereof;  joint venture is a form of partnership w/ a
c.)Those made to a public ocer or his wife, legal personality separate and disnct from
descendants and ascendants, by reason of  the pares
pares compo
composing
sing it, and
and should
should thus
his oce. be governed
governed by the law of partnership
partnership,,
the
the SuSupr
prem
emee Co
Cour
urtt has
has rereco
cogn
gnizized
ed the
the
disncon between these two business
 

fo
form
rmss, and
and hashas held
eld tha
that al
alth
thou
ough
gh a have contributed it up to actual delivery
corporaon cannot enter into a partnership without necessity of any demand;
contract, it may, however, engage in a joint 4. Sh
Shal
alll preser
preserve ve said
said prop
proper
eres
es with
with the
vent
ventur
uree if the
the na
natu
ture
re of th
the
e vent
ventur
ure
e is diligence of a good father of a family
authorized by its charter. pending their delivery to the
partnership;
Ar
Ar.
. 1784.
1784. A partnership begins from the 5. And shall
shall iinde
ndemni
mnify
fy the
the par
partne
tnersh
rship
ip for
for
moment of the execuon of the contract, any damage caused it by the retenon
unless it is otherwise spulated. (1679) of said properes or by the delay in

Ar. 1785. When a contract for a xed term their contribuon.

or parcular undertaking is connued aer Ar. 1787. When the capital or part thereof 
the terminaon of such term or parcular whic
wh ich
h a papart
rtne
nerr is bo
boun
undd to cont
contri
ribu
bute
te
undertaking without any express consists of goods, their appraisal must be
ag
agree
reeme
ment
nt,, the
the righ
rights
ts an
and
d du
dues
es of the
the made
ma de in the
the mamannnner
er pres
prescr
crib
ibed
ed in thethe
partners remains the same as they were at contract of partnership, and in the absence
such
such termin
terminao
aon,
n, so far as is con
consis
sistent
tent of spulaon, it shall be made by experts
with a partnership at will. chosen by the partners, and according to
curren
currentt prices,
prices, the subseq
subsequen
uentt cha
change
ngess
A con
connu
nua
aon
on of thethe busi
busine
ness
ss by the
the ther
thereo
eoff bei
being fo forr the
the acco
accouunt of thethe
partners or such of them as habitually acted partnership.
ther
therei
ein
n durin
uringg the
the teterm
rm,, with
withou
outt an
any
y
selement or liquidaon of the partnership Ar. 1788. A partner who has undertaken to
aairs, is  prima facie ev evid
iden
ence
ce of a contribute a sum of money and fails to do
connuaon of the partnership. so becomes a debtor for the interest and
da
dama
mages
ges fr
from
om the
the me
me he shou
should
ld ha
have
ve
Parnership a will is one in which no term complied with his obligaon.
of existence has been xed and which may
be terminated at the will of any partners. The same rule applies to any amount he
may
ma y have
have take
taken n frfrom
om the
the part
partne
ners
rshi
hip
p
Ar. 1786.
Ar. 1786. Every partner is a debtor of the coers, and his liability shall begin from the
pa
part
rtne
ners
rshi
hip
p fo
forr what
whatev
ever
er he may
may hahave
ve me he converted the amount to is own
promised to contribute thereto. use.

He shall also be bound for warranty in case Liabiliy o parner or esaa
of evic
evico
onn with
with re
rega
gard
rd to sp
spec
eci
icc an
and
d Failure to return the money taken, there is
de
dete
term
rmin
inat
atee thin
things
gs whic
whichh he may
may hahave
ve the element
element of fraudulent
fraudulent appropri
appropriaon
aon of 
contributed to the partnership, in the same the
the mo
moneneyy deli
delive
vere
red
d to a part
partne
nerr with
with
case
casess an
andd in the
the sa
same
me mann
manner
er as the
the speci
specic
c inst
instru
ruco
cons
ns fo
forr the
the us
use
e of the
the
vendor is bound with respect to the vendee. partnership, then estafa is commied under

He
fr
from
omshall
the
thealso
mbee liable
me they for
they sh the
shou ldfruits
ould have
have thereof 
been
been the Revised Penal Code.
delivered, without the need of any demand. Ar. 1789. An indust
industria
riall partne
partnerr cannot
cannot
engage in any business for himself, UNLESS
Obligatons o parners o conribue: the partnership expressly permits him to do
1. Shal
Shalll deli
delive
verr at the begi
beginn
nnin
ing
g of the
the so; and if he should do so, the capitalist
partnership or, if a dierent date has partners may either exclude him from the
been
bee n agreed
agreed upo
upon,
n, at the spula
spulated
ted r
rm
m or avavai
aill them
themse
selv
lves
es of the
the be
bene
net
tss
me
m e th the
e pro
proper
peres
es he agre
agreed
ed to which he may have obtained in violaon of 
contribute; this provision, with a right to damages in
2. Shal
Shalll an
answ
swer
er for evic
evico
on,
n, in case
case the
the either case.
partnership is deprived of the
ownership of any specic property he Indusrial parner is one who contributes
contributed; his industry or labor in the partnership.
3. Sh
Shal
alll answe
answerr to the par
partn
tners
ershi
hip
p for the
the
fruits of the properes whose delivery Indusrial parner barred rom engaging in
he delayed from the date he should business
 

To prevent any conict of interest between co

comp
mpenensa
sate
te them
them with
with the
the pr
pro
ots
ts an
and
d
the industrial and the partnership, and to benets
bene ts which he may have earned for the
insure faithful compliance by said partner partnership by his industry. However, the
with his prestaon. courts may equitably lessen this
resp
respon
onsi
sibi
bili
lity
ty if thro
throug
ugh
h the
the papart
rtne
ner’
r’ss
Ar
Ar.
. 17
1790
90.. Unless there is a spulaon to extraordina
extraor dinary ry eorts in other acvies of 
the contrary, the partners shall contribute the partnership, unusual prots have been
equal shares to the capital of the realized.
partnership.

Ar. 1791. If there is no agreement to the

Ar. Par
Parne
nerr li
liab
parnership able
le oorr dama
damage
gess ca
causused
ed he
he
contrary, in case of an imminent loss of the Art.
Art. 1794
1794 fofoll
llow
owss the
the gene
genera
rall rule
rule of 
busine
bus iness
ss of the partne
partnersh
rship,
ip, any par
partne
tnerr contracts that where a person is at fault in
who ref
refuse
usess to contri
contribut
butee an add
addio
ional
nal the fulllment of his obligaons he shall be
share
share to the capcapita
ital,
l, except
except an indindust
ustria
riall liable
liable for the pay paymen
mentt of damages
damages.. ThThe
e
part
partne
ner,
r, to sasaveve the
the vent
ventur
ure,
e, shshal
alll be partner’
er’s fault, however, must be
ob
obli
liged
ged to se sell
ll his
his inter
interes
estt to the
the ot
otheherr dete
determ
rmiined
ned in acco accord
rda
ance
nce wi with
th the
the
partners. circumstances of person, me and place.

Ar. 1792. If a partpartne

nerr au
auth
thor
oriz
ized
ed to Li
Liqu
quidida
ato
tonn nece
ecessar
ssary
y o asce
ascer
rai
ain
n
manage collects a demandable sum, which damages
was owed to him in his own name, from a It is rst necessary that a liquidaon of the
person who owned the partnership another business thereof be made to the end that
sum
sum al alsso dem
emananda
dabl
ble,
e, the
the susum
m thus
thus the prots and losses may be known and
collected shall be applied to the two credits the causes of the laer and the
in pr
prop
opor
oro
on
n to thei
theirr amou
amountnts,
s, even
even responsibility of the defendant as well as
though he may have given a receipt for his the damages which each partner may have
own credit only; but should he have given it suered, may be determined.
for the account
account of the partnership
partnership credit
credit,,
the amount
amount shall
shall be fully
fully app
applie
lied
d to the Ar. 1795. The risk of specic and
laer. determinate things, which are not fungible,
contributed
contr ibuted to the partnership
partnership so that only
The provisions of this arcle are understood their use and fruits may be for the common
to be without prejudice to the right granted benet, shall be borne by the partner who
to the debtor by Art. 1252, but only if the owns them.
person
per sonal
al credit
credit of the par
partne
tnerr should
should be
more onerous to him. If the things
things contri
contribut
buted
ed are fungib
fungible,
le, or
cannot be kept without deteriorang, or if 
Requisies: they were contributed to be sold, the risk
1. Two
Two exis
exisn
ng
g deb
debts
ts shall be borne by the partnership. In the
2. T
3. Both
Bo
heth one
d
deb
ebts
on e tswmus
mustcoll
ho t be
co dema
de
llec mand
ected ndab
ted theable
the dleeb
ebtt is a absenc
abs encee of spula
spulaon
on,, the risk
risk of things
things
broughtt and apprai
brough appraised
sed in the invent
inventory
ory,,
partner who is authorized to manage shall also be borne by the partnership, and
and is actually managing the in such case the claim shall be limited to the
partnership value at which they were appraised.

Ar. 1793. A partner who has received, in

Ar. Risk o Specifc and deerminae hings
whole or in part, his share of a partnership The risk of specic and determinate things
credit, when the other partners have not which are not fungible, like a boat, only the
coll
collect
ected
ed th
thei
eirs
rs,, shal
shalll be ob
obli
lige
ged,
d, if the
the use of which is contributed, shall be borne
debtor should thereaer become insolvent, by the partner
the  partner as the ownership thereof is
to bring to the partnership capital what he not transf
transferr
erred
ed to the partne
partnersh
rship.
ip. This
This
received even though he may have given fo
foll
llow
owss the
the gene
genera
rall rule
rule that
that the
the thin
thing
g
receipt for his share only. perished with the owner.

Ar
Ar. 1794. Every partner is responsible to
. 1794. Things ungible or perishable
the partnership for damages suered by it If the
the thin
things
gs cont
contri
ribu
bute
ted
d ar
are
e  fungible or 
through his fault, and he cannot cannot be kept without deteriorang
 

(perishable)
(perishable) like wine, oil, etc., even if they also
also re
rece
ceiive a sharare
e in the
the pro
prots
ts in
are
are co
cont
ntri
ribu
buted
ted only
only fo
forr the
the ususe
e of the
the proporon to his capital.
partnership, the risk of loss shall be for the
account
acco unt of the partners
partnership
hip for the la laer
er Rules in prof sharing:
cann
cannot
ot make
make us use
e of them
them with
withououtt thei
theirr 1. The partners share the prots in
geng consumed or presumed. accordance
accor dance with the rao establish
established
ed
by their contract.
Things conribued o be sold 2. If ther
there
e is no such
such sp
spula
ulaon
on in th
the
e
If the things contributed are to be sold, the partnership contract, then:
 partnership bears the risk of loss, loss, for
obviously
obvio usly the partnershi
partnership
p is the intended
intended 1. If all
all ar
are e cap
capital
italis
istt part
partn ner
erss they
they
have
hav e the prot
protss in propor
proporon on to
owner; otherwise, the rm cannot make the their capital contribuons;
sale. 2. If ther
theree ar
are
e capit
capitali
alist
st aass well
well as
industrial partners, the industrial
Things brough and appraised in invenory part
partne
nerr g
get
et a sha
share
re each
each that
that is
The partnership
The  partnership bears the
the risk of loss of  just and equitable while the
things brought and appraised in capitalist partners divide the
the inventory as this has the eect remainder in proporon to their
of an implied sale thus making the capital contribuons; and
partnership the owner of said things. 3. If ther
theree is a capicapitatali
list
st-i
-in
ndustr
ustriial
part
partne
ner,
r, he gets
gets a sh shar
aree in the
the
Ar. 1796. TheThe part
partne
ners
rshi
hipp sh
shalalll be prots as an industrial partner and
res
respon
ponsibl
sible
e to evever
ery
y partn
rtner foforr the
the an addional share in proporon to
amounts he may have disbursed on behalf  his cap
capital contribuon to be
of the partnership an d f or the determined as in (b), above.
corresponding interest, from the me the
expenses are made; it shall also answer to Rules in loss sharing:
each
eac h partne
partnerr for the obliga
obligaon
onss he may 1. The spulaon in the partnership
have contracted in good faith in the interest agreement regarding loss sharing must
of the partnership business, and for the risk be followed.
inconsequence of its management. 2. If ther
there e is no such
such agree
agreeme
ment nt,, but th
thee
contra
con tract
ct provid
provides
es for a prot
prot sharin
sharingg
Re
Resp
spon
onsi
sibi
bili
liy
y o hhee par
parne
nersrshi
hip
p o a raon, the prot sharing rao shall also
parner be the loss sharing raon.
If a pa
partn
rtner
er ha
hass adva
advancnced
ed fund
fundss fo
forr the
the 3. In the
the ab
absen
sence
ce of loss
loss sharin
sharingg an
and d prot
prot
partnership, he is entled to recover the shar
sharin
ing
g spu
spulalao
ons
ns in the
the concontr
trac
act,
t,
amoun
amo unts
ts advanc
advanced ed by him with
with int
interes
erest.
t. then
then the
the loloss
ss shal
shalll be bo
bornrne
e by thethe
This
This must
must be so fo forr the
the re
reas
ason
on that
that a partne
par tners
rs in propor
proporon
on to their
their cacapi
pita
tall
partner is a mere agent of the partnership contri
con tribu
buons
ons;; but a purely
purely ind
indust
ustria
riall
an
andd un
unde
derr the rules of agency
agency,, an agent 
agent  partner is exempted from parcipaon
who advanc
advances
recover es funds
the same for his principal
interest. principal may  in the loss.

Share o indusrial parner in profs and

Ar
Ar.
. 1797.
1797. The prots and losses shall be losses
distributed in conformity with the Unless agreed upon, the industrial partner
agreement. If only the share of each partner shall
sha ll rec
receiv
eivee suc
suchh share
share in the prots
prots as
in the prots has been agreed upon, the may be just just and
and eq
equiuita
tabble undnder
er the
the
share of each in the losses shall be in the circ
circum
umst stan
ance
ces.
s. As fo forr the
the loss
losses
es,, the
the
same proporon. indus
ind ustri
trial
al partne
partnerr is not liabl
liable.
e. Howeve
However,r,
In the absence of spulaon, the share of  under
und er Art.
Art. 1816,
1816, if the partners
partnershiphip has a
each partner in the prots and losses shall co
cont
ntra
ract
ctua
uall de
debt
bt an
and
d it ca cannnnot
ot pa
pay,
y, the
the
be in prprop
opor
oro
on n to whwhat
at he ma may y have
have industrial partner equally with the capitalist
contributed, but the industrial partner shall partners, can be compelled by the creditor
no
nott be liab
liable
le fo
forr the
the lo
loss
sses
es.. As foforr the
the to pay
pay his  pro rata share out of his own
prots, the industrial partner shall receive property or assets.
such share as may be just and equitable
un
unde
derr th
thee ci
circ
rcum
umststan
ances
ces.. If bebesi
side
dess his
his Ar.
Ar. 1798.
1798. If the partners have agreed to
services he has contributed capital, he shall entrust to a third person the designaon of 
 

the share of each one in the prots and partner’s capital contribuon.
losses, such designaon may be impugned
only when it is manifestly inequitable. In no Appoined as manager aer he
case
case may
may a part
partne
nerr who
who has
has begun
egun to constuton o he parnership
execute the decision of the third person, or Partner
Partner app
appoin
ointed
ted in art
artss of partne
partnersh
rship
ip
who has not impugned the same within a may
ma y exe
execu
cute
te all
all ac
acts
ts of adadmi
mini
nist
stra
rao
on n
period of three months from the me he notwithstanding the opposion of the other
had knowledge thereof, complain of such partners, unless he should act in bad faith.
decision. His power is revocable only upon just and

The designaon of prots and losses cannot lawf

lawful
ul ca
caus
usee an
andd up
upon
on the
the vote
vote of the
the
part
partne
ners
rs rerepr
pres
esen
enn
ng
g thethe co cont
ntro
roll
llin
ing
g
be entrusted to one of the partners. interest.
Reason: revoca
revocaon
on rep
repres
resent
entss cha
change
nge in
Reason or he provision terms of contract.
Admiedly, the designaon of prots and In case o mismanagemen: Usual remedies
losses cannot be entrusted to one of the allowed by law including dissoluon.
partne
par tners
rs as the fulll
fulllmen
mentt of a contra
contract
ct
cannot be le to one of the contracng Appo
poin
inm
me
en as manag anagerer aer
aer hhe
e
pares. It may, however, be entrusted to a constuton o he parnership
third person by common interest. Appoin
App ointme
tment
nt ma
mayy be re
revo
voke
ked
d at any me
for any cause what so ever.
ever.
Ar. 1799. A spulaon which excludes one
or more
more pa part
rtne
ners
rs fr
from
om any
any shar
share
e in the
the Reason: re
revo
voca
cao
onn not fo fou
unded
ded on a
prots or losses is void. change of will on the part of the partners.
Appointment not condion of contract. It is
Stpu
Stpulalato
tonn o ex excl
clud
ude
e a par
parne
nerr rom
rom merely
merely a simp
simple
le contract of agency
agency,, which
profs and losses is void may be revoking at any me. It is believe
The law does not allow a provision in the that
that the vovote
te for re
revvoca
ocaon
on must
ust also
also
contra
con tract
ct of partne
partnersh
rship
ip exc
exclud
luding
ing one or represent the controlling interest.
more partners from sharing in the prots
and losses. The reason is that a partnership Sc
Scop
opee o h hee powe
powerr o h he
e mana
managiging
ng
is or
orga
gani
nize
zedd fo
forr the
the co
comm
mmon
on be
bene
net
t or parner
interest of the partners. General rule: partner appointed as manager
has all the powers of a general agent as well
Reason or exclusion o indusrial parner as all
all the
the inci
incide
dent
ntal
al po
powe
wersrs neces
necessa
sary
ry to
An industrial partner is not liable for losses carry out the object of the partnership in
because if the partnership fails to realize the transacon of its business.
any prots, the industrial partner would Excepton : When
When powe
powersrs of mana
manage
gerr is
have contributed his labor in vain. specicall
specicallyy restricted.
restricted. A managing
managing partner
partner
Furthermore, the industrial partner cannot may not bind the partnership by contract
withdraw the work already done by him for
the partnership. foreign to its business.

Compensaton or service rendered

Compensaton
Ar. 1800. The The part
partne
nerr who
who has has been
been Parner Generally no entle o
appoin
app ointed
ted manage
managerr in the arclearcless of the co
comp
mpen
ensa
sato
ton,n, In the absence of an
pa
part
rtne
ners
rshi
hip
p may
may exec
execut
utee al
alll ac
acts
ts of the
the agreement to the contrary, each member of 
administraon despite the opposion of his the partnership assumes the duty to give his
partners, unless he should act in Bad faith., me, aenon, and skill to the
and his powers is irrevocable without the managememe ent of its aairs, as may be
 just or lawful cause. The vote of the reasonably necessary to the success of the
part
partne
ners
rs rerepr
pres
esenenn
ngg thethe co cont
ntro
roll
llin
ing
g common
com mon enterp
enterpris
rise;
e; and fo
forr this
this servic
service
e a
interest shall be necessary for such share of the prots is his only
revocaon of power. A power granted aer compen
com pensa
saon.
on. In managi
managing
ng partne
partnersh
rship
ip
th
thee part
partn
ner
ersh
shiip has co cons
nst
tuute
tedd may aairs, a partner is praccally taking care of 
re
revo
voke
kedd at an
any
y me.
me. Ea Each
ch pa
partrtne
nerr ha
hass a his
his own interest or man managi
aging his
his own
right to an equal voice in the conduct of the business. In the absence of any prohibion
pa
part
rtne
ners
rshi
hip
p bu
busisine
ness
ss.. Th
This
is righ
rightt is nonott in the arts. Of partnership for the payment
dependent on the amount
amount or size of the of salaries to general partners, there is
 

no
noth
thin
ing
g to pr prev
event
ent the
the pa
part
rtne
ners
rs to ente
enterr respecve dues;
into a collateral verbal agreement to that 3. Th
There
ere is
is no spul
spulao
aon
n th
that
at o
one
ne of
of them
them
eect. shall not act without the consent of all
EXCEPT
EXC EPTION
IONS: S: In pr prop
oper
er ca
case
ses,
s, the
the law
law the others.
may imply a contract for compensaon;
1. A partn
partnerer en
engag
gageded by
by his
his co
co-pa
-partn
rtners
ers tto
o
perform services not required of him in ART. 1802 In ca case
se it shou
should
ld ha
have
ve be
been en
fullment of the dues and in capacity s
spu
pula
late
ted
d that
that none
none of thethe mana
managi ging
ng
other than that of a partner. partner shall act without the consent of the
2. When
When therthere e is extrao
extraordrdin
inar
ary
y neglect
neglect on ot
othe
hers
rs,, the
the co
conc
ncur
urre
renc
nce
e of all
all shal
shalll be
the part of one partner to perform his necessary for validity of the acts, and the
du
due
es,s, imimpo
posising
ng enr
enre e burd
burdenen on absence or disability of any one of them
remaining partner. canno
cannott alleged
alleged,, unless
unless there
there is immin
imminent
ent
3. One
One papartrtne
nerr may
may emplemploy
oy the oth otherer danger of grave or irreparable injury to the
to do work ork for him outsi utside
de of and
and partnership.
independent of the co-partnership.
4. Partners exempted by terms of   When unanimiy o acton stpulaed
pa
part
rtne
nersrshi
hipp from
rom re rend
nder
erin
ingg seserv
rviices
ces concurrence necessary or validiy o acs
may demand pay for services rendered. The partners may spulate that none of the
5. Wher
Where e one
one part
partne
nerr is ent
entru
rust
sted
ed wi
witth managing partners shall act without the
manage
man agemenmentt and dev devote
otess his whole
whole consent of the others. In such a case, the
t he
me and devoon at the instance of the unanimous consent of all the managing
ot
othe
herr pa
partrtne
ners
rs who
who ar are
e a
aenendi
ding
ng to partners shall be necessary for the validity
their individual business and giving no of their acts. This consent is
me
m e or a aen
enoonn to the
the part
partneners
rshi
hip
p so indispensable that neither absence nor

business. disability of any one of them may allege as

excuse to dispense with requirement.
Excepon: When there is imminent danger
Ar
Ar.
. 1801
1801.. If two or more
more papart
rtne
ners
rs ha
have
ve of grave or irreparable injury to the
been intrusted with the management of the partnership then a partner may act alone
partne
par tnersh
rship
ip withou
withoutt the speci
specica
caonon of  without consent of partner who is absent or
thei
theirr re
resp
spec
ecv
vee due
duess or with
withououtt the
the under disability.
spulaon that one of them shall not act
without the consent of all others, each one Cons
Consen
en o manaanagi
gin
ng pa
par
rne
ners
rs no
no
separately execute all acts of   necessary in routne ransactons
ad
admi
mininist
stra
rao
on,
n, bu
butt if an
anyo
yonene of themthem The requirement of wrien authority refers
should
sho uld oppose
oppose the act of eac
each h ot
othe
her,
r, the eviden
evidently
tly to formal
formal and unusua
unusuall wrien
wrien
decision of the majority shall prevail. In the contracts.
cas
case of e the partners owning the
controlling interest shall decide the maer. Ar. 180
1803. When the manner of  
Where
Whe re respec
respecve
ve dues of two or more more mana
ma nage
geme
ment
nt has
has nonott agr
agree
eedd up
upon
on,, the
the
managing partners not species. following rules shall observed:

Each one may separaely perorm acs 1. All

All partne
partners
rs shall
shall be consid
considere
ered
d agen
agents
ts
o adminisraton and whatever any one of them may do
1. If one
one or
or more
more ooff the
the manag
managing
ing partne
partners
rs alone shall bind the partnership without
shal
shalll op
oppo
pose
se the
the acacts
ts of the
the ot
othe
hers
rs,, prej
prejud
udic
ice
e to the
the prov
provis
isio
ion
n of arc
arcle
le
then the decision of the majority of the 1801
managing
manag ing partners
partners shall prevail. Right
to oppose can be exercise only by those 2. None
None of the
the part
partne
ners
rs ma
may,y, wit
witho
hout
ut th
thee
entrusted with mgt. consent
conse nt of others,
others, make
make any importa
importantnt
2. In case
case of e,
e, m
mae
aerr sh
shall
all be deci
decided
ded by alteraon in the immovable property of 
th
the
e vovote
te of the
the papartn
rtners
ers owni
owning
ng the
the the partnership, even if it may be useful
controlling interest. to the
the pa
part
rtne
ners
rshi
hip,
p, bu
butt if ther
there
e ids
ids
re
refu
fusa
sall of the
the co
cons
nsen
entt by the
the ot
othe
herr
REQUISITES FOR APPLICATION OF RULE partners is manifestly prejudicial to the
1. Two or more partners have been interest of the partnership, the court’s
appointed as managers; intervenon may be sought.
2. There is no specicaon of their
 

Rules when manner o he managemen

managemen not become a member of the partnership,
ha
ha has
has no
no ag
agre
reed
ed upon
upon alalll par
parne
ners
rs even if the other partners know about the
considered as managers and agens agreement. Not being a member of 
All partners shall have equal rights in the the partnership, he does not acquire the
mgmt. and conduct
conduct of partnershi
partnership p aa
aairs
irs.. rights of a partner nor is he liable for its
All
All of ththem
em shal
shalll co
cons
nsid
idere
eredd mgrs
mgrs.. and
and debts.
agents and whatever any one of them may
do alone shall bind the partnership. If there Reason or he rule
is mely
mely opposi
opposion
on,, ho
howe
weve
ver,
r, the mae
maerr Partnership is based on mutual trust and
shall decided by majority vote. In case
of ee,, vote
vote of part
partn
ner
erss re
reprpres
esen
enn
ngg condence among the partners. Inclusion of 
new partner would be a modicaon of the
controlling interest. original
original contract
contract of partnershi
partnershipp requiring
requiring
un
unan
anim
imou
ouss co
cons
nsen
entt of all
all th
the
e pa
part
rtne
ners
rs..
Unanimous consen required  or Prohibion applies eve even if person
aleraton o immovable propery associated is already a partner.
The consent
consent need not be express.
express. It ma
may y
presume from the fact of knowledge of the Ar.
Ar. 18
1805.
05. The partnership books shall be
alteraon without interposing any kept
kept,, subj
subjec
ectt to an
any
y ag
agre
reeme
ement nt be
betw
twee
een
n
objecon. Prohibion only applies the partners, at the principal place of the
to immo
immova vabl
ble
e pr
prop
opert
erty
y bebeca
caus
usee of the
the bu
busi
sine
ness
ss of the
the part
partne
ners
rshi
hip,
p, an
and
d ever
every
y
greater importance of this kind of property, partner
partn er shall at any reasonable
reasonable hour have
have
and th thee alter
era
aon ther ereeof must be access to and may inspect and copy any of 
important. This would be an act of strict them.
domi
domin nion.
ion. If refu
refusa
sall to give
give cocon
nse
sent
nt is
manif
man ifest
estly
ly preju
prejudic
dicial
ial to
to tthe
he int
interes
erestt of  Keeping o parnership books
the partnership, court intervenon maybe Par
Parne
nerr wi
wih
h duy
duy o keep
keep par
parne
ners
rshi
hip
p
sought. Consent may presume from silence books
(lack
(lack of opp
opposi
osion
on despit
despite
e knowle
knowledge
dge).I
).If 
f  Th
Thee du
duty
ty to keep
keep tr true
ue an
and
d co
corr
rrec
ectt bo
book
okss
alteraon is necessary for preservaon of  show
showining
g the
the r
rm’
m’ss ac
acco
coun
unts
ts,, su
such
ch bobook
okss
the property, consent of the other partners being at all mes open to inspecon of all
not required. members of the rm, primarily rests on the
managi
man aging
ng or acve
acve part
partne
ner.
r. It is presu
presumeme
Ar. 1804
Ar. 1804. EvEvery
ery pa
part
rtne
nerr may
may as
asso
sociciat
ate
e thatt the partne
tha partnersrs hav
have
e kno
knowle
wledge
dge of the
another person with him in his share, but contents of the partnership books and that
the associates shall not admied into the said books statestate accurately the state
partnership without the consent of all other of accounts, but errors can corrected.
partne
partners,
rs, even
even of the partner
partner havin
having g an
associate should be a manager of  Righ
Righs
s wi
wih
h he
he re
resp
spec
ec o par
parne
ners
rshi
hip
p
subpartnership nature books
Books should
should kept
kept at the principal place of 
The paro
member naerparnership
ship ormanded abhird
eween a business
busine ss as each par
partne
tnerr has the right
right to
free access to them and to inspect or copy
Person for a division of the prots coming any of them at any reasonable me, even
to him from the partnership enterprise is aer
aer diss
dissol
olu
uon
on.. Insp
Inspec
econon ri
righ
ghts
ts no
nott
termed subpartnership. absolute
abso lute can restrained
restrained from using info info
It is a partnership within a partnership and for other than partnership purpose.
is disnct and separate from the main or
principal partnership. Access o parnership books
Rights can exercise at any reasonable hour.
Righ o he person
Righ person associ
associae
aedd wih
wih he This means reasonable
reasonable hours on business
business
parnership’s share days throughout the year and not merely
Subpartners
Subpa rtnership
hip agreements
agreements do not during some arbitrary period of a few days
a
aec
ectt the
the comp
compososi
ion
on,, ex
exis
iste
tenc
nce,
e, or chosen by the managing partners.
operaons of the rm. The subpartners are
partners interest, Ar. 1806. Partners shall render on demand
tr
true
ue and
and full
full info
inform
rma
aonon of all
all thin
things
gs
However, in the absence of the mutual aecng the partnership to any partner or
assent of all the pares, a subpartner does the legal representave of any deceased
 

part
partne
nerr or of an anyy part
partne
nerr unde
underr lega
legall i.e. the winding up of partnership aairs
disability. Duty to render informaon, there is completed.
must be no concealment between partners
in all
all maaer
erss a
aec
ecn
ng
g the
the part
partne
ners
rshi
hip.
p. Duy o ac
Duy acco
coun
un o
orr secr
secre
e an
and
d simi
simila
larr
Informaon must use only for partnership profs
purpose. Not just on demand but partner The
The duty
uty of a part
partne
nerr to acco
accoun
untt as a
also
also hahass duduty
ty of vovolu
lunt
ntar
ary
y disc
disclo
losu
sure.
re. duciary operates to prevent from making a
Ho
Howev
wever,
er, duty to render
render info
info does notarise secret prot out of the operaon of the
with respect to maers appearing part
partn
ner
ersh
ship
ip and
and from carrcarryi
yin
ng on the
the
in partnership books since each partner has
the right to inspect those. Good faith not business for his private advantage or
a busine
business
ss in com
compe
peon
on w/ the rm
on
only
ly req
requi
uire
ress that
that a papart
rtne
nerr shou
should
ld no
nott w/o con
consen
sentt of other
other partner
partners.
s. Viola
Violaon
on
make
ma ke a fafals
lse
e st
stat
atem
emen
entt bu
butt al
also
so that
that he may be ground for dissoluon.
should abstain from any false concealment.
Duy o accoun or earnings accruing even
Ar. 1807.
Ar. 1807. Every partner must account the aer erminaton o parnership
partne
par tnersh
rship
ip for any benet,
benet, and hold as If a partner uses info obtained by him from
trustee for it any prots derived from him the partnership for his own account w/o the
without the consent of the partners from consent of the other partners, he is liable to
any
any tr tran
ansa
sac
con
on cocon
nnect
nected
ed wi
with
th the
the account for any benet he might obtain.
forma
formaon,
on, conduc
conduct,
t, or liq
liquid
uidao
aon
n of the
partnership or from any use by him of his Duy o make ull disclosure o inormaton
property. belonging o parnership
A pa
part
rtne
nerr is also
also subj
subject
ect to thethe d
duc
ucia
iary
ry
The relaon between the partners duty
dut y of undivi
undivided
ded loyalt
loyaltyy and comcomple
plete
te
is essenally
essenally duciary involving
involving trust and disclosure of info of all things aecng the
condence, each partner considered in law, part
partne
ners
rshi
hip.
p. By Info Inform
rmaaon
on is meanmeantt
as he is, in fact, the condenal agent of  info
inform
rmaaon
on,, whi
which cancan be used
used for thethe
th
the
e ot
othe
hers
rs.. Th
The
e dues
dues of a papart
rtne
nerr ar
are
e purpos
pur poses
es of the parpartne
tnersh
rship.
ip. Info
Info cannot
cannot
analogous to those of a trustee. us
use
e fo
forr a partn
partner’
er’ss pr
priv
ivat
atee gain
gain – even
even if 
aer terminaon.
Duy o ac or common benef
Cannot
Can not use and appapply
ly exclusi
exclusivel
vely
y to own Duy no
Duy no o ac
acqu
quir
iree ine
inere
res
s or ririgh
gh
indivi
individua
duall benet
benet partne
partnersh
rship
ip assets
assets or adverse o parnership
result
resultss of kn
knowl
owledg
edgee and info gained
gained in If partner does, he holds it in trust for the
charac
cha racter
ter of par
partne
tner.
r. Managi
Managingng par
partne
tners
rs benet of the partnership and must account
parcularly owe a duciary duty to inacve to the rm for the prots of the transacon,
partners. unless it appears that the others consented

Duy begins during he orm

ormaton
aton Ar
Ar.
. 1808.
1808. The Capit
Capitalist
alist partners cannot
cannot
o
Pr
Prinparnership
inci
cipl
ple
e of good
good fa
fait
ith
h apappl
plie
iess no
nott on
only
ly
eng
engage for their own account in any
operaon, which is of the kind of business
during partnership but during the in which the partnership is engaged, unless
negoaons leading to the formaon of the there
there is a spula
spulaon
on to the cocont
ntra
rary
ry.. An
Any
y
partnership. Also, a person who agreed w/ capitalist
capit alist partner
partner violang
violang this prohi
prohibion
bion
an
anotothe
herr to fo
form
rm a papart
rtne
ners
rshi
hip
p ha
hass the
the shall bring to the common funds any prot
obligaon to account for commissions and accruing
accrui ng to him from his transacon
transacons, s, and
discounts received in acquiring property for shall personally bear all the losses.
the future partnership.
Prohibiton
Prohibit on again
agains
s parner
parner engaging
engaging he
Duy contnues even aer he dissoluton business
o he parnership Prohib
Pro hibito
itonn rel
relatv
atvee  – Prohibion against
Duty of partner to act w/ utmost good faith capitalist partner to engage in business is
towards hi s co
co--partn
tner
erss co
connnues relave, unlike the industrial partner who is
throughout the enre life of the partnership absolutely prohibited from engaging in any
even aer dissoluon for whatever reason business
business for himself.
himself. Capitalis
Capitalistt partner
partner is
or whatever means, unl the relaonship is only prohibited from engaging for his own
terminated, account in any operaon which is the same
 

as or similar to the business in which the

part
partneners
rshhip is engaengage
ged
d andand whi
which is Ar. 1810. The property rights of a partner
compeve w/ said business are:
VIOLATION  – Obligaon to bring to 1. His rights in specic partnership
common
com mon fundfund any prots derived
derived and in property;
case of losses, he shall bear them alone.
Partners, however, by spulaon may 2. His int
interes
erestt iin
n the
the p
part
artner
nershi
ship;
p;
permit it. The law permits him to carry on a
business not connected or compeng with 3. His right to parcipate in the
thatt of the partn
tha partners
ership
hip.. Law is silent
silent on
whet
wh ethe
herr he ca can
n enga
engage
ge in sasame
me line
line of  management, extent of prope
management, property
rty right
rightss
of a partner.
busi
businenesss fo forr the
the acco
accouunt of another er..
Prohibion sll applies because of duciary Principal Righs
posio
pos ionn imposi
imposingng dues
dues of utmutmost
ost good
good 1. Rights
Rights in spe
speci
cicc partn
partner er pr
prope
operty
rty;;
fa
faiith
th.. He may not not cacarr
rryy on any other ther 2. Inte
Intere
rest
st in par
partn
tner
ersh
shipip;;
business in rivalry w/ the partnership. 3. Right
Right tto
o parc
parcipa
ipate
te iin
n manag
manageme
ement.
nt.

Reason or prohibiton RELATED RIGHTS

Fiduci
Fiduciary
ary nature
nature of rel
relao
aonsh
nship
ip impose
imposess 1. Righ
Rightt to rereim
imbu
burs
rsem
emenentt fo
forr amou
amountntss
obli
obliga
gao
onn of utmo
utmost
st good
good fa
fait
ith.
h. Rule
Rule advancecedd to partners ership and to
prevents use of info obtained in course indemnicaon for risks inconsequence
of tra
transa
nsacon
con of partne
partnersh
rship
ip busine
business
ss or of management (art. 1796).
becaus
bec ausee of connec
connecon
on w/ rm regaregardi
rding
ng 2. Right of access and inspecon of 
business secrets and clientele of rm to its partnership books (art. 1805).
prejudice. 3. Righ
Rightt to true
true and full
full info
inform
rmaaon
on of al
alll
things aecng partnership (art. 1806).
Ar. 1809.
Ar. 1809. Any partner shall have the right 4. Righ
Rightt to fo
form
rmal
al accou
accountnt of partn
partners
ershi
hip
p
to a formal account
acc ount as partnership aairs: aairs under certain circumstances (art.
1809).
1. If he is wron
wrongfgful
ully
ly excl
exclud
uded
ed from
from the 5. Right
Right to hhave
ave part
partner
nershi
ship
p disso
dissolve
lved
d als
alsoo
partnershi
partn ership
p busin
business
ess or possessio
possession
n of  under
und er certai
certain
n con
condi
dions
ons (ar
(arts.
ts. 1830-
1830-
its property by his co-partner; 1831).

2. If tthe
he right
right exists
exists under
under tthe
he term
termss of any
any Parnership propery and parnership
agreement; capial distnguished
distnguished

3. Prov
Provid
ided
ed by ar
arc
cle
le 1
180
807;
7;

4. When
Whenev
everer other
other circu
circums
msta
tanc
nces
es
render it just and reasonable, Right of

the partner to a formal account.

General rule: During exi
xisstence of 
partne
par tnersh
rship,
ip, a par
partne
tnerr is not entle
entled d to a
fo
form
rmal
al ac
acco
coun
untt of part
partne
ners
rshi
hipp a
aai
airs
rs..
Reason: rights of partner amply protected
in arts1805 and 1806. In addion, it would
cause much inconvenience and unnecessary
waste of me.

Ex
Exce
cep
ptonon:: In the
the sp spec
ecia
iall an
andd unus
unusua
uall
sit
situa
uaons
ons enu
enumer
merated
ated und
under er art.
art. 1809.
1809.
Right of partner
partner to demand an accounng
accounng
w/o bringing about dissoluon is
a ne
neces
cessasary
ry co
coro
roll
llar
ary
y to righ
rightt to shar
sharee in
pr
pro
ots
ts.. A fo
form
rmal
al ac
acco
coun
untt is a neneces
cessa
sary
ry
incident to the dissoluon of the
partnership.
Parnership Parnership
 

propery capial
Changes Variable: its Consan: it
value value may remains
vary from day unchanged
today w/ as the
changes in amount is x
market value by
agreement
of the
partners, and
is not
aected by
uctuaons
in the value
of the
partnership
property,
although it
may be
increased
and
decreased by
 

partners;
unanimous
consent of  
the partners. 2. A partne
partner’s
r’s ri
right
ght in spec
specic
ic part
partner
nershi
ship
p
Asses Includes not The pr
prop
oper
ertty is not assiassign
gnab
ablle ex
exce
cep
pt in
Included only the aggregate connecon with the assignment of rights of 
original of the all the partners in the same property;
capital individual
co
cont
ntri
ribu
buo
onsns,, co
cont
ntri
ribu
buoons
ns 3. A partner
partner’s
’s right in speci
specicc partne
partnersh
rship
ip
but also all made by the pr
prop
opert
erty
y is no
nott subj
subject
ect to a
aach
achme
ment
nt or
property partners in execu
execuon,
on, except
except on a claim
claim agains
againstt the
su
subs
bseq
eque
uent
ntly
ly esesta
tabl
blis
ishi
hing
ng partnership;
acquired or connuing
because of the 4. A partner
partner’s
’s right in speci
specicc partne
partnersh
rship
ip
the partnership. pr
prop
opert
erty
y is no
nott subj
subjec
ectt to lega
legall supp
suppor
ortt
partnership under art. 291 nature of a partner’s right in
or w/ specic partnership property
partnership
funds, Art. 1811 contemplat
contemplateses tangible
tangible prope
property
rty
including but not intangible things. A partner is a co-
partnership owner w/ his partners of specic
name an d partnership
partn ership prop
propert
erty,
y, but the rules on co-
goodwill. owne
ow nersrshi
hip
p do no
nott neces
necessa
sari
rily
ly apappl
ply.
y. Th
Thee
legal incidents of this tenancy in partnership
Ownership o cerain propery are
are dis
disnc
ncv
vel
ely
y char
charac
acte
teri
ris
scc of thethe
Propery use by he parnership – Where partnership relaon. They are as follows:
there is no express agreement that property
used by a partnership constutes Equal righs o possession - Ordinarily, a
partne
par tnersh
rship
ip proper
property,
ty, suc
such
h use does
does not part
partne
nerr has
has an equa
equall ri
righ
ghtt to poss
posses
esss
make it partnership property, and whether specic partnership property for
it is so dedepe
pend
ndss on the inte
inten
non
on of the
the partnership purposes. None of the partner
pares, w/c may be shown by proving an scan possesses and uses the
expres
exp resss ag
agree
reemen
mentt or ac acts
ts of papar
rcu
cula
larr specic partnership property other than for
conduc
con duct.t. The intent
intent of the pares
pares is the partnership purposes w/o the consent
controlling factor. of the other partners. Should any of them
Prop
Properery
y ac acqu
quir
ired
ed by a par parne
nerr wi
wih
h use the property for his own benet, he
par
pa rne
ners
rshi
hip undss  – Unle
p und Unless
ss a co cont
ntra
rary
ry must account,
account, like a strang
stranger,
er, to the others
intenon appears, property acquired by a fo
forr the
the pr
pro
ots
ts de
deri
rived
ved there
there frfrom
om or the
the
partne
par tnerr in his own name name w/ parpartner
tnershi
shipp valu
alue of his wr wroongf
gful
ul poss
osses
essi
sio
on or
funds is partner
p artnership
ship property. However,
However, occupaon. A partner wrongfully excluded
if the propert erty was acquired aer from possession of partnership property

dissoluon but before the winding up of the by a co-partner has a righ ghtt to formal
partnership aairs, it would be his separate account and may even apply for a
property
proper ty but he would be liabl
liable
e to account  judicial decree of dissoluon. On the death
to the partnership for the funds used in its of a partner, his right in specic partnership
acquision. property
prope rty vests in the survivi
surviving
ng partners.
partners. By
agreem
agreementent,, the right
right to posses
possesss speci
specicc
Ar. 1811. A partner is co-owner with his partnershi
partn ershipp property
property may surrend
surrender.
er. In the
partners of specic partnership property. absenc
abs encee of specia
speciall agr
agreem
eement,
ent, howe
howevever,
r,
The incidents of this co-ownership are such neither partner separately owns, or has the
that; excl
cluusive right of possession of any
partnershi
partn ershipp property
property or any propoproporona
ronall
1. A partner, subject to the provision of this part thereof.
thereof. Each has dominion over
t
tle
le an
andd an
anyy ag
agre
reem
emenentt betw
betwee
eenn the
the the enenre partnertnersship property. The
partner, has an equal right with his partners possession of partnership property by one
to possess specic partnership property for partne
par tnerr is the pos
posses
sessio
sion
n of all unl his
partnership purposes; but he has no right to posses
pos sessio
sion
n bec
become
omess advers
adverse.
e. A partne
partnerr
poss
posses
esss such
such prop
proper
erty
ty foforr any
any oth
other cannot iniate tle by adverse possession
purpose without the consent
consent of his unl and unless he makes an adverse claim.
 

part
partne
ners
rshi
hip
p and
and notnot to the the part
partne
ners
rs..
Righ
Righ no
no as
assi
sign
gnab
ablele - A pa
part
rtne
nerr ca
cann
nnot
ot However, their interest in the partnership
se
sepa
para
rate
tely
ly asassi
sign
gn hishis righ
rightt to sp spec
eci
icc is.
is. Th
The
e meth
methodod of reach
reachin
ing
g a judg
judgme
mentnt
partne
partnersh
rship
ip proper
propertyty but all of them can debtor’s interest in partnership property is
assign their rights in the same property. specically set forth in art.1814.

Reasons or non-assignabiliy:

non-assignabiliy: Ar. 1812. A part
partne
ner’
r’ss inte
intere
rest
st in the
the
1. It preve
prevents
nts iinte
nterfe
rferen
rence
ce by out
outsid
siders
ers in
in partnership is his share of the prots and
partnership aairs; surplus.
2. It prote
protect
ctss the
the righ
rightt of othe
otherr part
partne
ners
rs
an
andd papart
rtne
nersrshi
hip
p cred
credit
itor
orss to have
have Share o profs and surplus  – The partner’s
pa
part
rtne
ners
rshi
hip
p as asse
sets
ts apappl
plie
iedd to rmrm interest in the partnership consists of his
debts; share in the undistributed prots during the
3. It is oen
oen impo
imposs
ssib
ible
le to dete
determ
rmin
inee the life of the partnership as a going concern
extent of a partner’s benecial interest and his share in the undistributed surplus
in a parcular partnership asset. Reason aer its dissoluon.
for impossibility: Each partner, having a
beneci
ben ecial
al int
interes
erestt in the partne
partnersh
rship
ip Prots:
ts: the exce cesss of retueturns over
property considered as a whole, has a expend
exp enditu
iture
re in a transa
transacon
con or series
series of 
benecial
bene cial interes
interestt in each part. Where, tr
tran
ansa
sac
con
ons;
s; or the
the ne
nett inco
income
me of the
the
howe
howevever,
r, none
none of the aboveabove reasons
reasons partnership for a given period.
appl
apply,
y, an aut
author
horize
izedd assign
assignmen
mentt by a
partner of his right in specic Surplus: the assets of the partnership aer
partnership property is void, but it may partne
partnersh
rship
ip debts
debts and liabi
liabili
lies
es are pai
paid
d
be regarded as a valid assignment of  and seled and the rights of the partners
the partner’s interest in the among themselves are adjusted. It is the
partnershi
partnership.
p. The law allows
allows a rering
rering exce
excessss of asse
assets
ts ov
over
er liab
liabil
ili
ies
es.. If the
the
partner to assign his rights in liab
liabil
ili
ies
es ar
are
e more
more than
than the
the asse
assets
ts,, the
the
partnership property to the partner(s) dierence represents the extent of the loss.
connuing the business.
Ar.1813. A conveyance by a partner by his
Righ limied o share o wha remains whole interest in the partnership does not
aer parnership debs has been paid of itself dissolve the partnership, or, against
Strictly speaking, no parcular partnership the
the otothe
herr part
partne
ners
rs in the
the abse
absencnce
e of 
property or any specic or an aliquot part agreement,
agreem ent, entle the assignee, during the
thereof can be considered the separate or connuance of the partnership, to interfere
individual property of any partner. The in the management or administraon of the
whole of partnership property belongs to partnership business or aairs, or to require
the partnership considered as a juridical any informaon or account of the
person, and a partner has no interest in it partnership
partn ership transa
transacons,
cons, or to inspect the

but his share of what remains aer all part

partn
ner
ersh
ship
ip book
books;
s; howewevver it mer erel
ely
y
partnership debts are paid. Consequently, en
ent
tle
less the assi
assign
gnee
ee to re rece
ceiive the
the
specic partnership property is not subject accordance
accord ance with his contract,
contract, the prots to
to aachment, execuon, garnishment, or which the assigning partner wou would
injuncon, w/o the consent of all the otherwise be entled.
partners except on a claim against the
partnership. For the same reason that the In case of fraud in the management of the
property belongs to the partnership, the partnership, the assignee may avail himself 
partners cannot claim any right under the of the usual remedies. In case of dissoluon
homestead or exempon laws when it is of the partnership, the assignee is entle to
aached for partnership debts. However, a recei
receive
ve his
his assi
assign
gnor
or’s
’s inte
interes
restt an
andd may
may
 judgment creditor may levy upon a requir
req uire
e an accoun
accountt fr
from
om the date
date only of 
partner’s interest in the partnership itself the last account agreed to by all partners.
partners.
because it is actually his property, by means E
Eec
ectt of assi
assign
gnme
mentnt of part
partne
ner’
r’ss wh
whol
ole
e
of a “charging order.” The right of   interest in partnership.
the partners to specicpa
cpartnership
property is not subject to legal support A partner
partner’s
’s right
right in speci
specicc partne
partnersh
rship
ip
since the property belongs to the property is not assignable but he may assign
 

his interest in the partnership to any of his preferred rights of the partnership creditors
co-partners or to a third Person irrespecve on due applicaon to a competent court by
of the consent of the other partners, in the any judgement creditor of the partner, the
absence of agreement to the contrary. co
cour
urtt whic
which
h enter
entered
ed the
the inte
interes
restt of the
the
debt
debtoror part
partnner wi
with
th paym
paymenentt of the
the
Righs wihheld rom assignee unsased amount of such judgement debt
1. To int
interf
erfere
ere in the man
managem
agement
ent.. with the interest thereon; and may then or
2. To requ
require
ire any
any info
informa
rmaon
on oorr account
account.. later appoint a receiver of his share of the
3. To inspect
inspect any
any of the
the partner
partnership
ship books
books.. prots, and of any other money due or to

No one can be compelled to be partners w/ fall due to him in respect of the partnership,
and make all other orders, direcons and
someon
som eonee else.
else. The assign
assignmen
mentt doe
doess not accoun
acc ounts
ts and inqinquir
uiries
ies which
which the deb
debtor
tor
divest the assignor of his status and rights part
partn ner mi
migh
ghtt have
have made,
ade, or whic
which
h
as a partner
partner nor oper
operate
ate as dissoluo
dissoluon.
n. circumstances of the case may require. The
The law, however, provides the non- interest charged may redeem at any me
assigning collaborates w/ a ground before foreclosure, or in any case of a sale
for dissolving the partnership if they bein
being g dir
ire
ected
cted by the the co
couurt,
rt, may be
so desire. purcha
chase wit
without there
ereby causing
dissoluon:
Remedy o oher parners
Dissoluton o parnership no inended – 1. With
With sep
separ
arat
ate
e pr
prop
oper
erty
ty,, by any one or
Many
Man y partne
partnersh
rship
ip agreem
agreement
entss are made
made more of the partners;
merely as security for loans, the assigning
pa
part
rtne
nerr ne
never
ver inte
intend
ndin
ing
g to dedest
stro
roy
y the
the 2. With
With par
partn
tner
ersh
shipip pr
prop
oper
erty
ty,, by an
anyy on
one
e
partnership relaon. If the assigning partner or more
more of the the parartn
tner
erss wi
witth the
neglects his dues aer assi
neglects assignment
gnment,, co
cons
nsen
entt of all
all the
the pa
part
rtne
nersrs a whos
whosee
the other partners may dissolve the inte
interes
restt ar
are
e no
nott so chchar
arge
ged d or sosold
ld,,
partnership under art. 1830. no
noth
thin
ing
g in this
this tle
tle shal
shalll be heheld
ld to
Dissol
Dissolut
uton
on o parne
parnersh
rship
ip inend
inended
ed  – A depriv
dep rive
e a par
partne
tnerr of his right,
right, if any,
any,
partner’s conveyance of his interest in the under the exempon laws, as regards
partnership operates as dissoluon of the his interest in the partnership.
partnership only when it is clear that the
pares
par es contem
contempla
plated
ted and intintend
ended
ed the Appl
Applic
icat
aton
on oorr a ch
char
argi
ging
ng orde
orderr a
aer
er
enre withdrawal from the partnership of  securing judgemen on his credi
such
such partner
partner and the term
termina
inaon
on of the Whiile a separat
Wh rate cr
cred
ediito
torr of a parartn
tner
er
partnership as between the partners. ca
can
nnot aach or levy upon speci ci
c
partnership
partn ership property for the sasfacon
sasfacon of 
Righs o assignee o parner’s ineres his credit
credit bec
becaus
ausee par
partne
tnersh
rship
ip assets
assets are
1. To recei
receive
ve in acco
accorda
rdance
nce w/ hhis
is co
contr
ntract
act reserved for partnership creditors, he can
th
the
e pr
pro
ots
ts ac
accr
crui
uing
ng to the
the assi
assign
gnin
ing
g secure a judgment on his credit and then
partner; apply
app ly to the proper
proper court for a “char“chargin
ging
g
2. To avai
availl himsel
himselff of the usual
usual remed
remedie iess order”, subjecng the interest of the debtor
provided by law in the event of fraud in partner in the partnership w/ the payment
the management; of the unsased amount of such judgment
3. To recei
receiveve the assi
assigno
gnor’s
r’s in
intere
terest
st in case
case w/ interest thereon w/ the least
of dissoluon; interfe
interferen
rence
ce w/ the par partne
tnersh
rship
ip busine
business
ss
4. To re
requ
quirire
e an acacco
coun
untt of part
partne
ners
rshi
hipp and the rightrightss of the other partners.
partners.
aairs, but only in case the partnership By virtue of the charging order, any amount
is diss
dissol
olve
ved,
d, an
andd such
such acacco
coun
untt shal
shalll or po
porron
on ther
thereo
eoff w/c
w/c the
the partn
partnerersh
ship
ip
cover the period from the date only of  would otherwise
otherwise pay to the debtor-par
debtor-partner
tner
th
the
e last
ast acco
accouunt agre
agreed
ed to by al alll should
sho uld instead
instead be given
given to the judgme
judgmentnt
partners. The purchaser of a partner’s cr
cred
ediitor.
tor. This
This re rem
medy,
edy, howowev
ever
er,, is w/o
w/o
inte
intere
rest
st may
may ap
appl
ply
y to thethe cour
courtt fo
forr prejudice to the preferred rights of 
dissoluon aer the terminaon of the partnership creditors whose claims should
specied term or undertaking or at any be sased rst.
me if the partnership is one at will.
Availabiliy o oher remedies
Ar. 1814. Without prejudice to the Art. 1814 have made this an exclusive
 

remedy so that a writ of execuon will not synonymous with “company,” “house,” and
be proper. However, if the judgment debt “concern.”
remains unsased, the court may resort to
other courses of acon notwithstanding the Imporance o having a frm name
issuance of the charging order. A partnership must have a rm name under
whiich it wi
wh will
ll oper
operat
ate.
e. A r
rm
m nam ame
e is
Re
Rede
demp
mpto
ton
n or pu
purc
rcha
hase
se o ineinere
res
s ne
neces
cessa
sary
ry to dis
disng
ngui
uish
sh the
the pa
part
rtne
ners
rshi
hip,
p,
charged which has a disnct and separate juridical
Redemptoner – The interest
intere st of the debtor- personality from the individuals composing

par
partne
tnerr so w/
purchased charge
cha rged
the d may beproperty
separate redeem
redeemededany
of or the partnership and from other
partnerships and enes.
one or more of the partners, or w/
partnership property but w/ the consent of  Righ o he parners o choose frm name
all the partners whose interests are not so The partners enjoy the utmost freedom in
charged or sold. the selecon of the partnership name.
As a general rule, they may adopt any rm
Redempton Price  – The value of  name desired.
the partner’s interest in the partnership has
no bearing on the redempon price w/c is Use
Use o mimisl
slea
eadi
ding
ng name
name  – The partners
likely to be lower since it will be dependent cann
cannotot use
use a name
name that
that is iden
idenc
cal
al or
on the amount of the unsased judgment decepvely confusingly similar to that
debt. of any exisng partnership or corporaon or
to any other name already protected by law
Righ o redeeming non-debor parner – or is pate
patent
ntly
ly dece
decep
pve
ve,, co
conf
nfus
usin
ing
g or
There
There deemin
deemingg non-de
non-debto
btorr pa
partn
rtner
er does
does contrary to exisng laws, as to mislead the
not acquir
acquiree absolu
absolute
te own
owners
ership
hip ove
overr the publ
public
ic by pass
passin
ing
g itse
itself
lf o as anot
anothe
herr
debtor
deb tor-pa
-partn
rtner’s
er’s int
inter
eres
estt but holds
holds it in partnership or corporaon, or its goods or
tr
trus
ustt fo
forr him
him cons
consis
isten
tentt w/ pr
prin
inci
cipl
ples
es of  services as those of such other company.
company.
duciary relaonship.
Liabiliy inclusion o name in he frm name
Righs o parner under exempton laws  – Persons who, not being partners, include
A partner cannot claim any right under the their names in the rm name do not acquire
homestead laws or exempon laws when the rights of a partner but shall be subject
specic partnership property is aached for to the
the liab
liabil
ilit
ity
y of a pa
partn
rtner
er insofarr as 3rd
insofa
partnership
partne rship debt. W/ respect,
respect, howev
however,
er, to Persons without noce are concerned. Such
the partn
partner’s
er’s intere
interest
st in the partnershi
partnership
p as persons become partners by estoppel. Art.
disnguish
disnguished
ed from his interest
interest in speci
specic
c 1815 does not cover the case of a limited
partnership property, the partner may avail partner who allows his name to be included
hims
himsel
elff of thethe exexem
emppo
on laws
aws aer
aer in the rm name, orof a person connuing
partnership debts have been paid. A the business ess of a partnership aer
partner’s interest or share in the diss
dissol
olu
uon
on,, who
who us
uses
es the
the naname
me of the
the
partnership property is really his property.
property. dissolved partnership or the name of 
a deceased partner as part thereof.
Ar
Ar.
. 1815.
1815. Every partnership shall operate
under a rm name, which may or may not Ar. 1816. All partners, including industrial
Ar.
include the name of one or more of the ones, shall
shall be liable
liable pro
 pro rata with all their
partners, those who, not being members of  property and aer all the partnership assets
the partnership,
partnership, include their names in the ha
have
ve be
been
en exha
exhaus
uste
ted,
d, fo
forr the
the cocont
ntra
ract
ctss
rm name, shall be subject to liability of a which may be entered into in the name and
partner for the account of the partnership, under its
signature and by a person authorized to act
Requiremen o he frm name for the partnership. However, any partner
Meaning o word “frm”  – The name, tle, may
ma y enter
enter into
into a separ
separat
ate
e ob
obli
liga
gaon
on to
or style under which a company transacts perform a partnership contract.
bu
busi
sines
ness;
s; a pa
part
rtner
nersh
ship
ip of two
two or more
more
pers
person
ons;
s; a co com
mme
merrcial
cial hous
ouse. In its Artcle 1816 distnguished rom artcle
common
com mon accept
acceptao
aon,
n, the ter
term
m impli
implies
es a 1787
partnership. The term is
is also used as
 

Arcle 1816
Arcle 1816 appli
applies
es in cases
cases where
where thir
thirdd Ar. 181
Ar. 1818.
8. Every partner is an agent of the
pa
part
rty
y cr
cred
edit
itor
orss ar
are
e conc
concern
erned
ed as it fa fall
llss partnership for the purpose of its business,
under the heading of secon 3. “Obligaons and the act of every partner, including the
of the
the PaPart
rtne
ners
rs with
with Rega
Regard
rd to Thir
Thirdd execuon in the partnership name of any
Persons.” Arcle 1797 applies only where instrument,
instrument, for apparentl
apparently
y carrying
carrying on in
the issue is among the partners as it falls the usual way the business of the
under the heading of Secon 1, Chapter 2, partnership of which he is a member binds
which states: “Obligaons of the Partners the
the part
partne
ners
rshi
hip,
p, unle
unless
ss the
the part
partne
nerr so
Among Themselves
Themselves.”.” The  pro rata liability acng has in fact no authority to act for the

of partners
1816 being ato third
clear personsofunder
mandate Arcle
the law, any partnersh
partne rship
ip in the par
parcu
cular
lar maer,
maer, and
the person
person withwith who
whomm he is dealing
dealing has
s
spu
pulalao
on
n chan
changi
ging
ng or modi
modifyfyin
ing
g such
such knowle
knowledge
dge of the fact
fact tha
thatt he has no
liab
liabiility
ity is void
oid exexce
cep
pt as amomon ng the such liability.
partners.
An act of a partner which is not apparently
Reers o parnership obligatons fo
forr the
the carr
carryi
ying
ng on of busi
busine
ness
ss of the
the
Arcle 1816 which refers to the payment of  partnership in the usual way does not bind
part
partne
nersrshi
hipp ob
obli
liga
gao
ons
ns aris
arisin
ingg from
from the par
partne
tnersh
rship
ip unless
unless author
authorize
ized
d by the
contra
con tracts
cts clearl
clearlyy impose
imposess subsid
subsidiar
iary
y and other partners.
 joint ( pro rata)
rata) liability for contractual debts
owing to th thiird persons upon all the Ex
Exce
cept
pt when
when auth
author
oriz
ized
ed by the
the ot
othe
herr
partners, including industrial partners who partners or unless they have abandoned the
or
ordi
dina
nari
rily
ly arare
e nonott liab
liable
le fo
forr lo
loss
sses
es.. Th
The
e business, one or more but less than all the
liability is subsidiary because the partners partners have no authority to:
cann
cannotot be ma madede anansw
swer
erab
able
le with
with thei
theirr
separate property
separate property unless
unless the partn
partnershi
ership
p 1. Assign
Assign tthe
he partn
partners
ership
hip pprop
roperty
erty in
in tru
trust
st
property has rst been exhausted. fo
forr cr
cred
edit
itor
orss or on thethe assi
assign
gnee
ee’s
’s
promise to pay th the
e debts of the
Pro rata liability   – Literally,  pro rata liability partnership.
mean
me anss pr
prop
opor
oro ona
nate
te dist
distri
ribu
buo
onn of 
liab
liabil
ilit
ity.
y. In the
the law law of ob obli
liga
gao
ons
ns,, the
the 2. Dispos
Dispose
e of the
the goodw
goodwill
ill of the
the busin
business
ess..
concurrence of two or more debtors in one
an
andd ththe
e sa
same
me obli
obliga
gao
on
n mamakekess it  prima 3. Do any
any oth
other
er act
act whic
which
h wo
woul
uld
d ma
make
ke iitt
 facie a joint ( pro rata)
rata) obligaon, and the im
impo
poss
ssib
ible
le to ca
carr
rry
y on the
the or
ordi
dina
nary
ry
debts
deb ts is presum
presumed ed divide
dividedd int
into
o as many
many business of a partnership.
equal shares as there are debtors and each
one of them is bound to pay only his share. 4. Co
Conf
nfes
esss a jjud
udgm
gmen
ent.
t.

Ar. 1817. An Any

y spu
spula
lao
on
n ag
agai
ains
nstt the
the
5. En
Ente
terr into
into a co
comp
mpro
romi
mise
se conc
concern
ernin
ing
g a
liability laid down in the preceding arcle
partnership claim or liability.
shall be void, except as among the partners.
Indusriall parner
Indusria parner canno
canno exemp
exemp himsel 
himsel  6. Submit
Submit a part
partner
nershi
ship
p claim
claim or lliab
iabili
ility
ty to
rom liabiliy o hird persons arbitraon.
Each one of the industrial partners is liable
to third persons for the debts of the rm 7. Renoun
Renounce
ce a claim
claim of
of tthe
he partn
partners
ership
hip..
and if he has paid such debts out of his
pr
priv
ivat
ate
e pr
prop
oper
erty
ty duri
during
ng the
the life
life of the
the No act of a partner in contravenon of a
partnership, when its aairs are seled he rest
restri
ric
con
on on auauth
thor
orit
ity
y shal
shalll bind
bind the
the
is entled to credit for the amount so paid, partnership to persons having knowledge of 
and if its results that there is not enough the restricon.
property in the partnership to pay him, then
the capitalist
capitalist partners
partners must pay him. Our Ar. 1819. Where tle to real property is in
conclusion is that neither on principle nor the
the part
partne
ners
rshi
hip
p na
name
me,, an
any
y pa
part
rtne
nerr ma
mayy
on authority can the industrial partner be convey tle to such property by a
relieved from liability to third persons for convey
con veyanc
ance
e exec
execute
uted
d in the parpartne
tnersh
rship
ip
the debts of the partnership. na
name
me;; bu
butt the
the pa
part
rtne
ners
rshi
hip
p may
may rereco
cove
verr
such property unless the partner's act binds
the partnership under the provisions of the
 

rst paragr
rst paragraph
aph of ar
arcle
cle 1818,
1818, or unl
unless
ess partnership, except in the case of fraud on
such
such proper
property
ty has been convey
conveyed
ed by the the partnership, commied by or with the
grantee or a person claiming through such consent of that partner.
gr
gran
ante
tee
e to a hold
holder
er fo
forr valu
value
e with
withou
outt
knowledge that the partner, in making the Notce o parner is notce o parnership
conveyance, has exceeded his authority. Clearly a third person desiring to give noce
to a partnership of some maer pertaining
Where tle to real property is in the name to the partnership business need not
of the partnership, a conveyance executed communicate with all of the partners. If

by atabl
equi
equitapartner,
ble
e inteinrest
interehis
st own
of name,
the
the pa passes
part
rtne
nersthe
rshi
hip,
p, noce is delivered
eecve to a partner,
communicaon to the that is an
partnership.
provided the act is one within the authority
of the partner under the provisions of the Know
Knowle ledg
dge
e bebeo
ore
re beco
becomi
ming
ng papar
rne
nerr
rst paragraph of Arcle 1818. Where
Whe re the knowledge
knowledge or noce
noce had been
been
received by the partner before he became a
Where tle to real property is in the name  partner , and his partne
partners
rs are ignorant
ignorant of 
of one or more but not all the partners, and this, and he is not the partner acng in the
the record does not disclose the right of the parcu
par cular
lar maer
maer,, there
there is no doubt
doubt tha
thatt
partnership
partne rship,, the partners in whose name there has been neither knowledge of nor
the tle stands may convey tle to such noce to the partnership.
property, but the partnership may recover
such property if the partners’ act does not Ar. 1822. Where, by any wrongful act
bind the partnership under the provisions or omis
omissision
on of anany
y pa
part
rtne
nerr acng
acng in the
the
of the rst paragraph of Arcle 1818, unless or
ordi
dina
nary
ry cocour
urse
se of the
the busi
busine
ness
ss of the
the
the purchaser or his assignee, is a holder for pa
part
rtne
ners
rshi
hipp or with
with the
the auth
author
orit
ity
y of co
co--
value, without knowledge. pa
part
rtne
ners
rs,, lo
loss
ss or inju
injury
ry is caus
caused
ed to an
any y
person, not bein eing a partner in the
Where the tle to real property is in the partnership, or any penalty is incurred, the
name of one or more or all the partners, or partnership is liable therefor to the same
in a third person in trust for the extent as the partner so acng or oming
partne
partnersh
rship,
ip, a convey
conveyanc
ancee exe
execut
cuted
ed by a to act.
partner in the partnership name, or in his
own name, passes the equitable interest of  Parner liable or wrongul ac o a parner
the partner
partnershiship,
p, provid
provided
ed the act is one
one The partners are liable for the negligent
within the authority of the partner under operaon of a vehicle by a partner, acng in
th
the
e pr
prov
ovis
isio
ions
ns of the
the rrst
st pa
para
ragr
grap
aph
h of  the course of business, which results in a
Arcle 1818. trac accident.

Where the tle to real property is in the If he is driving a partnership-owned vehicle

na
name
me of al
alll the
the pa
part
rtne
ners
rs a co
conv
nvey
eyan
ance
ce for purposes of his own, the acng partner

executed by all the partners passes all their alone is liable it is not a partnership tort.
rights in such property.
Parnership may proceed agains negligen
Ar. 1820. An admission or representaon
Ar. parner
made by any partner concerning Wher
Wh ere
e a pa
part
rtne
ners
rshi
hip
p is liab
liable
le to a thir
third
d
partnership aairs within the scope of his person, there is a right of indemnity against
author
authority
ity in accorda
accordance
nce with
with this
this Tit
Title
le is the partner whose negligence caused the
evidence against the partnership. injuries.

Ar
Ar. 1821. No
. 1821. Noc
ce
e to an
anyy pa
part
rtne
nerr of an
any
y Ar 823. Th
r.. 1823. The
e pa
part
rtne
ners
rshi
hip
p is bo
boun
und
d to
maer relang to partnership aairs, and make good the loss:
the knowledge of the partner acng in the
parcular maer, acquired while a partner 1. Wher
Wheree on
onee part
partne
nerr acn
acng
g with
within
in th
the
e
or ththen
en pres
presen
entt to his
his mi
mind
nd,, and
and the
the scope of his apparent authority receives
know
knowle ledg
dge
e of an any
y ot
othe
herr part
partne
nerr wh
whoo money
mon ey or proper
property
ty of a third
third person
person
rea
eassonably could and should have and misapplies it.
comm
commun unic
icat
ated
ed it to the
the acacn
ngg pa
part
rtne
ner,
r,
operate as noce to or knowledge of the
 

2. Wher
Where e the part
partne
ners
rshi
hipp in the cou
cours
rse
e of  and if he has made such representaon or
its business receives money or property co
cons
nsen
ented
ted to its
its bein
beingg ma
made
de in a pupubl
blic
ic
of a third person and the money or manner he is liable to such person, whether
property so received is misapplied by the
the rep
repres
resen
enta
tao
onn ha
hass or ha
hass no
nott been
been
any partner while
while it is in the custody
custody of  made or communicated to such person so
the partnership. giving credit by or with the knowledge of 
the apparent partner making the
Parnership bound by parner’s breach o  representaon or consenng to its being
rus made:

The partnership is liable for the conversion

(misappro
(misappropria
priaon)
on) of money or property
property 1. When
When a parpartne
tnersh
rship
ip liabi
liabilit
lity
y resu
results
lts,, he
entr
entrus
uste
ted
d to the
the pa
part
rtne
ners
rshi
hip
p by a thir
third
d is liable as though he were an actual
person. The eect under Arcle 1824 is the member of the partnership.
sa
same
me whet
whethe
herr by the
the part
partne
ners
rshi
hip
p an
andd
subsequently misappropriated by a partner. 2. When
When no pa partn
rtners
ership
hip lliab
iabili
ility
ty res
result
ults,
s, he
is liable pro rata with the other persons,
Ar. 1824.
Ar. 1824. All partners are liable solidarily if any, so consenng to the contract or
wi
with
th ththee parartn
tner
ersh
shiip fo
forr ev
ever
eryt
yth
hing
ing re
repr
pres
esen
enta
tao
onn as to incu incurr liab
liabil
ilit
ity,
y,
ch
char
arge
geab
ablle to thethe par artn
tner
ersh
ship
ip under otherwise separately.
Arcles 1822 and 1823.
When a person has been thus represented
Law imposes solidary liabiliy to be a partner in an exisng partnership, or
The law imposes solidary liability upon the wi
with
th onone e or more
more pers
person
onss not
not actu
actual
al
partne
par tners
rs and the par partne
tnersh
rship
ip in cases
cases of  pa
part
rtne
ners
rs,, he is an agent
agent of thethe pe
pers
rson
onss
torts and acts of conversion by a partner as consenng to such representaon to bind
provided in Art. 1824. It may be stated that them to the same extent and in the same
the liability of a partner for a debt of the manner as though he were a partner in fact,
partne
par tnersh
rshipip depend
dependss upon
upon whether
whether the with respect to persons who rely upon the
debts is contractual or it arises from tort or representaon. When all the members of 
convers
con version
ion.. If it arises
arises from
from con
contra
tract,
ct, the the
the exis
exisnng
g pa
part
rtne
ners
rshi
hip
p co
cons
nsen
entt to the
the
liability is subsidiary and pro
and  pro rata;
rata; if it arises re
rep
pre
ressen
entatao
on
n, a par artn
tner
ersshi
hip
p act or
fr
from
om to tort
rt or co conv
nvers
ersio
ion,
n, the
the liab
liabililit
ity
y is obligaon results; but in all other cases it is
solidary. the joint act or obliga
obligaon
on of the person
person
acng and the persons consenng to the
Business parners solidarily liable representaon.
Arts. 1711 and 1712 of the New Civil Code
and Sec. 2 of the Workmen’s Compensaon Es
Esto
toppppel
el – A prprecl
eclus
usio
ion,
n, in law,
law, whic
whichh
Act reasonably indicate that in prevents a man from alleging or denying a
compensaon cases, the liability of business fact,
fact, in cocons
nseq
eque
uenc
nce
e of his
his ow
ownn  previous
partne
par tners
rs should
should be merely
merely joijoint
nt and not act , allegaon, or denial of a contrary tenor.
solidary, and one of them happens to be
in
inso
solv
lven
ent,
t, the
the amou
amount
nt awar
awarde
dedd to the
the Person bound by his represenaton
de
depe
pend
nden
ents
ts of the
the de
dece
ceas
ased
ed empl
employoyee
ee A person who hold himself out as a partner
would only be parally sased, which is in a business, or consents to his being so
ev
evid
iden
entl
tly
y con
contr
trar
ary
y to the
the inten
ntentt and
and held out, is liable on contracts made with
purpose of the law to give full protecon to third
third person
personss who deal with
with the person
personss
the employee. carrying on the business on the faith of the
representaon. He is stopped to deny the
Ar. 1825. When a person, by words spoken apparent agency.
or wrwriien
en or by co cond
nduc
uct,
t, rerep
pre
ressen
entt
himself, or consents to anothe Ar. 1826. A person admied as a partner
Ar.
represenng him to anyone, as a partner in into an exisng partnership is liable for all
an exisng partnership or with one or more the obl
obliga
igaon
onss of the par
partne
tnersh
rship
ip arisin
arising
g
persons not actual partners, he is liable to before his admission as though he had been
any such persons to whom such a part
partne
nerr when
when susuch
ch ob
obli
liga
gao
ons
ns were
were
representaon has been made, who has, on
th
the
e fa
fait
ith
h of such
such rerepr
pres
esen
enta
tao
on,
n, give
given n incurred, except that this liability shall be
sased only out of partnership property,
credit to the actual or apparent partnership, unless there is a spulaon to the contrary.
 

In
Inco
comi
ming
ng papar
rne
nerr li
liab
able
le oror exexis
istn
tng g b. By the
the expr
expres
esss will
will of any par
partner
tner,,
obligatons who must act in good faith, when
A nenewl
wly
y ad
admi
mie
ed
d part
partne
nerr is liab
liable
le foforr no den
denit
ite
e term
term or parparcu
cula
larr is
obligaons of the partnership at the me of  specied.
his
his adm
dmiissi
ssion.
on. The obliobliga
gao
onn of the the
incoming partner shall be sased only out c. By the express will of all the
of partnership
partnership property. This is not a harsh pa
part
rtner
nerss wh
whoo ha
have
ve no
nott assi
assign
gned
ed
rule because the incoming partner their interests or suered them to
“partakes of the benet of the partnership be charged for their separate debts,
property,
has everandy maneaestablished
ns of obbusiness.
taining fHe
ull either before or aer the
terminaon of any specied term or
knowledge
knowl edge of protecng
protecng hims
himself,
elf, because
because parcular undertaking.
he may insist on the liquidaon or
selement of exisng partnership debts. On
d. By the expul
expulsi
sio
on of any
any part
partn
ner
the
the ot
othe
herr hand
hand,, the
the cred
credit
itor
orss have
have no
fr
from
om the
the busi
busine
ness
ss bona
bona d
de
e in
means of protecng themselves.
acco
accord
rdan
ance
ce wi
with
th su
such
ch a powe
powerr
conferred by the agreem emen
entt
Ar. 1827.
Ar. 1827. The creditors of the partnership
between the partners
shall be preferred to those of each partner
as rerega
gard
rdss the
the part
partne
ners
rshi
hip
p prop
proper
erty
ty..
2. In co
con
ntravenon of th thee agr
gre
eeme
ement
Without prejudice to this right, the private
betw
betwee
eenn the
the part
partne
ners
rs,, wher
where
e the
the
cred
credit
itor
orss of each
each part
partne
nerr may
may asask
k the
the
circumstances do not permit a
aachment and public sale of the share of 
dissoluon under any other provision of 
the laer in the partnership assets.
this arcle, by the express will of any

1828. The dissoluon of a partnership

Ar. 1828.
Ar. partner at any me.
is the change in the relaon of the partners
3. By any
any even
eventt wh
whicich
h make
makess it un
unllawfu
awfull
ca
caus
used
ed by any
any parartn
tner
er ce
cea
asi
sin
ng to be
for the business of the partnership to
associated in the carrying on as
be carried on or for the members to
disnguished from the winding up of the
carry it on in partnership.
business.

Ar. 1829. On dissoluon the partnership is 4. When a specic thing which a partner
no
nott te
term
rmin
inat
ated
ed,, bu
butt co
con
nnunues
es un
unl
l the
the had
had prom
promis
ised
ed to cont
contri
ribu
bute
te to the
the
wi
win
nding
ding up of partpartnner
ersship
hip aai
aairs
rs is par
artn
tner
ersh
ship
ip,, per
eriishes
shes befo
before
re the
completed. delivery; in any case by the loss of the
thing, when the partner who
 “Dissoluton,” “Winding up,” and co
cont
ntri
ribu
buted
ted it hahavi
ving
ng reserv
reserved
ed the
the
 “Terminaton” explained ownership thereof, has only transferred
Dissoluo
Dissoluon,
n, winding
winding up, and terminaon
terminaon to the partnership the use or enjoyment
of the same; but the partnership shall
should not be confused because they are not be dissolved by the loss of the thing
disnct terms in law. Dissoluon
“des
“desig
igna
nates
tes the
the po
poin
intt in me
me when
when the
the when it occurs aer the partnership has
pa
part
rtne
ners
rs ce
ceas
ase
e to ca
carr
rry
y on thethe bu
busi
sine
ness
ss acquired the ownership thereof.
togeth
tog ether:
er: ter
termin
minao
aon n is the point in me
when all partnership aairs are wound up; 5. By the
the de
deat
ath
hooff any
any part
partne
ner.
r.
winding up is the the proproce
cesss of sesel
liing
partnership aairs aer dissoluon.” 6. By the
the insol
insolven
vency
cy of a
any
ny par
partn
tner
er or o
of 
f 
the partnership.
Ar. 1830. Dissoluon is caused:
7. By the
the civil
civil interd
interdic
icon
on o
off any
any partner
partner..
1. Withou
Withoutt viola
violaon
on of the
the agree
agreemen
mentt
between the partners: 8. By decre
decree
e of court
court unde
underr the foll
follow
owin
ing
g
arcle.
a. By the termin
terminao
aon
n of the denite
denite
term or parcular undertaking Causes o dissoluton in general
specied in the agreement. Generally, a partnership may be dissolved
by causes: (1) without violaon
violaon of the
 

agreement between the partners; or (2) in agreement

agreem ent,, or otherw
otherwise
ise so condu
conducts
cts
cont
contra
raven
venoon
n of the the agagre
reem
emenent.
t. Ot
Othe
herr hims
himsel
elff in ma
maer
erss rela
elang
ng to the
sp
speci
ecic
c cacaus
uses
es ar
are;e; (3)
(3) an even
eventt whic
whichh part
partne
nersrshi
hip
p busi
busine
ness
ss that
that it is not
not
make
ma kess th
thee bu
busi
sine
nessss of the
the part
partne
ners
rshi
hip
p reasonably praccable to carry on the
unlawful; (4) loss of a specic thing which a business in partnership with him.
partnerr had promised to contribute
partne contribute to the
the
partnership; (5) the death of a partner; (6) 5. Th
The
e busin
business
ess of tthe
he part
partner
nershi
ship
p can
can
th
the
e in
inso
solv
lven
ency
cy of an any
y pa
part
rtner
ner or of thethe only be carried on at a loss.
partne
par tnersh
rship
ip its
itself
elf;; (7) civil
civil interd
interdic
icon
on of 

an
any
y pa
part
decree. rtne
ner;
r; an
and
d last
lastly
ly (8)
(8) by judi
judici
cial
al 6. Other circumstances render a
dissoluon equitable.

Parnersh
Parne rship
ip cease
ceasedd upo
uponn exp
expira
iraton
ton o  On the applicaon of the purchaser of a
erm; no more juridical personaliy pa
part
rtne
ner'
r'ss inter
interes
estt un
unde
derr Ar
Arcl
cle
e 1813
1813 or
A partnership having ceased to exist since 1814:
1959, the partnership has no more juridical
personality nor capacity to sue and be sued. 1. Aer
Aer th
the
e termi
termina
naon
on o
off the
the speci
specied
ed
(Reynolds Philippine Corporaon vs. Court  term or parcular undertaking.
of appeals, G.R. No. 36187, Jan. 17, 1989)
1989 )
2. At any me
me if th
the
e par
artn
tner
ersh
shiip wa
wass a
Eec o Wihdrawal beore expiraton o  partne
partnersh
rship
ip at will
will when
when the int interes
erestt
he erm wass assi
wa assign
gned
ed or when
when the
the chchar
argi
ging
ng
Unde
Un derr Arc
Arclele 1830
1830,, even
even if ther
theree is a order was issued.
sp
spec
eci
ied
ed tetermrm,, one
one part
partne
ners
rs caus
cause e its
its
dissoluon by expressly withdrawing eve n Who may petton or dissoluton
before the expiraon of the period, with or Dissoluon of a partnership may be decreed
without jusable cause. Of course, if the by the court on applicaon either (1) by a
cause is not jused or no cause was given, partner or, in case he has assigned his
the
the wiwith
thdr
drawawining
g part
partne
nerr is liab
liable
le foforr interest, (2) by his assignee.
damages but in no case can he be
compelled to remain in the rm. With his Ar. 1832. Except so far as may be
with
withdr
draw
awalal,, the
the nunumb
mber
er of memb
member erss is necessary to wind up partnership aairs or
decreased,
decrea sed, hence, the diss dissoluo
oluon.n. And in to com
comple
plete
te tra
trans
nsaco
acons
ns begun
begun but
but not
whatev
wha tever
er way we view view the situa
situaon,
on, the then
then ni
nishe
shed,
d, dis
dissol
soluo
uonn termina
terminates
tes all
conclusio
concl usion
n is inevitable
inevitable that the partnpartners
ers au
auth
thor
orit
ity
y of any
any pa
part
rtne
nerr to ac
actt fo
forr the
the
were to be guided in the liquidaon of the partnership:
partne
partnersh
rship
ip by the pro provis
vision
ionss of its duly
duly
registered arcles of partnership. (Roxas(Roxas vs. 1. With respect to the partners
Maglana, G.R. L-30616, Dec. 10, 1990) 1990 )
a. Wh
When
en the
the diss
dissol
olu
uon
on iiss not
not by the
the
Ar. 1831. On applicaon by or for a partner act, insolvency or deat
eath of a
th
the
e cocour
urtt sh
shal
alll decr
decree
ee a dissdissol
olu
uon
on partner.
whenever:
b. When
When ththe
e di
disso
ssolu
luon
on is
is by suc
such
h ac
act,
t,
1. A partn
partner
er has
has been
been decla
declare
redd insan
insane
e in insolvency or death of a partner, in
any judicial proceeding or is shown to cases where arcle 1833 so
be of unsound mind. requires.

2. A par
artn
tner
er beco
become
mess in any
any othe
otherr wa
wayy 2. With respect to persons not partners,
incapable of performing his part of the as declared in arcle 1834.
partnership contract.
General Rule
3. A partner has been guilty of such If the
the caus
cause
e of diss
dissol
olu
uon
on is no
nott by ac
act,
t,
conduct as tends to aect prejudicially deat
death,
h, or inso
insolv
lven
ency
cy of a part
partne
ner,
r, the
the
the carrying on of the business. authority ceases immediately.
Excepton
4. A partner willfully or persistently For the purposes of winding-up partnership
commits a breach of the partnership aairs.
 

plac
place
e if more
more than
than on
one)
e) at whic
which
h
Ar. 1833.
Ar. 1833. Where the dissoluon is caused th
the
e partnership business was
by the act, death or insolvency of a partner, regularly carried on.
each partner is liable to his co-partners for
his share of any liabili
liability
ty create
created
d by any Th
The
e liab
liabil
ilit
ity
y of a pa
part
rtne
nerr un
unde
derr the
the r
rst
st
partner acng for the partnership as if the paragraph, No. 2, shall be sased out of 
partnership had not been dissolved unless: partnership assets alone when such partner
had been prior to dissoluon:
1. The diss
dissol
olu
uon
on bei
being by act
act of any
any

pa
part
parrtne
artnner,
r,ship
tner
ers hithe
th
p e had
part
partne
nerr wled
knowl
no ac
acn
ng
g fo
edge
ge for
ofr tth
he
e 1. Unk
Unknown
nown as a par
artn
tner
er to the
the pers
person
on
with whom the contract is made.
dissoluon.
2. So far unknown and inacve in
2. The
The di
diss
ssol
olu
uon
on bein
beingg by the
the deat
death
h or partner
par tnershi
ship
p aairs
aairs that
that the busin
business
ess
in
inso
solv
lven
ency
cy of a pa
part
rtne
ner,
r, the
the pa
part
rtne
nerr reputaon of the partnership could not
acng for the partnership had be said to have been in any degree due
knowle
kno wledge
dge or noce
noce of the death
death or to his connecon with it.
insolvency.
The partnership is in no case bound by any
General Rule act of a partner aer dissoluon:
If the cause of dissoluon is the death, act,
or insolvency of a partner, authority of a 1. Wher
Where e the
the par
artn
tner
ersh
shiip is disso
issollved
ved
partner to bind ceases upon the knowledge because it is unlawful to carry on the
of the dissoluon. business, unless the act is appropriate
for winding up partnership aairs.
If dissoluon is caused by act of one of 
par
pares
es,, co-p
co-par
artn
tner
erss are
are also
also liab
liable
le to 2. Where the partner has become
cont
contri
ribu
bute
te towa
toward
rdss a liab
liabil
ilit
ity
y as if no insolvent.
dis
dissol
soluo
uonn has happen
happened,
ed, pro
provid
vided
ed that
that
there is no noce or the partner does not 3. Where
Where the
the pa
part
rtne
nerr has n
no
o autho
authori
rity
ty to
have knowledge of the dissoluon. wind up partnership aairs; except by a
transacon with one who —
Ar. 1834. Aer dissoluon, a partner can
Ar.
bind the partnership, except as provided in a. Had extended credit to the
the third paragraph of this arcle: partnership prior to dissoluon and
had no knowle
knowledge
dge or noce
noce of his
his
1. By any
any act appr
approp
opri
riat
ate
e for wind
windin
ing
g up want of authority.
partn
tner
ersship aairs or compleng
transacons unnished at dissoluon. b. Had not extended crcre
edit to th
the
e
partne
partnersh
rship
ip prior
prior to dis
dissol
soluo
uon,
n,

2. By any
any tran
transa
sac
con
on whic
whichh woul
would
d bind
bind and, having no knowledge or noce
the partne
partnersh
rship
ip if dis
dissol
soluo
uon
n had not
not of his want of authority, the fact of 
taken place, provided the other party to his want of authority has not been
the transacon: adversed in the manner provided
for adversing the fact of  
a. Had extended credit to the dissol
dissoluo
uon n in the rs
rstt paragra
paragraph,
ph,
partnership prior to dissoluon and No. 2 (b).
had no knowledge or noce of the
dissoluon. Nothin
Noth ing
g in this
this arc
arcle
le sh
shal
alll aec
aectt the
the
liabil
liability
ity und
under
er arcle
arcle 1825
1825 of any person
person
b. Though he had not so extended who aer dissoluon represents himself or
credit,
cred it, had neverth
nevertheles
elesss known
known of  consents to another represenng him as a
the partnership prior to dissoluon, partner in a partnership engaged in carrying
and, having no knowledge or noce on business.
of dissoluon, the fact of  
dissoluon had not been adversed General Rule
in a newspaper of general Dissoluo
Dissoluonn terminates
terminates the autho
authority
rity of the
circulaon in the place (or in each partners to bind partnership.
 

Exceptons assignee, upon cause shown, may obtain

An
Anyy act appr
approp
opri
riat
ate
e for wi win
nding
ding-u
-up
p winding up by the court.
partnership aairs or compleng
transacons unnished at dissoluon Who may wind up Parnership Aairs?
Partner designated in the agreement.
If th
thir
ird
d pe
pers
rson
onss that
that tr
tran
ansa
sact
cted
ed ha
had
d no In absence of agreement, the part that did
actual knowledge of the dissoluon. no wrongfully dissolved the partnership.
*Per
erssons exten
end ding crecredit prior to
dissoluon are en entl
tle
ed to noce of  If all partners died, the legal representave
diss
disso
olu
luo
knowle
kno on.
wledgen. ofIf dis
dge they
thsoluo
eyuon,
dissol had
han,
d they
noy noc
the noce
may ehold
holodr of the last surviving partner provided that
the partner is not insolvent.
the rered partner for obligaons made by
connuing partners aer dissoluon. Winding up o a dissolved parnership may
be done
Ar. 1835. The dissoluon of the Extrajudicially by the partners themselves.
partnership does not of itself discharge the Judicially under the control of a competent
exisng liability of any partner. court.
*Managing
*Man aging partner or winding-up
winding-up partner
A partner is discharged from any exisng has the right to sell rm property even aer
liability upon dissoluon of the partnership the life of the partnership has expired.
by an agreemen
agreementt to that
that eec
eectt betwee
between n
himself,
himse lf, the partnership
partnership credito
creditorr and the Ar. 1837. When dissoluon is caused in any
pers
personon or part partne
ners
rshi
hip
p con
connu
nuining
g the
the way
wa y, ex exce
ceppt in co con
ntr
trav
aven
eno
onn of the the
bu
busisines
ness;
s; an
andd such
such agagre
reem
emen
entt may
may be partne
par tnersh
rship
ip agreem
agreement,
ent, eac
eachh partner
partner,, as
in
infe
ferr
rred
ed frfrom
om thethe cocour
ursse of dea eali
ling
ng ag
agai
ains
nstt his
his co
co-p
-par
artn
tners
ers an
andd all
all pe
pers
rson
onss
between the creditor having knowledge of  claiming through them in respect of their
th
thee dissoissolluon
uon and the per ersson or inter
nteresests
ts in the the par artn
tner
ersh
ship
ip,, unles
nlesss
partnership connuing the business. otherwise agreed, ed, may have the
partnership
partn ership property applied
applied to discharge
discharge
Th
Thee in
indi
divi
vidu
dual
al pr
prop
oper
erty
ty of a de dece
ceas
ased
ed its liabilies, and the surplus applied to pay
partner shall be liable for all obligaons of  in cas
cash thethe net amounmountt owi
owing to the the
the partne
partnersh
rship
ip incur
incurred
red whi
whilele he was a respec
res pecve
ve partne
partners.
rs. But if dis
dissol
soluo
uon
n is
partner, but subject to the prior payment of  caused by expulsion of a partner, bona de
his separate debts. under the partnership agreement and if the
expel
exp elle
ledd part
partne
nerr is disc
discha
harg
rged
ed frfrom
om all
all
General Rule partnership liabilies, either by payment or
Dissoluon of a partnership does not itself  agreement under the second paragraph of 
disc
discha
harg
rgee the
the exis
exisn
ng
g liab
liabil
ilit
ity
y of an
any
y arcle 1835, he shall receive in cash only
partner. the net amount due him from the
Excepton partnership.
A papart
rtne
nerr can
can be disc
discha
harg
rged
ed from
from anany
y
exisn
exi sng g liabil
liability
ity upon
upon dis
dissol
soluo
uon
n of the When dissoluon is caused in contravenon
part
partne
nersrshi
hipp prov
providided
ed that
that ther
there
e is an of the partnership agreement the rights of 
ag
agre
reem
emen entt betw
betweeeen
n the the part
partne
ners
rshi
hip
p the partners shall be as follows:
cr
cred
ediitor
tor and and thethe perersson or par artn
tner
erss
connuing the business. 1. Each
Each part
partner
ner who has not caused
caused
*Ind
*Indiv
ivid
idua
uall pr
prop
oper
eres
es of the the de
dece
ceas
ased
ed dissoluon wrongfully shall have:
partner shall be liable to all obligaons of 
the
the papartrtne
ners
rshi
hipp ma
made
de wh whil
ile
e he wa
wass a a. Al
Alll the ri
righ
ghts
ts spec
speci
ied
ed in th
the
e rst
rst
partner. paragraph of this arcle.

Ar.
r. 1836
1836.. Unl
Unless
ess oth
otherwi
erwise
se agreed
agreed,, the b. The
The ri
righ
ght,
t, as agai
agains
nstt each
each par
partn
tner
er
partners who have not wrongfully dissolved who
wh o hahass caus
caused
ed the
the diss
dissol
olu
uon
on
the partnership or the legal representave wrongf
wro ngfull
ully,
y, to dam
damages
ages bre
breach
ach of 
of the last surviving partner, not insolvent, the agreement.
has the right to wind up the partnership
aai
aairs
rs,, pro
rovi
vid
ded
ed,, howe
howeve
ver,
r, that
hat any 2. Th
Thee partne
partners
rs w
who
ho have
have not
not cau
caused
sed the
partner, his legal representave or his dissoluon wrongfully, if they all desire
 

to connue the business in the same

name
nam e either
either by thethemse
mselve
lvess or joi
jointl
ntly
y I h
hee papar
rne
ners
rshi
hip
p was di diss
ssol
olve
vedd in
with
with ot
othe
hers
rs,, may
may do soso,, du
duri
ring
ng the
the conraventon o he agreemen
agreed term for the partnership and for 1. Th
Thee remain
remainin
ing
g part
partne
ners
rs have
have the ri righ
ghtt
that purpose may possess the to sell partnership property to pay the
partner
partnershi
ship
p proper
property,
ty, provid
provided
ed they partnership’s liabilies and the surplus
secure the payment by bond approved is distributed to the remaining partners
by the court, or pay any partner who as well.
has caused the dissoluon wrongfully, 2. As agai
againnst the
the gu
guil
ilty
ty par
artn
tner
er fo
forr the
the
tpartnership
he value at ofthehidissoluon,
s interest less
in any
the diss
dissol
olu
uon
on of the
the part
partne
ners
rshi
hip,
p, the
the
remain
rem aining
ing partne
partners
rs have
have the right
right to
damages recoverable under the second recover damages for breach.
paragraph, No. 1 (b) of this arcle, and 3. The remaining partners may also
in like manner indemnify him against all connue the business up to end of the
present or future partnership liabilies. spulated term of the partnership.

3. A partner who has caused the Ar. 1838.

Ar. 1838. Where a partnership contract is
dissoluon wrongfully shall have: rescinded on the ground of the fraud or
misr
misrep
epre
rese
sent
nta
aon
on of on
onee of the
the papar
res
es
a. If th
thee busines
esss is not connued theret
thereto,
o, the par
party
ty en
entle
tled
d to res
rescin
cindd is,
under the provisions of the second with
withou
outt prej
prejud
udic
ice
e to any
any ot
othe
herr ririgh
ght,
t,
paragraph, No. 2, all the rights of a entled:
partnerr unde
partne underr the rst paragraph,
paragraph,
subject to liability for damages in 1. To a lien
lien on, o
orr ri
right
ght of
of reten
retenon
on of,
of, the
the
the second paragraph, No. 1 (b), of  surp
surplu
luss of the
the pa partn
rtners
ershi
hip
p pr
prop
oper
erty
ty
this arcle. aer
aer sa sas
sfy
fyin
ingg ththe e partn
artner
ersh
ship
ip
liabilies to third persons for any sum
b. If the bu
busi
sine
ness
ss is conn
connue uedd unde
underr of money paid by him for the purchase
the second paragraph, No. 2, of this of an interest in the partnership and for
arcle,
ar cle, the right
right as agains
againstt his co
co-- any capital or advances contributed by
partne
par tners
rs and all claimi
claiming
ng thro
throug
ughh him.
them in respect of their interests in
the partnership, to have the value 2. To stan
stand
d, aer
er all
all liabi
abilie
liess to thir
third
d
of his int
interes
erestt in the partne
partnersh
rship,
ip, pe
persrson
onss ha
have
ve been
been sas
sase
ed,d, in the
the
less any damage caused to his co- place of the creditors of the partnership
partners by the dissoluon, fo
forr any
any paym
paymen
ents
ts ma
madede by him him in
ascertained and paid to him in cash, respect of the partnership liabilies.
or the payment secured by a bond
approv
app roved
ed by the courcourt,
t, and to be 3. To be inde
indemn
mniied
ed by the
the pers
person
on guil
guilty
ty
released from all exisng liabilies of the fraud or making the
of the partnership; but in re
repr
pres
esen
enta
tao
on n ag
agai
ains
nstt all
all de
debt
btss an
and
d
asce
cerrtaining the value of the liabilies of the partnership.
partner's interest the value of the
good-will of the business shall not Righ
Righ o par
parne
nerr o re resc
scin
ind
d cocon
nra
rac
c o 
be considered. parnership
If one is induced by fraud or
Righs o parners upon dissoluton misrepresentaon to become a partner, the
1. Dissol
Dissoluo
uonn is ca
cause
used
d withou
withoutt viola
violaonon cont
contra
ract
ct is void
voidab
able
le.. If the
the cont
contra
ract
ct is
of the agreement. annull
ann ulled,
ed, the inj
injure
uredd party
party is entle
entled d to
2. In contra
contraven
venon
on of the agr
agreem
eementent.. restuon. Here, the fraud or
mi
misr
srep
eprerese
sent
nta
aoon via
viate
tess cons
consenent.
t.
I parn
arner
ersh
ship
ip is di disssolv
olved wi wih
ho
ou However, unl the partnership contract is
violaton o he agreemen annulled by a proper acon in court, the
1. All partne
partners
rs may
may have
have the
the pprop
ropert
erty
y sold
sold partnership relaons exist and
for payment of partnership liabilies. the
the defr
defrau
aude
ded
d part
partne
nerr is liliab
able
le fo
forr all
all
2. If there
there is surp
surpllus
us,, aer
aer payin
aying
g the
the
liabilies of the rm, it shall be given in obligaons
1. Right to ofthird
injpersons.
ured partner where
cash to the partners. partnership contract rescinded
 

2. Right of retenon of partnership 7. Th

The
e indi
indivi
vidu
dual
al prope
propert
rty
y of a deceas
deceased
ed
property partner shall be liable for the
3. Right
ght to be subrogated in place of  contribuons specied in No. 4.
creditors of partnership
4. Righ
Rightt to be indem
indemni
nieedd by ththe
e gu
guil
ilty
ty 8. When
When part
partne
ners
rsh
hip pro
propererty
ty and
and the
pa
partn
rtner
er agai
agains
nstt al
alll liab
liabil
ili
ies
es of the
the individual properes of the partners are
partnership. in possession of a court for distribuon,
partnership creditors shall have priority
Ar. 1839. In seling accounts between the on partnershi
partnership
p property
property and separ
separate
ate
partners
partne rs aer
aer dis
dissol
soluo
uon,
n, the fol
follow
lowing
ing creditors on individual property, saving
rule
ruless sh
shal
alll be ob
obse
serv
rved,
ed, subj
subjec
ectt to an
any
y the rights of lien or secured creditors.
agreement to the contrary:
9. Where
Where a part
partne
nerr has beco
become
me inso
insolv
lven
entt
1. The
The as
asset
setss of
of the
the part
partner
nershi
ship
p are:
are: or his estate
estate is insolv
insolvent
ent,, the claims
claims
against his separate property shall rank
a. Th
The
e part
partne
ners
rshi
hip
p prop
propert
erty.
y. in the following order:

b. The
The cont
contri
ribu
buo
ons
ns of the
the part
partne
ners
rs a. Tho
Those
se owing
owing tto
o sepa
separat
rate
e credit
creditors
ors..
necessary for the payment of all the
liabilies specied in No. 2. b. Those owing to partnership
creditors.
2. Th
The
e liab
liabil
ili
ies
es of the
the pa
part
rtne
ners
rshi
hip
p shal
shalll
rank in order of payment, as follows: c. Tho
Those
se owing
owing tto
o part
partner
nerss by
by way
way of
contribuon.
a. Tho
Those
se owin
owing
g to credit
creditors
ors other
other than
than
partners. Rules or seling accouns beween he
parners
b. Tho
Those
se owin
owing g to par
partne
tners
rs o
othe
therr th
than
an 1. Th
Thee asset
assetss of tthe
he part
partne
ners
rshi
hip
p
for capital and prots. 2. Liabil
Liabilie
iess of
of the par
partne
tnersh
rship
ip
3. Appl
Applic
ica
aon
on ofof asse
assets
ts
c. Th
Thos
ose
e owing
owing to p
par
artn
tners
ers in
in respe
respect
ct 4. Co
Cont
ntri
ribu
buo
onn by the
the pa
part
rtne
ners
rs
of capital.
Asses o he parnership
d. Th
Thos
ose
e owing
owing to p
par
artn
tners
ers in
in respe
respect
ct 1. Part
Partne
ners
rshi
hip
p pr
prop
opert
erty
y
of prots. 2. The contr triibuons of the partners
ers
nec
eces
essa
sarry fo forr the
the payme
aymen
nt of all
all
3. Th
Thee assets
assets sh
shal
alll be appli
applied
ed in th
the
e order
order liabilies
of thei
theirr decl
declar
ara
aon
on in No.
No. 1 of this
his
arcle to the sasfac co
on of the Order o applicaton o he asses
liabilies. 1. Those
Those owin
owingg to p
part
artner
nershi
ship
p credit
creditors
ors
2. Th
Thos
osee owing
owing to part
partne
ners
rs othe
otherr than
than for
4. The partners shall contribute, as capital and prots such as loans given
provided by arcle 1797, the amount by ththe
e partners or advances for
necessary to sasfy the liabilies. business expenses
3. Those owing for the return of the
5. An assi
assign
gnee
ee fo
forr the be
bene
nett of credi
credito
tors
rs capital contributed by the partners
or any person appointed by the court 4. Th
The
e share
share of the
the pro
prot
ts,
s, if
if an
any,
y, due
due to
sh
shal
alll ha
have
ve the
the righ
rightt to enfo
enforc
rce
e the
the each partner
contribuons specied in the preceding
number. Or
Orde
derr o apappl
plic
icat
aton
on o par
parne
nerr whwhoo
be
beco
com
me insnsol
olv
ven or his his esaae
e hishis
6. An
Anyy partn
partner
er or his le
lega
gall rep
repres
resen
enta
tav
ve
e insolven, he claims agains his separae
sh
shal
alll ha
have
ve the
the righ
rightt to enfo
enforc
rcee the
the propery
contribuons specied in No. 4, to the 1. Those
Those owing
owing to sep
separa
arate
te credi
creditor
torss
extent of the amount which he has paid 2. Those
Those owin
owing
g to p
part
artner
nershi
ship
p credit
creditors
ors
in excess of his share of the liability. 3. Those owing to partners by way of 
contribuon
 

Liabiliy
Liabil iy o dec
deceas
eased
ed parne
parner’s
r’s 6. When
hen a part
partne
nerr is exp
expel
ellled and
and the
the
individual propery re
rema
main
inin
ing
g part
partne
ners
rs con
connunue
e the
the
Th
Thee inindi
divi
vidu
dual
al pr
prop
oper
erty
ty of a de
dece
ceas
ased
ed busin
business
ess either
either alo
alone
ne or with
with oth
others
ers
partner shall be liable for his share of the without liquidaon of the partnership
cont
contri
ribu
buo
ons
ns nece
necess
ssar
ary
y to sa
sas
sfy
fy the
the aairs.
liabilies of the partnership incurred while
he was a partner. The liability of a third person becoming a
partner
partner in the partnership
partnership connui
connuing
ng the
Ar. 1840. In the following cases creditors of  business, under this arcle, to the creditors
the dissolved partnership are also creditors of the
the diss
dissol
olve
ved
d part
partne
ners
rshi
hip
p shshal
alll be
of the person or partnership connuing the sase
sa sedd out of the par
partne
tnersh
rship
ip proper
property
ty
business: only,
only, unl
unless
ess there is a spula
spulaon
on to the
contrary.
1. When
When any
any n new
ew ppar
artn
tner
er iiss ad
admi
mie
edd into
into
an exisng partnership, or when any When the business of a partnership aer
pa
part
rtner
ner rere
reress an
andd as
assi sign
gnss (or
(or the
the dissoluon is co connnued under any
representave of the deceased partner cond
condiion
onss se
sett fo
fort
rth
h in this
this arc
arcle
le the
the
as
assi
sign
gns)
s) hishis righ
rights
ts in part partne
ners
rshi
hip
p credito
cred itors
rs of the disdissol
solved
ved partne
partnersh
rship,
ip, as
property to two or more of the against the separate creditors of the rering
pa
part
rtne
ners
rs,, or to ononee or moremore of the the or deceased partner or the representave
partners and one or more third of the deceased partner, have a prior right
person
per sons,
s, if the busin
business
ess is connu
connueded to any claim of the rered partner or the
without liquidaon of the partnership repr
repres
esen
enta
tav
vee of thethe dedecea
cease
sed
d papart
rtne
nerr
aairs. against the pers erson or partnership
connuing the business, on account of the
2. When
When allall but
but one part
partnner rer
rere
e and rered or deceased partner's interest in the
as
assi
sign
gn (or
(or the
the re
reprpres
esen
enta
tav
ve
e of a dissolved partnership or on account of any
deceased partner assigns) their rights consideraon promised for such interest or
in partnership proper ertty to the for his right in partnership property.
remaining partner, who connues the
busi
usiness
ness wi
with
thou
outt liqu
liquid
ida
aon
on of  Nothin
Noth ing
g in this
this ar
arcl
cle
e shal
shalll be he
held
ld to
partnership aairs, either alone or with modify any right of creditors to set aside
others. any assignment on the ground of fraud.

3. When
When any
any pa
part
rtne
nerr rere
reress or dies
dies and
and The
The useuse by thethe pers
person
on or part
partne
ners
rshi
hip
p
the business of the dissolved connuing the business of the partnership
partnership is connued as set forth in name, or the name of a deceased partner as
Nos. 1 and 2 of this arcle, with the part thereof, shall not of itself make the
consent of the rered partners or the individual property of the deceased partner
representave of the dece
cea
ased liab
liable
le fo
forr an
any
y de
debt
btss cont
contra
ract
cted
ed by such
such
partner, but without any assignment of  person or partnership.
his right in partnership property.
Dissoluton o a parnership by change o
4. When all the partners or their members
representa
repres entaves
ves assig
assign
n their rights in Causes
partnership property to one or more 1. Ne
Neww par
partn
tner
er is ad
admi
mie
ed
d
third persons who promise to pay the 2. Part
Partnner re
rer
res
es
debts and who connue the business 3. Partner dies
of the dissolved partnership. 4. Pa
Part
rtne
nerr wit
withd
hdra
raws
ws
5. Partne
Partnerr is expell
expelled
ed fr
from
om part
partner
nershi
ship
p
5. When
When anyany par
partn
tner
er wron
wrongfgful
ully
ly ccau
ause
sess a 6. Other partners assign their rights
dissoluon and the remaining partners to sole remaining partner
con
connunuee the
the busi
busine
ness
ss unde
underr thethe 7. All the partn
partners
ers assi
assign
gn th
their
eir righ
rights
ts in
pr
prov
ovis
isio
ions
ns of ararc
cle
le 1837
1837,, seseco
cond
nd partnership
partne rship p
property
roperty to third
th ird pers
person
ons.
s.
paragraph, No. 2, either alone or with *Any change in membership dissolves a
others,
other s, and without liquidaon
liquidaon of the
partnership aairs. partnership
*When a and bucreates
siness a o
new
f one
a dissolved
partnership is connued by former or
 

without new partners, the old creditors are pers

person
on or partpartne
ners
rshi
hip
p con
connu
nuin
ing
g the
the
creditors
creditors of the person or partnership
partnership that business, at the date of dissoluon, in the
is connuing the business. absence of any agreement to the contrary.

Ar. 1841. When any partner reres or dies, Righ o demand an accountng o 
and the business is connued under any of  pa
par
rne
ners
rshi
hip
p a aai
airs
rs mus
mus be dire
direc
ced
ed
the con
condi
dions
ons set forth
forth in the preced
preceding
ing agains
arcle, or in arcle 1837, second paragraph, 1. Wi
Wind
ndin
ing-
g-up
up part
partne
ners
rs
No. 2, without any selement of accounts 2. Su
Surv
rviv
ivin
ingg part
partne
ners
rs
as bebetw
twee
eenn him
him or his his es
esta
tate
te an
andd the
the 3. Th
The
e pe
pers
rson
on the partn
partner
ersh
ship
ip con
conn
nui
uing
ng
pers
personon or partpartne
ners
rshi
hip
p con
connunuin
ing
g the
the the business
business, unless otherwise agreed, he or his
legal representave
representave as against
against such person Ar
r.. 1843.
843. A limi
limited
ted pa
part
rtne
ners
rshi
hip
p is on
onee
or partnership may have the value of his formed by two or more persons under the
inter
ere
est at the date of dissoluon provisions of the following arcle, having as
ascertained, and shall receive as an ordinary members one or more general partners and
creditor an amount equal to the value of his one or more limited partners. The limited
interest
intere st in the dissolved
dissolved partnership
partnership with partners as such shall not be bound by the
interest, or, at his opon or at the opon of  obligaons of the partnership.
his legal representave, in lieu of interest,
the prots
prots arib
aributa
utable
ble to the use of his General partner Limited partner
righ
rightt in the
the prop
propererty
ty of thethe diss
dissol
olve
vedd Personally liable for Liability extends
partnership; Provided, That the creditors of  partnership only to his capital
the dis
dissol
solved
ved partne
partnersh
rship
ip as agains
againstt the obligaons contribuon.
separate creditors, or the representave of  Have equal right in No share in
the rered or deceased partner, shall have management of   management of  
pr
prio
iori
rity
ty on anany
y clclai
aim
m araris
isin
ingg un
unde
derr this
this partnership partnership.
arcl
ar cle,
e, as pr prov
ovid
ided
ed ar arc
cle
le 1840
1840,, thir
third
d May contribute May contribute
paragraph. money, property or money and property
industry
Righs o retring o propertes o  Proper party to Not proper party to
deceased, parner when business proceedings proceedings
contnued Inter
Interes
estt cann
cannot
ot be Interest is assignable
To have
have the value of the interest
interest of  assi
assign
gned
ed to makemake with assignee
the rering partner or deceased partner in new partner acquiring all rights of 
the partnership determined as of the date the limited partner
of dissoluon. His name may Name not included
appear in the rm in rm name
To re
rece
ceiive ther
therea
eae
er,
r, as an ordi
ordina
nary
ry name
creditor, an amount equal to the value of  Prohibited from No prohibion
his share in the dissolved partnership with engaging in a
inte
intere
rest
st,, or
or,, at his
his op
opo
on,
n, in plac
place
e of  business like
interest, the prots aributable to the use partnership’s
of his right. His rerement, His rerement,
insolvency and insolvency and
General Rule death
dea th dis
dissol
solves
ves the
the death does not
When partner reres from the partnership, partnership dissolve the
he is entled to the payment of what may partnership
be due to him aer liquidaon.
Excepton Characeristcs o limied parnership
No liqu
liquid
ida
aon
on need
needed
ed wh
when
en ther
there
e is 1. Must
Must be form
formeded in acco
accord
rdan
ance
ce with
with th
the
e
selement as to what rering partner shall requirements of the law.
receive. 2. Ther
ere
e mus
must be one or moremore gen
gener
eral
al
partners who control the management
Ar
Ar.
. 1842.
1842. The right to an account of his of the business.
interest shall accrue to any partner, or his
legal representave as against the winding 3. There
ere mcontribung
partners ust be one toorthe
mcapital
ore limand
ited
up partners or the surviving partners or the
 

sharing in the prots but have nothing l. Th

The
e righ
right,
t, if
if give
given,
n, of
of one
one or more
more o
of 
f 
to do with the management. the limited partners to priority over
4. Obli
Obliga
gao
ons
ns of the part
partner
nersh
ship
ip mu
must
st be other limited partners ers, as to
paid out of common fund and in the contribuons or
or as
as to
se
sepa
para
rate
te prop
properere
ess of the
the gegene
nera
rall compen
com pensa
saon on by way of income
income,,
partners. and the nature of such priority.

Ar. 1844. Two or more persons desiring to m. The right

right,, if give
given,
n, of the remai
remainin
ning
g
form a limited partnership shall: ge
gen
ner
eral
al par artn
tner
er or parartn
tner
erss to
connue the business on the death,
1. Sign
Sign an
andd sw
swea
earr to a cer
cerc
cat
ate,
e, whic
which
h re
rer
rem
emenent,
t, civi
civill inter
nterdi
dic
con
on,,
shall state — insanity
insanity or insolvency
insolvency of a genera
generall
partner.
a. The name of the partnership,
adding thereto the word "Limited". n. The right, if given, of a limited
part
partne
nerr to dema
demand
nd and
and re
rece
ceiive
b. The cha
charact
racter
er of
of the
the busine
business.
ss. property other than cash in return
for his contribuon.
c. The
The loca
locao
onn of the
the prin
princi
cipa
pall pla
place
ce
of business. 2. Fi
Fille fo
forr re
reco
cord
rd the cer
cerc
cat
ate
e in the
the
Oce
O ce of the Securi
Securies
es and Exchange
Exchange
d. Th
The
e name
name and p
pla
lace
ce of res
resid
iden
ence
ce of  Commission.
each member, general and limited
partners bei
ein
ng respec
cv
vel
ely
y A limited partnership is formed if there has
designated. been substanal compliance in good faith
with the foregoing requirements.
e. Th
The e term
term for whic
which
h the part
partne
ners
rshi
hip
p
is to exist. Qualifcatons o limied parnership
f. The amount of cash and a 1. Th
Thee partn
partners
ers mmusustt sign
sign an
and
d swe
swear
ar to a
descripon of and the agreed value cercate of limited partnership
of the other property
property contribu
contributed
ted 2. Must
Must le
le for
for rrec
ecor
ord d the
the cer
cerc
cat
ate
e in
by each limited partner. the oce of the Securies and
Exchange Commission
g. The addio
addional
nal contri
contribu
buons
ons,, if any,
any,
to be made by each limited partner Ar
Ar.
. 1845
1845.. The
The con
contri
tribu
buons
ons of a limite
limited
d
and the mes at which or events on partner may be cash or property, but not
the happening
happening of which they sh shal
alll services.
be made.
Limited partners can only contribute money
h. Th
The
e me,
me, if agr
agree
eed
d up
upon
on,, when
when tthe
he and properterty and cannot contribute
contribuon of each limited partner se
serv
rvic
ices
es to the
the part
partne
ners
rshi
hip
p to prot
protec
ectt
is to be returned. persons dealing with the rms with frauds.

i. Th
The
e shar
sharee of
of the
the pro
prots
ts or
or the
the othe
otherr Ar. 1846. The surname of a limited partner
compe
com pens
nsa
aon
on by wayway of inco
income
me shall not appear in the partnership name
which
which each
each lim
limite
ited
d partne
partnerr shall
shall unless:
receive by reason of his
contribuon. 1. It is also the surname of a gen
genera
eral
partner.
 j. The right, if given, of a limited
partner to substute an assignee as 2. Prior to the me when the limited
contr
contrib
ibut
utor
or in his
his plac
place,
e, and
and the
the partner became such, the business has
terms and condions of the been carried on under a name in which
substuon. his surname appeared.

k. The right,
right, if g
give
iven,
n, o
off the
the partn
partners
ers to
admit addional limited partners. A
in limited
a partpartner
partne
ners
rshi p whose
hip name surname
name cont
contrary appears
rary to the
provisions of the rst paragraph is liable
liable as
 

a general partner to partnership creditors A limi

limite
tedd pa
part
rtne
nerr is excl
exclud
uded
ed fr
from
om any
any
who
wh o ex
exte
tend
nd cred
credit
it to the
the part
partne
ners
rshi
hip
p acve voice in the control of the aairs of 
without actual knowledge that he is not a the rm.
general partner. Limie
Lim ied
d par
parne
nerr canno
canno per
peror
orm
m acs
acs o 
adminisraton
Limied parner’s surname is no included Limited partners may not perform any act
in he frm name provided hese of admi
admini
nist
stra
rao
onn wiwith
th re
resspec
ectt to the
circumsances interests of the partnership, not even in the
1. If the
the surna
surname
me ooff genera
generall pa
partn
rtner
er is the cap
capacit
acity
y of agenagents
ts of thethe manag
anagiing
same with limited partner’s partners.
2. If the limit
limited
ed partn
partner
er’s’s surna
surname
me was ART. 1849. Aer the formaon
formaon of a limited
includ
included
ed and was carrie
carriedd on the new
new partnership, addional limited partners may
partnership be admied upon lling an amendment to
*If
*If th
the
e limi
limite
ted
d papartn
rtner’
er’ss surn
surnam
ame
e was
was the original cercate in accordance with
included in the rm name, he is liable as a the requirements of Arcle 1865.
general partner.
The writng o amend a certfcae
Ar. 1847. If the cercate contains a false 1. Sh
Shal
alll conf
confor
orm
m to the requi
requirereme
mentntss of 
statement, one who suers loss by reliance Arcle 1844 as far as necessary to set
on su
such
ch stat
statememen
entt may
may hohold
ld liab
liable
le an
any
y forth clearly the change in the
part
party
y to the
the ce
cer
rca
catte wh
whoo kn
knew
ew the cercate which it is desired to make.
statement to be false: 2. Be sign
signeded a
and
nd sswor
worn
n to by a all
ll memb
members,ers,
and
and an am amen
endm
dmen
entt susubs
bsttu
ung
ng a
1. At the me he signed
signed the ccer
erca
cate.
te. limited partner.
ART. 1850. A general partner shall all have
2. Subs
Subseq
eque
uent
ntly
ly,, but
but with
within
in a su
suc
cie
ient
nt the rights and powers and be subject to all
me before the statement was relied the restricons and liabilies of a partner in
upon to enable him to cancel or amend a partner
partnershiship
p witho
without
ut lim
limite
itedd partne
partners.rs.
the cercate, or to le a peon for its Howeve
How ever,
r, withou
withoutt the wrien
wrien con consen
sentt or
cancellaon or amendment as provided ra
raca
cao
on n of the
the speci
specic
c acactt by allall the
the
in arcle 1865. limited partners, a general partner or all of 
the general partners have no authority to:
Liabiliy or alse saemen in certfcae
Under this provision, any partner to 1. Do any act in contravenon of th the
e
the cercate containing a false statement cercate.
is liable provided the following requisites 2. Do any act which would make it
are present: im
impo
poss
ssib
ible
le to carry
carry on the
the or
ordi
dina
nary
ry
1. He knewknew the
the state
stateme
ment
nt to be fals
false
e at business of the partnership.
the me he he signed the cercate,
cercate,
or subsequen
subsequently,
tly, but having
having suci
sucient
ent 3. Confess a judgement against the
me to cancel or amend it or le a partnership.
peon for its cancellaon or
amendment, he failed to do so. 4. Posses
Possesss par
partner
tnershi
ship
p proper
property,
ty, or a
assi
ssign
gn
2. Th
Thee pe
pers
rson
on seeki
seeking
ng to enfo
enforc
rce
e liab
liabil
ilit
ity
y thei
theirr ri
righ
ghts
ts in sp spec
eci
icc part
partne
ners
rshi
hip
p
has relied upon the false statement in property, for other than a partnership
transacng business with the purpose.
partnership.
3. Th
Thee perso
person
n suer
suered
ed loss
loss as a re
resu
sult
lt of  5. Admit
Admit a perso
person
n as a gene
general
ral p
part
artner
ner..
reliance upon such false statement.
6. Admi
Admitt a pers
person
on as a limi
limite
ted
d part
partne
ner,
r,
1848. A limited partner shall become
ART. 1848.
ART. unless the right so to do is given in the
liab
liable
le as a ge gene
nera
rall part
partne
nerr unle
unless
ss,, in cercate.
addion to the exercise of his rights and
powers as a limited partner, he takes part in 7. Connu
Connuee the busi
busines
nesss wi
with
th part
partner
nershi
ship
p
the control of the business. pr
prop
oper
erty
ty on the
the de
deat
ath,
h, rer
rerem
ement
ent,,
Limied parner has no conrol in business
insanity, civilpartner,
of a general interdicon orthe
unless insolvency
right so
to do is given in the cercate.
cercat e.
 

3. Non-
Non-pa
par
rci
cipa
pao
onn in the manag
managem
emen
entt
Powe
Powersrs o ge
gene
nera
rall pa
par
rne
nerr in li
lim
mi
ied
ed of the business.
parnership
The general partner shall have all the right ART. 1853
1853.. A pers
person
on may
may be a gene
genera
rall
an
and
d popowe
wers
rs an
andd be su subj
bjec
ectt to all
all the
the partner and a limited partner in the same
restricons and liabilies of a partner in a partnership at the same me, provided that
partnership without limited partners.
this
this fac
factt shall
shall be sta
stated
ted in the cercate
cercate
provided for in Arcle 1844.
ART. 1851. A limited partner shall have the

same rights as a general partner to: A person who is a general, and also at the
1. Have
Have ththe
e partn
partner
ersh
ship
ip book
bookss kept
kept at the same me a limited partner, shall have all
pr
prin
inci
cipa
pall plac
place
e of busi
busine
ness
ss of the
the the rights and powers and be subject to all
partnershi
partn ership,
p, and at a reason
reasonable
able hour
hour
restri
restrico
cons
ns of a general
general par
partne
tner;
r; except
except
to inspect and copy any of them.
that,
that, in res
respec
pectt to his contr
contribu
ibuon
on,, shall
shall
2. Have on demand true and full have the rights against the other members
inf
inform
ormao
aon n of all things
things aecng
aecng the whic
which
h he woul
would
d ha
have
ve ha
had
d if he wer
were
e no
nott
partner
par tnershi
ship,
p, and a formal
formal acc
accoun
ountt of  also a general partner.
partnership aairs whenever
circ
circum
umssta
tan
nce
cess re
rennder it just
just and
and ART. 1854. A limited partner also may loan
reasonable. money to and transact other business with
the
the pa
partn
rtners
ershi
hip
p an
andd un
unleless
ss he is also
also a
3. Ha
Have
ve diss
disso
oluo
luon n and wi
win
ndin
ding up by gene
genera
rall part
partner
ner,, re
recei
ceive
ve on acco
accoununtt of 
decree of court. resul
resulng
ng claims
claims agains
againstt the parpartne
tnersh
rship,
ip,
with general
general creditor
creditors,
s, a  pro rata share of 
A lim
limite
ited
d partne
partnerr sh
shall
all have the right
right to the
the asse
assets
ts.. No limi
limited
ted pa part
rtne
nerr shal
shalll in
re
rece
ceiv
ive
e a shshar
are
e of thethe pro
prott or ot
othe
herr respect to any such claim:
compensaon by way of income and to the
return
retu rn of his contr
contribu
ibuon
on as provid
provided
ed in 1. Rece
Receiive or hold
hold as colla
collate
tera
rall se
secu
curi
rity
ty
Arcles 1856 and 1857. any partnership property.

Righs o limied parner 2. Rece

Receiive fro
from
m a gene
generarall par
partn
tner
er or the
It has lesser rights than a general partner. It partnership any payment, conveyance,
may
ma y exerc
exercis
ise
e righ
rights
ts si
simi
mila
larr to a gene
genera
rall or release from liability, if at the me
partner. the assets
assets of the partners
partnership
hip are nonott
suc
sucie ient
nt to disch
dischar
arge
ge pa partn
rtners
ershi
hip
p
ART. 1852. Wi With
thou
outt prej
prejududic
ice
e to the
the liabil
liabilie
iess to person
personss not claimi
claiming
ng as
provisions of Arcle 1848, a person who has general or limited partners.
contri
contribut
buted
ed to the capita
capitall of a busin
business
ess
cond
conduc
ucte
ted
d by a pe pers
rson
on or papart
rtner
nersh
ship
ip The receiv
receiving
ing of collat
collatera
erall securit
security,
y, or a
erroneously believing that he has become a paym
paymenent,
t, con
conve
veya
yanc
nce,
e, or re rele
leas
asee in
limited partner in a limited partnership, is viola
violaon
on of the for
foregoi
egoing
ng provis
provision
ionss is a
not, by reason of his exercise of the rights fraud on the creditors of the partnership.
of a limited partner, a general partner with
the person or in the partnership carrying on Lo
Loan
anss an
andd busi
busine
ness
ss r
ran
ansa
sact
cton
onss wi
wih
h
the business, or bound by the obligaons of  limied parners
such person or partnership; provided that A limited partner is allowed to loan money
on ascerta
ascertaini
ining
ng the mis
mistak
take
e he prompt
promptlyly to the rm; transact other business with the
renounces his interest in the prots of the partnership, and receive a pro
a pro rata share in
business, or other compensaon by way of  the assets with general creditors.
income.
Li
Lim
mi
ied
ed pa
par
rne
nerr no
no al
allo
lowe
wed
d o hold
hold
Conditons or exempton rom liabiliy collaeral securiy
1. Prompt
Prompt renu
renunci
nciao
aon n of inte
interest
rest and/
and/ or A limitetedd partn tne
er may not receiv
eive
income upon ascertaining the mistake.
2. Non-in
Non-inclu
clusio
sion
n of limite
limited
d partne
partner’s
r’s n
name
ame partnership property as collateral security.
in the rm name.
 

ART. 1855. Where there are several limited the return of the contribuon or for the
partners the members may agree that one dissoluon of the partnership.
or more of the limited partners shall have a
priori
priority
ty ove
overr other
other limite
limited
d partne
partners
rs as to In the
the ab
abse
senc
nce
e of any
any stat
statem
emen
entt in the
the
the return of their contribuons, as to their cercate to the contrary or the consent of 
compensaon by way of income, or as to all members, a limited partner, irrespecve
any other maer. If such an agreement is of the nature of his contribuon, has only
made it shall be states in the cercate, and the right to demand
demand and receive
receive cash in
in the absence of such a statement all the return for his contribuon.
limite
limited
d partne
partners
rs shall
shall stand
stand upon
upon equ
equal
al
foong. A limited partner may have the partnership
dissolved and its aairs wound up when:
ART. 18
ART. 1856
56.. A limited partner may receive
fr
from
om the the part
partne
nersrshi
hip
p the
the sh
shar
aree of the
the 1. He righully but unsuccessfully
pr
pro
otsts or the
the comp
compen ensa
sao
on
n by wa way
y of  demands the return of his contribuon.
in
inco
come
me spu
spula
lated
ted foforr in the
the cecer
rca
cate
te;;
provided, that aer such payment is made, 2. Th
The
e ot
othe
herr liabil
liabili
ies
es of the par
partn
tners
ershi
hip
p
whether from the property of the have not been paid, or the partnership
partnership or that of a general partner, the pro
rope
pert
rty
y is insu insu
cien
cientt fo
forr thei
theirr
part
partneners
rshi
hip
p asasse
sets
ts are
are in exexce
cess
ss of all
all payme
aymentnt as re reqquir
ired
ed by the the rs rstt
liabilies of the partnership except liabilies para
paragr
grap
aph,
h, No
No.. 1, andand the
the limi
limite
tedd
to limi
limite
ted
d papart
rtner
nerss on acco
accoun
untt of thei
theirr partner would otherwise be entled to
contribuons and to general partners. the return of his contribuon.

ART. 1857. A limi

limited
ted pa
part
rtne
nerr shal
shalll no
nott Conditons o a limied parner entled o
receive from a general partner or out of  reurn o his conributon
part
partne
ners
rshi
hip
p prop
proper
erty
ty an
any
y part
part of hishis 1. Al
Alll liab
liabil
ili
ies
es of the
the part
partne
ners
rshi
hip
p have
have
contribuons unl: been paid or there are assets sucient
to pay partnership liabilies.
1. All liab
liabili
ilies
es of tthe
he partn
partners
ership
hip,, except
except 2. The consent of all the partners is
liabil
liabilie
iess to genera
generall par
partne
tners
rs and to obtained.
limite
lim itedd partne
partners
rs on acc
accoun
ountt of their
their 3. The cercate is cancelled or so
contribuons, have been paid or there amended as to set forth the withdrawal
remain
rem ainss proper
property
ty of the partne
partnersh
rship
ip or reducon of the contribuon.
sucient to pay them.
When limied parner may demand reurn
2. The co
connsent
ent of alalll memb
member
erss is had
had, 1. Th
Thee partn
partner
ersh
ship
ip iiss dis
disso
solv
lved
ed
unless
unless the return
return of the cocont
ntri
ribu
buo
on
n 2. Th
Thee date
date speci
specied
ed for its return
return has
has
may be righully demanded under the arrived
provisions of the second paragraph. 3. If no
no term
term is spec
specieied,
d, aer
aer si
sixx month
months’
s’
noce in wring to all other partners.
3. The cercate is cancelled or so
amended as to set forth the withdrawal Limied parner o receive cash
or reducon. It will be noted that the limited partner has
a right to demand and receive cash only in
Su
Subj
bjec
ectt to the
the prov
proviisi
sio
ons of the
the rst
rst return for his contribuon even when he
paragraph, a limited partner may righully contributed property.
demand the return of his contribuon:
ART. 1858. A limited partner is liable to the
1. On the
the diss
dissolu
oluon
on of a part
partner
nershi
ship.
p. partnership:

2. When the date specied in the 1. For the dierence between his
cercate for its return has arrived. contribuon as actually made and that
stated in the cercate as having been
3. Aer
Aer he has
has gi
give
ven
n six
six month
months’
s’ noc
noce
e in made.
wring to all other members, if no me
is specied in the cercate, either for 2. For any unp
unpaid
aid contri
contribu
buon
on which
which he
agreed in the cercate to make in the
 

future at the me and on the retu

return
rn of his
his co
cont
ntri
ribu
buo
on,
n, to whic
whichh his
his
condions stated in the cercate. assignor would otherwise be entled.

A limited partner holds a trustee for the An assignee shall have the right to become
partnership: a subst
substute
uted
d partne
partnerr if all the members
members
1. Specic property stated in the consen
con sentt theret
thereto
o or if the assign
assignor,
or, being
being
cercate as contributed by him, but thereu
the reunto
nto empowe
empoweredred by the cer
cerca
cate,
te,
which was not contributed or which has gives the assignee that right.
been wrongfully returned.

An assignee becomes a substuted limited

2. Mone
Money y or ot
othe
herr prop
proper
erty
ty wron
wrongf
gful
ully
ly partner when the cercate is
paid or conveyed to him on account of  appropriately amended in accordance with
his contribuon. Arcle 1865.

The liabilies of a limited partners as set The substuted limited partner has all the
fo
fort
rth
h in thishis ar
arc
clle ca
can
n be wawaiive
ved
d or rights and powers, and is subject to all the
compro
com promis
mised
ed only
only by the consen
consentt of all restri
restrico
cons
ns and liabil
liabilie
iess of his assign
assignor,
or,
members; but a waiver or compromise shall excep
exceptt thos
those
e liab
liabil
ili
ies
es of whwhic
ich
h he wawass
not
not aec
aectt the righ
rightt of a cr
cred
edit
itor
or of a ignorant at the me he became a limited
partnership who extended credit or whose partner and which could not be ascertained
claim arose aer the lling and before a for the cercate.
can
cancel
elllaon or amen enddment of the
cercate, to enforce such liabilies. The substuon of the assignee as a limited
partner does not release the assignor from
When a contributor has righully received liabil
liability
ity to the partne
partnersh
rship,
ip, under
under arcle
arcle
the return in whole or in part of the capital 1847 and 1858.
of his contribuon, he is nevertheless liable
to th
thee pa
part
rtne
ners
rshi
hip
p fo
forr any
any sum,
sum, no nott in Limied parner’s ineres assignable
ex
exce
cess
ss of suchuch re retturn
urn wi with
th inter
nteresest,
t, A limite
ted
d partner’s intere
erest in the
necess
nec essary
ary to dis
discha
charge
rge its lia
liabil
bilie
iess to all
partne
partnersh
rship
ip is assign
assignabl
able.
e. Th
The
e assign
assignee,
ee,
credito
cred itors
rs who extend
extended ed credit
credit or whose
whose
claims arose before such return. howeve
however,
r, of a limite
limited
d partne
partner’s
r’s interes
interestt
does not necessarily become a substuted
Limied parn
Limied parner
er liabl
liable
e o parnersh
parnership ip or limited partner.
sum reurned
A limi
limited
ted partner
partner whose contrib
contribuon
uon has ART. 1860. The The re rer
rem
emen
ent,
t, dea
eath
th,,
been righully returned is sll liable to the insolvency, insanity or civil interdicon of a
partnership for an amount not in excess of  generall partner
genera partner dissolves
dissolves the partnershi
partnership,
p,
the sum returned plus interest as may be un
unle
less
ss the
the bu
busi
sine
ness
ss is co
con
nnu
nued
ed by the
the
necessary to pay the claims of persons who remaining general partners:
exten
extended
ded crcred
edit
it or whos
whose
e cl
clai
aims
ms ar
aros
ose
e
before the return. 1. Und
Under a ri
righ
ghtt so to do stated in the
cercate.
ART. 1859.
ART. 1859. A limited partner’s interest is
assignable. 2. With
With the
the co
conse
nsent
nt of all mem
member
bers.
s.

A subs
subst
tut
utee limi
limite
ted
d pa
partn
rtner
er is a pe
pers
rson
on It must be observed that the death, etc., of 
ad
admi
mie
edd to allall the
the righ
rights
ts of a limi
limite
ted
d a general
general partner
partner dissolves
dissolves the partnershi
partnership
p
partner who has died or has assigned his while the death of a limited partner does
interest in a partnership. not cause the dissoluon of the rm, unless
there is only one limited partner.
An as
assi
sign
gnee
ee,, who
who does
does not
not beco
become
me a
substuted limited partner, has no right to ART. 1861. On the the deat
deathh of a limi
limite
ted
d
require any informaon or account of the partner his executor or administrator shall
partnership transacons or to inspect the have all the rights of a limited partner for
partne
partnersh
rship
ip books;
books; he is only
only entle
entled
d to
receive the share of the prots or other the purpose of seling his estate, and such
power as the deceased had to constute his
compensaon by way of income, or the assignee a substuted limited partner.
 

contribuon respecvely, in proporon to

The estate of a deceased limited partner the respecve amounts of such claims.
sh
shal
alll be liab
liable
le fo
forr al
alll his
his liab
liabil
ili
ies
es as a
limited partner. Ar. 1864. The cercate shall be cancelled
when
whe n the par
partne
tnersh
rship
ip is dissol
dissolved
ved or all
ART. 1862. On due applicaon to a court of  limited partners cease to be such.
competent jurisdicon by any creditor of a A cercate shall be amended when:
limited partner, the court may charge the
int
interes
erestt of the indebt
indebted
ed lim
limited
ited partne
partnerr 1. Ther
ere
e is a chan
change
ge in th
the
e nam
name of the
the

with payment of the unsased amount

amount of  partners
ership or in the amount or
such claim, and may appoint a receiver, and charact
cha racter
er of the contri
contribu
buon
on of any
make
ma ke all
all ot
othe
herr or
orde
ders
rs,, direc
direco
ons
ns,, an
and
d limited partner.
inquir
inquiries
ies which
which the cir
circum
cumsta
stance
ncess of the
the
case may require. 2. A per
ersson is subs
subst
tu
uted
ted as a limi
limite
ted
d
partner.
The interest
interest may be red
redeem
eemed
ed with
with the
separate property of any general partner, 3. An addional limited partner is
but may not be redeemed with partnership admied.
property.
4. A person is admied as a general
Th
The
e rereme
medi
dies
es co
conf
nfer
erre
red
d by the rs rstt partner.
paragraph shall not be deemed exclusive of 
others which may exist. 5. A gener
generalal part
partner
ner rer
reres,
es, dies
dies,, be
becom
comeses
insolvent or insane, or is sentenced to
ART. 1863. In se sel
lin
ingg ac
acco
coun
unts
ts aaer
er civil
civil int
interd
erdic
icon
on and the busin
business
ess is
dissoluon the liabilies of the partnership connued under arcle 1860.
shall be entled to payment in the following
order: 6. Th
There
ere is
is a chang
change
e in tthe
he ch
chara
aracte
cterr of tthe
he
1. Those to cre creditors, in the order of  business of the partnership.
pr
prio
iori
rity
ty as prprov
ovid
ided
ed by law,
law, excep
exceptt
those to limited partners on account of  7. Th
There
ere is
is a fa
false
lse or
or errone
erroneous
ous stateme
statement
nt
th
thei
eirr co
cont
ntri
ribu
buo
ons
ns,, and
and to gene
generarall in the cercate.
partners.
8. Th
There
ere is
is a chan
change
ge in
in the
the me as
as stat
stated
ed
2. Th
Thos
osee to limit
limited
ed part
partne
ners
rs in resp
respect
ect to in the cercate for the dissoluon of 
th
thei
eirr sh
shar
aree of the
the pr
pro
ots
ts and
and ot
othe
herr the partner
partnershi
ship
p or for the return
return of a
co
comp
mpenensa
sao
on
n by way
way of incom
incomee on contribuon.
their contribuons.
9. A me
me is xed
xed fo
forr the dissol
dissoluo
uon
n of the
3. Th
Thos
ose
e to limit
limited
ed part
partner
nerss in respe
respect
ct to partnership, or the return of a
the capital of their contribuons. co
con
ntr
triibuo
buon,
n, no meme havin
aving
g been
specied in the cercate.
4. Thos
Thosee to gener
general
al par
partn
tner
erss ot
othe
herr than
than
for capital and prots. 10. Th
Thee member
memberss desire
desire to make a chan
change
ge
in any other statement in the cercate
5. Th
Thos
ose
e to gener
general
al part
partne
ners
rs in resp
respec
ectt to in order that it shall accurately
prots. represent the agreement among them.

6. Th
Thos
osee to gener
general
al part
partne
ners
rs in resp
respec
ectt to Ar. 1865. The wring to amend a
capital. cercate shall:

Subject to any statement in the cercate 1. Co

Conf
nfor
ormm to the
the requi
require
reme
ment
ntss of ar
arcl
cle
e
or to su subs
bseq
eque
uent
nt agagre
reem
emenent,
t, limi
limite
ted
d 1844 as far as necessary to set forth
partners share in the partnership assets in cl
clea
earl
rly
y the
the chchan
ange
ge in the
the cecer
rca
cate
te
respect to their claims for capital, and in which it is desired to make.
respe
respect
ct to thei
theirr cl
clai
aims
ms fo
forr pr
pro
ott or fo
forr
compensaon by way of income on their 2. Be ssig
igne
ned
d and
and sw
swor
orn
n to by
by all
all me
memb
mber
ers,
s,
and an amendment substung
substung a
 

limited partner or adding a limited or Ar

Ar.
. 1866
1866.. A co
cont
ntri
ribu
buto
tor,
r, un
unle
less
ss he is a
general partner shall be signed also by general partner, is not a proper party to
the membe
emberr to be subs ubst
tu
ute
ted
d or proceed
pro ceeding
ingss by or agains
againstt a par
partne
tnersh
rship,
ip,
added, and when a limited partner is to exce
except
pt wh
wherere
e the
the ob
objec
jectt is to enfo
enforce
rce a
be subst
substute
uted,
d, the ame
amendm
ndment
ent sha
shall
ll limited partner's right against or liability to
also be signed by the assigning limited the partnership.
partner.
Ar 1867.. A limite
r.. 1867 limited
d par
partner
tnershi
ship
p formed
formed
The wring to cancel a cercate shall be under the law prior to the eecvity of this
signed by all members. Code,
Cod e, may become
become a limit
limited
ed partne
partnersh
rship
ip
under this Chapter by complying with the
A pepers
rson
on desi
desiri
ring
ng the
the canc
cancel
ella
lao
on
n or provis
provision
ionss of arcle
arcle 1844,
1844, provid
provided
ed the
amendment of a cercate, if any person cercate sets forth:
designa
gnated in the rst and sec ecoon d
paragraphs as a person who must execute 1. Th
The
e amount
amount of tthe
he origi
original
nal cont
contrib
ribuo
uon
n
the wring refuses to do so, may peon of each limited partner, and the me
th
the
e court
ourt to ord
order a cacanc
ncel
elllaon
aon or when the contribuon was made.
amendment thereof.
2. That
That the prope
propert
rty
y of the partn
partner
ersh
ship
ip
If the court nds that the peoner has a ex
exce
ceed
edss the
the amamo ount
unt suuci
cien
entt to
righ
rightt to ha
have
ve the
the wri
wringng exec
execut
uted
ed by a discharge
disc harge its liabili
liabilies
es to persons
persons not
person who refuses to do so, it shall order claiming as general or limited partners
the Oce of the Securies and Exchange by an amount greater than the sum of 
Comm
Commiissi
ssion wher
wheree thethe ce
cer
rc
catate
e is the contribuons of its limited partners.
recor
rec orde
ded,
d, to recor
record
d the
the ca
canc
ncel
ella
lao
onn or A limited partnership formed under the law
amendm
ame ndment
ent of the cer
cerc
cate;
ate; and whewhen
n prior to the eecvity of this Code, unl or
the cercate is to be amended, the court unless
unl ess it bec
become
omess a limit
limited
ed partne
partnersh
rship
ip
shall also cause to be led for record in said under
und er this
this Cha
Chapte
pter,
r, shall
shall connu
connue e to be
oce a cered copy of its decree seng governed by the provisions of the old law.
forth the amendment.
CORPORATIONS
A cerc
cercate
ate is amend
amendeded or cancelled
cancelled when TITLE I - GENERAL PROVISIONS
there is led for record in the Oce of the DEFINITIONS AND CLASSIFICATIONS
Securies and Exchange Commission, where
the cercate is recorded: Sec. 1. Title of the Code.  – This Code shall
be known as “The Corporaon Coder of the
1. A wring in accordance with the Philippines”.
provi
rovisi
sion
onss of the rs
rstt or sec
eco
ond
paragraph. Sec. 2. Corporaon dened. - A corporaon
is an arcial being created by operaon of 
2. A cer
ered copy of the order of the law having the right of succession and the
court in accordance with the provisions powers, aributes and properes expressly
of the fourth paragraph. autho
uthori
rize
zed
d by law
law or inci
nciden
dent to its
its
existence.
3. Aer
Aer the
the cer
cerc
cat
atee is duly
duly amend
amended
ed in
accordance with this arcle, the Defniton
amende
ame ndedd cer
cered
ed shall
shall therea
thereaer
er be A corporaon
corporaon is an arcial
arcial being
being created
created
for all purposes the cercate provided by op
oper
era
aon
on of law law havi
having
ng the
the ri
righ
ghtt of 
for in this Chapter. succession and the powers, aributes and
properes expressly authorized by law or
A certfcae is considered cancelled or incident to its existence.
amended when here is fled or record
1. A wri
wring
ng to amend
amend the cerca
cercate;
te; or
or Aribues
2. A cer
ered copy of the order of the 1. It is an ar
ar
ci
cial
al be
bein
ing.
g.
co
cour
urtt in the
the even
eventt of an unju
unjus
se
edd 2. It is
is creat
created
ed b
byy op
oper
era
aon
on o
off law.
law.
refusal of a partner to sign the wring.
3. It has
has tthe
he ri
righ
ghtt of succe
success
ssio
ion.
n.
 

4. It has
has only
only the power
powers,
s, ari
aribu
butes
tes and
and partnership.
properes expressly authorized by law Right of   No right of Possesses
or incident to its existence. Succession succession right of  
succession
Similarites beween a parnership and a Extent of   Partners Stockholders
corporaton Liability to (except are liable only
Third Persons limited to the extent
1. Juridical personality separate and
partners) of their
disnct from the individuals composing
are liable investments
it.
personally as
2. Ac
Actt only
only tthr
hrou
ough
gh its
its agen
agents
ts.. and represented
3. Composed of an aggregate of   subsidiarily by the shares
individuals. for subscribed by
4. Distribute prots to those who partnership them.
contribute to capital. debts to
5. May be orga
organiz
nized
ed only
only when
when th
there
ere iiss a third
law authorizing it. persons.
Transferability A partner A stockholder
6. Subj
Subjec
ectt to inco
income
me ttax
ax..
of interest cannot has the right
transfer to transfer his
Distnctons beween a parnership and a interest so shares
corporaton as to make a without the
partner prior consent
Poin o without the of the other
Par
rn
ners
rsh
hip Corpora
rat
ton
Comparison consent of   stockholders.
Manner of   By mere By law or all other
Creaon agreement oper
opera
aon
on of  exisng
of the law partners.
pares Term of   May be May not be
Number of   By a Requir
quires
es at existence established form
formed
ed for
for a
Pares minimum of leas
leastt v
vee (5
(5)) for any term in excess
two (2) incorporators period of   of 50 years
persons me ext
extend
endibl
ible
e to
Commence- Generally From the date spulated not more than
ment of   from the of the by the 50 years.
Juridical moment of issuance of   partners.
Personality execuon of the cercate Firm name A limited A corporaon
the contract of partnership may adopt a
incorporaon is   required rm name
of the to add the provided it is
Securies and word ‘Ltd.’ not idencal
Exchange to its name. or decepvely
Commission similar to any
(SEC) registered
Powers May Can exercise rm name or
exercise only the contrary to
powers powers exisng laws.
authorized expressly Dissoluon May be Ma
Mayy only
only be
by partners granted by diss
dissol
olve
ved
d at dissolved with
provided the law or any
any mmee by the consent of 
same are incident to its the will of   the state.
not contrary existence. any or all
to law, partners.
morals, Governing Civil Code Corporaon
good Laws Code
customs,
public policy Advana
anag ges o a co corp
rpo
ora
rae
e orm
orm o 
or public business organizatons
order.
1. The capacity to hold property, to
Management When it is It is vested in
contract, to sue and be sued as a legal
not agreed th
thee boar
board
d of 
unit or disnct enty.
upon, each di
dire
rect
ctor
orss or 2. Exempon of shareholders from
partner is an trustees.
agent of the individual liability.
 

3. Connu
Connuityity of exis
existen
tence
ce in
in spite
spite of
of dea
death
th 2. Quas
Quasi-i-pu
publ
blic
ic – are en
eneess eng
engag
aged
ed in
or changes of members. rendering basic services of such public
4. Tr
Tran
ansf
sfer
erab
abil
ilit
ity
y of shar
shares.
es. importance as to entle them to certain
5. Centra
Centrali
lized
zed mana
managemgement
ent und
under
er a boar
board
d privileges like eminent domain or use of 
of directors. public property. Eg. Electric, gas, water
6. Stan
Standa
dard
rdizized
ed metho
methodsds of or
orga
gani
niza
zao
on,
n, and telephone companies.
man
ma nagem
agemen entt andand nan
nancece foforr the
the 3. Govern
Governmenment-o
t-owne
wnedd or contro
controlle
lled
d–a are
re
protec
ec
on of shareh
ehoolders and enes organ
organized
ized by
by the government
government
creditors under statutory regulaons. or corporaons of which the
government is a majority stockholder.
Di
Disa
sadv
dvan
ana
age
gess o a corp corporora
aee orm
orm o  Eg. Philippine Air Lines
business organizatons 4. Dome
Domessc – one one inconcorp
rpor
orat
ated
ed under
nder
1. The
The lim
limite
itedd liabil
liability
ity of
of the sstock
tockhol
holder
derss Philippine laws.
serves toto limit
limit the credit
credit available
available to 5. Fo
Fore
reig
ign
n – onone
e fo
form
rmed
ed,, or
orga
gani
nize
zed,
d, or
the corporaon. ex
exis
isn
ngg unde
underr any
any laws
laws otothe
herr tha
than
2. The
The tran
transfe
sferab
rabil
ility
ity of
of sha
shares
res perm
permits its the
the those of the Philippines.
uning of incompable and conicng 6. Corpor
Corporao
aon n aggreg
aggregate
ate – on
one
e compo
composed
sed
interests in one enterprise. of more than one member or
3. Th
Thee mino
minori rity
ty stock
stockho hold
lders
ers are usualusuallyly corporator.
subs
ubser
ervi
vienentt to the the wi wisshes of the the 7. Corporaon sole – consists of one
majority. member or corporator and his
4. In big corpo
corpora rao
onsns,, the
the ststoc
ockhkhol
olde
ders
rs’’ successors.
von
vong g righ
rightsts have
have becobecome me larglargelely
y 8. Religious corporaons, sole or
theo
theore
rec
calal becabecaus use
e of wid widespr
espreaeadd aggregate – organized, either as sole or
ownership, lukewarmness and
disinterest in management, inera, and aggregate,
the church. to administer properes of 
inaccessible meeng places. 9. Ec
Eccl
cles
esia
ias
sca
call – or
orga
ganinize
zedd fo
forr re
reli
ligi
giou
ouss
5. In larg
large
e corpor
corporaoaons,ns, man
managem
agement ent and
and purposes.
con
contr
trol
ol has been been sep epar
arat
ated
ed fr fro
om 10.
10. La
Lay
y – or orga
gani
nize
zed
d fo
forr a pupurp
rpos
ose
e otothe
herr
ownership. than religious
6. By and
and larg
large e corpo
corporaraons
ons are subj
subject
ect to
to 11. Eleemosyna
Eleemosynary ry – organized for chari
charitable
table
governmental restricons, controls, and purposes.
report
rep ort requir
requiremeements nts not impose
imposed d on 12. Civil – are those
those than ecclesias
ecclesiascal
cal and
other forms of business organizaons. elee
eleemo
mosysyna
nary
ry,, whet
whethe herr publ
public
ic or
7. Corpor
Corporate
ate sphe
spherere of acv
acvity
ity is
is li
limit
miteded in private.
the tra
transa
nsaco
con n of its busi
busines
nesss to the 13. Close – one
one wherein all all the outst
outstandin
anding g
state of the organizaon. stock is owned by the persons who are
8. The co corp
rpor
oratatee foform
rm invo
involvlves
es “double acve in management and conduct of 
taxaon” on corporaon income. the business.
14. Open – oneone in which
which all the
the members
members or
Sec. 3. Classes of corporaons.  – corporaons have a vote in the elecon
Corporao
Corpor aons
ns formed
formed or organi
organized
zed und
under
er of the directors and other ocers.
th
thiis Cod
Code maymay be sto tock
ck or non-son-sto
tock
ck 15
15.. Mul-
ul-na
nao
ona
nall – oneone havi
havin
ng bee een n
corp
corpororaaon
ons.
s. Co
Corp
rpor
ora
aon
onss whic
whichh hahave
ve cr
crea
eate
ted
d or orgaorgani
nize
zed
d in one
one statstatee
capita
cap itall stock
stock div
divide
ided
d int
into
o sha
shares
res and are conduc
con ducts
ts bus
busine
iness
ss or acvi
acvies
es acro
acrossss
authorized to distribute to the holders of  naonal boundaries and but subject to
such shares dividends or allotments of the the legal sancons of the countries in
surplus prots on the basis of shares held which they operate.
are stock corporaons. All other 16. Non-prot – organized without
corporaons are non-stock corporaons. cont
contem
emplpla
aon
on of gain gains,
s, pro
protsts or
dividends to their members on invested
Oher kinds o corporatons capital.
1. Quas
Quasi-i-co
corp
rpor
ora
aon
onss – from
from the word
word 17
17.. De Jure
ure – one cr crea
eate
tedd in stri
strict
ct or
“quasi
“qu asi”,
”, mea
meanin
ning
g “as if”,
if”, are en
enes
es subs
ubstan
tanal
al co
conf
nfor
ormi
mity
ty wi
with
th the
the
that are not absolutely corporaons but statutory requirements for
ar
are
e cons
considider
ered
ed as if they
they we
were
re.. Eg
Eg..
Public boards created by law incorporaon and whose right to exist
as a corporaon cannot be successfully
 

aacked even in a direct proceeding for 2. The formulaon of business and

that purpose by the State. nancial plans.
3. Assembling the enterprise by
Sec. 4. Cor
Corpor
porao
aonsns cre
create
ated
d by spe
specia
cial 
l  neg
ego
oa
aon
onss and obta
obtaiining
ning some
ome
laws or charters.  – Corporaons created by cont
contro
roll ov
over
er the
the subj
subjec
ectt mae
maerr by
special laws or charters shall be governed opon or contracts made on behalf of 
primarily by the provisions of the special the proposed corporaon or on his own
law or charter creang them or applicable credit.
to them, supplemented by the provisions of  4. The making of arrangements for
this Code, insofar as they are applicable. nancin
cing the enterprise and the
oataon of securies.
Sec. 5. Corpo
Corporator
ratorss and incorp
incorporato
orators,
rs, 5. Arra
Arrang
ngee tac
tacul
ul and
and pain
painle
less
ss me
meth
thod
odss
stockholder
stockh s, and members.  – Corporators
olders, for geng his own reward for the task
are
ar e th
thos
osee who
who co comp
mpos ose
e a co corp
rpor
ora
aonon,, of promo
promoon on out of the prospec
prospecve
ve
whet
wh ethe
herr as st stock
ockho
holdlder
erss or memb
membersers.. investors and for reimbursement for his
Incorp
Inc orpora
orator
torss are tho
those
se stockh
stockhold
olders
ers or ex
expe
pens
nses
es,, cont
contra
ract
cts,
s, and
and se serv
rvic
ices
es
memb
me mber
erss me
mennon
oned
ed in the the arc
arcle
less of  without frightening away those who are
in
inco
corp
rpor
ora
aon
on as or orig
igin
inal
ally
ly fo
form
rmin
ing
g anand
d expected to provide the funds.
compos
com posing
ing the corpor
corporao
aon n and who are
signatories thereof. General rule: A corporaon is not bound by
any agreement made by a promoter.
Co
Corp
rpor
orato
ators
rs in a ststoc
ock
k co
corp
rpor
ora
aon
on ar
are
e Excepton o he rule: Unless and unl the
call
called
ed ststoc
ock-
k-ho
hold
lder
erss or sh shar
areh
ehol
olde
ders
rs.. corporaon approves the agreement.
Corporators in a non-stock corporaon are
called members.
Sec. 6.ofClas
shares Clstock
assi
sic
ca
aon
of on ofcorporaons
stock sh
shar
ares The
es..  – may
Componens o a Corporaton be divided into classes or series of shares,
1. Corpor
Corporato
ators
rs – are those
those who
who compo
composedsed or both, any of which classes or series of 
a corporaon, whether as stockholders shares may have such rights, privileges or
of member erss. The te terrm includes restricons as may be stated in the arcles
incorporators, stockholder erss or of incorp
incorpora
oraon
on:: Pro
Provid
vided,
ed, That no share
members. may be depriv
depriveded of vong
vong rights
rights except
2. In
Incor
corpo
pora
rato
tors
rs – ar
are
e thos
thosee ststoc
ockh
khol
olde
ders
rs those classied and issued as “preferred” or
or members menoned in the arcles “redee
“re deemab
mable”
le” shares
shares,, unless
unless otherw
otherwise
ise
of incorpora
incorporaonon as originally
originally forming pr
prov
ovid
ided
ed in this Code:
Code: Provi
Provided,
ded, furth
further,
er,
and
and cocomp
mpososin
ing
g the
the co
corp
rporora
aonon an
andd That there shall always be a class or series
who are signatories thereof. of shshar
ares
es whic
whichh have
have comp
complelete
te von
vongg
3. St
Sto
ock
ckhhold
older
erss or shshar
areh
ehoolder
lderss – araree rights. Any or all of the shares or series of 
those corporators in a stock shares may have a par value or have no par
corporaon. value as may be provided for in the arcles
4. Memb
Member erss – are thos
thosee corpo
corpora
rato
tors
rs in
in a of incorp
incorpora
oraon
on:: Pro
Provid
vided,
ed, how
howeve
ever,r, That
non-stock corporaon. banks, trust co
com
mpanies, insurance
5. Promoters – is a self-constuted companies, public ulies, and building and
organi
organizer
zer who nd ndss an enterp
enterpris
rise
e or loan associaons shall not be permied to
venture and helps to aract investors, issue no-par value shares of stock.
fo
form
rm a co corp
rpor
ora
aon
on anand
d laun
launch
ch it in
business, all with a view to promoon Pr
Pref
efer
erred
red shar
shares
es of stoc
stock k issu
issued
ed by an any
y
prots. corporaon may be given preference in the
distribuon of the assets of the corporaon
Prom
Promot on – is the
oton the act
act of pr
proc
ocur
urin
ing
g the
the in case of liquidaon and in the distribuon
ini
inial
al nan
nance
cess an
and
d the
the ma
maki
king
ng of all
all of dividends, or such other preferences as
prep
prepar
ara
aoons nece
necess
ssar
ary
y to lau launch a may be stated in the arcles of  
corporaon. incorporaon which are not violave of the
prov
provis
isio
ions
ns of this
this Co
Code
de:: Pr
Prov
ovid
ided
ed,, That
Actvites o a promoer preferr
pre ferred
ed shares
shares of stock
stock may be issuedissued
1. The disco
iscovver
ery
y and
and inve
inves
sga
gao
onn of a
promising business opportunity. only with a stated par value. The board of 
directors, where authorized in the arcles
of incorporaon, may x the terms and
 

condions of preferred shares of stock or 8. Dissol

Dissoluo
uon
n of the cor
corpor
porao
aon.
n.
an
any
y se
seri
ries
es ther
thereo
eof:
f: Pr
Prov
ovid
ided
ed,, Th
That
at such
such
termss and condi
term condion
onss shall
shall be eec
eecve
ve Ex
Excep
ceptt as prprov
ovid
ided
ed in the
the im
imme
medi
diat
atel
ely
y
upon the ling of a cercate thereof with preceding paragraph, the vote necessary to
the Securies and Exchange Commission. appr
approv
ove
e a parparcu
cula
larr corp
corpor
orat
ate
e act
act as
provided in this Code shall be deemed to
Shares of capital stock issued without par refer only to stocks with vong rights.
value shall be deemed fully paid and non-
assessable and the holder of such shares Defniton
shall not be liable to the corporaon or to A “stock”
“stock” or share
share of stock
stock is one of the
its creditor
creditorss in respect
respect thereto
thereto:: Provided; units into which the capital stock has been
That shares without par value may not be divided. It represents the interest or right
iss
issued
ued for a consid
considera
eraon
on less
less than
than the that the holder of the stock or stockholder
valu
valuee of ve ve (P5.
(P5.00
00)) peso
pesoss per
per sh
shar
are:
e: has in the corporaon.
Provided, further, That the enre
considera
consi deraon on received
received by the corporaon
corporaon A stoc
stockk ce
cer
rca
cate
te cer
cer
es
es that
that on
one
e is a
for its no-par value shares shall be treated ho
hold
lder
er or owne
ownerr of a ce
cert
rtai
ainn nu
numb
mber
er of 
as cap
capita
itall and shall not be availa
available
ble for shares of stock in the corporaon. It is a
distribuon as dividends. mere documentary evidence of the holder’s
owne
ow ners
rshi
hip
p of shar
shares
es an
and
d a co conv
nven
enie
ient
nt
A corporaon may, furthermore, classify its instrument for the transfer of tle.
shares for the purpose of insuring
comp
compli
lian
ance
ce with
with co
cons
nst
tu
uon
onal
al or le lega
gall Classes or series o shares o sock subjec
requirements. o resrictons

Except as otherwise provided in the arcles 1. rights

Sh
Shar
ares
esexcept
shal
shalll not be de
depr
preferred priv
ived
or ed of von
vong
redeemable g
of inco corrporaon and stated in the shares but non-vong shares must sll
cer
cer ca
cate
te of ststoc
ock,
k, each
each shar
share
e shal
shalll be be entles to vote on maers specied
equal in all respects to every other share. in the last paragraph of Secon 6 like
Where the arcles of incorporaon provide maers
ma ers rel
relan
angg to amendm
amendment ent of the
the
for non-vong shares in the cases allowed arcles of incorporaon and dissoluon
by this Code, the holders of such shares of the corporaon.
shall nevertheless be entled to vote on the 2. Where
Where non-
non-vovon
ngg shar
shares
es are prprov
ovid
ided
ed
following maers: fo
forr ther
theree must
must alwa
always
ys be a cl clas
asss or
series of shares with complete vong
1. Amendment of the arcles of   rights.
incorporaon. 3. Ba
Ban nks,
ks, trtru
ust cocommpani
anies
es,, insu
nsuran
rance
companies, public ulies, and building
2. Adopo
Adopon
naand
nd ame
amendm
ndment
ent of by-l
by-laws
aws.. and
and loan
loan asso
associ
cia
aon
onss sh
shal
alll not
not be
permied to issue no-par value shares
3. Sale,
Sale, leas
lease,
e, excha
exchange
nge,, mo
mortga
rtgage,
ge, p
pled
ledge
ge of stock.
or other disposion of all or 4. Prefer
Preferred
red shar
shares
es ooff stock
stock which
which mmay
ay be
be
su
subs
bsta
tan
nal
ally
ly all
all of thethe corp
corpor
orat
ate
e given preference in the distribuon of 
property. asse
assetsts in case
case of liqui quidao
daonn and
dist
distri
ribu
buo
onn of dividivide
dend
ndss or otheotherr
4. Incurr
Incurring
ing,, cre
crean
ang
g or incr
increas
easing
ing bon
bonded
ded prefer
pre ferenc
ences
es may be issuedissued only
only with
with
indebtedness. stated par value.
5. Th
Thee terms
terms and cond
condiion
onss of prefe
preferr
rred
ed
5. Increa
Increase
se o
orr decrea
decrease
se o
off capit
capital
al stock
stock.. shares or series thereof may be xed by
the board of directo ectorrs only when
6. Merger or consolidaon of the authorized by the arcles of  
corporaon
corpo raon with another
another corpo
corporaon
raon inco
incorp
rpor
ora
aon
on the
the eec
eecvi vity
ty ther
thereo
eof 
f 
or other corporaons. shal
shalll be re
reck
ckon
oned
ed frfrom
om the the l
lin
ing
g of 
cercate with the SEC.
7. Inves
esttmen
entt of corporate funds in 6. Sh
Shar
ares
es with
withou
outt par
par valu
valuee may
may not
not be
anot
anothe
herr corp
corpor
ora
aon
on or bu busi
sine
ness
ss in
accordance with this Code. issued for a consideraon less than the
value of ve (P5.00) pesos per share.
 

7. Unle
Unlessss ooth
ther
erwi
wise
se pro
provi
vide
dedd by law
law the
the 4. Incurr
Incurring
ing,, crean
creangg or in
increa
creasin
singg bon
bonded
ded
righ
rights
ts,, pr
priv
ivil
ileg
eges
es or rest
restri
rico
cons
ns on indebtedness;
cl
clas
asse
sess or se seri
ries
es of shar
shares
es must
must be 5. Increa
Increase
se o
orr decrea
decrease
se o
off ca
capit
pital
al st
stock
ock;;
stated in the arcles of incorpora
incorporaonon 6. Merger or consolidaon of the
and in the stock cercates. corporaon
corpo raon with another
another corporaon
corporaon
or other corporaons;
Classes or series o shares 7. Investment of corporate funds in
1. Von
Vongg an
andd Non-
Non-Vo
Von
ng
g Sha
Shares
res;; an
anot
othe
herr corp
corpor
ora
aon
on of bu busi
sine
ness
ss in
General
Gene rule:: Every member of a non-
ral rule accordance with the Corporaon Code;
stock corporaon and every legal owner and
of shares in a stock corporaon, has a 8. Dissol
Dissoluo
uon
n of the cor
corpor
porao
aon.
n.
righ
rightt to be pres presenentt an
and d vote
vote at all all
corporate meengs. Sec. 7. Founders’ shares. – Founders' shares
Excepton
Exce pton o he rule: Unless there is a cla
classied as such in the arcles of 
spulaon in contrary. incorporaon may be given certain rights
2. Par Value
Value and No- No-Par
Par Value
Value Share
Sharess and privileges not enjoyed by the owners of 
Par value is the given xed or denite ot
othe
herr stoc
stocks
ks,, pr
prov
ovid
ided
ed that
that where
where the
the
val
value of a sh shar
are
e in thethe ar arc
clles of  exclusive right to vote and be voted for in
incorporaon. the elecon of directors is granted, it must
3. Common and Preferred Shares. be for a limited period not to exceed ve (5)
Preferred shares of stock may be: (a) year
yearss subje
ubject
ct to thethe app
appro
rov
val of the
the
preferred as to assets; (b) preferred as Securies
Securi es and Excha
Exchange
nge Commission
Commission.. The
to dividends. Preferred as to dividends ve-year period shall commence from the
may
ma y eieith
ther
er be cumu cumulalav
vee or non-non- date
date of thethe afor
afores
esai
aid
d appr
approv
oval
al by the
the
cu
cumu
mulalav
ve,e, or pa par
rci
cipa
panngg or no non-
n-
parcipang Securies and Exchange Commission.
4. Pr
Proomoo
moon n Shar
Shareses – araree susuch
ch stock
stockss Defniton
issued to those who may originally own   Founders’ shares , generally common stock,
the min
mininging gro
ground
und or valuab
valuablele rights
rights are given to the founders or promoters of a
connected
conne cted therewith,
therewith, in consiconsiderao
deraon n corporaon in payment of money expended
of their deeding the same to the mining or services rendered in the promoon of it.
company when the company is
incorporated, or it may mean such stock Sec.
Sec. 8. Redee
Redeemable shares.  – Redeemable
mable shares.
as is issued to promoters. shares
sha res may be issued
issued by the corpor
corporao
aonn
5. Shares
Shares of of Escro
Escrow w – are
are sh
shares
ares subject
subject to when expressly so provided in the arcles
an es escr
crow
ow agree greemmenent,
t, that
that is, an of incorporaon. They may be purchased or
agreement under which the shares are take
takenn up by thethe corp
corpor
ora
aonon upon
upon the
the
deposited by the grantor or his agent expiraon of a xed period, regardless of 
with a third person, to be delivered by the
the exis
existen
tence
ce of un unre
rest
stri
rict
cted
ed reta
retain
ined
ed
th
thee dep
depos osiita
tary
ry to the ven enddee or earnings in the books of the corporaon,
subscriber only upon the happening of  and upon such other terms and condions
certain condions. as may be stated in the arcles of 
6. Foun
Founde
der’r’ss S
Sha
hare
res;s; incorporaon, which terms and condions
7. Re
Rede
deem
emabablele “Call
“Callabablele”” Shar
Shares
es;; must
mu st also
also be stat
stated
ed in the
the cer
cerca
cate
te of 
8. Tr
Trea
easu
sury
ry Shar
Shareses;; stock represenng said shares.
9. Ot
Othe
herr shares
shares clas
classi sie
ed d to comply
comply with
with
constuonal or legal requirements. Defniton
  Redeem
Redeemable
able (“Callabl
(“Callable”)
e”) shar es of stock 
shares
Insances
Insances whe
when n non
non-vo
-votn
tng
g sha
shares
res may
may which are usually preferred are frequently
voe issued subject to redempon at the opon
1. Amendment of the arcles of   of either the corporaon, the stockholder,
incorporaon; or bo
both
th,, at a de
den
nit
ite
e pr
pric
ice
e repres
represen
enn
ngg
2. Adopo
Adopon naand
nd ame
amendm
ndment
ent of by-l
by-laws
aws;; premium above the amount originally paid.
3. Sale,
Sale, leas
lease,
e, excha
exchange
nge,, mo
mortga
rtgage,
ge, ppled
ledge
ge
or other disposion of all or Sinking fund refers to a fund set-up by the
su
subs
bsta
tan
nal
ally
ly all
all of thethe corp
corpor
orat
atee
property; co
corp
rpor
ora
aon
on wher
wheree ca
cash
sh is gr
grad
adua
uall
lly
y set
set
aside in order to accumulate the amount
necessary to meet the redempon price of 
 

redeemable shares of specied dates in the extensi

extension
on as ma
mayy be de
dete
term
rmin
ined
ed by the
the
future. Securies and Exchange Commission.

Sec. 9. Treasury
Sec. Treasury shares.
shares. - Treasury shares Sec. 12. Minimum capital stock required of 
are shares of stock which have been issued st
stoc
ock
k cocorp
rpor
ora
aon s.  – Stock corporaons
ons.
and
and fully
ully pai
aid
d for,
or, but su sub
bse
seq
quen
entl
tly
y incorporated under this Code shall not be
reacqui
reac quired
red by the issuin
issuing
g cor
corpor
porao
aon
n by required to have any minimum authorized
purchase, redempon, donaon or through capi
capita
tall sto
tock
ck ex
exce
cept
pt as othe
otherw
rwiise
some other lawful means. Such shares may specically provided for by special law, and
again be disposed of for a reasonable price subject to the provisions of the following
xed by the board of directors. (n) secon.

Defniton Sec.
ec.13.
13.  Amount of capital stock to be
Tr
Trea
eassury
ury shar
shares
es arare
e owned
wned by the the subs
subscr
crib
ibed
ed and
and paidaid for purp
purpoose of 
corporaon having been reacquired by the inco
incorrpor aon..  – At least twenty-ve
poraon
issuing corporaon by “purchase, pe
perc
rcen
entt (25%
(25%)) of the
the au
auth
thor
oriz
ized
ed cacapi
pita
tall
redem
red emppon
on,, do
dona
nao
on
n or thro
throug
ugh
h so
some
me stock as stated in the arcles of  
other lawful means.” It has no vong rights incorp
incorpora
oraon
on mus
mustt be subsc
subscrib
ribed
ed at the
or rights as to dividends or distribuons. me of incorporaon, and at least twenty-
ve percent (25%) of the total subscripon
TITLE II - INCORPORATION AND must
mu st be paid
paid up
upon
on subs
subscr
crip
ipo
on,
n, the
the
ORGANIZATION OF PRIVATE balance to be payable on a date or dates
CORPORATIONS xed in the contract of subscripon without
Defniton need of call, or in the absence of xed date
Incorporaon is the act of creang a
corporaon. or da
dates
board tes,
of ,directors:
up
upon
on call
call fo
forrded,
pa
paym
Provided,
Provi ymen
enttver,
by that
however,
howe the
the
in no case shall the paid-up capital be less
Sec. 10. Nu Numb
mberer an
andd ququal
ali
ica
cao
ons
ns of  than ve thousand (P5,0000) pesos.
incorp
incorpora
orator s.  – Any number of natural
tors.
persons not less than ve (5) but not more Amoun o be subscribed and paid
th
than
an een
een (15),
(15), all of lega
legall ag
agee an
and
d a Illusraton:
majo
ma jori
rity
ty of whom
whom are are resid
residen
ents
ts of the
the If X, Inc.
Inc. has au
auth
thor
oriz
ized
ed cacapi
pita
tall
Philippines, may form a private corporaon stock of P100, 000 divided into 1,000 shares
for any lawful purpose or purposes. Each of  with par value of P100.00 per share, it must
the incorp
incorpora
orator
torss of s stock
stock corcorpor
porao
aonn be show
shown n that
that at least
least P25,
P25, 000 or 250
must own or be a subscriber to at least one shares of the authorized capital stock must
(1) shar
sharee of thethe ca
cappit
ital
al stotock
ck of thethe be subscribed. Of the total subscripon of 
corporaon. P25, 000, at least P6, 250.00 or 25% of total
subscrcriipon must be paid. It is not
Qualifcatons o incorporaors necessary that each subscriber pay Twenty-
1. Must
Must be a nat
natur
uralal pers
person
on.. ve percent (25%) on his subscripon. On
2. Must
Must be of lega
legall a
age
ge.. the
the ot othe
herr ha
hand
nd,, wh
wher
eree the
the au
auth
thor
oriz
ized
ed
capital stock is stated at 2,000 no par value
Se
Sec.
c. 11. Cor
Corpor ate term.  – A corporaon
porate shares , it must be shown that at least 500-
shall exist for a period not exceeding y no par value share have been subscribed.
(50) years from the date of incorporaon The basis of computaon is on the number
un
unle
less
ss so
soon
oner
er diss
dissol
olve
ved
d or unle
unlessss sa
said
id of shares.
period is extended. The corporate term as
originally stated in the arcl cle
es of  Securies and Exchange
incorporaon may be extended for periods Commission (SEC) may conduct compliance
not exceeding y (50) years in any single with paid-up capital requirements because
instance by an amendment of the arcles of  it has come
ome to thethe knowl
nowled
edge
ge of the
the
incorporaon, in accordance with this Code; Commis
Com missio
sion
n tha
thatt some
some corpor
corporao
aonn have
have
Provided, That no extension can be made been organized merely as fronts for some
ea
earl
rlie
ierr than
than ve
ve (5)
(5) year
yearss prio
priorr to th
the
e hidden objecves with no real intenon of 
original or subsequent expiry date(s) unless
there are jusable reasons for an earlier carrying out the purported purposes in their
arcles of incorporaon. If a bigger capital
 

stock is required, the abuse of the privileges the

the Phil
Philip
ippi
pine
nes,
s, an
andd no assoassoci
cia
aon
on,,
of a corporaon would be minimized. partnership, or corporaon the capital
of which is not wholly owned by cizens
Capi
Capia
all soc
sock
k requ
requir
irem
emen
ens
s unde
underr h he
e of the Philippines, shall engage directly
special laws or indirectly in the retail trade business.
1. In case of mining and agr griicu
culltural
incorporaon, or corporaon organized 7. Only
Only vessel
vesselss of d
dome
omesc
sc owners
ownership
hip are
fo
forr th
the
e pu
purp
rpos
ose
e of the
the disp
dispos
osiion
on , auth
author
oriz
ized
ed to engaengage
ge in coas
coastw
twis
ise
e
exploitaon, development or ulizaon shipping in the Philippines. Vessels are
of natural resources of the Philippines, co
cons
nsid
ider
ered
ed of do dome
messcc owowneners
rshi
hip
p
as well as corporaon organized for the when such ownership is vested in some
opera
perao
ons
ns of publ ublic ul
ulies
ies,, the
the one or moremore of the the foll
ollowi
owing:
ng: (1)
Constuon provides that at least 60 % Ci
Ciz
zen
enss of thethe Phil
Philip
ippi
pine
nes;
s; (2)
(2) any
any
of the capital stock of such corporaon corporaon or any company composed
must
mu st be own
owned by cizcizen
enss of the
the wholly of the cizens
cizens of the Philippines;
Philippines. (3) any corporaon or company created
unde
underr the
the laws
laws of the the PhPhil
ilip
ippi
pine
nes,
s,
2. The
The InInsu
sura
ranc
nce
e Code
Code pro
provivide
de that
that “no
“no pr
prov
ovid
ided
ed at leasleastt 75%
75% of the the capi
capita
tall
domesc insurance company shall, if a stock
sto ck thereo
thereoff or of any interest
interesteded in
stock corporaon, engage in business in said
said ca
capi
pita
tall is wh
whololly
ly ow
owne
nedd by the the
the Philippines unless posses of a paid cizens of the Philippines.
up capital stock equal to at least two
millio
millionn pesos”
pesos”.. Where
Where the ins insura
urance
nce Sec.14. Contents of arcles of the
co
comp
mpan any
y is to engag
engage e in insu
insura
ranc
nce
e incorpora
incor ons.  – All corporaon organized
poraons.
business it must have a “paid-up capital
stock of at least ve million pesos” to under
and
and Ex this
Exch Code
chan ge shall
ange Co
Comm leissi
mmis with
on the
sion arSecuries
arc
cle
less of 
be investe
invested d in securi
securies
es speci
specied
ed by inco
corrporaon in any of th the
e ocial
law, which securies are to be languages,
langu ages, duly signed and acknoacknowledg
wledgeded
deposited with the Insurance by all
all of thethe inco
incorp
rpor
orat
ator
orss cont
contai
aini
ning
ng
Commissioner. substanally the following maers, except
as otherwise prescribed by this Code or by
3. The
The Fina
Financ
ncin
ing
g Comp
Compan any
y Act
Act re
requ
quir
ires
es special laws:
thatt “at lea
tha least
st sixt
sixty
y  per centum of the
capital of nancing companies must be 1. Th
The
e name
name o
off the
the corp
corpor
ora
aon
on..
owned by cizens of the Philippines and
shall have a paid-up capital of not less 2. The
The sp
spec
eci
icc purp
purpos
ose
e or purpo
purpose
sess fo
forr
than ve hundred thousand pesos”. which the corporaon is being
incorp
incorpora
orated
ted.. Where
Where the cocorp
rpor
ora
aon
on
4. Commer
Commercia
ciall banks
banks are requ
require
ired
d to have
have have
hav e mor
moree than
than one stated
stated pur
purpos
pose,
e,
a paid-up capital of 100 million pesos. the arcle of incorporaon shall state
When a commercial bank having licence which the primary is and which is/are
to oper
operatate
e an ex expa
pan
nded fo
fore
reiign the sec
secon
ondar
dary
y pur
purpos
pose e or purpos
purposes:
es:
currency deposit system it must have a Provided , That a non-stock corporaon
paid-up capital of at least 150 million may not include a purpose which would
pesos and when a commercial bank is change or contradict its nature as such.
auth
authooriz
rized to en enga
gage
ge in univers
rsaal
banking it must have a paid up capital 3. Th
The
e place
place wh
where
ere the
the pri
princ
ncip
ipal
al oce
oce of 
of at least 500 million pesos. the corporaon is to be located, which
must be within the Philippines.
5. The
The New
New Cons
Const
tu
uon
on pro
provi
vide
dess that
that::
“The
“Th e owners
ownership
hip and manage
managemen
mentt of  4. Th
The
e term
term for
for which
which the
the cor
corpor
porao
aon
n is to
mass media shall be limited to cizens exist.
of the Philippi
Philippines
nes or to corporaons
corporaons or
associaon wholly-owned and manage 5. Th
Thee names,
names, nnao
aonal
nalie
iess an
and
d res
reside
idence
ncess
by such cizen”. of the incorporators.

6. Unde
Underr the
the Re
Reta
tail
il Tra
Trade
de Na
Naononal
aliz
iza
aon
on
law “no person who is not a cizen of 
 

6. The numbe
umberr of dire
direct
ctor
orss or tr
tru
ust
stee
eess Incorporators may choose any name they
which shall not be less than ve (5) nor see t , however strange, uneuphonious, or
more than een (15). unrhetorical it may be , provided it is one
not idencal with or prejudicially similar to
7. The
The nam
names,
es, nnao
aonal
nalie
iess and res
reside
idence
ncess a name which has previously been adopted
of the person who shall act as directors by and is being use by another corporaon
or trtrus
uste
tees
es unl the the rs
rst reregu
gula
larr as its corporate name
dir
directo
ectors
rs or tru
truste
stees
es are duly
duly elec
electe
tedd
an
andd ququal
ali
ied
ed acacco
cord
rdan
ance
ce with
with thi
this Change o Corporae name
Code. The
The chan
changege of thethe corp
corpor
orat
ate
e name
name
doesn’t mean a new corporaon, nor the
8. If it be a stock
stock cor
corpo
pora
rao
on,
n, the
the amo
amoununtt successor of the original corporaon. It is
of its authorized capital stock in lawful the same corporaon with a dierent name
money of the Philippines, the number having its character with no respect change.
of shares which it is divided, and in case The
The corp
corpor
ora
aon
on con
connu
nues
es,, as befo
before
re,,
the shares are par value shares, the par responsible in its new name for all debts or
value of each, the names, naonalies other liabilies it had previously contracted
and residences of the original or incurred.
subscriber
subs criber,, and the amount
amount subscribed
subscribed
and paid by each on his subscripon, 2. SpSpeci
ecic
c pu
purp
rpos
ose
e or
or p
pur
urpo
pose
ses.
s.
and if some or all of the shares are The
The stat
statem
emen
entt of the
the purp
purpos
ose
e has
has its
its
without par value, such fact must be principal funcon the armave
stated. authorizaon of the management to enter
into those co con
ntr
tra
acts and business ess
9. If it be a non-
non-ssto
tock
ck corp
corpora
oraon
on,, the
amo
am ount of its ca capi
pita
tal,
l, the names es,, transa
transaco
cons
incidental ns which
whi
to its ch may beofcon
aainment consid
thesidered
ered as
purposes.
na
nao
ona
nali
lie
ess and
and re resi
side
dencnces
es of the
the It also imposes implied limitaons of their
contributors an d the amount, authority by the exclusion of lines of acvity
contributed by each. which are not covered.

10. Such other

other maers are not
not inconsistent
inconsistent 3. Princi
Principal
pal oce
oce of
of tthe
he Corp
Corpora
oraon
on..
with law and which the incorporators The principal oce of the corporaon must
may deem necessary and convenient. be within the Philippines. It is where the
books of the corporaon are kept and its
The Securi
Securies
es and Exchan
Exchange
ge Commis
Commissio
sion
n ocers usually and ordinarily meet for the
shall not accept the arcles of incorporaon purp
purpos
ose
e of mana
managi
ging
ng thethe aai
aairrs and
and
of any stock corporaon unless transacons of the business of the
accompanied by a sworn statement of the corporaon.
Tr
Trea
easu
sure
rerr elec
electe
ted
d by the su
subs
bscr
crib
iber
er
showing that at least 25% of the authorized 4. Terms
Terms ooff Exist
Existenc
ence
e of the Corpor
Corporao
aon.
n.
capital stock of the corporaon has been The corporaon shall exist for a period not
subscribed, and at least 25% of the total exceeding y (50) years from the date of
subscripon has been fully paid to him in incorporaon unless sooner dissolved or
ac
actu
tual
al cash
cash and/
and/or
or in pr
prop
oper
erty
ty the
the fa
fair
ir unless said period is extended.
valuaon of which are equal to at least 25%
of th
the
e sasaid
id subs
subscr
crip
ipo
on
n , such
such pa
paid
id up 5. Na
Namemes,
s, Naon
Naonal ali
ies
es and res
resid
iden
ences
ces of 
capita
capitall being
being not less
less tha
than
n ve-th
ve-thous
ousand
and incorporators.
pesos (P5,000). The names, naonalies and residences of 
the incorp
incorpora
orator
torss must
must be stated
stated in the
Sec.15. Forms of Arcles of Incorporaon. arcles of the corporaon for the purpose
 – Unless otherwise prescribed by special of complying
complying with legal requirement
requirement that
law, arcles of incorporaon of all domesc majo
ma jori
rity
ty of the
the inco
incorp
rpor
orat
ator
orss must
must be
corporaons
corpor aons shall
shall supp
supplyly substanal
substanally
ly the residents of the Philippines and complying
fo
foll
llow
owin
ing
g requ
requirirem
ement
entss in the
the fo
form
rm as with
with the stastatut
tutory
ory req
requir
uireme
ementnt on share
share
provided for by the SEC: owners
own ership
hip and in othother
er instan
instances
ces whe
where
re

1. Th
The
e name
name o
off th
the
e corp
corpor
ora
aon
on.. Filipino Cizens are required.
6. Number
Number of dir
directo
ectors
rs and tru
trustee
stees.
s.
 

The number
number of the director
director and trustees
trustees Pr
Prop
opererty
ty as su subs
bscr
crip
ipo
on
n paym
paymen
entt –
must not be less than ve (5) nor more than Generally, all forms of tangible properes
een (15). are acceptable for purposes of payment to
subscripon provided that the three test of 
7. Na
Name
mes,
s, naon
naonal
ali
ies
es and res
resid
iden
ences
ces of  paid-up capital determinaon are complied
directors. wi
with
th,, i.e.,
.e., owne
owners
rshi
hip,
p, ex
exiisten
stence
ce and
A majority of the directors or trustees of all valuable, subject to certain restricons as
corporaon organized under this Code must may be imposed by law.
be a residents cizens of the Philippines.

SE
SECC adopted the policy that
8. Amount
Amount of auth
authori
orized
zed capita
capitall stock.
stock. disc
discou
ourarages
ges the
the incl
inclus
usio
ion
n of inta
intang
ngibible
le
A stock corporaon must state the “amount assets
assets as goo goodwi
dwill,
ll, lease-
lease-hol
hold
d rights
rights,, or
of it
itss au
auth
thor
oriz
ized
ed ca
capi
pita
tall st
stoc
ock
k in lawf
lawful
ul mber concession rights, payment of such
money of the Philippines, the number of  prop
properere
ess Mo Moto
torr vehi
vehicl
cle,
e, re
real
al esta
estatete
shares into which it is divided, and in case properes and navigable vessels in payment
the shares
shares are par val value
ue shares
shares,, the par of pre-incorporaon subscripon, increases
value of each, the names, naonalies, and of capital stock or in exchange for addional
residences of the original subscribers, and issuance of shares are allowed only by the
the amount subscribed and paid by each on SEC provided that:
his
his su
subs
bscri
crip
pon
on,, an
and
d if sosome
me or al alll the
the 1. There
There has bee
been n a proof
proof of valid
valid
shares are without par value, such fact must transfer;
be stated”. 2. All taxes
taxes d
due
ue from
from the
the proper
properes
es
has been paid; and
9. Non-
Non-ststoc
ockk Co
Corp
rpor
ora
aon
on.. 3. Such properes have been
The Corporaon Code requires the arcles
of the non-stock corporaon to states: the reasonably valued.
amount of its capital, the names, Papers o accompany artcles wih SEC
naonalies and residence cess of its The SEC requires the following papers to be
contributo
contributorsrs and the amount
amount contr
contribute
ibuted
d submied to it with the arcles cles of 
by each. A non-stock corporaon may have incorporaon:
capi
capita
tall bu
butt it ha
hass no auth
author
oriz
ized
ed ca
capi
pita
tall 1. A veri
veric
ca
aon
on slip
slip exec
execut
uted
ed by the
stock. Chief of the Record Secon states
that
that the
the prop
propos osed
ed name
name of the the
10. Inclusion
Inclusion of ot
other
her maers.
maers. corporaon has been veried and
The arcles of incorporaon “may include found to be disnct/ not similar to
other maers that is not inconsistent with th
thee names of already exisng
law and which the incorporators may deem co
corp
rpor
ora
aon
on or thos thosee pen endi
ding
ng
necessary and convenient”. registraon.
2. Wrien undert ertaking to change
Sworn Statement of the Treasurer corporate name in case there is a
The Securi
Securies
es and Exc
Exchan
hange
ge Commis
Commissio
sion
n person, rm or enty with a prior
shall not accept the arcles of incorporaon right to the use of said name or one
of any stock corporaon unless similar to it.
accompanied by a sworn statement of the 3. Swo
Sworn statement ent of assets and
Tr
Trea
easu
sure
rerr elec
electe
ted
d by thethe su subs
bscr
crib
iber
erss liabilies, duly executed under oath
showing that at least: by the corporate treasurer together
with the amount P50.00 to defray
1. 25% of
of the
the au
autho
thoriz
rized
ed ca
capit
pital
al stoc
stock
k has
has publicaon expenses.
been subscribed. 4. Bank
Bank cer
cerca cate
te of dep depos
osit
it,, issu
issued
ed
under oath by the bank manager or
2. 25%
25% of the subs
subscri
crip
pon
on ha
hass bee
been
n ful
fully
ly any aut
author
horize
izedd bank
bank o ocer,
cer, that
that
paid in actual cash or property. ther
theree is a depodeposisitt of the
the stat
stated
ed
amoun
amo untt rep
repres
resen
enng ng the paid-u
paid-upp
3. Th
The
e pa
paid
id-u
-upp capit
capital
al being
being no
nott less than
than capital of the corporaon either in
P5,000.00. the name of the treasurer in trust

SEC Policy for the corporaon or in the name

of the corporaon itself.
 

5. Wr
Wriien auth
author
oriity to veri
verify
fy bank
ank La
Law
w rerese
serv
rves
es he
he ri
righ
ghs
s o modi
modiyy he
he
depos
dep osit
it si
sign
gned
ed by the the co
corp
rpor
orat
ate
e charer
treasurer empowering the SEC and The constuon and the Corporaon Code
/or the Central bank to check and reserved the right to amend the charter of a
inspect the existence of the bank priv
privat
atee corp
corpor
ora
aon
on.. The
The cons
const
tu
uon
on
deposi
dep ositt of the corpor
corporate
ate paid-u
paid-up
p pr
prov
ovid
ides
es that
that “no
“no frfran
anch
chis
ise
e or ri
righ
ghtt be
capital. granted except under the condion that it
6. Ta
Taxp
xpay
ayer
er acco
accou
unt numb
numberer of the
the shall be subject to amendment, alteraon,
incorporators pursuant to Execuve or repeal by the Naonal Assembly when
order No. 213. public interest so requires.
7. Registraon Data Sheet, a
statement in stascal data form, Amendmen o Artcles o Incorporaton
Amendmen
signed by an authorized The arcles of incorporaon may be
represe
rep resenta
ntave
ve of the corpor
corporao
aon n amended for legimate purposes that refer
regardi
rega rding
ng import
important
ant inf
inform
ormao
aon n to any maer stated in the arcles of
about the the cocorrporate s e al , incorporaon. It may refer to:
corpora
corp orate
te nam
name,
e, princi
principal
pal oce,
oce, 1. Ch
Chan
ange
ge o
off corp
corpor
orat
atee name
name;;
capital structure, their subscripon 2. Extens
Extension
ion of term of corp
corpora
oraon
on;;
and TAN (SEC
(SEC Bullen, Oct. 1982).
1982). 3. Change
Change inin class
classes
es o
orr serie
seriess of shar
shares;
es;
4. Change in rights, privileges or
Sec. 16.  Amendment of Arcles of  restricons in share ownership;
Incorporaon.  – Unless otherwise 5. Increa
Increase
se o
orr decrea
decreasese iin
n th
the
e nu
numbe
mberr of
prescribed by this Code or by special law, directors; and
and for legimate purposes, any provision 6. Change
Change in purpos
purpose e or purpos
purposeses and
and
or maer stated in the arcles of 
in
inco
corp
rpor
ora
aoon may be am amenend
ded by a other necessary changes.
majority vote of the board of directors or Voe or recen assen required in
trustees and the vote or wrien assent of  amendmen o he artcles o incorporaton
the stockholders represenng at least two- shall be as ollows:
thirds (2/3) of the outstanding capital stock, Stock Corporaon – A majority vote of the
without prejudice to the appraisal rights of  directors or trustees and the vote or wrien
dissenng stockholders in accordance with assent of the stockholders represenng at
the provision of this Code, or the vote or least two- thirds (2/3) of the outstanding
wrien
wri en ass
assent
ent of two-th
two-third
irdss (2/
(2/3)
3) of the capital stock. Under secon 81 of the Code,
members if it be a non-stock corporaon. a dissenng
dissenng stockho
stockholder
lder may exercise
exercise his
appraisal right if he is against th the
e
The original and amen endded arcl cle
es amen
am endm
dmenentt to be made
made and
and dema
demandnd
alto
altoge
geth
ther
er shshal
alll cont
contai
ain
n all
all prov
provis
isio
ion
n payment of the fair value of his shares.
required by law to be set out in the arcles
of incorporaon. Such arcles, as amended Non-stock Corporaon – A majority vote of 
sh
shal
alll be inindi
dicat
cateded by un under
dersco
scori
ring
ng the
the board of directors and the vote or wrien
chan
changege or chan
change gess made
made,, an
and
d the
the copy
copy assent of 2/3 of the members.
thereo
thereoff duly
duly cere
cered d under
under oath
oath by the
corporate secretary and the majority of the The amendments to the arcl cle
es of 
directors or trustees stang the fact that inco
incorp
rpor
ora
aonon shal
shalll take
take ee
eect
ct upon
upon its
its
said amendments have been duly approved approv
app roval
al by the Sec
Securiuries
es and Exchan
Exchange
ge
by the required vote of the stockholders or Commission or from the ling with the said
memb
me mbererss, shalalll be su subm
bmiied to the Commis
Com missio
sion
n if not act
acted
ed upon
upon within
within six
Securies and Exchange Commission. months from the date of ling for a cause
not aributable to the corporaon.
The amendment shall take eect upon its
approv
app roval
al by the Securi
Securies
es and Exchan
Exchange
ge Sec. 17. Grou rounds
nds whwhen
en arcl
rcles
es of 
Commission or from the date of ling with inco
incorp
rpor
ora
aon
on or am amen
endm
dmenentt ma
mayy be
th
the
e said
said Co
Comm
mmis
issi
sion
on if no
nott ac
acte
ted
d upon
upon rej
reject
ected
ed or dis
disapp
approved.  – The Securies
roved.
within six (6) months from the date of ling and Exchange Commission may reject the

fcorporaon.
or a cause n ot aributable to the
the arcles of incorporaon or disapproved any
amendment thereto if the same is not in
compliance with the requirements of this
 

Code: Provi
Provided,
ded, That the Commission shall by which the corporaon can be idened
give
give the incorp
incorpora
orator
torss a rea
reason
sonabl
able
e me and disnguished from other corporaon,
wi
with
thin
in whic
whichh to corr
correc
ectt or modi
modify
fy the
the rms or enes.
objeco
objeconab
nable
le poro
poronsns of the arcle
arcless or
amendment. The following are grounds for Change o corporae name
such amendment or disapproval: A corp
corpor
ora
aon
on may
may ch
chan
ange
ge its
its na
name
me by
merely
merel y amending
amending its charter
charter in the manner
manner
1. That
That th
the
e arcle
arcless of inco
incorpo
rpora
raon
on or
or any
any prescribed by law. The change of name of 
amendment thereto is not substanally the corporaon does not result in
in accordance with the form prescribed dissoluon. The changing of the name of a
herein. corporaon is no more the creaon of a
corporaon than the changing of the name
2. That
That the
the purp
purpos
osee or pu
purprpos
oses
es of the of a natural person.
corporaon are patently
uncon
unconst
stuo
uonal
nal,, illega
illegal,
l, immora
immoral,l, or Re
Res
sri
rict
cton
on in use
use in ce cer
rai
ainn name
namess o 
con
contr
trar
aryy to gogove
vern
rnme
mentnt rul
rules and words
regulaon. There are special laws prohibing the use of 
certain
certai n names and/or words. Thus, under
3. That the Treasurer’s Adavit the
the GeGene
nera
rall Ba
Bank
nkin
ingg AcAct,
t, no pe pers
rson
on or
concerning the amount of capital stock ent
entyy not
not cond
conduc
ucnng g the
the busibusine
ness
ss of 
subscribed and/or paid is false. commerc
com mercial
ial bankin
bankingg shall
shall use the wor words
ds
“bank”, “banking”, “banker”, “building and
4. That the required percentage of  loan associaon”, “trust corporaon”, etc.
owners
own ership
hip of the capit
capital
al stock
stock to be or word
wordss of simi
simila
larr im
impo
port
rt.. The
The word
word
owned by cizens of the Philippines has
not been complied with as required by “Naonal”
those under
by those doing Act
doing bus2612
busin esss may
ines as notbank
babe use
nker
ers,
s,
exisng laws of the constuon. brokers
bro kers,, or saving
savingss instu
instuon
ons.
s. “Unite
“Unitedd
Naons
Na ons”” both
both in its full
full and abbrev
abbreviaiated
ted
No arcles of incorpora
incorporaon on or amendment
amendment for
orms
ms,, fo forr comm
ommer erci
cial
al and bus busines
inesss
to arc
arcle
less of inco
incorp rpor
ora
aon
on of bank banks,
s, purposes. There are other names or words
bankin
ban king
g and qua quasi-
si-ban
bankin
king
g insinstu
tuon
ons,
s, which pursuant to other special laws may
buil
buildi
ding
ng and and loan
oan assoassoci cia
aoon, tr trus
ustt not be used.
comp
compananie
ies,
s, pu
publ
blic
ic u uli
lie
es,
s, educ
educaaononal
al
instuon, and other corporaons Sec. 19. Com Commen
mencem
cement
ent of CorCorpor
porate
ate
governed by special laws shall be accepted Existe
Exi nce..  – A private corporaon formed
stence
or appr
approvoved
ed by the
the Co Commmmis issi
sion
on ununle
less
ss or organized under this Code commences to
accompanied by a favourable ha
have
ve co
corp
rpor
orat
ate
e exis
existen
tence
ce an
and d juri
juridi
dical
cal
reco
recomm
mmenend daon
aon of the the apprappro opria
priate
te person
per sonali
ality
ty and is deemed
deemed incorp
incorpora
orated
ted
government agency to the eect that such from the date the Securies and Exchange
arcles or amendment is in accordance with Commission issues a cer ercat
cate of 
law. incorp
incorpora
oraon
on under
under its ocia
ociall seal;
seal; and
thereupon the incorporators,
Sec.
Sec. 18
18.. Cor
Corpor
porate
ate nam e.  – No corporate
name. stockholders/members, an d their
name may be allowed by the Securies and succes
suc cessor
sorss shall
shall const
constute
ute a body
body polpolic
ic
Exchange Commission if the proposed name and corporate under the name stated in the
is idenc
idencal al or dec
decep
epvel
vely
y or con
confus
fusing
ingly
ly arcles of incorporaon for the period of 
similar to that of any exisng corporaon or me menoned therein, unless said period
to any other name already protected by law is extend
extendeded or the corcorpor
porao
aonn is sooner
sooner
or it
itss pa
pate
tent
ntly
ly dedecep
cepv
ve,
e, co
conf
nfus
usin
ing
g or dissolved in accordance with law.
contrary to exisng laws. When the change
in a corp
corpor
orat
atee name
name is ap appr
prov
oved
ed,, the
the Sec. 20. De Fac
Facto
to corpor
corporao n.  – The due
aon.
co
commmi
misssion
sion shalhall iss
ssue
ue an amen amende dedd incorpora
incorporaon
on any corporaon
corporaon claiming in
cer
cerc
cat
atee of incoincorp
rpor
ora
aon
on unde
underr the
the good faith to be a corporaon under this
amended name. Code,
Cod e, and its right
right to exer
exercis
cise
e cor
corpor
porate
ate
powers, shall not be inquired into

Necessiy oary
It is necess Corporae
necessary that a name
that corpor
corporao
aonn sho
should
uld collaterally in any private suit to which such
corporaon may be a party. Such inquiry
have a name because that is the only way
 

may be made by the Solicitor General in a of a cont

contra
rary
ry teno
tenor.
r. The
The ob
obje
ject
ct of the
the
quo warranto proceeding. principle of estoppel is to prevent injusce
to an otherwise innocent person.
De fact
facto
o corporaon   – generally refer to
organizaon
organizaonss exercising
exercising corporate
corporate power Sec. 22. Ee
Eect
ct of non
non-us
-use
e of cor
corpor
porate
ate
unde
underr colo
colour
ur of a more
more or less
less lega
legall
lly
y charter and connuous in operaon of a
constuted corporaon. corpor
corporao n.  – If a corporaon does not
aon.
fo
form
rmal
ally
ly or
orga
gani
nize
ze and
and comm
commen
ence
ce the
the
Elemens o De aco corporaton transacon of its business or the
1. Exi
Existe
stence
nce of a val
valid
id law
law u
unde
nderr which
which a construc
constr ucon
on of its works within
within two (2)
corporaon can be organized. years from the date of its incorporaon, its
2. An aem
aempt
pt in goo
goodd faith
faith to iinco
ncorpo
rporat
rate.
e. corporate powers cease and the
3. Actual
Actual exercis
exercise
e of incorp
incorpora
orate
te po
power
wers.
s. corpor
cor porao
aonn shall
shall be deedeemed
med dissol
dissolved
ved..
However, if a corporaon has commenced
Quo warranto –
warranto – an inquiry made into the the transacon of its business but
right of a corporaon to conduct business. su
subs
bseq
eque
uent
ntly
ly beco
become
mess con
connu
nuou
ousl
sly
y
inoperave for a period of at least ve (5)
Illusraton year
years,
s, the
the same
same shal
shalll be groun
groundd fo
forr the
the
Seven
Sev en compet
competent
ent ind
indivi
ividu
dual
al org
organi
anized
zed a suspensio
susp ension
n or revocaon
revocaon of its corporate
cor
corporaon by ling the arcl cles
es of  franchise or cercate of incorporaon.
incorporaon and securing a cercate of 
incorporaon with the SEC. However, the This provision shall not apply if the failure
addresses of two of the original subscribers to organize, commence the transacons of 
were omied in the arcles of   its
its bu
busi
sine
ness
sses
es or the
the co
cons
nstr
truc
ucoon
n of its
its
incorporaon. In suit led by X, a creditor,
against the corporaon he alleged that the works,
causes orbto
eyconnuously
ond the coperate
ontrol isofduethto
e
corp
corporora
aon
on ha
hass no va vali
lid
d exist
existen
ence
ce anand
d corporaon as may be determined by the
sought to hold the seven incorporators (also Securies and Exchange Commission.
direc
ecttors) liable per erssonally on the
obliga
gaon. X’s allegaon that the Organizaton
corporaon had no valid existence would The idea of organi
organiza
zaon
on in ref
referen
erencece to
cons
consttut
ute
e a coll
collat
atera
erall (s
(sid
ide)
e) a
aacackk in a corpor
corporao
aons
ns means
means execuv
execuvee str
struct
ucture
ure,,
private suit. Only the Solicitor General as elecon of ocers, providing for
government lawyer may raise the queson su
subs
bscr
crip
ipo
on
n and
and paym
paymen
entt of capi
capita
tal,
l,
by quo warra
warranto
nto procee
proceeding.
ding. (Liter
(Literally
ally by adop
adopo
on n of by-l
by-law
aws,
s, and
and otothe
herr step
stepss
“what right”). necess
nec essary
ary to endow
endow the legal en
entyty wit
withh
capacity to transact business for which it
Sec. 21. Corp
Corpor
ora
aon
on by esesto
topp el..  – All
ppel was created.
persons who assume to act as a corporaon
knowing it to be without authority to do so The Grant of corporate existence, conferred
shall be liabl
shall liable
e as gen
genera
erall par
partne
tners
rs for all by the issuance of cercate of  
debts, liabilies
liabilies and damages
damages incur
incurred
red or incorporaon, is subject to two subsequent
arising as a result thereof: Provided, condions, to wit:
ho
howe
weve
ver,r, Tha
Thatt when
when any such
such ostens
ostensibl
ible
e 1. The corporaon must “formally
corp
corpor
ora
aonon is sued
sued on an any
y trtran
ansa
saco
conn organize”.
entered by it as a corporaon or on any tort 2. Th
Thee corpora
corporaon
on mmust
ust actu
actuall
ally
y beg
begin
in the
the
comm
commi ieded by it as such
such,, it shal
shalll no
nott be “transacon of its business”.
allo
allowe
wed d to useuse as a defe
defensnse
e its
its lack
lack of 
corporate personality. Failure
Failure to comply
comply with either or both
both of 
these condions within two (2) years from
One who
One who asassu
sume
mess an ob
obli
liga
gao
on
n to an the date of its incorporaon, its corporate
ostensible corporaon as such cannot resist power cease and the corporaon must be
perfor
performan
mancece thereo
thereoff on the gro
ground
und that
that deemed dissolved.
there was in fact no corporaon.
Sec. 23. The board of directors or trustees.
Estoppel
man from–denying
It is preclusion, which preventof 
a fact in consequences a  – Unless otherwise provided in this Code,
the corpor
corporate
ate pow
powers
ers of all corpor
corporao
aon
n
his own previous act, allegaons, or denial formed under this Code shall be exercised ,
 

all business conducted and all property of  3. Domes

Domescc air carr
carrie
ier,
r, the dire
direcn
cngg head
such corporaons
corporaons controlled and held by or 2/3 of the board of directors and
th
thee bo
boar
ard
d of dire
directo
ctors
rs or tr
trus
uste
tees
es to be other managing ocers shall be cizens
elected from
from among
among the holders
holders of stock,
stock, of the Philippines.
or where
where there
there is no stock,
stock, from
from among
among 4. Registe
Registered
red iinve
nvestm
stment
entss com
compan
panies
ies,, the
the members of the corporaon,
corporaon, who shall
shall dire
direct
ctor
orss ther
thereo
eoff mumust
st be Fi Fili
lipi
pino
no
hold oce for one (1) year and unl their cizen.
successors are elected and qualied. 5. Pri
Private
vate dev
develop
elopm
menentt banks
anks,, all
all the
the
members of the board of directors shall
Every director must own at least one (1) be cizen of the Philippines.
share of the capital stock of the corporaon 6. In case
case o
off n
nanc
ancing
ing corp
corpora
oraon
on,, at lleas
eastt
of which he is a director, which share shall 2/3
2/3 of all
all memb
members
ers of the
the bo
boarardd of 
st
stan
andd in hi
hiss name
name on the
the book
bookss of the
the directors shall be cizen of the
corporaon. Any director who ceases to be Philippines.
the owner of at least one (1) share of the
capital stock of the corporaon of which he Sec. 24. Elecon of directors or trustees.  –
is the director shall thereby cease to be a At all
all elec
elecon
onss of direc
directo
tors
rs or tr
trus
uste
tees
es,,
director. Trustees of non-stock corporaons there must be present, either in person or
must be members thereof. A majority of the by repres
represen
enta
tav
vee auth
author
oriz
ized
ed to ac actt by
dir
directo
ectors
rs or tru
truste
stees
es of all corpor
corporao
aons
ns wrien proxy, the owners of the majority of 
organized under this Code must be the outstanding capital stock, or if there be
residents of the Philippines. no capital stock, a majority of the members
entled to vote. The elecon must be by
Qualifcatons o direcors ballot if requested by any vong
1. He must
must own
own at lea
least
st one
one (1) shar
share
e of 
the capital stock of the corporaon in stockholder or member. In stock
corporaons, every stockholder entled to
his name. vote shall have the right to vote in person
2. Maj
ajor
oriity of the dire
direct
cto
ors must
must be a or by proxy the number of shares of stock
resident cizen of the Philippines. standing, at the me xed in the by-laws, in
3. A director must not have been his own name on the stock books of the
co
conv
nvic
icte
ted
d by nnal
al judg
judgem
emen
entt of an co
corp
rpor
ora
aon
on,, or where
where the the byby-l-law
awss ar
are
e
oense
oe nse punis
punishab
hable
le by impris
imprisonm
onment
ent silent, at the me of the elecon; and said
exceeding six (6) years or a violaon of  shar
sharehehol
olde
derr mamayy vovote
te such
such nu numbmber
er of 
the provisions of the Corporaon Code shares
sha res for as many many per person
sonss as there
there are
commied within ve (5) years prior to directors
direct ors to be elected or he may cumulate cumulate
the date of elecon or appointment. said shares and give one candidate as many
vo
vote
tess as thethe nunumbmber
er of diredirecto
ctors
rs to be
The dir
directo
ectors,
rs, once
once elected
elected,, bec
become
ome the elected
ele cted mul
mulpliplied
ed by the numbernumber of his
repres
represent
entav
aves
es of the corpor
corporao
aonn its
itself
elf,, shares
sha res shall
shall equal,
equal, or he may distri distribut
bute
e
not its stockholders. The directors of a non- them on the same principle among as many
st
stoc
ock
k corp
corpor
ora
aon
on are
are rerequ
quir
ired
ed to be candidate as he shall see t; Provided, That
members thereof an d like stock the total number of votes cast by him shall
corporaons “majority of the directors and not exceed
exceed the numbers
numbers of sh shares
ares owned
trustees of all corporaons organized under by him
him as sho shown in the the bookooks of the the
the Corpor
Corporao
aon n Code
Code must
must be residen
residentsts co
corp
rpor
ora
aoon mulmulp plied
lied by the the wh whol
ole
e
cizen of the Philippines”. There are some number of directors to be elected cted::
special corporaon not organized with the Pr
Prov
ovid
ided
ed,, hohoweweve
ver,
r, that
that no de deli
linq
nque
uent
nt
Co
Corp
rpor
ora
aon
on Co Code
de whwher
eree dire
direct
ctor
orss ar
aree stocks
sto cks shall
shall be voted.
voted. Unless
Unless othotherwi
erwise
se
required to be cizens of the Philippines. provided in the arcles of incorporaon, or
They are as follows: in the by- laws, member memberss of cor corpor
porao
aonn
1. Bank
Bank and banki
banking
ng ins
instu
tuo
on,n, at leas
leastt which
whi ch have
have no capitacapitall stock
stock may cast as
2/3 of the members of the board of  many
ma ny vovotetess as ther
theree araree tr
trus
uste
tees
es to be
direct
cto
ors shall be cizen of the elected
ele cted bu butt may no nott cast more
more than one
Philippines. vo
vote
te fo forr oneone can candida
didate
te.. Cand
Candididat
ates
es
2. Rural banks, every mem emb ber of th thee receiving the highest number of votes shall

board of directors shall be cizens of 

the Philippines. be declar
declared
ed elected
elected.. Any meeng of the
stoc
stockh
khol
olde
ders
rs or mememb
mbererss cal
calle
led
d fo
forr an
elecon
elecon may ad adjou
journ
rn from
from day to day or
from me to
 

me but not sine die or denitely if, for any Se

Sec.
c. 25. Corp
Corpor
orat
ate
e oce
ocers
rs,, qu
quor um..  –
orum
reason, no elecon is held, or if there are Imme
Immedidiat
atel
elyy aer
aer thei
theirr elec
eleco
on,
n, the
the
not present or represented by proxy, at the dir
directo
ectors
rs of a corpora
corporaon
on mus
mustt for
formal
mallyly
meeng, the owners of the majority of the organi
org anized
zed by the eleco
eleconn of a presid
president
ent,,
outstanding capital stock, or if there be no who shall be a director, a treasurer who
capita
capitall stock,
stock, a maj
majori
ority
ty of the member
memberss may or may not be a director, a secretary
entled to vote. who
wh o sh
shal
alll be a re
resi
side
dent
nt ciz
cizen
en of thethe
Philippines, and such other ocers as may
Mehods o votng be provided for in the by-laws. Any two (2)
The vong methods which may be resorted or more posions may be held concurrently
to by a vong stockholder are as follows: by the same person, except that no one
1. St
Stra
raig
igh
ht von
vong.
g. shall act as president and secretary or as
2. Cumula
Cumulaveve vo
vong
ng for
for o
one
ne ca
candi
ndidat
date.
e. president and treasurer at the same me.
3. Cumula
Cumulaveve vo
vong
ng by dis
distri
tribu
buon.
on.
The directors or trustees and ocers to be
Example o Sraigh Votng elected shall
shall p
perform
erform th
the
e dues enjoined
enjoined
A owns 100 shares of stock in X corporaon. on them by law and by the by-laws of the
Du
Duri
ring
ng th
the
e mee
meeng
ng foforr the
the purp
purpos
osee of  corporaon. Unless the arcles of  
elecng ve directors, he may cast his vote incorporaon or the by-laws provide form a
by giving each of the ve candidates 100 greater majority, a majority of the number
votes, hence, he distribute equally his vote of dire
direct
ctor
orss or tr
trus
uste
tees
es as x
xed
ed in the
the
without preference or discriminaon. arcles of incorporaon shall constute a
quorum
quo rum for the tratransa
nsacon
con of corpor
corporate
ate
Ex
Exam
ampl
ple
e o Cumu
Cumula latv
tve
e votn
votng g or
or one
one business, and every decision of at least a
candidae
In the preceding illustraon, if A owns 100 majority of the directors or trustees present
at a meeng at which there is a quorum
vong shares and there are ve directors to shall be valid as a corporate act , except for
be elected, A is entled to 500 votes which the
the elec
eleco
on
n of thethe oce
ocers
rs whic
whichh shal
shalll
he may “cumulate” by giving it to candidate requ
requir
ire
e the
the vote
vote of a majo
majori
rity
ty of all
all the
the
Z alone. members of the board.
Example o Cumulatve votng by Qualifcaton o corporae ocer
disributon 1. Presiden. He must be a director.
As in the same example above, if A owns 2. Treasurer. He may or may not be a
10
1000 von
vongg sh
shar
ares
es,, an
andd ther
theree are
are ve
ve director.
directors to be elected, A is entled to 500 3. Secreary. He must be a resident and
votes which he may distribute to candidate cizen of the Philippines
Y and Z giving the former 300 and the laer 4. Other
Other oocer
cerss provi
provided
ded for in the
the by-
by-
200 provi
provided
ded th
that
at the total
total numb
number
er of  laws.
vote
votess cast
cast by him
him dodoes
es no
nott excee
exceed
d 500
500
votes. Three levels o corporae conrol
1. The board of director which is
Votng o sequesered shares o sock responsibl
respo nsible
e for the corpo
corporate
rate poli
policies
cies
It ha
hass be
beenen he
held
ld that
that the
the “Pre
“Presi
side
den
nal
al an
andd the
the gene
genera
rall ma
mana
nage
geme
mentnt of the
the
Co
Comm
mmis issi
sion
on on Good Good Gove
Governrnme
ment
nt may
may business aairs of the corporaon.
proper
pro perly
ly exercis
exercise
e the prerog
prerogav
avee to vote
vote 2. Th
Thee ocer
ocers, s, who
who in the
theor
oryy execu
execute
te th
the
e
sequestered stock of corporaon, granted policies lay down by the board , but in
to it by the President
President of the Philippi
Philippines
nes xxx pr
prac
accece o
oenen ha
have
ve wide
wide lat
latud
udee in
pe
pend
ndin
ingg ththe
e outco
outcomeme of pr proc
oceed
eedin
ing
g to de
dete
term
rmininin
ing
g the
the cocour
urse
se of bu busi
sine
ness
ss
determ
det ermine
ine the owners
ownershiphip of seq
seques
uester
tered
ed operaons.
sh
shar
ares
es of stockstock.. xx
xxxx Subs
Substu
tuo
onn of  3. Stoc
Stockh
khol
older
derss who like
like amen
amendm dmen
ents
ts of 
directors is not be done without reason or the arcles of incorporaon.
rhyme, and undertaken only when essenal
to preven
preventt disdisapp
appeara
earance
nce or wastag
wastage e of  Teleconerencing o Board Members
corporate property, and always under such In the Phi
Phili
lippi
ppines
nes,, teleco
teleconfe
nferen
rencin
cing
g and
circumstan
circum stancece as assure
assure that replacements
replacements videoconferencing of members of board of 

ar
are
e trtru
uly and
experience pro
roce
cess
ssed
ed
probity. of co
comp
mpet
eten
ence
ce,, directors
directors of private
private corpo
corporaon
raon is a reality,
reality,
in light of the Republic Act No. 8792.The
Securies and Exchange Commission issued
 

SEC
SEC Memor
emoranandu
dumm Circ
Circul
ular
ar No
No.. 15,
15, on has authority to act in his stead, and to
November 30, 30, 200
2001, providing the perform the dues of the oce.
guidelines to be complied with related to
such
such confere
conference
nces.
s. Thus,
Thus, the cou
court
rt agrees
agrees Secreary
with the RTC that persons in the Philippines A secretary must be a resident cizen of the
may have a teleconference with a group of  Philippines. It is generally its duty to make
persons in South Korea relang to business and
and keep
keep corp
corpororat
ate
e re
reco
cord
rds;
s; to mamake
ke
transacons or corporate governance. proper entries of the votes, resoluon and
proc
procee
eedi
ding
ngss of the the shshar
areh
ehol
olde
ders
rs and
and
Direcors and ocers distnguished dire
direct
cto
ors in the the man
managem
agemen entt of the
the
The ocers of a corpor
corporao
aon,
n, unlike
unlike the corp
corpor
ora
aon
on,, and
and of allall ot
otheherr mae
maersrs
directors, are true agent of the corporaon. required to be entered in the records. The
Each ocer may bind the corporaon by his secr
secreta
etary
ry is the
the mini
minist
ster
eria
iall o
ocer
cer who
who
individual acts within the actual or apparent canno
can nott bind
bind the cor
corpor
porao
aonn unles
unlesss he is
scope of authority. On the other hand, a authorized to do so.
direc
directo
torr ha
hass no au
auth
thor
orit
ity
y to act
act fo
forr the
the
corporaon. Treasurer
The treasurer of the corporaon “may or
Auhoriy o corporae ocers may not be a director”. He is the proper
The
The corp
corpor
ora
aon
on tran
transa
sact
ct its
its busi
busine
ness
ss ocer and the only proper ocer in the
through its ocers or agents. An ocer’s absen
bsence
ce of ex expr
pres
esss pro
provisi
visio
on to the
the
power as an agent of the corporaon must contrary, to receive and keep the money of 
be sought from the statute, charter, and the the corporaon and to disburse them as he
by-laws or in a delegaon of authority to may be authorized.
su
such
ch ocer
ocers,
s, fr
from
om the
the ac
acts
ts of bo
boar
ard
d of 
dir
directo
ectors,
rs, formal
formallyly express
expressed
ed or imp
implie
lied
d Oher ocers
from a habit or custom of doing business. The
The by-law
-lawss of the
the co
corp
rpor
ora
aon
on may
may
provide for such other ocers and agent as
Chairman o he Board may be necessary and convenient
A chairman of the board of directors must consid
con sideri
ering
ng the nature
nature and needs of the
hims
himsel
elff dire
direct
ctor
or be a dire
direct
ctor
or of the
the business.
business. Their compensaon
compensaon is provided
provided
corporaon. His duty as presiding ocer is for by the by-laws and the board of 
not an execuve one. It has been suggested directors in a suitable manner.
th
that
at he well
well be give
given
n advi
adviso
sory
ry du
due
ess in
determining execuve salaries, bonus plans Quorum – signies the number of persons
and pensions, determining dividend policy, be
belo
long
ngin
ing
g to a co corp
rpor
ora
aon
on req
requi
uire
red
d to
selecn
selecng g audito
auditors,
rs, and dealin
dealingg queso
quesonsns transact business.
with labor and company policy.
Sec
coon 25 of the Corporaon Co Cod
de
Presiden re
requ
quiire
ress more
more peop
people
le than
than a simp
simple
le
Th
Thee pr
pres
esid
iden
entt must
must be a diredirecto
ctorr of the
the majo
ma jori
rity
ty to fo
form
rm a quor
quorum
um.. If no su
such
ch
corporaon. The powers of the president of  dening number is determined, a quorum is
a corporaon are vested in him by law or a simple majority.
the by-laws; otherwise, he has no power
over the corporate
corporate property and businessbusiness Direcors canno voe by proxy
than
tha n has any other
other dir
directo
ector.
r. Ho
Howev
wever,
er, he The direc
director
torss cann
cannot
ot vot
vote
e by proxy
proxy but
may
ma y be given
given acactu
tual
al auth
author
orit
ity
y to ma make
ke must
ust pererso
sona
nallly pres
presen
ent,
t, an
and
d act
act by
parcular co conntracts, or to ex exe
ecu
cutte themselves.
conv
conveyeyan
ances
ces,, bo
borr
rrow
ow mone
money, y, execu
executete
mort
mo rtga
gage
ges,
s, an
andd do ot othe
herr ac
acts
ts,, by the
the Sec.
ec. 26. Rep
Report
ort of ele
eleco
con
n of dir
direct
ectors
ors,,
ch
char
arte
ter,
r, ththee by-l
by-law
awss, res eso
oluo
luonsns of  truste
trustees
es and oce rs.  – Within thirty (30)
ocers.
directors or their informal acquiescence. days
days aer
aer the
the elec
eleco
on n of th
the
e oce
ocersrs,,
trustees and directors of the corporaon,
Vice- Presiden the secretary, or any other ocer of the
In the absence of the president, or if the corporaon
corpo raon shall submit to the Securies
Securies
oce
rule, of
rul ththe
the president
e vice
vi presibecomes
ce pres iden elvacant,
dent elec
ected as
ted anda an
andd Ex
Exch
chan
ange
ge Co
Comm
mmis
issi
sion
on,, the
the na
name
mes,
s,
naonalies and residenc ences of the
appointed by the shareholders or directors directors, trustees and ocers elected.
 

Should a dir
Should direct
ector,
or, truste
trustee
e or oc
ocer
er die,
die, for the purpose, and in either case, aer
resign or in any manner cease to hold oce, previous noce to stockholders or members
his heirs in case of his death, the secretary of the
the corp
corpor
ora
aon
on of the
the inte
inten
non
on to
or any other ocer of the corporaon, or propos
propose e suc
such
h remova
removall at the mee
meeng
ng.. A
the director, trustee or ocer himself, shall speci
special
al memee
eng
ng of the
the stoc
stockh
khol
olde
dersrs or
imme
immed diat
iately
ely re
repport
ort such fa fact
ct to the
the mem
embe
bersrs of thethe co
corp
rpor
ora
ao
on fo forr the
the
Securies and Exchange Commission. purpose of removal of directors or trustees,
or any
any of them
them,, must
must be call
called
ed by thethe
Sec. 27. Disqua
Disquali
lica
caon
on of dir
direct
ectors
ors,, secretary on order of the president or on
trustees
trust ocers.  – No person convicted
ees or ocers. the wrien
wrien demand
demand of the stockh
stockhold olders
ers
by nal judgement of an oense punishable represenng or holding at least a majority
by imprisonment for a period exceeding six of the outstanding capital stock, or, if it be a
(6
(6)) year
years,
s, or a viol
viola
aon
on of this
this Code
Code,, non-
non-st
stoc
ock
k corp
corpor
ora
aon
on,, on thethe wr wriien
en
commied within ve (5) years prior to the de
dema
mand
nd of a majo
majori
rity
ty of the
the memb
member erss
date of his elecon or appointment, shall entled to vote. Should the secretary failed
qualify as a director, trustee or ocer of  to refuse to call the special meeng upon
any corporaon. such demand, or fail or refuse to give the
noce, or if there is no secretary, the call
Sec.
Sec. 27 of the
the Corp
Corpor
ora
aon
on Code
Code is an for the meeng may be addressed directly
addional safeguard that only upright and to the stockholders or members of any by
hone
honest
st indi
indivi
vidu
dual
alss be entr
entrus
uste
ted
d with
with any stock ckh
holder or mem embber of the
management of the corporate aairs. corporaon signing the demand. Noce of 
the me and place of such meeng, as well
A director of a cooperave who is as the intenon to propose such removal,
subseq
sub sequen
uently
tly ele
elected
cted as mem
memberber of the
Sang
Sanggu
guni
nian
ang
g Pang
Panglulung
ngso
sod
d (City
(City Cou
Counci
ncil)
l) must be given by publicaon or by wrien
noc
noce e as pres
prescr
crib
ibed
ed in this
this Code
Code.. The
The
become
bec omess autom
automaca
acally
lly dis
disqua
quali
lied
ed from
from vacancy resulng from removal pursuant to
connuing as such director by virtue of the this secon may be lled by elecon at the
clear mandate of PD No. 269 providing that same meeng without further noce, or at
except for “barrio captains and councillors” any regular or at any special meeng called
elecv
elecvee ocial
ocialss are inelig
ineligibl
ible
e to become
become fo
forr the
the purp
purposose
e aer
aer gi
givi
ving
ng noc
noce
e as
ocers and/or directors of any cooperave. prescribed in this Code. Removal may be
with or witwithout cause: Pro rovi
vide
ded,
d, That
The SEC ruled that rms engage in wholly or removal without cause may not be used to
parally
paral ly naon
naonalize
alized
d acvies,
acvies, aliens
aliens are deprived minority stockholders or members
banned from being appointed to of the right of representaon to which they
managem
man agement
ent posio
posionn suc
such
h as presid
president
ent,, may be entled under Secon 24 of this
vice-president, treasurer, auditor, secretary, Code.
etc. of said companies. However, they can
be elected directors in preparaon to their Direcors or rusee may be removed even
allo
allowa
wabl
ble
e pa
par
rci
cipa
pao
on
n or shar
share
e in the
the wihou cause
capital of such acvies, in accordance with The legislave policy is that the
th
thee Com
Common
monweal
wealth
th Act No. No. 108
08,, as shareholders shall be the ulmate masters,
amended by PD 715, otherwise known as not the directors. The shareholders should
the An- Dummy Law. be clothed with the power of judging the
competency and tness of the directors and
Sec. 28. Remo
Sec. Removal
val of director
director or trustees.  – of choosing a board that will carry out of 
Any director or trustee of the corporaon their business policy.
may be removed from oce by a vote of 
the stockholders holding or represenng at Directors represenng minority may not be
least two- thirds (2/3) of the outstanding remo
remove
vedd with
withou
outt ca
caus
use.
e. Th
Thee po
powe
werr to
capital stock, or if the corporaon be a non- removed director or trustee even without
stock corporaon , by a vote of at least two- cause
cause given
given to shareh
sharehold
olders
ers or member
memberss
th
thir
irds
ds (2
(2/3
/3)) of the
the mem
membe bers
rs ent
entle
led
d to may
ma y not
not be used
used to depr
depriv
ived
ed mi
mino
nori
rity
ty
vote: Provided , That such removal shall take shareh
sharehold
olders
ers or member
memberss of the rig
right
ht of 
plac
place
e ei
eith
ther
corporaoneroratat athe
re
regu
gula
larr mee
specialmeen
ng
g of
meeng the
the
called re
repr
pres
esen
enta
tao
on
n to whwhic
ich
h they
they ma
may
y be
entled under Secon 24 of the Corporaon
Code. Cumulave vong of 
 

direc
ecttors in a stock corporaon is majority of the outstanding capital stock at
mandatory and cannot be dispensed with in a regular or special stockholders’ meeng.
the by
by-la
-laws.
ws. Being a statut
statutory
ory right,
right, the In no case shall the total yearly
stockholders cannot be deprived of the use co
com
mpens
ensaon of direct ectors, as such
of cumulave vong. directors, exceed ten percent (10%) of the
net
net inco
income
me befor
efore
e incom
ncomee tax
tax of the
the
May he resul o he duly held electon o  corporaon during the preceding year.
direcors be alered by mere agreemen o 
he direcors? Se
Sec.
c. 31. Liability of directors, trustees or 
The Securi
Securieses and Exchan
Exchange
ge Commis
Commissio
sionn ocers. – Directors or trustees who willfully
ru
rule
led
d that
that:: “An
“An agre
agreem
emen
entt by whi
which and knowingly vote for or assent to patently
direc
directo
torr is repos
reposed
ed in an
any
y bo
body
dy exce
except
pt unlawful acts of the corporaon or who are
majority of stockholders is in violaon of  guilty
guilty of gross
gross neg
neglig
ligenc
ence
e or bad faith
faith in
‘public policy’ and ‘enforceable’ ”. direcng the aairs of the corporaon or
acquire any personal or pecuniary interest
The Securi
Securieses and Exchan
Exchangege Commis
Commissio
sionn in conict with their duty as such directors,
has jurisdicon or authority to “hear and or trus
truste
tees
es sh
shal
alll be liab
liable
le join
jointl
tly
y and
and
decide cases” involving controversies in the severa
erally for all damages ges resu
esulng
el
elec
econ
on or ap appo
poin
intm
tmenents
ts of dire
directo
ctors
rs,, therefrom suered by the corporaon, its
trus
truste
tees
es,, oce
ocers
rs or mana
managegers
rs of su
such
ch stoc
stockkhol
holders
ders or membe embers
rs and
and oth other
corporaons, partnerships or associaons. persons.
Cont
Contro
rov
ver
ersy
sy co
con
nce
cern
rniing re
remo
mov
val of 
directors or trustees may also be heard by When a director, trustee or ocer aempts
the SEC. to acquire or acquires, in violaon of his

Sec. 29. Vacancies in the oce of director 

Sec. duty, any interest adverse to the
corporaon in respect of any maer which
trustee.  – Any vacancy occurring in the
or trustee. has been reposed in him in condence, as
board of directors or trustees other than by to which equity imposes a disability upon
removal by the stockholders or members or him to deal in his own behalf, he shall be
by expiraon of term, may be lled by the liable as a trustee for the corporaon and
vote of at least a majority of the remaining must account for the prots which
directors or trustees, if sll constung a othe
otherw
rwis
ise
e woul
ould have
ave accr
accru
ued to the
quorum;; otherwise, said vacancies must be
quorum corporaon.
lled by the stockholders in a regular or
special meeng called for that purpose. A Direcors are rusees
direc
directo
torr or tr
trus
uste
tee
e so el
elect
ected
ed to ll
ll the
the It is well-stated rule in corporate law that
vaca
vacanc
ncy
y sh
shal
alll be elec
electe
ted
d only
only fo
forr the
the directors of corporaons are trustees and
unexpired term of his predecessor in oce. are required to act in the utmost good faith.

Any directorship or trusteeship to be lled Liabiliy o corporae direcors and ocers

by reason of an increase in the number of  or illegal dismissal o employees
directors or trustees shall be lled only by In case
casess of ille
illega
gall dism
dismis
issa
sal,
l, corp
corpor
orat
ate
e
an elec
eleco
onn at a re regu
gula
larr or at a sp spec
ecia
iall dir
directo
ectorsrs and oc
ocersers are sol
solida
idaril
rily
y liable
liable
meeng of stockholders or members duly with the corporaon, where terminaons of 
call
called
ed fo
forr the
the purp
purposose,
e, or in thethe sasame
me employment are done with malice or in bad
mee
me enng auth
author
oriizi
zing
ng the
the incr
increa
easse of  faith. (Ace
(Acesi
site
te CoCorp
rp.. vs.
vs. NL
NLRC
RC,, G.R.
G.R. NoNo..
direc
directo
tors
rs or tr
trus
uste
tees
es if so st
stat
ated
ed in thethe 152308, January 26, 2005, 449 SCRA 360)
noce of the meeng.
Se
Sec. 32. Deali
c. 32. Dealings
ngs of directors
directors,, trustees
trustees or 
Sec. 30. Compensaon of directors.  – In the ocers
oce corporaon.  – A conrac
rs with the corporaon.
absenc
abs ence
e of any provisio
provision
n in the by-law
by-lawss o he corporaton wih one or more o is
xing
xing their
their compen
compensa
saon,
on, the dir
directo
ectors
rs direcors or rusees or ocers is voidable,
shall not receive any compensaon, as such a he opton o such corporaton, unless
directors, except for reasonable per diems: all he conditons are presen:
Provided, however, That any such

compensaon (other than

be granted to directors bypier
the diems)
vote ofmay
the 1. Tha
Tha he pr
pres
esen
ence
ce o such
such dire
direc
cor
or or
rusee in he board meetng in which
stockholders represenng at least a he conrac was approved was no
 

necessary o constue a quorum or with

with such
such ocer
ocerss or ag
agen
ents
ts.. (Yao Ka Sin
such meetng. Tr
Trad
adin
ing
g vs.
vs. Co
Cour
urtt of Ap
Appe
peal
als,
s, G.
G.R.
R. No.
No.
53820, June 15, 1992, cing Francisco
Francisco vs.
2. Tha he voe o such direcor or GSIS, 7 SCRA 577)
rus
ruse
ee
e wa
wass no
no nece
necess
ssar
ary
y or
or he
he
approval o he conrac. Corporae
Corpor ae pre
presid
siden
en pre
presum
sumeded o have
have
auhoriy
3. Tha
Tha he con
conrac
rac is air
air and
and reas
reasona
onable
ble As a strict rule, the corporate president has
under he circumsances. no inherent power to act for the
corporaon, slowly giving way to realizaon
4. Tha in he case o an ocer, he that such ocer has certain limited powers
co
con
nra
rac
c wiwih
h h
he
e oce
ocerr has
has been
been in the transacon of the usual and ordinary
previous
previously
ly auhorized
auhorized by he Boar
Board
d o  business of the corporaon. In the absence
Direcors. of agreem
agreementent or by law
law provis
provision
ion to the
contrary, the president is presumed to have
Where any o he frs wo conditons se the authority to act within the domain of 
orh in he preceding paragraph is absen, the
the gene
generarall of his
his or her
her usua
usuall due
dues.
s.
in he case o a conrac wih a direcor or (People’s
(Peop le’s Aircargo,
Aircargo, and Ware
Warehousi
housing
ng Co.,
rusee, such conrac may be ratfed by Inc. vs. Court of Appeals, G.R. No. 117847,
he voe o he sockholders representng Oct. 7, 1998)
a leas wo-hirds (2/3) o he ousanding
capial sock or o wo-hirds (2/3) o he Sec.
ec. 33. Contr
Contracts
acts between
between corpo
corporao
raons
ns
memb
me mber
erss in a meet
meetng
ng ca call
lled
ed or
or h
he
e with
with inte
interl
rloc
ocki
king
ng dire
direct
ctors.  – Exc
ors. Except
ept in
purpos
pur pose:
e: Pro
Provided, Tha ull disclosur
vided, disclosuree o  cases of fraud, and provided the contract is
he advers
adversee inere
ineres
s o he direc
direcors
ors or
rusees involved is made a such meetng: fair and reasonable under the
circumstances, a contract between two or
Provided, however, Tha he conrac is air more
mo re co corp
rpor
ora
aon
onss hahavi
ving
ng inter
interlo
lock
ckin
ingg
and reasonable under he circumsances.
circumsances. directors shall not be invalidated on that
ground alone; Provided, That if the interest
Di
Dire
rec
cor
or disq
disqua
uali
life
fed
d o voe
voe i he has
has of the interl erlocking director in one
personal ineres corp
corporora
aon
on or corpcorpor
ora
aon
onss is mere
merely ly
A dire
direct
ctor
or is disq
disqua
uali
lie
ed
d to vote
vote at a nominal, he shall be subject to th thee
meeng of the board if he has any personal provisions of the preceding secon insofar
interest in a maer before the board; in as the laer corporaon or corporaons are
such case, his vote cannot be counted in concerned.
making up a quorum. Stockh
Stockhold
olding
ingss exceedi
exceedingng twenty
twenty
percen
per centt (20
(20%)
%) of the outoutsta
standi
nding
ng capita
capitall
Disclosure o adverse ineres by direcor stock
sto ck shall
shall be con
consid
sidered
ered subst
substan
analal for
It has been held that in dealin
dealing
g with
with thei
theirr purposes of interlocking directors.
corpor
cor porao
aon
n the dir
directo
ectors
rs must
must mak
make e full
full
disc
disclo
losu
sure
re of all
all re
rele
leva
vant
nt fa
fact
ctss or the
the Inte
Interl
rloc
ocki
king
ng dire
directo
ctors
rs – Inter
Interlo
locki
cking
ng
tr
tran
ansa
sac
con
on is vo
void
idab
able
le.. Th
Thee fa
fail
ilur
ure
e of a directors are persons who serve as member
director to inform his fellow directors of his of the board of directors of two or more
ad
adve
vers
rse
e babarg
rgai
aini
ning
ng poposi
sio
on
n and
and ot othe
herr compen
com pengg corpor
corporao
aonsns or corpor
corporao
aons
ns
material circumstances should be seriously enga
engage
gedd in pr
prac
accal
cally
ly the
the same
same kind
kind of 
considered and inspected by the courts as business.
manner on the fairness and good faith of 
the transacon and whether it is just and Eec o Corporae conracs wih
reasonable as to the corporaon. inerlocking direcors
Interlocking directors of corporaons does
Exceptons
Except ons in Signin
Signing
g conra
conrac
c wi
wihou
hou not make a contract between or among the
auhoriy o Board o Direcors is void corporaons void and of no eect provided
If a privat
private
e cor
corpor
porao
aonn int
inten
enona
onally
lly or there in no fraud and reasonable under the
neglig
neg ligent
ently
ly clothe
clothed
d its ocers
ocers or age
agents
nts circumstances.
with apparent power to perform acts of it,

the
that corporaon willauthority
such apparent be estopped to as
is real, deny
to Sec. 34. Dislo
Disloyalty
yalty of a dire ctor.  – Where a
director.
director, by virtue of his oce, acquires for
innocent third persons dealing in good faith himself a business opportunity which
 

should belong to the corporaon, thereby majority

majori ty vot
votee of the board,
board, except
except wit
withh
obtaining prots to the prejudice of such respect to: (1) approval of any acon for
corporaon, he must account to the laer whic
wh ich
h shshar
areh
ehol
olde
ders
rs’’ appr
approv
oval
al is also
also
for all such prots by refunding the same, required; (2) the lling of vacancies in the
unless his act has been raed by a vote of  board; (3) the amendment or repeal of by-
the stockholders owning or represenng at laws or the adopon of new by-laws; (4) the
least
least two-th
two-third
irdss (2/3)
(2/3) of the out
outsta
standi
nding
ng amendment or repeal of any resoluon of 
capi
capita
tall st
stoc
ock.
k. This
This prov
provis
isio
ion
n sh
shal
alll be the board which by it express terms is not
applicable notwithstanding the fact that the so amen
amenabable
le or rerepe
peal
alab
able
le;; and
and (5)
(5) a
director risked his own funds in the venture. dist
distri
ribu
buo
on n of cash
cash divi
divide
dend
ndss to the
the
shareholders.
Dutes o direcors Sec. 36. Cor
Corpor
porate
ate powers
powers and 
Dire
Directo
ctors
rs owe
owe a three
three-f
-fol
old
d du
duty
ty to the
the ty.  – Every corporaon incorporated
capacity.
capaci
corporaon.
corpor aon. Firs
First,
t, they must be obedient; under this Co Codde has the power wer and
they owe a duty to keep within the powers capacity:
of the corporaon as well as within those of 
the board
board of director
directors.
s. Sec
Secon
ond,
d, they must 1. To sue
sue and be sued
sued in its
its corpo
corpora
rao
on
n
be dil
dilige
igent;
nt; they owe a dutyduty to exercise
exercise name.
reasona
reas onable
ble care
care and prupruden
dence.
ce. The third
third
duty owing by directors is that of individual 2. Of succ
success
ession
ion by its
its co
corpo
rporat
rate
e name
name ffor
or
loyalty. the period of me stated in the arcles
of incorp
incorpora
oraon
on and the cercerc
cate
ate of 
Co
Conc
nce
ep o “cor “corp por
ora
ae
e or bu busi
sine
ness
ss incorporaon.
opporuniy.”
The doctrine of “corporate opportunity” is
but
but ononee phphas
ase
e of the the card
cardin
inal
al rule
rule of  3. To adopt
adopt a
and
nd use a co
corpo
rporat
rate
e seal.
seal.
undi
undivi
vid
ded loyal
oyalty
ty on the the part
part of the the 4. To amen
amendd its
its ar
arcles
cles of inco
incorpo
rpora
raon
on iin
n
d
duci
uciar
arie
ies.
s. If ther
there e is a pr pres
esen
ented
ted to a accordance with the provisions of this
corp
corpor
orat
ate
e ocer
ocer or dire directo
ctorr a busi
busine
ness
ss code.
oppo
opportrtun
unit
ity
y whic
which h thethe corp
corporora
aon
on is 5. To adop
adoptt by-la
by-laws
ws,, not co
cont
ntra
rary
ry to law,
law,
nanci
na nciall
ally
y able
able to undundert
ertake
ake,, is fro
from
m its morals, or public policy, and to amend
na
natu
ture
re,, in the
the line
line of thethe corp
corpor
ora
aon
on’s
’s or repeal the same in accordance with
business and is of praccal advantage to it, this Code.
is on
onee in whic
whichh the
the corp
corpor
ora
aonon will
will be
brou
brough
ghtt into
into con
conicictt wi
with
th that
that of his his 6. In case
case o off stock
stock co
corpo
rpora
raons
ons,, to issu
issue
e or
corporaon, the law will not permit him to sell
sell sto
stocks
cks to subscr
subscribe
ibers
rs and to sellsell
seize the opportunity for himself. treasury stocks in accordance with the
provis
pro vision
ionss of this
this code;
code; and to admit
admit
Direcor is a fduciary. members to the corporaon if it be a
He who is in such duciary posion cannot non-stock corporaon.
serve himself rst and his cestuis
(beneciary) second. He cannot manipulate 7. To purcrch
hase,
ase, re
rece
ceiive,
ve, tak
ake
e or grgran
ant,
t,
the
the aaai
airs
rs of his
his corp
corpor
ora
aon
on to thei
theirr hold,
old, co
connvey,
vey, sell,
ell, leas
lease,
e, pled
pledge
ge,,
disa
disadv
dvan
anta
tage
ge an
and
d in disr
disreg
egar
ard
d of thethe mortgage and otherwise deal with such
standards of common decency. He cannot real and personal
personal property,
property, incl
includin
uding
g
by the int
interv
erven
enon
on of a cor
corpor
porate
ate enty
enty securies and bonds of other
violate the ancient principle against serving corporaons, as the transacon of the
two masters. lawful business of the corporaon may
be reasonably and necessarily require,
Sec.
ec. 35.
35. Exe
Execu
cuve
ve Com
Commi ee.  – The by-
miee. subject to the limitaons prescribed by
laws
laws of a corpo
orpora
rao
on
n may cr crea
eate
te an law and the Constuon.
execuve commiee, composed of not less
than three members of the board, to be 8. To enter
enter into
into with
with ot
othe
herr corp
corpor
ora
aon
onss
appoin
app ointed
ted by the boa
board.
rd. Said
Said commi
commiee
ee merger or consolidaon as provided in
may act, by majority vote of all its this code.
members, on such specic maers within
the competence of the board, as may be 9. To make reasonable donaons,
delegated to it in the by-laws or on a including those for the public
public welfare or
 

fo
forr hohosp
spit
ital
al,, char
charit
itab
able
le,, cult
cultur
ural
al,, or trustees and raed at a meeng by the
sci
scien
enc,
c, civic,
civic, or simila
similarr pur
purpos
poses:
es: stoc
stockh
khol
olde
ders
rs rerepr
pres
esen
enn
ngg at leas
leastt two-
two-
Provided, That no corporaon, domesc thirds (2/3) of the outstanding capital stock
or foreign, shall give donaons in aid of  or by at leasleastt two-
two-th
thir
irds
ds (2/3
(2/3)) of the
the
any polical party or candidate or for members in case of non-stock corporaons.
purposes of parsan polical acvity. Wrien noce of proposed acon and of 
the me and place of the meeng shall be
10. To establ
establish
ish pensi
pension,
on, rerem
rerement
ent,, and addressed to each stockholder or member
oth
ther
er plans
lans fo
forr the
the ben
ene
ett of its at his place of residence as shown on the
direc
irecto
tors
rs,, tr
tru
ust
stee
ees,
s, oce
ocers
rs and books of the corporaon and deposited to
employees. the
the addre
ddress
sse
ee in the
the post
post oce
oce wi witth
po
post
stag
age
e prprep
epai
aid,
d, or serv
served
ed pe
pers
rson
onal
ally
ly::
11. To exercis
exercisee such other
other powers
powers as may Pr
Prov
ovid
ided
ed,, That
That in case
case of exexte
tens
nsio
ion
n of 
be essenal or necessary to carry out its corporate
corpor ate term, any disse
dissenng
nng stock
stockholde
holderr
purpos
purposee or purpos
purposes
es as stated
stated in its may exercise his appraisal right under the
arcles of incorporaon. condions provided in this Code.

Powers o a corporaton Exension o corporae erm limied o 50

A corporaon has such powers, and such years
powers only, as are conferred upon it by The corporate term may be extended for
law or by its agreement. Powers may be periods not exceeding 50 years in any single
conferred upon a corporaon: instance as provided by secon 11 of the
1. Expr
xpres
esssly. Co
Corp
rpor
ora
aon
on Co Code
de.. No exten
extensi
sion
on cacan
n be
2. Im
Impl
plie
iedl
dly,
y, becaus
because
e they
they are inci
inciden
denta
tall made
ma de earl
earlie
ierr than
than 5 year
yearss prio
priorr to the
the
to corporate existence.
3. Im
Impl
plie
iedl
dly,
y, becau
because
se they
they ar
are
e ne
neces
cessa
sary
ry original or subsequent expiry date(s) unless
there are jusable reasons for an earlier
or pr
prop
oper
er in or
orde
derr to exer
exerci
cise
se the
the extension as determined by the SEC.
powers expressly conferred.
Corporaton canno exend expired erm.
General express powers A corp
corpor
ora
aon
on ca
cann
nnot
ot ext
exten
end
d its
its life
life by
Se
Sec
co
on 36 of the Co Corrporaon Code amendment of its arcles of incorporaon
en
enum
umer
erat
ates
es the
the ge
gene
nera
rall an
and
d ex
expr
pres
esss eected
ee cted dur
during
ing the thr
three-
ee-yea
yearr statut
statutory
ory
powers of corporaons. period for liquidaon when its original term
of existence had already expired.
Oher corporae powers
The Corpor
Corporao
aonn Code
Code enumer
enumerate
atess other
other Sec. 38. Pow Power er to inc
increa
rease
se or dec decrea
reasese
express powers of corporaons as follows: ca
capi
pita
tall st
stoc
ock;
k; incu
incur,
r, cr
crea
eatete or incr
increa
easese
1. Power
Power to exte
extend
nd or shor
shorte
ten
n corpo
corpora
rate
te bo
bond
nded
ed inde
indebtbted
edne ss..  – No corporaon
ness corporaon
term (Sec. 37).
37). shall increase or decrease its capital stock
2. Power
Power to incre
increas
ase
e or decrea
decrease
se capit
capital
al or incu
incur,r, creat
create e or incr
increas
easee an
anyy bo
bondndeded
stock; incur, create or increase bonded indebtedness unless approved by a majority
indebtedness (Sec. 38).38). vo
vote
te of thethe boboarardd of direct
directororss an
and,
d, at a
3. Po
Powe
werr to deny
deny pre-e
pre-empmpvvee right
right (Sec. stockh
sto ckhold
olders
ers’’ meeng
meeng duly duly called
called for the
39)..
39) purpose, two-thirds (2/3) of the
4. Power
Power to sell
sell or
or d
disp
ispose
ose assets
assets (Sec. 40).
40). outsta
out standi
ndingng capita
capitall sto
stock
ck shall
shall fav
favoror the
5. Power
Power to acq
acqui
uire
re own
own ssha
hare
ress (Sec. 41).
41). increase or diminuon of the capital stock,
6. Po
Powe
werr to inve
invesst cocorp
rpor
orat
atee fund
unds in or the incurring, creang or increasing of 
another corporaon or business or for and bonded
bonded indebtedn
indebtedness.ess. Wri
Wrien
en noce
any other purpose (Sec. 42).42). of the proposed increase or diminuon of 
7. Power
Power toto decl
declar
aree divi
divide
dend
ndss (Sec. 43).
43). the
the capi
capitatall stoc
stock k or of the the incu
incurrrrin
ing,
g,
8. Power to enter into management cr
crea
ean
ng,g, or incr increa
easi
sing
ng of any any bond
bonded ed
contracts (Sec. 44).
44). indebtedness and of the me and place of 
the
the stoc
stockhkhololde
ders
rs’’ mee
meeng ng at whicwhich h the
the
Sec. 37. Powe
Powerr to exte
extend
nd or sh
shor
orte
ten
n pr
prop
opos
osed
ed incr
increas
ease e or dimi
diminu
nuo
on n of the the
co
corp
rpor
orat
ate term..  – A privat
e term private
e corpor
corporao
aonn capital stock or the incurring or increasing
may extend or shorten its terms as stated in of any
any bond
bonded
ed inde
indebt
bted
edne
ness
ss is to be
the arcles of incorporaon when improved co
cons
nsid
ider
ered,
ed, mu
mustst be adaddr
dres
esse
sed
d to each
each
by a majority vote of the board of directors stockholder at his place of residence as
 

shown on the books of the corporaon and incorporaon. From and aer approval by
de
depo
posi
site
ted
d to the
the ad
addr
dres
esse
see
e in the
the po
post
st the Securi
Securies
es and Exchan
Exchangege Commis
Commissiosion
n
oce
o ce with
with po
post
stag
age
e pr
prep
epai
aid,
d, or se
serv
rved
ed and the issuance by the Commission of its
personally. cerca
cer cate
te of li
ling,
ng, the capita
capitall sto
stock
ck shall
shall
stan
stand
d incr
increa
ease
sed
d or decr
decrea
ease
sed d and
and the
the
A cercate in duplicate
duplicate must be signed
signed by incu
incurr
rrin
ing,
g, crea
creang
ng or incr
increas
easining
g of any
any
a majority of the directors of the bonded
bon ded ind
indebt
ebtedn
edness
ess aut
author
horize
ized,
d, as the
corp
corpor
ora
aon
on and
and coun
counter
tersi
sign
gned
ed by thethe cerca
cer cate
te of ling may declar
declare:
e: Provided,
chairman and secretary of the stockholders’ That the Securies an d Exchange
meeng, seng forth: Commission shall not accept for ling any
cercate of increase of capital stock unless
1. That
That th
the
e req
requir
uiremen
ements
ts of
of thi
thiss se
secon
con accompanied
accomp anied by
by the sworn
sworn sta
statemen
tementt of 
have been complied with. the Tre
Treasu
asurer
rer of the corcorpor
porao
aonn law
lawful
fully
ly
holding oce at the me of the ling of the
2. The amount of the increase or cercate, showing that at least twenty-ve
diminuon of the capital stock. percen
percentt (25%)
(25%) of such
such increa
increased
sed cap
capita
itall
stock has been subscribed and that at least
3. If an inc
incre
reas
ase
e of the cap
capit
ital
al stock
stock,, the twenty
twe nty-v
-vee percen
percentt (25%)
(25%) of the amount
amount
amount of capital stock or number of  subscribed has been paid either in actual
shares of no-par stock thereof actually cash to the corporaon or that there has
subscr
sub scribe
ibed,
d, the namnames,
es, naona
naonali
lies
es been
been tr tra
ansfe
nsferr
rred
ed to the the co corp
rpor
ora
aon
on
and residences of the persons property the valuaon of which is equal to
subscribing, the amount of capital stock twenty-ve percent (25%) of the
or num
number
ber of shshares
ares of no-par
no-par stock subs
subscr
crip
ipo
on:n: Pr
Prov
ovid
ided
ed,, furt
furthe
her,
r, That
That no
subscr
sub scribe
ibedd by each,
each, and the amo amount
unt
paid by each on his subscripon in cash decr
decreaease
se of thethe capi
capita
tall stoc
stock
k sh
shal
alll be
approved by the Commission, if its eect
or property, or the amount of capital shal
shalll pre
reju
jud
dice the
the ririse
se of co corp
rpoorate
rate
stock
sto ck or num
number
ber of shares
shares of no-par
no-par creditors.
stock
sto ck all
alloe
oedd to each stockh
stockhold
older
er if  Non-stock corporaons may incur or create
such
such inincre
creas
ase
e is fo
forr the
the pu
purp
rpos
ose
e of  bonded
bon ded indindebte
ebtedne
dness,
ss, oorr increas
increase
e the
making ee
eecve stock dividend same, with the appro
approval
val by a majority vote
therefor authorized. of the board of trustees and of at least two-
thirds (2/3) of the members in a meeng
4. Any bonded indebtedness to be duly called for the purpose.
incurred, created, or increased.
Bo
Bond
ndss issu
issued
ed by a cocorp
rpor
ora
aon
on shal
shalll be
5. The actual indebtedness of the registered with the Securies and Exchange
corporaon on the day of the meeng. Commission, which shall have the authority
to determine the suciency of the terms
6. The
The amo
amoun
untt of tthe
he stoc
stock
k repres
represent
ented
ed a
att thereof.
the meeng.
Bonds – Bonds are in form and eect similar
7. The
The vote
vote autho
authori
rizi
zing
ng the incre
increas
ase
e or to promissory notes, secured by mortgage
diminuon of the capital stock, or the or trust deed upon specied property of the
incurring, creang or increasing of any debtor corporaon.
bonded indebtedness.
Propertes o a bond
An
Any y in
incr
creas
ease
e or dedecre
creas
ase
e in the
the cacapi
pita
tall Ev
Ever
ery
y bo
bond
nd issu
issue
e us
usua
uall
lly
y invo
involv
lve
e thre
threee
stock or the incurring, creang or increasing pares: (1) the debtor – corporaon; (2) the
of any bonded indebtedness shall require creditor – bondholder; and (3) the trustee.
pri
prior appro
pprova
vall of the
the Secu
Securi
rie
ess and
and
Exchange Commission. Bonds classifed
Bond
Bondss arare
e clas
classi
si
ed into
into:: co
cou
upon
pon or
One of the duplicat
duplicate
e cer
cerca
cate
te shall
shall be re
regi
gist
ster
ered
ed bon
bonds,
ds, mo
mort
rtga
gage
ge bonds
nds,
kept on le in the oce of the corporaon debentures, converble bonds,
and
and the
the othe
otherr sh
shal
alll be led
led wi
with
th the
the parcipang bonds, collateral trust bands,
Securies
Securies and Exchan
Exchangege Commis
Commissiosion
n and and guaranteed bonds.
aached to the
the original arcles of 
 

Coupon or regisered bonds

Coupon bonds are payable to bearer or to Pre-empv
Pre-em pvee right
right – It means
means litera
literally
lly to
the order of a person, and have aached to establish a prior right. A stockholder’s pre-
them coupon notes for each instalment of  empve
emp ve right is his right
right to subsc
subscrib
ribee to
interest as it falls due. new shares of stock in proporon to his
exis
exisng
ng stoc
stockh
khol
oldi
ding
ngs,
s, be
befo
fore
re the
the neneww
Morgage bond shares are issued to others.
A mo
mort
rtga
gage
ge bond
bond is on
onee se
secu
cure
red
d by a
mortgage on corporate property. Sec. 40. Sale or other disposion of assets.
 – Subject to the provisions of exisng laws
Debenure bonds on illegal combinaons and monopolies, a
Debe
Debent
ntur
ure
e bond
bondss are
are not
not sesecu
cure
red
d by corporaon may, by a majority vote of its
specic corporate property but rather solely board of directors
directors or trustees,
trustees, sell
sell,, lease,
on the issuer’s ability to pay the exchange,
exchan ge, mortga
mortgage,
ge, pledge or otherwise
otherwise
indebtedness. disp
dispos
ose
e of all
all or subs
substa
tan
nal
ally
ly all
all of itsits
property and assets, including its goodwill,
Convertble bonds upon
upo n such
such terms
terms and condion
condionss and for
Converble bonds are those which includes such consideraon, which may be money,
a provision which permits the holder of the stocks, bonds or other instruments for the
bond to convert the bond into a specied paymen
pay mentt of money
money or other
other proper
property ty or
number of shares of stock of the consideraon, as its board of directors or
corpor
corporao
aonn at his opon within
within a period
period tr
trus
uste
tees
es may
may deemdeem ex expe
pedi
dien
ent,
t, whenwhen
xed therein. authorized by the vote of the stockholders
represenng at least two-thirds (2/3) of the
Partcipatng bonds
Th
The
e owne
owners
rs or hohold
lder
erss of pa
par
rci
cipa
pan
ngg outstanding capital stock; or in case of non-
stock corporaon, by the vote of at least
bond
bondss enent
tle
le them
them to par arc
cip
ipat
atee in two-
two-ththir
irds
ds (2/3
(2/3)) of thethe me
membmberers,
s, in a
earni
earning
ngss of the
the corp
corpor
ora
aon
on abov
above e the
the stockh
sto ckhold
olders
ers’’ or member
members’ s’ meeng
meeng dulyduly
specied rates of interest xed. called for the purpose. Wrien noce of the
proposed acon and of the me and place
Collaeral rus bonds of the meeng shall be addressed to each
Collateral trust bonds are secured by a lien stoc
stockh
khol
olde
derr or memb
member er at his
his plac
placee of 
on sesecu
curi
rie
ess depo
deposi
site
ted
d wi
with
th a name
named d residence as shown on the books of the
trustee constung the collateral. corporaon and deposited to the addressee
in the post oce with the postage prepaid,
Guaraneed bonds or serv
served
ed pe pers
rson
onal
ally
ly:: Prov
Provid
ided
ed,, Th
That
at any
Gu
Guar
aran
ante
teed
ed bond
bondss are
are gu
guar
aran
ante
teed
ed or dissen
dissenng
ng stockh
stockhold
older
er may exerexercis
cise
e his
secured
secure d by another corporaon
corporaon other than app
apprais
raisal
al ri righ
ghtt unde
underr thethe co cond
ndiion
ons
the issuing corporaon. provided in this Code.

Sec. 39. Power to deny pre-empve right.  – A sale or other disposion shall be
All stockholders of a stock corporaon shall deem
deemeded to cove
coverr su
subs
bsta
tan
nal
ally
ly all
all the
the
enjoy pre-empve right to subscribe to all corporate
corpor ate property
property aand
nd assets
assets if thereb
therebyy
issues or disposion of shares of any class, the corporaon would be rendered
in proporon to their respecve incapa
incapable
ble of connu
connuing
ing the busine
business
ss or
shareholdin
shareh oldings,
gs, unles
unlesss such right
right is denied
denied accomplishing the purpose for which it was
by the ar arc
clles of inco
incorp
rpor
ora
aonon or an incorporated.
amendm
ame ndment
ent thereto:
thereto: Pr Prov
ovid
ided
ed,, That such
pre-empve right shall not extend to shares Aer such authorizaon or
to be issu
issued
ed in comp
compli lian
ance
ce wi with
th laws
laws approval by the stockholders or members,
requiring stock oerings or minimum stock the
the bo
boar
ard
d of direc
directo
tors
rs or trtrus
ustee
teess ma
may,
y,
ownership by the public; or to shares to be neverth
nev ertheles
eless,
s, in its dis
discre
creon,
on, abando
abandon n
issued in good faith with the approval of the su
such
ch sasale
le,, leas
lease,
e, ex
exch
chan
ange
ge,, mo
mort
rtga
gage
ge,,
stockholde
stock holders
rs represenng
represenng two-thirds
two-thirds (2/3) pledge or other disposion of property and
of ththe
e outs
outsta
tan
nding
ding capiapitatall st
stoc
ockk, in assets, subject to the rights of third pares
exchange for property needed for corporate un
unde
derr any co
cont
ntra
ract
ct rela
relang
ng there
thereto
to,,
pu
purp
rpos
oses
es or in papaym
ymen
entt of a pr
prev
evio
ious
usly
ly without further acon or approval by the
contracted debt. stockholders or members.
 

mem
embbers in the case of non-stock
Nothing in this secon is intended corporaons, at a stockholders ers’ or
to res
restri
trict
ct the power of any corpora
corporaon,on, memb
me mber
ers’
s’ mee
meeng
ng duly
duly call
called
ed fo
forr the
the
without the authorizaon by the purpos
purpose.
e. Wrien
Wrien noce
noce of the pro
propos
posed
ed
stockh
stockhold
olders
ers or mem
member
bers,
s, to sel
sell,
l, lease,
lease, investment and the me and place of the
exchange,
exchan ge, mortgage,
mortgage, pledge
pledge or otherwise
otherwise mee
een
ng
g shallall be add
addre
ress
ssed
ed to ea eacch
dispose of any of its property and assets if  stoc
stockh
khol
olde
derr or memb
member
er at his
his plac
placee of 
th
the
e same
same is ne neces
cessa
sary
ry in the
the ususua
uall and
and residence as shown on the books of the
reg
eguular cocouurse of busines esss of said corporaon and deposited to the addressee
corporaon or if the proceeds of the sale or in the post oce with postage prepaid, or
ot
othe
herr disp
dispos
osi
ion
on of such
such pr
prop
oper
erty
ty an
andd serv
served
ed pers
perso
onall
ally; Provided, That
hat any
assets be appropriated for the conduct of  dissenng stockholder shall have appraisal
its remaining business. ri
righ
ghtt as pr
prov
ovid
ided
ed in this Code:
Code: Provided,
however,
howev er, That were the investment by the
In non-st
non-stock
ock cor
corpor
porao
aons,
ns, where
where co
corp
rpor
ora
aon
on is reaso
reasona
nabl
bly
y ne
neces
cessa
sary
ry to
there are no members with vong rights, accomplish its primary purpose as stated in
th
thee vote of at leaeasst a majo
majori
rity
ty of the
the the arcles of incorporaon, the approval
trustees in oce will be sucie cient of the stockholders or members shall not be
authorizaon for the corporaon to enter necessary.
in
into
to an
any
y tr
tran
ansa
sac
con
on auauth
thor
oriz
ized
ed by this
this
secon. Sec. 43. Power to declare dividends.  – The
board of directors of a stock corporaon
Sec. 41. Powe acquire own shares.  – A
Powerr to acquire may declare dividends out of the
stock corporaon shall have the power to unrestricte
unres tricted
d retained
retained earnings
earnings which shall

purchase
legimate or acquire purpose
corporate its own or
shares for a
purposes, tbe
o payable
all sto in
tock cash,
ckh
h erin
olders s property,
on the orbin asistock
s of 
includ
including
ing but not limite
limited
d to the fo
foll
llow
owin
ing
g outstandi
outst anding
ng stock held by them: Provided,
case
cases:
s: Pro
Provid
vided,
ed, That the corporaon
corporaon has That any cash dividends due on delinquent
unrestricted retained earnings in its books stock shall rst be applied to the unpaid
to co
cove
verr th
the
e shar
shares
es to be pupurch
rchas
ased
ed or balance on the subscripon plus costs and
acquired: expens
exp enses,
es, whi
while
le sto
stock
ck divide
dividends
nds sha
shall
ll be
withheld
withh eld from the delinquen
delinquentt stock
stockholde
holderr
1. To el
elim
imin
inat
ate
e frac
fraco
ona
nall sh
shar
ares
es aris
arisin
ing
g unl his unpaid
unpaid subs
subscrip
cripon
on is fully paid:
paid:
out of stock dividends. Provid
Provided,
ed, fur
furthe
ther,
r, Tha
Thatt no stock
stock divid
dividend
end
shal
shalll be issu
issued
ed with
withououtt the
the apappr
prov
oval
al of 
2. To collect or compromise an stockh
sto ckhold
olders
ers repres
represenenng
ng not less
less than
than
indebtedness to the corporaon, arising two-thirds (2/3) of the outstanding capital
out of unpaid subscri cripon, in a stock at a regular or special meeng duly
de
deli
linq
nque
uency
ncy sale
sale,, an
andd to pupurch
rchas
asee called for the purposes.
delinquent shares sold during said sale.
Stoc
Stockk corp
corpor
ora
aon
on ar are
e pr proh
ohib
ibit
ited
ed fr from
om
3. To pay dissenng or withdrawing retaining
retain ing surplu
surpluss pro
prots
ts in excess
excess of one
stockh
stockhold
olders
ers entle
entledd to paymen
paymentt for hundre
hun dred d percent
percent (100%)
(100%) of their their paid-i
paid-inn
their shares under the provisions of this ca
capi
pita
tall stoc
stock,
k, excep
except:t: (1)
(1) when
when jus juseedd
Code. approved by the Board of Directors; or (2)
when the corporaon is prohibited under
Sec. 42. Power to invest corporate funds in an
anyy loloan
an ag
agree
reeme
mentnt with
with anyany n nananci
cial
al
another corporaon or business or for any  ins
instu
tuoonn or crcred
edit
itor
or,, wheth
whether er loloca
call or
purpose.  – Subject to the provisions
other purpose. foreign,
forei gn, from declaring
declaring dividends
dividends without
of th
this
is co
code
de,, a pr
priv
ivate
ate co
corp
rpor
ora
aon
on may
may its/his consent, and such consent has not
investt its fund
inves fundss in any other corporaon
corporaon or yet been secured; or (3) when it can be
business or for any purpose other than the clea
clearl
rly
y shoshown thathat suchsuch ret eten
eno
on n is
primary purpose for which it was organized ne
neces
cessasary
ry ununde
derr speci
specialal ci circ
rcum
umststan
ancece
when approved by a majority of the board obtaining in the corporaon, such as when
of directors or trustees and raed by the ther
theree is a needneed foforr spspec
ecia
iall re
reseserv
rve
e foforr

stoc
stockh
khol
olde
ders
rs repr
repres
esen
enn
ngg at leleas
astt two-
two- probable conngencies.
thirds (2/3) of the outstanding capital stock,
or by at least two-thirds (2/3) of the Concep o dividends
 

A dividend is a corporate prot set aside,

declared and ordered by the directors to be Scrip dividend
paid to the stockholders on demand or at a Scrip dividend is a wring or a cercate
xed me. issued to a stockholder entling him to the
pa
paym
ymen
entt of mone
money y or the
the like
like at so
some
me
Dividends distnguished rom profs future me inasmuch as the company, at
“Div
“Divid
iden
ends
ds”” mean
meanss the
the pro
protsts or that
that the me the scrip dividends are declared,
poron
por on of the prots
prots of the corpora
corporaon
on has prots not in cash.
whic
wh ichh it
itss bo
boar
ard
d of dire
directo
ctors
rs,, by pr
prop
oper
er
resoluon, sets apart for rotable Liquidatng dividend
distribuo
distribuonn among
among the stockhold
stockholders.
ers. It is Liquidang dividend involves the
disnguished from “prots” for the prots distribuon of assets by a corporaon to its
in th
the
e han
hands of a co corp
rpoorao
raon n do not stockholders upon dissoluon.
become dividends
dividends unl they have been set
apart, or at least declared, as dividends and Sec. 44. Power to enter into a
transferred to the separate property of the manage
man agemen
mentt con
contra ct.  – No corpo
tract. corporaon
raon
individual stockholders. shall conclude a management contract with
another
anoth er corporaon
corporaon unless such contract
Surplus prots – Surplus or net prots of a shall have been approved by the Board of 
corporaon is the dierence between the Directo
Directors
rs and by stockh
stockhold
olders
ers owning
owning at
tota
totall pr
pres
esen
entt valu
value
e of its its as
asse
sets
ts,, a
aer
er least the majority of the outstanding capital
deduc
ded ucngng los
losses
ses and lialiabil
bilie
ies,
s, and the sto
stock
ck,, or by at leaseast majorajoriity of the
the
amou
am ountnt of it
itss ca
capi
pita
tall st
stoc
ock.
k. (11 Fletc
Fletcher,
her, mem
embebers
rs in the
the case
case of a non- non-ssto
tock
ck
Sec. 5335) corporaon, of both the managing and the

Basis o dividend declaraton managed

manage d corpor
corporao
aon,
n, at a meemeengng duly
duly
called
called for the purpos
purpose:e: Pro
Provid
vided,
ed, That (a)
The board of directors of a stock wher
wh eree a stoc stockh
khol
olde
derr or stocstockhkhol
olde
ders
rs
corporaon may declare dividends on the represenng the same interest of both the
ba
basi
siss of ou
outs
tsta
tand
ndin
ingg st
stoc
ock
k he
held
ld by the
the managi
man aging
ng and the man manage
agedd corpor
corporaoaons
ns
stockh
stockhold
olders
ers.. The basbasis
is theref
therefore
ore is the own and control
control more than one-third
one-third (1/3)
stockholde
stock holder’s
r’s total subscri
subscripon
pon and not on of the
the tota
totall ou
outs
tsta
tand
ndin
ing
g cacapi
pita
tall stoc
stockk
the amount paid by him on the entled to vote of the managing
subscripon. This is for the reason that his corporaon; or (b) where the majority of 
enre subscripon represents his holding in the members of the Board of Directors of 
the corporaon for which he pays interests the managing
managing corporaon
corporaon also constute
constute a
on any unpaid
unpaid poron.
poron. (SEC Opinion, Dec. majority of the members of the Board of 
17, 1973) Directors of the managed corporaon, then
the management contract must be
Classes o dividends appr
approvoved
ed by the the stoc
stockh
khol
olde
ders
rs of the the
Dividends which a corporaon may declare manage
man aged d corpor
corporao
aonn owning
owning of at least least
and distribute to its stockholders may be two-th
two -third
irdss (2/3)
(2/3) of the tot total
al outsta
outstandi
nding
ng
clas
classsied
ied into
into:: ca
cash
sh div
dividen
idend,
d, stotock
ck capital stock entled to vote, or by at least
dividend, property dividend, scrip dividend, two-thirds (2/3) of the members in case of a
and liquidang dividend. non-st
non -stock
ock corpor
corporao
aon.
n. No manage
managemen mentt
contract shall be entered into for a period
Cash dividend longer than ve years for any one term.
Cash dividend is one payable in money.
The
The prov
provisisio
ions
ns of the the next
next prec
preced
edin
ing
g
Sock dividend para
paragr
grap
aphh sh shal
alll appl
apply y to anyany cont
contraract
ct
Stock dividend is a dividend payable in stock wher
wh ereb
ebyy a corp corpor ora
aon
on unde
undert
rtak
akes
es to
instead of cash or property. manage or operate all or substanally all of 
the
the bubusi
sines
nesss of the the ot othe
herr cor
corpo
pora
rao
on,
n,
Propery dividend whether
wheth er such contracts
contracts are called serviservice
ce
The
The di
dire
rect
ctor
orss in thei
theirr disc
discre
reo
on
n may
may co
conntr
trac
acts
ts,, oper
eraan
ng agre
agreem
emen
ents
ts or
au
auth
thor
oriz
ize
e didist
stri
ribu
buo
ons
ns in bond
bondss or in ot
othe
herw
rwis
ise:
e: Prov
Provid ided
ed,, howe
howeve
ver,
r, Tha
Thatt suc
suchh
proper
property,
ty, such
such as war
wareho
ehouse
use receipt
receiptss for service contracts or operang agreements
whiskey or shares of stock of a subsidiary which relate to the exploraon,
corporaon. development, exploitaon or ulizaon of 
 

natural resources may be entered into for deprive either the corporaon or the other
such periods as may be provided by the part of money or property acquired under
pernent laws or regulaons.
the contract. On the other hand, the great

Concep o managemen conrac weight of authority is to consider executor

A man
manage
agemen
mentt contra
contract
ct is an agre
agreeme
ement
nt contracts as unenforceable.
un
unde
derr whic
which
h the
the bo
boar
ardd of dire
directo
ctors
rs of a
corp
corpor
ora
aon
on dele
delega
gate
tess the
the powe
powers
rs of  Ulra vires conracs acceped docrines
management to another person or 1. If the
the contra
contract
ct is ffull
ully
y execut
executed
ed on both
both
corporaon for a period of me provided sides, the contract is eecve and the
for in the agreement.
co
cour
urts
ts will
will no
nott inte
interf
rfer
ere
e to de
depr
priv
ive
e
Eecs o Managemen conracs either part of what has been acquired
Contracts by which the board of directors under it.
delega
delegates
tes the power
power of super
supervis
vision
ion and 2. If the
the con
contra
tract
ct is exec
executo
utorr on b
both
oth sid
sides,
es,
management to another person or as a rule
rule either
either party can mainta
maintain
in an
corp
corpor
ora
aon
on fo
forr a spspec
eci
ied
ed peri
period
od are
are acon for its non-performance.
in
inva
vali
lid
d if th
they
ey invo
involv
lve
e a surre
surrende
nderr by the
3. Wher
Where
e the cont
contra
ract
ct is exec
execut
utor
or on side
side
board of its power and duty of supervision
only, and has been fully performed on
and control.
the other, the courts dier as whether
Managemen prerogatves an acon will lie on the contract against
An owner of a business enterprise is given the party who has received benets of 
cons
consid
ider
erab
able
le ma
marg
rgin
in in mamana
nagi
ging
ng hishis performance under it. Majority of the

business
society asbecause
a whole itthat
is deemed important
he should succeed.to cour
courts
ts hold
hold that
that the
the part
party
y who
who has
received benets from the performance

Sec. 45. Ultra vires acts of corporaons.  – is stopped” to set up that the contract

No corp
corpor
ora
aon
on unde
underr this
this Code
Code sh
shal
alll us ultra vires to defeat an acon on the

possess or exercise any corporate powers co

cont
ntra
ract.
ct. Th
There
ere is,
is, ho
howe
weve
ver,
r, a ru
rule
le

except those conferred by this Code or by which

hich is wi
wid
dely
ely re
reco
cogn
gniize
zed
d by the
courts that ultra vires. “Should not be
its arcles of incorporaon and except such
as ar
are
e nece
necess
ssar
ary
y or incid
nciden
enta
tall to the allowed to prevail, when involved for or

exercise of the powers so conferred. agains

againstt the cor
corpor
porao
aon,
n, whe
where
re it will
will
defeat the ends of jusce or work a
legal wrong.
Intra vires – The acts of a corporaon within
its express or implied powers.
Ul
Ultr
tra
a vire
viress – Th
The
e ac
acts
ts of a co
corp
rpor
ora
aon
on Acts which are ulra vires are voidable bu
may
may be rat
ratfed
fed. In order that such ultra
outside its express or implied powers. vires may be raed it must be shown that

It denotes some act or transacon on the 1. Th

The
e act
act wa
wass co
consu
nsumm
mmated
ated or ex
execu
ecuted
ted..

part of a corporaon which, although not 2. No credit

creditors
ors are prejud
prejudice
iced
d or they
they

unlawf
unlawful
ul or contra
contrary
ry to publi
publicc pol
policy
icy of  have given their consent thereto.

executed by an individual, is yet beyond the 3. Th

The
e right
right of
of the
the publi
publicc or the
the stat
state
e are

legim
legimate
ate powers
powers of the corpor
corporao
aon
n as not involved.
4. All of the
the stock
stockhol
holder
derss con
consen
sentt ther
thereto
eto..
they are dened by the statute under which
it is formed, or which are applicable to it, or
A corporaon, like an individual, may raty
by its charter or incorporaon papers.
and hereby
hereby render
render bindin
binding
g upo
upon
n i he
originally auhorized acs o is ocers or
Admiedly, if the contract is executed on
both sides neither party can maintain an
oher
oher agens
agens. This
This is true
true beca
becaus
use
e the
the
quesoned investment is neither contrary
acon
acon to set aside
aside the tra
transa
nsaco
con
n or to
recover
recover what has been parted
parted with. The to law, morals, public order or public policy.
It is a corp
corpor
orat
ate
e tr
tran
ansa
sac
con
on or cont
contra
ract
ct
courts will not interfere in such a case to
which is within the corporate powers but
 

which is defecv
defecve
e from a purported
purported failure the appropriate government agency to the
to observe in its execuon the requirement eect that such by-laws or amendments are
of th
the
e law
law that
that the
the inve
invest
stme
ment
nt must
must be in accordance with law.
author
authorize
ized
d by the arma
armave
ve vote
vote of the
Necessiy o by-laws
stoc
stockh
khol
olde
ders
rs ho
hold
ldin
ing
g 2/3
2/3 of the
the vo
von
ng
g
The corporaon must adopt the code of by-
power.
laws for its internal government.

Sec. 46. by-laws Adopon.  – Every Corporaton has inheren power o adop
corporaon formed under this code, must, by-laws
within one month aer receipt of ocial One
On e of itsits legal
legal inci
incide
dent
ntss an
andd is usua
usuall
lly
y
noce of the issuance of its cercate of  expr
expres
essl
sly
y gr
gran
ante
ted
d by law law of the
the ch char
arter
ter
in
inco
corp
rpor
ora
aoon by the the Se Secu
curi
rie
ess and
and su
subj
bjec
ectt to susuch
ch limi
limita
tao
onsns as maymay be
Exchange Commission, adopt a new code of  contai
con tained
ned in the sta statut
tutee or the cha charte
rter,
r,
by-laws for its government not inconsistent su
subj
bjec
ectt to susuch
ch limi
limita
tao
onsns as maymay be
with this code. For the adopon of by-laws contained in the statute or charter, and the
by the corporaon the armave vote of  gene
generarall re
requ
quir
irem
emen
entsts of valivalidi
dity
ty.. If a
the stockh
stockhold
olders
ers repres
represen
enng
ng at least
least a corporaon fails to le its by-laws within
majority of the outstanding capital stock, or the period required by law its cercate of 
of at least a majority of the outstanding incorp
incorpora
oraon
on may be suspensuspended
ded or eveneven
capital stock, or of at least a majority of the revoked.
members, in the case of non-sck
corpor
corporao
aons,
ns, shall
shall be necess
necessary
ary.. The by- Secon 46 allows he adopton and fling o 
laws shall be signed by the stockholders or he by-laws beore incorporaton
incorporaton provided
members vong for them and shall be kept
in the principal oce of the corporaon, the same is approved by all the
incorp
corpor
orat
ator
orss and
and submi
bmied
ed to the the
subject to the inspecon of the Se
Secu
curi
rie
ess and
and ExExch
chan
ange
ge Co Comm
mmis
issi
sion
on
stoc
stockh
khol
olde
ders
rs or memb
members ers du
duri
ring
ng ooce
ce together with the arcles of incorporaon.
hours; and a copy thereof, duly cered to
by a majority of the directors or trustees By-laws canno provide or unreasonable
and countersigned by the secretary of the resricton
cor
corporaon, shall be led with the Restricon upon the trac in stock must
Securies and Exchange Commission which have their source in legislave enactment,
shall be aached to the original arcles of  as the corporaon itself cannot create such
incorporaon. im
impe
pedi
dime
ment
nts.
s. By-l
By-law
awss are
are cr
crea
eate
ted
d foforr
protecon and not for restricon.
Notwit
Notw iths
hsta
tand
ndin
ing
g the
the pr
prov
ovis
isio
ions
ns of the
the
prec
preced
edin
ing
g para
paragr
grap
aph,
h, by-l
by-law
awss may
may be Elemens o valid by-laws
adopted and led prior to incorporaon; in 1. Must
Must no
nott be incons
inconsist istent
ent with
with the
the
such case, such by-laws shall be approved general law and the Corporaon Code.
and signed
signed by all the incorp
incorpora
orator
torss and 2. Must
Must no
nott be inco
inconsi
nsiste
stent
nt wi
with
th p
publ
ublic
ic
submied to the Securies and Exchange policy.
Commission, together with the arcles of  3. Must
Must be g gener
eneralal iin
n appli
applicao
caon n and
and not
incorporaon. directed against parcular individuals.
4. Must
Must no
nott be incons
inconsist istent
ent with
with the
the
In all cases, by-laws shall be eecve only arcles of incorporaon.
upon
upo n the issuance
issuance by the Securi
Securies
es and 5. Must not impair obligaons and
Exchange Commission of a cercaon that contracts.
the by-laws are not inconsistent with the 6. Must
Must nnot
ot be in restra
restraintint of trad
trade.
e.
Code. 7. Must
Must no
nott restr
restrict
ict rel
religi
igious
ous fre
freedo
edom.m.

The Securi
Securies
es and Exc
Exchan
hange
ge Commis
Commissio
sion
n By-laws validiy
shall not accept for ling the by-laws or any As a rule, the by-laws of a corporaon are
amendment thereto of any bank, banking valid if they are reasonable and calculated
instuon,
inst uon, building
building and loan asso
associaon
ciaon,, to carr
carryy into
into eec
eectt the
the ob
obje
ject
ctss of the
the
trust
u
uli ty,company,
lity , educ
educa insurance
aon
onal
al ins company,
instu
tuon or public
on ot
othe
herr corporaon,, and are not contradic
corporaon contradictory
tory to
the general policy of the laws of the land.
specia
spe ciall corpor
corporao
aons
ns govern
governed
ed by specia
speciall
laws, unless accompanied by a cercate of 
 

Binding eec o by-laws transacon of its corporate business

By-laws when valid, substanally the same and aairs.
force and eect as laws of the corporaon
as have the provisions of its charter in so far The enu
enumera
meraon
onss of conten
contents
ts of by-la
by-laws
ws
as the corporaon, the persons within it is are
are no
nott excl
exclus
usiv
ive
e and
and ne
neit
ithe
herr do
does
es the
the
concerned. They are in eect wrien into provision require all the maers menoned
the charter and in this sense; they become to appear in the by-laws.
part of the fundamental law of the
corporaon.
corpor aon. And the corporaon,
corporaon, and its The By-laws must not violate the
direc
directo
tors
rs an
and
d ocer
ocerss ar
are
e bo
boun
undd by and
and Constuon
Cons tuon,, the Corporaon
Corporaon Code, other
must co
mus comp
mply
ly wiwith
th them
them.. Stra
Strang
nger
ers,
s, special laws and the arcles of  
however, are not bound to know by-laws incorporaon.
whiich ar
wh are
e mer erel
ely
y pro
rovi
visi
sion
onss fo
forr the
government of a corporaon and noce of  A corporaon which has ailed o fle is by-
them will not be presumed. laws wihin he prescribed period does not
ipso facto lost its powers as such.
Se
Secc 47.
47. Con
Conten
tents
ts of by-law s.  – Subject to
by-laws.
th
the
e pr
prov
ovis
isio
ions
ns of the
the Co
Cons
nst
tu
uon
on,, this
this Sec. 48. Am
Sec. Amen
endm
dmen
entsts to by
by-l
-law
aws.s.  – The
Code, other special laws, and the arcles of  board of directors or trustees, by a majority
incorp
incorpora
oraon
on,, a privat
private
e corpor
corporao
aon
n may vote thereof, and the owners of at least a
provide in its by-laws for: majority of the outstanding capital stock, or
at least a majority of the members of a non-
1. Th
The
e me, pla
place
ce and
and manne
mannerr of calli
calling
ng stock
sto ck corpor
corporao
aon,
n, at a reg
regula
ularr or specia
speciall
an
and
d cond
conduc
ucn
ngg re
regu
gula
larr or spec
speciaiall meeng duly called for the purpose, may

meengs of the directors or trustees. amend or repeal any by-laws or adopt new
by-laws. The owners of 2/3 of the
2. The me
me and mann
mannerer of ca
callling
ing and ou
outs
tsta
tand
ndining
g capi
capita
tall stoc
stockk or 2/3
2/3 of thethe
conducng regular or special meengs member
mem berss in a non-s
non-sck ck corpor
corporao
aonn may
of the stockholders or members. delegate to the repeal any by-laws or adopt
ne
neww byby-l
-laws
aws:: pr
prov
ovidided
ed,, that
that an
anyy po
power
wer
3. The re
requ
quiire
redd quor
quoru
um in mee
meen
ngs
gs of  de
dele
legat
gated
ed to the the bo boar
ardd of dire
direct
ctor
orss or
st
stoc
ockh
khol
olde
dersrs or me
memb
mber
erss an
and
d the
the truste
tru stees
es sha
shall
ll be consid
considere
ered
d as revoke
revokedd
manner of vong therein. whene
enever stock
ckhholders owning or
represenng a majority of the outstanding
4. The
The fo
form
rm for prox
proxie
iess of stock
stockho
hold
lder
erss capital stock or a majority of the members
and members and the manner of vong in non-stock corporaons, shall so vote at a
them. regular or special meeng.

5. The qualicaons, dues and Whenever any amendment or new by-laws

compensaon of directors or trustees, are adopted, such amendment or new by-
ocer and employees. laws shall be aached to the original by-
laws in the oce of the corporaon, and a
6. The
The me ffor
or holdi
holding
ng the
the annua
annuall el
eleco
econ
n copy thereof, duly cered under oath by
of directors or trustees and the mode or the corporate secretary and a majority of 
manner of giving noce thereof. the directors or trustees, shall be led with
the Securi
Securies
es and Exchange
Exchange Commi
Commission
ssion,,
7. The
The ma
manne
nnerr of elecon
elecon or a
app
ppoin
ointme
tment
nt the
the same
same to be a aac
ache
hedd to the
the or
orig
igin
inal
al
an
and
d the
the te
term
rm of oce
oce of all
all oce
ocess arcle
ar cless of incorp
incorpora
oraon
on and origin
original
al by-
other than directors or trustees. laws.

8. The
The pe
pena
nal
les
es for
for viol
viola
aon
on of the
the by-
by- Amende
Amen derr or ne
neww by-l
by-law
awss shal
shalll on
only
ly be
laws. eecve upon the issuance by the SEC of a
cerca
caon that the same are not
9. In the
the case
case of sck
sck corp
corpor
ora
aon
ons,
s, th
the
e inconsistent with this code.
manner of issuing stock cercates.

The authority to make or adopt the original

10. Such other
other maer
maer as may be necessa
necessary
ry by-laws of a corporaon cannot be given to
for the proper or convenient the board of directors or trustees. The
 

stockholders of a stock corporaon or the Noce of an

Noce anyy meen
meeng g may
may be waiv
waived
ed,,
memb
me mbers
ers of the
the nonon-
n-s
sck
ck corp
corpor
ora
aon
on expressly or impliedly, by any stockholder
adopt or make the original by-laws. or member.

An amendmen o by-law renders Whenever, for any cause, there is no person

sockholder ineligible as direcor authorized to call a meeng, the SEC, upon
It is well-seled xxx that corporaons have peon ofof a stockholder
stockholder or
or member,
member, and
th
thee po
power
wer to make
make byby-l
-law
awss de
decl
clar
arin
ing
g a on the showing of good cause there for,
person employed in the service of a rival may
ma y issu
issue
e an ororde
derr to the
the pe
peon
onin
ing
g
company to be in inel
elig
igib
ible
le oror h he
e stockholder or member direcng him to call
co
corp
rpo
ora
ratton’
n’ss Boa
Board o Dir ire
eco rs.. An
cors a meen
meeng g of the
the corp
corpor
ora
aon
on by gi
givi
ving
ng
amendment which renders ineligible, or if  proper noce required by this Code or by
elected, subjects to removal, a director if he the by-laws. The peoning stockholder or
be also a director in a corporaon whose member shall preside thereat unl at least
busi
busine
nesss is in co comp
mpe
eo
on n wiwith
th or is a majority of the stockholders or members
antago
ant agonis
nisc
c to the other
other corpor
corporao
aon n is present have chosen one of their numbers
valid. This is based upon the principle that as presiding ocer.
where the director is so employed in the
service of a rival company, he cannot serve Corporae decisions; ratonale o meetngs
both, but must betray one or the other. As a rule, a majority of the shareholders or
Such an amendment advances the benet members have no power to vote or act for
of the corporaon and is good. the corporaon as to maers on which
shareholders have authority, except at a
Meetngs Necessiy meeng called and conducted according to

A
canmajority
bind theof corporaon
the stockholders oramembers
only at meeng law. Wrien or oral consent to a corporate
act by the shareholders or members
regularly held and conducted. To constute individually, even though a majority may
a legal meeng, so as to render the acts and agree, is not binding on the corporaon.
vote
vot e of the majori
majorityty bin
bindin
dingg the meeng
meeng
must
mu st be regul
regular
arly
ly ca
call
lled
ed by oneone ha
havi
ving
ng When here is no person auhorized o call
authority. In the absence of provision to the a meetng
cont
contra
rary
ry susuch
ch au auth
thor
orit
ity
y ex
exis
ists
ts in the
the A stockholder or member may peon the
directors or managing agents. SEC upon showing of good cause, to call a
mee
me enng and
and dir irec
ecn
ngg the the pe
peo oner
ner
Se
Sec.
c. 49. Kin
Kinds Meeng..  – Meengs of 
ds of Meeng (sto
(stock
ckho
hold
lder
er or memb
member er)) to gigive
ve no
noce
ce
dire
direct
ctor
ors,
s, tr
trus
uste
tees
es,, st
stoc
ockhkhol
olde
ders
rs,, or required by the Code and the by-laws. The
members may be regular or special. peon
pe oning
ing stockh
stockhold
older
er or member
member shall
shall
pr
pres
esid
ide
e at such
such mee
meengng un unl
l at leas
leastt a
Se
Sec.
c. 50. Regular and special meengs of  majori
maj ority
ty of the stockh
stockhold
olders
ers or member
memberss
stock holders or members.  – Regular present have chosen one of their numbers
meengss of stockhold
meeng stockholders
ers or members
members shall as presiding ocer.
be held annually on a date xed in the by-
laws, or if not so xed, on any date in April Sec.
ec. 51. Plac
Place
e an
andd m
mee of me
meeeng
ngss of 
of every year as determined by the board of  stockh
stockhold
olders
ers or mem
member s.  – Stockholders’
bers.
directors or trustees: Provided, that wrien or members’ meengs, whether regular or
noce of regular meengs shall be sent to speci
cia
al, shall be held in the city or
all stockh
stockhold
olders
ers or member
memberss of record
record at municipal
munic ipality
ity where the principal
principal oce of 
least 2 weeks prior to the meeng, unless a the corporaon is located, and if praccable
dierent period is required by the by-laws. in the principal oce of the corporaon:
Provided, that Metro Manila shall, for the
Sp
Spec
eciial mee
meeng
ngss of st stoc
ockh
kho
older
lderss or purposes of his secon, be considered a city
members shall be held at any me deemed or municipality
necess
nec essary
ary or as pro
provid
vided
ed in the by-
by-law
laws:
s:
Provid
Provided,
ed, howev
however,
er, that
that at least
least 1 week
week Noce of meengs shall be in wring, and
wri
wrien
en no
noce
ce shal
shalll be sent
sent to alalll st
stock
ock the me and place thereof stated therein.
ho
hold
lder
erss or memb
member ers,
s, unle
unless
ss ot
othe
herw
rwis
ise
e Al
Alll proc
procee
eedi
ding
ngss had
had and
and anyany busi
busine
ness
ss
provided in the by-laws. transacted at any meeng of the
stockholders or members, if within the
 

powers or author
powers authority
ity of the corpor
corporao
aon,
n,
sh
shal
alll be vali
valid
d even
even of the
the mee
meengng be Sec. 54. Who shall preside
Sec. preside at meengs.  –
improperly held or called, provided all the The president shall preside at all meeng of 
stockholders or members of the the directors or trustees as well as of the
corporaon are present or duly represented stockh
stockhold
olders
ers or member
members, s, unless
unless the by-
at the meeng. laws provide otherwise.

Place o meetngs The meengs of directors or trustees may

(Regular or special) meengs shall be held be held anywhere in the by-laws. Noce of 
in th
the
e city
city or muni
unicipa
cipallity where
here the regular or special meengs of directors or
principal oce of the corp. is located. trustees must be sent to them at least 1 day
prior to the scheduled meeng, unless the
If the meeng be improperly held or called by-laws provided otherwise.
(as when there was a defecve noce) the
same shall sll be valid provided that Sec. 55. Righ
Rightt to vote
vote of pled pledgo
gorrs,
1. ThThee act don
donee was wit
withi
hin
n the pow
powers
ers o
of 
f  mortgagors
mortg agors and admin
administra tors.  – In case
istrators.
the corporaon. of pled
pledge
ged
d or mort
mortga
gaged
ged shar
share
e in stoc
stockk
2. All
All the st
stoc
ockh
khol
older
derss or membe
membersrs were
were corpor
corporao
aons,
ns, the pledgo
pledgorr or mortga
mortgagor
gor
present or duly represented. shall have the right to aend and vote at
meengs of stockholders, unless the pledge
Sec 52. Qu
Quor
orum
um in mee
meeng s.  – Unless
ngs. or mortgagee is expressly given such right in
otherwise provided for in this Code or in the wring which is recorded on the
by
by-l
-law
aws,
s, a qu
quor
orum
um shal
shalll co
cons
nsis
istt of the
the appropriate corporate books by the pledgor
stockholders represenng a majority of the or mortgagor.
outstanding
the
the me
memb
mber capital
ers thstock
s in the or aofmajority
e case
case non-
non-st of 
stoc
ock
k Executors,
Executo rs, admini
administr
strato
ators,
rs, receiv
receivers
ers and
corporaons. other legal representaves duly appointed
by the court may aend and vote in behalf 
Quorum – Signies the number of persons of the sto
stockh
ckhold
olders
ers or member
memberss wit
withou
houtt
be
belo
long
ngin
ing
g to a corpo
corpora
rao
on
n re
requ
quir
ired
ed to need of any wrien proxy.
transact
transact business.
business. Within the meaning
meaning of 
secon 52 above, a quorum shall consist of  The pledgor or morgagor of shatem in the
the stockholders represenng a majority of  absence
absen ce of agree
agreement
ment to the
the contrary,
contrary, if 
the outstanding capital stock or a majority the shate remain in his name on the books
of the members in the case of non-stock of the corporaon has he righ o aend
corporaon
corporaons. and voe a meetngs o sockholders.

Sec. 53. Reg

Regula
ularr of spe
specia
ciall meeng
meengss of  A person who appears on he books o a
directors
direc trustees..  – The meengs shall
tors or trustees corporaton or oherwise as he absolue
be held monthly, unless the by-laws provide owner
own er o sock
sock cle
clearl
arly
y has he righ
righ o
otherwise. voe, although in face he may hold it as
trustee.
Special meengs of the board of directors
or trustees may be held at any me upon Executor and administrator has the right, to
the call of the presiden
presidentt or as provid
provided
ed in vote shares belonging to the estate of his
the by-laws decede
decedent,
nt, and it can make no dieren
dierencece
that the share stand on the books of the
Mee
een
ngs
gs of direcirecto
tors
rs or tr trus
usttee
eess of  corporaon in the name of the decedent.
corporaons may be held anywhere in or
outside of the Philippines, unless the by- Sec. 56. Vong in case of joint ownership
laws provide otherwise. Noce of regular or of stock.  – In case of share of stock owned
special meengs stang the date, me and  jointly by 2 or more persons, in order to
place of the meeng must be sent to every vote the same, the consent of all the co-
director or trustee at least 1 day prior to the owners shall be necessary, unless there is a
sc
sche
hedu
dule
led
d mee
meengng,, unle
unless
ss otothe
herw
rwis
ise
e wrien proxy, signed by all the co-owners.
pr
prov
ovid
ided
ed in the
the by
by-l
-law
aws.
s. A dire
directo
ctorr or Authorizing one or some of them or any
trustee
truste e may waive this requirement,
requirement, either other person to vote such share or shares:
expressly or impliedly. provided, that when the shares are owned
 

in an capacity by the holders therof, any of a vong trust specically required as a

one of the joint owner can vote said shares condion in a loan agreement, said vong
or appoint a proxy therfor. trust may be for a period exceeding 5 years
but sha
shall
ll autom
automaca
acally
lly expire
expire upo
upon
n full
full
If share are owned by 2 or more persons payment of the loan. A vong trust
 jointly, he righ o voe is in hem joinly, agreement must be in wring and
and , in order that the shares may be voted, notarized, and shall specify the terms and
they must agree upon the vote. This rule of  condions
condi ons thereof. A cered copy of such
 joint acon applies to shares held by several agreement shall be led with the
executors
executo rs or truste
trustees,
es, in the abs
absence
ence of  corpor
cor porao
aonn and wit
with
h the SEC:
SEC: otherwi
otherwise,
se,
pro
provis
vision
ion for a majo majori
rity
ty vote
vote if the
the said agreement is ineecve and
duciaries disagree. unenforceab
unenf orceable.
le. The cercate
cercate or of stock
covered by the vong trust agreement shall
Sec. 57. Von
Vong g right for treasury share.  –
treasury be cancelled and new one shall be issued in
Treasury shares shall have no vong right as the name of the trustee or trustees stang
long as such stock remains in the treasury. that
that they
they are
are issu
issued
ed purs
pursua
uant
nt to sa
said
id
agreement. In the books of the corporaon,
Treasury shares have no votng righs. it shall be noted that the transfer in the
name of the trustee or trustees is made
Sec. 58. Proxies.  – Stockholders and pursuant to said vong trust agreement.
members may vote in person or by proxy in
all meengs of stock holders or members. The Trustee or trustees shall be execute and
Proxies shall be in wring, signed by the deli
delive
verr to the
the tran
transf
sfer
eror
orss von
vongg tr
trus
ustt
stock holder or member and led before cercates, which shall be transferable in
the scheduled
secretary. Unlessmeeng withprovided
otherwise the corporate
in the the same manner and with the same eect
as cercates of stock.
proxy, it shall be valid only for the meeng
for which it is intended. No proxy shall be The vong trust agreement led with the
valid and eecve for a period longer than corporaon shall be subject to examinaon
ve years at any one me. by any stockholder of the corporaon in the
same manner as any other corporate book
Proxy – In corporate law, is a person who or record: Provided, That both the
votes for and this represents the transferor and the trustee or trustees may
stockholders or members. exer
exerci
cise
se the
the ririgh
ghtt of insp
inspec
eco
on
n of all
all
corporate books and records in accordance
Votng by proxy with the provisions of this code.
Or
Ord
din
inaaril
rily the
the righ
rightt to votevote shal
shalll be
exercised by the stockholders themselves or Any other stock
stock holder
holder may transfer
transfer his
by their duly authorized
authorized repres
representav
entaves.
es. shares to the same trustee or trustees upon
Proxy to be valid must be: the
the term
termss an
and
d co
cond
ndi
ion
onss stat
stated
ed in the
the
1. In wrin
wring,g, signe
signedd by tthe
he stock
stockhol
holder
der or
or vong
vo ng trust
trust agr
agreem
eement
ent,, and there
there upon
upon
member giving it. shall be bound by all the provisions of said
2. File
Filedd wit
with
h the
the corpo
corporarate
te agreement.
secretary before the scheduled
meeng. No vong trust agreement
agreement shall be entered
3. It is valid
valid only
only for the
the meen
meeng g for whic
whichh into for the purpose of circumvenng the
it is intended unless otherwise law agai
agains
nstt monop
onopol
oliies and illeg
llegal
al
spulated. combinaons in restraint of trade or used
4. Even
Even if the proxy
proxy is
is a co
conn
nnuin
uing
g one
one it for purposes of fraud.
shall not be longer than 5 year at any
one me. Unless expressly renewed, all rights granted
in a vong trust agreement shall
Sec 59. Von
Vong g trus ts..  – One or more
trusts auto
automa
mac
cal
ally
ly ex
expi
pire
re at the
the end
end of thethe
stockholders of a stock corporaon may be agre
agreed
ed per
period
iod, and
and the von ong tr tru
ust
creat
create
e a vo
von
ngg tr
trus
ustt fo
forr the
the pu
purp
rpos
ose
e of  cer
cerca
cate
tess as we
well
ll as the
the ce
cer
rc
cat
ates
es of 
conferring upon a trustee or trustees the sck in the name of the trustee or trustees
right to vote and other rights pertaining to shall thereby be deemed cancelled and new
the share for a period not exceeding 5 years
at any one me: Provided, that in the case
 

cercates of stock shall be reissued in the No person can become a stockholder in a

name of the transferors. corporaon by virtue of a subscripon for
stoc
stockk unle
unless
ss ther
theree is a vali valid
d cont
contra
ract
ct
The vong trustee or trustees may vote by between him and the corporaon. When a
prox
proxy
y un
unle
less
ss the
the agagre
reem
emen
entt prov
provid
ides
es cont
contra
ract
ct of su subs
bscr
crip
ipo
onn foforr stoc
stockk in a
otherswise. corp
corpor
oraaon
on is bind
bindin
ing
g it is a cont contra
ract
ct
between the subscriber or subscribers and
Concep o votng russ the
the cocorprpor
ora
aon
on,, an
and d its
its foform
rmaaon
on and
and
A vo
vong
ng trust is an agreement
agreement by which
which validity are governed by the same principles
stockholders surrender their vong power substanally as any other contract except in
an
andd plac
placee it irre
irrevo
voca
cabl
bly
y in the
the ha
hand
ndss of  so far as such principles may be rendered
ot
othe
hers
rs fo
forr a de
den
nit
ite
e pe
peri
riod
od of me.
me. In inap
inappl
plic
icab
able
le by par parcucula
larr char
charte
terr or
exchange for the cercates of stock the statutory provisions. No express promise to
trustee
truste e delivers
delivers to the stockholder
stockholder vong pay is necess
necessary
ary to make
make the sub subscr
scribe
iberr
trust cercates. liable.

Limiatons on votng rus agreemen No orm required o subscripton conracs

1. It shal
shalll be for
for a perio
periodd not exce
exceed
edin
ing
g5 Unless otherwise required by law. Thus, a
year
yearss but if re reqquire
uiredd under
nder a loan person who accepts a cercate of stock
agreement, the period may be for more fr
from
om a cocorp
rpo
orao
raon,
n, or who acts cts as a
th
than
an 5 ye year
arss bu
butt shal
shalll au
auto
toma
maca
calllly
y stockholder by parcipang in stockholders’
cease upon full payment of the loan. meeng,, maki
meeng making
ng payments,
payments, or otherwise,
otherwise,
2. It must
must be iinn wr
wrin
ingg and
and notar
notarize
ized.
d. thereby becomes a stockholder and liable
3. It shall not be entered into to as such, not only to creditors, but also to
cir
circum
re cumven
rest
stra venttof laws
raiint law
trs e,
trad
ade,on nmonopo
mon
or opolie
shalllies
shal l sit and
be the corporaon, although there may have
no express contract of subscripon.
entered into purposes of fraud.
4. It shall
shall be
be led
led wiwith
th tthe
he corpo
corpora
raon on and
and Sale o Shares o Sock Needs SEC Approval
with SEC otherwise it shall be The Securies
Securies Act requir
requires
es that
that bef
before
ore a
ineecve and unenforceable. corporaon,
corpor aon, except a publ public
ic ulity,
ulity, bank
bank,,
5. It shal
shalll be subj
subjecectt to exam
examinina
aon onss by corporaon associaon and a few others,
any stockholder in the same manner as sells, or oers for sale in the Philippines any
any other corporate book or record. of its
its secu
securi
rie
es,
s, like
like shar
shares
es of stock
stockss or
6. Pa
Par
res
es to thethe von
vong g tr
trus
ustt agree
greeme ment
nt bonds,
bon ds, it must
must regi
registe
sterr the sam
samee and/or
and/or
shall be bound by all the provisions of  secu
securere a perermi
mitt frfrom
om thethe SESEC
C fo
forr the
the
said agreement. purpose. The authorizaon is in the form of 
an exemp
exemponon from
from the requir
requiremen
ements ts of 
Sec. 60. Su Subsbscr
crip
ipo
onn cont
contra ct..  – Any
ract registraon and licensing, and is issued by
cont
contra
ract
ct fo
forr the
the ac acqu
quis
isi
ion
on of un unis
issu
sued
ed the way of resoluon of the SEC.
stoc
stock
k in an ex exiis
sng
ng co
corp
rpor
ora
aon
on or a
corp
corpor
ora
aon
on ssll
ll to be fo form
rmed
ed shal
shalll be Powe
Powerr o issu
issue
e shar
shares
es is lo
lodg
dged
ed in he
he
deemed a subscripon within the meaning bo
boar
ardd o di
dire
rec
cor
orss and no stockh
stockhold
olders
ers’’
of this Title, notwithstanding the fact that meeng is necessary to consider it because
the pares refer to it as a purchase or some addional issuance of shares of stock does
other contract. not need approval of the stockholders. The
“Board of Trustees shall, in of stock of the
How can a person become a shareholder in corporaon and shall prescribe the form of 
a sock corporaton? the cercate of stock of corporaon.”
1. By subscripon contract with an
exisng corporaon for the acquision Kinds o Subscripton:
of unissued shares. 1.1. Pre-inc
Pre-incorpora on  – is one agreed upon
orporaon
2. By purc
purcha
hase
se from
from the
the corp
corpor
ora
aon
on of  before the inco corrporaon of the
treasury shares. proposed corporaon.
3. By trans
transfer
fer from
from a p
prev
reviou
iouss stockh
stockhold
older
er 1.2. Post-
Post-incor
incorpora
poraon
on Subscripo
Subscripon
n –
of the out
outsta
standi
nding
ng sha
shares
res or exi
exisn
sng
g entered into aer the incorporaon or
subscripon to shares. formaon of the corporaon.

Binding eec o subscripton

 

2. Absolute
Absolute Subscri
Subscripon
pon – one not
not subject
subject Sec.
ec. 62. Con
Consid
sideri
ering stocks..  – Stocks
ng for stocks
to any
any cocond
ndi
io
on or happappen enin
ingg of  shall not be issued for a consideraon less
certain unknown events. than
than the
the par or issuissued
ed pric
price
e ther
thereo
eof.
f.
3. Condional
Condional Subscripo
Subscriponn – its ffulll
ulllment
ment Consideraon for the issuance of stock may
depends upon the happening of  be any or a combinaon of any two or more
uncert
uncertain
ain events
events of conng
conngenciencies.
es. It of the following:
does not make the subscriber a
stockholder or render him liable to pay 1. Actual
Actual cash
cash paid
paid to the
the corpo
corpora
raon.
on.
the amount
amount of the sub
subscr
scrip
ipon,
on, unl
unl
pe
perf
rfor
orma
manc
nce
e or fulfulll
llme
ment
nt of thethe 2. Proper
Property,
ty, tangi
tangible
ble or iinta
ntangi
ngible
ble,, actu
actuall
ally
y
condion. received by the corporaon and
4. Subscripo
Subscripon n upon speci
special
al terms
terms – where
where necessary or convenient for its use and
“the corporaon agreed, as an lawful purposes at a fair valuaon equal
independent element, to do a certain to the par or issued value of the stock
thing or things, but not as condion to issued.
the accrual of liability of the subscriber
or th
the
e acqu
acquisisi
ion
on of the
the righ
rights
ts of a 3. Labor
Labor perfo
performe
rmedd for or
or servic
services
es actua
actually
lly
stockholder. rendered to the corporaon.

Sec. 61. Pre-incorporaon subscripon. – A 4. Previo

Previousl
usly
y incurr
incurred
ed indeb
indebted
tednes
nesss of th
the
e
subs
subscr
criipo
pon for share
haress of st
sto
ock of a corporaon.
corp
corpor
ora
aon
on s
sll
ll to be foform
rmed
ed shal
shalll be
irrevocable for a period of at least six (6) 5. Amount
Amountss tra
transf
nsferr
erred
ed from
from unre
unrestr
strict
icted
ed
mont
mo nths
hs frfrom
om the
the da
date
te of subs
subscri
crip
ponon,, retained earnings to stated capital.
unless
to thalle ofrethe other
voca on, subscribers
or unlesconsent
s the 6. Outstanding shares exchanged for
incorp
incorpora
oraon
on of said
said cor
corpor
porao
aonn fails
fails to stocks in the event of reclassicaon or
materialize within said period or within a conversion.
longer period as may be spulated in the
contract of subscripon: Provided, That no Where
Wher e the
the cocons
nsid
ider
era
aon
on is otothe
herr than
than
pr
pre-
e-in
inco
corp
rpor
ora
aon
on subs
subscr
crip
ipo
onn may
may be actu
actual
al cash
cash,, or cons
consis
ists
ts of inta
intang
ngib
ible
le
revoked aer the submission of the arcles property such as patents of copyrights, the
of inco
incorp
rpor
ora
aon
on to thethe Secu
Securi
rie
ess an
and
d valuaon there ereof shall inially be
Exchange Commission. determ
determine
ined
d by the incorp
incorpora
orator
torss or the
board of directors, subject to approval by
SEC. 61 Pre
SEC. Pre-in
-incor
corpor
porao
aon n sub
subscr
scrip
ipon
on is the Securies and Exchange Commission.
mandatory (Sec. 13 & 14) at least 25% of 
the
the auauth
thor
oriz
ized
ed capi
capita
tall st
stoc
ockk has
has been
been Sh
Shar
ares
es of stoc
stock
k sh
shal
alll not
not be issu
issued
ed in
subscr
sub scribe
ibedd and at least
least 25% of the total exchang
exch angee for promis
promissor
soryy notes
notes or future
future
subscripon has been fully paid. service. The same consideraons provided
for in this secon, insofar as they may be
Su
Subs
bscr
crip
ipo
onn for sh shar
ares
es of st sto
ock of a applicable, may be used for the issuance of 
corp
corpor
ora
aon
on s
sll
ll to be foformrmed
ed shal
shalll be bonds by the corporaon. The issued price
irrevocable for a period of at least 6 months of no-par value shares may be xed in the
from the date of subscripon, unless: arcles of incorporaon or by the board of 
1. All subscribers consent to its directors
directors pursuant
pursuant to authority
authority conferred
revocaon. upon it by the arcles of incorporaon or
2. The
The inco
incorp
rpor
ora
aon
on fa
fail
ilss to mate
materirial
aliz
izee the by-laws, or in the absence thereof, by
within
wit hin 6 months
months or a longer
longer period
period as the stockh
stockhold
olders
ers repres
represen
enng
ng at lea
least
st a
agreed upon. majority of the outstanding capital stock at
a meeng duly called for the purpose.
Th
The
e irrev
irrevoca
ocabi
bili
lity
ty of pr
pre-i
e-inc
ncor
orpo
pora
rao
on n
prevents a subscriber from speculang on Consideraton or issuance o sock may be
the stocks of the proposed corporaon and an
any
y or an
any
y co
comb
mbin
inat
aton
on o anany
y w
wo
o or
protect
protectss the corpora
corporaon
on from
from nanci
nanciall
ally
y more o he :
irresponsible subscribers. 1. Cash
2. Proper
Property
ty – tangib
tangible
le o
orr int
intang
angibl
ible
e
3. Labor
Labor perfor
performed
med or servic
serviceses act
actual
ually
ly
 

rendered fact or other person legally authorized to

4. Previo
Previousl
usly
y incurr
incurred
ed in
indeb
debted
tednes
nesss by the
the make the transfer.
transfer. No transfer,
transfer, however,
corporaon sh
shal
alll be vali
valid,
d, exce
except
pt as betw
betwee
eenn the
the
5. Amount
Amountss transf
transferre
erredd from
from unres
unrestri
tricted
cted pares, unl the transfer is recorded in the
retained earnings to stated capital book
bookss of the
the corp
corpor
ora
aon
on shshow
owin
ing
g the
the
6. Outsta
Outstandi
nding
ng share
sharess exc
exchan
hanged
ged for
for st
stock
ock names of the pares to the transacon, the
in the
the even
eventt of re recl
clas
assi
sic
ca
aonon or da
date
te of the
the tra
trans
nsfe
fer,
r, the
the nu
numb
mber
er of the
the
conversion cercate or cercates and the number of 
shares transferred.
Sources o corporae capial
1. Funds
Funds furnis
furnished
hed by sshar
hareho
eholde
lders
rs No shshar
ares
es of stoc
stock
k agai
agains
nstt whic
which
h the
the
2. Borrowings corporaon holds any unpaid claim shall be
3. Pro
Prots
ts and
and sto
stock
ck div
divid
idend
endss transferable in the books of the
corporaon.
Dieren
Dieren modes
modes by whichwhich a corpor
corporato
aton n
may issue shares o sock SEC. 63 The capital stock of stock
1. By subscripon before and aer corpor
corporao
aon
n shall
shall be divid
divided
ed into
into sha
shares
res
in
inco
corp
rpor
ora
aon
on,, to or orig
igin
inal
al,, un
unis
issu
sued
ed Cercate of stock shall be issued for said
stocks. shares.
2. By sale of treasury stock aer
incorp
incorpora
oraon
on for money
money proper
property,
ty, or Naure o a certfcae o sock
service. 1. It is a wri
wrien
en inst
instru
rumen
mentt signe
signed
d by the
the
3. By subs
subscr
crip
ipo
on n to new stocks
stocks,, when all
all proper ocer of a corporaon stang
the original stocks have been issued and or ack ckno
nowl
wled
edgi
ging
ng that
that the
the per
ersson
the amount of the ca cap pital stock named therein ein is the owner of a
increased. designated number of shares of stock.
4. By mak
makin
ing
g a stoc
stock
k divi
divide
dend
nd.. 2. It indi
indicate
catess th
thee na
name
me of the hold
holder,
er, the
the
number
mber,, kind
kind and
and clas
classs of share
haress
Limiatons in he issuance o socks represented, and the date of issuance.
1. Sh
Shal
alll not be issu
issued
ed for
for a consi
considedera
rao
onn 3. It i merel
merelyy the evevid
iden
ence
ce of th
the
e hol
holde
der'
r'ss
less than the par or issued price thereof  interest in the corporaon, his
except treasury shares so long as the ownersh
own ership
ip of the sha share
re represe
represente
nted
d
price is reasonable. thereby.
2. Shall not be issued in exch cha ange of  4. It is not essenal to make one a
promissory notes or future services. stockholder in a corporaon.
3. When
When the consiconside
dera
rao
onn is oth
otherer tha
thann
actual
actual cash
cash or consis
consists
ts of int
intang
angibl
ible
e  Ev
Every
ery stoc
stockh
khol
olde
derr ha
hass a ri righ
ghtt to
proper
pro perty,
ty, the value
value thereo
thereoff sha
shall
ll be have
hav e pro
proper
per cercat
cercate e issued
issued to
inially determined by the him
him as so soon
on as he ha hass cocomp
mplilied
ed
incorporators or the board of directors, with
wit h the condi
condions
ons whi
whichch ent
entlele
subject to the approval of the SEC. him to one.
4. Th
Thee issued
issued pri
price
ce of no par
par valu
valuee share
sharess  A corporaon
corporaon cannot
cannot issue
issue share
sharess
must be xed as provided in Sec. 62. in excess of the maximum
 issued price may vary from me to me authorized in its AOI.
but value may not be less than P5.  An over issued stock is absolutely
vo
void
id even
even if po
poss
sses
esso
sorr is in good
good
Sec. 63. Cercate of stock and transfer of  faith.
shares.  – The capital stock of stock  Shares can be transferred
corporaons shall be divided into shares for represented by the cercate by its
which cercates signed by the president or endorsement by the owner or his
vice
vice pres
presid
iden
ent,
t, coun
counte
ters
rsig
igne
ned
d by the the agent and delivery to the
secretary
secreta ry or assistant
assistant secretary, and sealed transferee.
with
with the seal of the corpora
corporaon
on shall
shall be
issu
issued
ed in acco
accord
rdan
ance
ce with
with the
the by
by-l
-law
aws.
s. Resrictons on ranser o sock
Shar
Shares
es of stoc
stock
k so isissu
sued
ed arare
e pe
pers
rson
onal
al 1. A by-l
by-law
aw prohi
prohibi
bits
ts a tran
transf
sfer
er of stoc
stock
k
prop
proper
erty
ty and may
may be trans
transfe
ferr
rred
ed by without the consent or approval of all
delivery
delivery of the cerca
cercate
te or cer
cerca
cates
tes stoc
stockh
khol
olde
ders
rs or of the the pr
pres
esid
iden
entt or
endorsed by the owner or his aorney-in- board of directors is ILLEGAL.
 

2. A prorovi
visi
sion
on in the
the ce
cer
rc
cat
ate
e that
hat is dividends as against the
transferable only to some person rst corporaon but the transferor,
appr
approv
oved
ed by the
the boboar
ard
d of dire
direct
ctor
orss as the
the nonomi
mina
nall ow
ownenerr of the
the
un
unla
lawf
wful
ully
ly re
rest
stri
ricts
cts the
the righ
rightt of the
the shar
share,
e, is the
the trtrus
ustee
tee foforr the
the
stockholder. benet of the real owner.
3. The condion “non-transfereraable” 3. It is inv
invali
alid as agaiagains
nstt co
corp
rpor
orat
ate
e
appe
appeararin
ing
g on cecer
rc
cat
ates
es of ststoc
ockk is creditors, and the transferor is sll
VOID. liab
liablle to the the co corp
rpo
orao
raon.n. The
4. corporaons which will engage in any transfer of stock by a shareholder
business reserved
business reserved for Filipino
Filipino cizens
cizens does
does not not re reli
liev
eve
e him
him fr from
om thethe
are required to indicate in AOI and all liability to creditors of the
cercates. corporaon for unpaid subscripon
unl the transfer is consummated
Two requir
requireme
emens
ns o eec
eec rans
ranser
er o  by being registered in the books.
socks 4. It is inva
invali
lid
d as agagai
ains
nstt cr
cred
edit
itor
orss of 
Endorsement and delivery of stock the transferor without noce of the
cercate transfer.
-the usual pracce is for the stockholder to
sign
sign th
the
e fo
form
rm on the baback
ck of the st
stoc
ock
k Shares of stock against which the
cercate. corpor
corporao
aonn holds
holds any unpaid
unpaid claim
claim shall
shall
-if the holder of the cercate desires to not
not be trtran
anssfera
ferabl
ble
e in the
the book
bookss – no
assume the legal right of the stockholder he unpaid claims against the stock.
lls up the blank in the form inserng his  no unpai
unpaidd subscr
subscrip
ipons
ons due and
name as transferee. payable.
-the
-then
n he dedeli
liver
verss the
the cer
cerca
cate
te to the
the
secretary
secretary of the corcorpor
porao
aonn so that
that the Sec. 64. Issuance of stock cercates.  – No
transfer may be entered in the books. cer
cerca
cate
te of stoc
stock
k shal
shalll be issu
issued
ed to a
subs
subscr
crib
iber
er un
unl
l the
the full
full amou
amountnt of his
his
Oher modes o ranser subscr
sub scrip
ipon
on togeth
together
er with
with int
interes
erestt and
1. Assign
Assignmen
mentt thru
thru a se
separ
parate
ate in
instr
strume
ument.
nt. expenses (in case of delinquent shares), if 
2. Judici
Judicial
al or extr
extra-j
a-judi
udicia
ciall selem
selement
ent of
of any is due, has been paid.
the estate.
SEC. 64 It is prohibited to issue cercates
Validiy o sock ranser of stock to a subscriber who has not paid
1. As be
betw
twee
een n par
pares
es the full amount of his subscripon together
-merely the delivery of the cercate with interest and expenses.
indorsed
indo rsed by the owner or his aorn
aorney-
ey-
in-fact or other person legally Derivave
Deriva ve suit – one brou
brought
ght by one or
authorized to make the transfer. more stockholders or members in the name
2. As agai
agains
nstt thi
third
rd p
per
erso
sons
ns and in behalf of the corporaon to redress
-the transfer of shares must be entered wrongs commied against it or to protect
and
and not
noted upon pon the
the books
ooks of the
the or vindicate corporate rights.
corporaon
-only absolute transfer are recorded Indi
Indivi
vid
dual sui
suit – one bro rou
ugh
ghtt by a
stockh
stockhold
older
er in his own name
name agains
againstt the
Eecs o unregisered shares corp
corpor
ora
aon
on fo
forr dire
direct
ct viol
viola
aon
on of hishis
1. It is va
vali
lid
d and bind
bindin
ing
g as bet
betwe
ween
en contractual rights such as right to vote, to
the transferor and transferee. dividends etc.
2. It is invalid insofar as the
Repr
eprese
esentave suit – a group of 
corpora
corp oraon
on is concern
concerned
ed except
except
stockholders may bring a direct suit against
when noce is given to the
the corpora
corporaon.
on. This is when
when a wrong
wrong is
cor
corporaon for purposes of 
commied against a group of stockholders.
registraon.
a) the
the trans
transfe
fero
rorr has the
the right
right to
Cercate of Stock – a wrien instrument
vote and to be voted for, and
signed by the proper corporate ocers, and
has the right
right to parci
parcipat
pate
e in evidencing
evidencing the fact that the person therein
any meeng
named is the registered owner of the share
b) the tra
transf
nsfero
erorr has
has the right
right to
or shares therein described.
 

Naure and Functons o Certfcaes 2. By delivering the cercate

It represents the number of shares which accompanied by a separate assignment.
th
thee co
corp
rpor
ora
aonon ackn
acknow
owleledg
dges
es that
that the
the 3. Where
Where sstoc
tock
k is levied
levied on iin
n execu
execuon
on of 
holder of the cercate is entled to and is  judgment, by delivering the cercate
a solemn and connuing armaon by the co
coup
uple
led
d with
with an assi
assign
gnme
ment
nt by the
the
corporaon that the person to whom it was sheri who conducted the levy.
issu
issued
ed is ent
entleled
d to allall the
the righ
rights
ts and 4. Transf
Transfer
er by sale
sale of d
deli
elinqu
nquent
ent shares
shares..
subject to all the liabilies of a stockholder
in the company in respect of the number of  Liabilites o a sockholders
shares named, and that the company will 1. Liabil
Liability
ity to
to the corpora
corporaon
on for unpa
unpaidid
respect his rights and the rights of anyone subscripon
to whim he may transfer such shares, by 2. Liabil
Liability
ity to
to the corpo
corpora
raon
on fo
forr interes
interestt
refusing to admit any new transferee to the on unpaid subscripon
rights
rights of a sto
stockh
ckhold
older
er except
except upon
upon the 3. Liabil
Liability
ity to
to credito
creditors
rs of the
the corpo
corpora raon
on
surrender of the cercate. on unpaid subscripon
4. Li
Liab
abil
ilit
ity
y for
for wate
watered
red ssto
tock
ck
Issuance o Sock Certfcae. I requires: 5. Liabil
Liability
ity for
for divide
dividends
nds uunla
nlawfu
wfully
lly paid
paid
1. sign
sign by tthe
he presi
presiden
dentt or vice-p
vice-pres
reside
ident,
nt, 6. Liability for failure to create a
coun
counte
ters
rsig
igne
nedd by thethe se secr
cret
etar
aryy or corporaon
assistant secretary, and sealed with the
seal of the corporaon,
corporaon, and issu issued
ed in Sec.
Sec. 65. Liability of directors for watered 
accordance with the law. ckss.  – Any director or ocer of a
stock
2. The ce cer
r
ca
cate
te mus
must be deliv eliver
ered
ed or corporaon consenng to the issuance of 
mail
ma iled
ed to thethe susubs
bscr
crib
iber
er,, with
with the
the stocks for a consideraon less than its par
documenta
docume ntary
ry stamps
stamps requir
required
ed by law
law or issued value or for a consideraon in any
armed thereon. form other than cash, valued in excess of its
3. The
The pa
parr valu
valuee with
with resp
respec
ectt to shar
shares
es fair
fair valu
value,
e, or who,
who, havi
having
ng know
knowle
ledg
dge
e
with par value, or the full subscripons, ther
thereo
eof,
f, do
does
es no
nott fo
fort
rthw
hwitith
h expr
expres
esss his
his
as to no-par value shares must be fully objecon in wring and le the same with
paid. the corporate secretary, shall be solidarily,
4. Where it involves transfer of   liable
liable with
with the sto
stockh
ckhold
older
er concern
concerned
ed to
outstanding shares, the original the cor
corpor
porao
aonn and its credit
creditors
ors for the
cercate must be retained. dierence between the fair value received
at the me of issuance of the stock and the
Purpose o Regisraton o Transer par or issued value of the same.
1. To enab
enablele the
the corpo
corpora
raon
on to
to kn
know
ow at
at all
all
mes who its actual shareholders are, SEC. 65 watered stocks – stock issued for no
because mutual rights and obligaons valu
value
e at all
all or foforr a valvalue less
less than
than its
its
exist between the corporaon and its equivalent either in cash, property, shares,
stockholders. stoc
stock
k divi
divide
dend
ndss, or serv servic
ices
es the
the law
2. To aord to the corporaon an prohib
prohibits
its the issuan
issuance ce of watere
watered d sto
stocks
cks
op
oppo
portu
rtuni
nity
ty to obobjeject
ct or rerefu
fuse
se ititss (only refers to original issue)
consent to the transfer in case it has 1. To prot
protec
ectt pers
persononss who
who maymay acqu
acquir
ire
e
any claim against the stock sought to be stock and those who may become the
tr
tran
ansfsfer
erre
redd or fo forr an
anyy othe
otherr vali
valid
d creditors of the corporaon on the faith
reason. of its outst
outstand
andinging capita
capitall sto
stock
ck being
being
3. To avoid fraudulent or cous fully paid.
transfer. 2. To secur
securee equa
equali lity
ty amo
amongng subsc
subscri
ribe
bers
rs
4. It is inte
intend
nded
ed al
also
so for
for the
the bene
benet
t an
and d and preven
preventsts discri
discrimin
minao
aon n against
against
protec
pro tecon
on of perperson
sonss who may deal deal those who have paid in full the par or
wi
with
th th the
e co corp
rpor
ora
aonon and
and become issued value.
creditors, so that they know who are
the stockholders, and as such liable to Who are liable or waered socks?
its creditors. Both consenng director or ocer and the
stoc
stockh
khol
olde
derr conc
concererne
ned
d fo
forr the
the wh
whol
ole
e
Right to Transfer shares of stock  amount of dierence.
1. By del eliiver
eriing th
the
e ce
cerrca
catte, duly
indorsed on the back.
 

Trust Fund
Trust Fund Theory
Theory – invol
involves
ves an implied
implied 3. Deny
Denyining
g a stoc
stockh
khol
olde
derr deli
delinq
nque
uent
nt fo
forr
promise to the corporaon to pay the par unpaid
unp aid sub
subscri
scripo
ponn the rig
right
ht to vo
vote
te
value of the shares in money or its (under secon 71)
equi
equiva
vale
lent
nt,, supp
supplelemen
mennngg it by a le
lega
gall 4. Col
Collec
leco on fr fro
om cash
cash divi
ividend
dendss and
and
restr
restric
ico
onn ag agai
ains
nstt re
rele
leas
ase
e or cc
ou
ouss with
withho
hold
ldin
ing
g stoc
stock
k divi
divide
dend
ndss (und
(under
er
payment
payme nt of this obligaon
obligaon to the prejudice Secon 43)
of creditors.
Sanctons on sock delinquen
Sec. 66. Interest on unpaid subscripons.  – 1. Righ
Rights
ts denie
denied
d to stock
stockho
hold
lder
er sha
shall
ll not
not
Subs
Subscrcrib
iber
erss fo
forr st
stoc
ock
k sh
shal
alll pay
pay to thethe be voted
oted or be en ent
tlled to voteote or
cor
corporaon inter ereest on all unpaid re
repr
pres
esen
enta
tao
onn at any any stoc
stockhkhol
olde
ders
rs''
subscripons from the date of subscripon, meeng, nor entled the holder thereof 
if so required by, and at the rate of interest to any of the rights of a stockholder
xed in the by-laws. If no rate of interest is except the right to dividends.
x
xed
ed in ththee by
by-l
-law
aws,
s, such
such rate
rate shal
shalll be 2. Righ
Rightt give
given
n to tthe
he co
corp
rpor
ora
aon
on..
deemed to be the legal rate. 3. Th
Thee corpor
corporaaon
on has
has the ri
righ
ghtt to apply
apply
cash dividends due on delinquent stock
Sec. 67. Payment of balance of   to the unpaid balance on the
subscripo
subsc n.  – Subject to the provisions of 
ripon. subscripon plus cost and expenses.
the contract of subscripon, the board of 
directors of any stock corporaon may at While
Whil e stoc
stock
k divi
dividen
dends
ds,, corp
corpor
ora
aon
on to
any me declare due and payable to the withho
wit hhold
ld the same
same from
from the delinq
delinquen
uentt
corpor
corporao
aonn unpaid
unpaid subscr
subscrip
ipons
ons to the stockholder unl his unpaid subscripon is
capital stock and may collect the same or fully paid.
such percentage thereof, in either case with
accrued
accrued interest
interest,, if any,
any, as it may deem
deem When is h
When hee babala
lanc
ncee o subssubscr
crip
ipto
tonn
necessary. payable?
1. On the
the dat
datee speci
specie
edd in the
the contr
contract
act of 
of 
Payment of any unpaid subscripon or any subscripon.
pe
perc
rcen
entatage
ge there
thereofof,, to
toget
gethe
herr with
with the
the 2. In the
the absen
absencece of an
anyy speci
specie
edd date
date in
interest accrued, if any, shall be made on the contr
contract
act of su
subsc
bscrip
ripon
on,, on the
th
thee datatee spec
speciied
ed in the the co
cont
ntra
ract
ct of  da
date
te stat
stated
ed in the cal calll made
made by thethe
subscripon or on the date stated in the call board of directors.
made by the board. Failure to pay on such
date
dat e shall
shall render the enreenre balanc
balancee due
due When does he sock become delinquen?
and payable and shall make the stockholder A stock becomes delinquent upon failure of
liable for interest at the legal rate on such the holder to pay the unpaid subscripon or
balance, unless a dierent rate of interest is balance thereof within 30 days from the
provid
pro vided
ed in the by-law
by-laws,s, comput
computeded from
from date specied in the contract of  
such date unl full payment. If within thirty subscripon or on the date stated in the
(30) days from the said date no payment is call.
made, all stocks covered by said
su
subs
bscr
crip
ipo
onn shshal
alll ther
thereu
eupo
ponn beco
become
me Call – a declar
Call declarao
aonn ocia
ocially
lly made by a
delinquent and shall be subject to sale as corporaon usually expressed in the form
hereinaer
herein aer provided, unless the board of  of a resolu
resoluon
on of the board of dir
directo
ectors
rs
directors orders otherwise. re
requ
quir
irin
ing
g paym
paymen
entt of all
all or a cert
certai
ain
n
prescribed
prescr ibed poron of a subscriber
subscriber's
's stock
Remedies
Remedi es o enorc
enorcee pay
payme
men
n o sock
sock subscripon.
subscripton
1. Extr
Extra-
a-ju
judi
dici
cial
al sa
sale
le at publ
public
ic au
auc
con
on – Requisies or a valid call
Pe
Permrmit
itss the
the corp
corpor
ora
aon
on to putput up 1. It mus
mustt be made
made inin th
thee ma
mann
nner
er
unpaid stock for sale and dispose of it prescribed by law.
fo
forr the
the ac acco
coun
untt of the
the deli
delinq
nque
uent
nt 2. It mus
mustt be mad
made e by the
the boa
board
rd of
of
subscribers (governed by secons 67-69 directors.
of the Corporaon Code of the 3. It must
must ope
operat
rate
e unifo
uniforml
rmly
y upon
upon all
all
Philippines). shares.
2. Judici
Judicial
al aco
aconn by cour
courtt acon
acon (pro
(provid
vided
ed
under Secon 70)
 

Sec.
Sec. 68. Delin
Delinquenc
quencyy sale.  – The board of 
directors may, by resoluon, order the sale Procedure:
of delinq
delinquen
uentt sto
stock
ck and shall
shall speci
specical
cally
ly 1. The board of directors passes a
state the amount due on each subscripon resoluon
resol uon declaring
declaring payable
payable the wh whole
ole
plus all accrued interest, and the date, me or ce
cert
rtai
ainn perce
percent
ntag
agee of thethe un
unpapaid
id
and place of the sale which shall not be less subscripon stang the date xed for
than thirty (30) days nor more than sixty paym
paymenent.t. If the
the date
date of paym paymen
entt is
(60) days from the date the stocks become specied in the contract of subscripon,
delinquent. no call is necessary.
2. Th
Thee stockh
stockhold
olders
ers are
are given
given noce
noce ooff the
Noce
Noc e of sa
said
id sa
sale
le,, with
with a copy
copy of the
the re
reso
solluo
uon by the secr secret
etar
aryy of the
resoluon, shall be sent to every delinquent corporaon. If the stockholders fails to
stoc
stock
khol
holder
der eith
either
er pers
person
onal
ally
ly or by pay within 30 days from date specied,
registered mail. The same shall furthermore the stocks becomes delinquent.
be publ
publis
ishe
hed
d on
once
ce a week
week foforr two
two (2)
(2) 3. the
the boar
board d of direc
directo
tors
rs,, by resol
resolu
uonon,,
cons
consec
ecu
uve
ve we
week
ekss in a newsnewspapape
perr of  orders
ord ers the sale
sale of delinq
delinquenuentt sto
stocks
cks,,
general circulaon in the province or city stang the amount due and the date,
where the principal oce of the me, and place of sale with noce to
corporaon is located. the
the deli
delinq
nque
uent
nt stoc
stockh
khol
olde
ders
rs whichich
noce shall be published.
Unless the delinquent stockholder pays to 4. On the date of sale, wi willl be sold at
th
the
e cocorp
rpor
ora
aonon,, on or be
befo
fore
re the
the da
date
te public aucon to higher bidder for cash.
sp
speci
ecie
ed
d fo
forr the
the sa
sale
le of the
the dedeli
linq
nque
uent
nt
stock, the balance due on his subscripon, Highest bidder – the person oering at the
plus accrued interest, costs of   sale to pay the full amount of the balance
ad
adve
ver
rse
semen
mentt andand expe
expens
nses
es of sasale
le,, or on the subscripon together with accrued
unless
unl ess the boardboard of dir directo
ectors
rs otherwi
otherwise se inter
nteres
est,
t, co
cosst of adverdvers
sem
emen
entt and
and
orders, said delinquent stock stock shall be sold expenses of sale, for the smallest number of 
at public aucon to such bidder who shall shares.
oer to pay the full amount of the balance
on the subscripon together with accrued In the absence of bidders or highest bidder,
inte
intere
rest
st,, cost
costss of ad adve
ver
rse
seme
ment
nt an and
d the corporaon may purchase for itself the
expenses of sale, for the smallest number of  delinquent stock.
shares or fracon of a share. The stock so
pu
purch
rchas
ased
ed shal
shalll be tr tran
ansf
sfer
erred
red to such
such Sec.
Sec. 69. Whe
When n sal
sale
e may be que
queso ned..  –
soned
purchaser in the books of the corporaon No acon to recover delinquent stock sold
an
andd a cecerrc
cat
atee fo
forr such
such st
stoc
ock
k shal
shalll be can
can be su sust
stai
aine
nedd upon
upon the
the grgrou
ound
nd of 
issued in his favor. The remaining shares, if  irregularity or defect in the noce of sale, or
an
any,
y, sh
shalalll be cred
credit
ited
ed in fafavo
vorr of thethe in the sale itself of the delinquent stock,
delinquen
delin quentt stockholde
stockholderr who shall likewise unless the party seeking to maintain such
be entled to the issuance of a cercate of  acon
ac on rrst
st pa
pays
ys or tend
tender
erss to the
the pa
part
rtyy
stock covering such shares. holdin
hol ding
g the stock the sum sum for which the
same was sold, with interest from the date
Should there
Should there be no bidder
bidder at the public
public of sale at the legal rate; and no such acon
aucon who oers to pay the full amount of  shall be maintained unless it is commenced
the bal
balanc
ance
e on the subsc
subscrip
ripon
on togeth
together
er by the ling of a complaint within six (6)
with accrued interest, costs of   months from the date of sale.
adversement and expenses of sale, for the
smallest number of shares or fracon of a Grounds for the recovery of stock
share, the corporaon may, subject to the unlawfully sold for delinquency are:
provisions of this Code, bid for the same, 1. Irr
Irregul
egulari
arity
ty or
or defec
defectt in the no
noce
ce of
and the total amount
amount due shall be credited
credited sale
as paid in full in the books of the 2. Irr
Irregul
egulari
arity
ty or defe
defect
ct in the
the sale
sale itsel
itselff of
corporaon. Title to all the shares of stock the delinquent stock
covered by the subscripon shall be vested
in the corporaon as treasury shares and Sec.
ec. 70. Cou
Court
rt acon
acon to re
recov
cover
er unpaid 
unpaid 
may be disposed of by said corporaon in subscrip
subsc on.  – Nothing in this Code shall
ripon.
accordance with the provisions of this Code. prevent the corporaon from collecng by
 

acon in a court of proper jurisdicon the SE

SEC.
C. 72 Befo
Beforere unpa
unpaid
id shshar
ares
es beco
become
me
amoun
amo untt due on any unpaid
unpaid sub
subscr
scrip
ipon,
on, deli
delinq
nque
uent
nt,, the
the hold
holder
er ther
thereo
eoff is not
not
with accrued interest, costs and expenses. consid
con sidered
ered to have
have vio
violat
lated
ed any contra
contract
ct
with the corporaon, and, therefore, he has
As a general rule, a corporaon may not all the rights of a stockholder which rights
main
ma inta
tain
in a suit
suit fo
forr the
the enfo
enforc
rcem
emen
entt of  include the right to vote.
unpaid subscripon without rst making a
call. Sec.
ec. 73. Los
Lostt or destro
destroyed
yed cercates.  –
cercates.
The following procedure shall be followed
Judici
Judicial
al rem
remedy
edy is limite
limited
d to the amo
amount
unt for the issuance by a corporaon of new
due
due on an any
y unpa
unpaidid su
subs
bscr
crip
ipo
on
n with
with cercates of stock in lieu of those which
accrued interest, costs and expenses have been lost, stolen or destroyed:

Sec. 71. E Eec

ectt of deli
delinq
nque
uenc
ncy.y.  – No 1. Th
Thee regist
registere
ered
d own
owner
er of a cer
cercacate
te of 
de
deli
linq
nque
uent
nt st
stoc
ock k shal
shalll be voted
voted fo forr be stoc
stockk in a corpcorpor
ora
aon
on or hishis lega
legall
entled
entle d to vote or to representaon
representaon at any re
repr
pres
esen
enttave
ave shal
shalll l
le
e wiwitth thethe
stockholde
stock holder's
r's meeng,
meeng, nor shal
shalll the holder
holder corpor
cor porao
aon n an adavi
adavitt in tritripli
plicat
cate
e
thereof be entled to any of the rights of a seng forth, if possible, the
stockholder except the right to dividends in circumstan
circum stances
ces as to how the cercate
cercate
accordance with the provisions of this Code, wass lost
wa lost,, stol
stolen
en or dest
destro
roye
yed,
d, the
the
unl and unless he pays the amount due on number of shares represented by such
his subscripon with accrued interest, and cer
cer ca
cate,
te, the
the seri
serial
al nu
numb
mberer of thethe
the costs and expenses of adversement, if  cercate and the name of the
any. corporaon which issued the same. He
shall also submit such other informaon
SEC. 71 Stock delinquency does not deprive and
and evid
eviden
ence
ce whic
whichh he ma mayy deem
deem
the holder of all his rights as a stockholder necessary.
ex
exce
cept
pt the
the righ
rightt to be vote
votedd fo
forr or be
entled to representaon at any 2. Aer
Aer veri
verify
fyin
ingg the
the ada
adavivitt and
and otothe
herr
stockholders' meeng. He shall sll receive info
inform
rma
aon
on an andd evid
eviden
ence
ce with
with the
the
divide
dividends
nds.. But del
delinq
inquen
uentt stocks
stocks sha
shall
ll be books of the corporaon, said
subject to delinquency sale. corporaon shall publish a noce in a
news
newspa pape
perr of gene genera
rall circ
circul
ula
aon
on
Eecs o Socks declared delinquen: publ
ublished
shed in the the place
ace wher
wheree the
1. Cann
Cannot ot be vo
vote
ted
d for or be ent
entle led
d to corporaon has its principal oce, once
vote
vote in co corp
rpor
orat
atee mee
meengngss or be a week for three (3) consecuve weeks
represented by proxy at any at the expense of the registered owner
stockholders’ meeng. of the
the cer
cer
cat
catee of stoc
stockk whic
whichh ha
hass
2. The
The hohold
lder
er of deli
delinq
nque
uent
nt st
stoc
ockk is not
not be
been
en lolost
st,, stol
stolen
en or dedeststro
roye
yed.
d. Th
The
e
ent
entle
ledd to exer
exerci
cise
se the
the righ
rights
ts of a noc
noce e sh
shal
alll stat
statee the
the name
name of sa said
id
stockholder (i.e. to inspect books and corporaon, the name of the registered
records, etc.). owner
own er and the serialserial number
number of saidsaid
3. The holder of delinquen entt stockckss is cerca
cer cate,
te, and the number
number of shares
shares
en
ent
tlled to divi divide
dend
ndss. Se
Seccoon 43 repres
rep resent
ented
ed by such such cerca
cercate,te, and
pr
prov
ovid
ides
es howe
howeve ver,
r, that
that “ an anyy cash
cash that aer the expiraon of one (1) year
dividends due on delinquent stock shall from the date of the last publicaon, if 
rst be applied to the unpaid balance no contest has been presented to said
on the
the susubs
bscr
crip
ipo
onn plus
plus cost
costss anand
d corporaon regarding said cercate of 
expense, while stock dividends shall be stock, the right to make such contest
withheld from the delinquent shall
sha ll be bar
barred
red and said
said cor
corpor
porao
aonn
stockholder unl his unpaid shall cancel in its books the cercate
subscripon is fully paid”. of stock which has been lost, stolen or
destroyed and issue in lieu thereof new
Sec. 72. Righs o unpaid shares.  – Holders cercate of stock, unless the
of subscribed
subscribed shares
shares not fully paid which registered owner les a bond or other
are not delinquent shall have all the rights se
secu
curi
rity
ty in lieu
lieu ther
thereo
eoff as may
may be
of a stockholder. required, eecve for a period of one
(1) year, ffor
or such
such amount
amount and in such
 

form and with such surees as may be ever

everyy ac
actt do
done
ne or ororde
dere
red
d do
donene at the
the
sasfactory to the board of directors, in meeng. Upon the demand of any director,
whic
wh ich
h ca
case
se a ne
neww cer
cerc
cat
atee ma
mayy be trustee, stockholder or member, the me
issued even before the expiraon of the when any director, trustee, stockholder or
one (1) year
year period
period provid
provided
ed herein
herein:: member entered or le the meeng must
Provid
Pro vided,
ed, That
That if a contes
contestt has been be noted in the minutes; and on a similar
presented to said corporaon or if an demand, the yeas and nays must be taken
acon is pending in court regarding the on any moon or proposion, and a record
owners
own ership
hip of said
said cer
cerca
cate
te of sto
stock
ck thereof carefully made. The protest of any
which has been lost, stolen or director, trustee, stockholder or member on
de
dest
stro
roye
yed,
d, the
the is
issu
suan
ance
ce of the
the ne
new
w an
anyy aco
acon n or pr
prop
opos
osed
ed ac
aco
on
n must
must be
cercate of stock in lieu thereof shall recorded in full on his demand. The records
be suspended unl the nal decision by of all business transacons of the
the court
court regard
regarding
ing the owners
ownership
hip of  co
corp
rpor
ora
aoon and
and thethe miminu
nute
tess of anyany
said cercate of stock which has been meengs shall be open to inspecon by any
lost, stolen or destroyed. director, trustee, stockholder or member of 
the
the corp
corporora
aon
on at re reas
ason
onab
able
le hohour
urss on
Exce
Except
pt in case
case of frau
fraud,
d, bad
bad fa
fait
ith,
h, or business days and he may demand, wring,
negligence on the part of the corporaon for a copy of excerpts from said records or
and its ocers, no acon may be brought minutes, at his expense.
agains
aga instt any corpor
corporao
aonn whi
which
ch sh
shall
all hav
have
e
issued cercate of stock in lieu of those Any ocer or agent of the corporaon who
lost, stolen or destroyed pursuant to the shall refuse to allow any director, trustees,
procedure above-described. stockholder or member of the corporaon
to exam
examin ine
e an
andd copy
copy exce
excerp rpts
ts frfrom
om its its
SEC. 73 The registered owner of cercates records or minutes, in accordance with the
of stock
tock in a cocorp
rpoorao
raonn or his
his leg
egal
al provisions of this Code, shall be liable to
representave shall le with the su
such
ch dire
directctor
or,, tr
trus
uste
tee,
e, stoc
stockh
khololde
derr or
corpor
corporao
aonn an ad
adavi
avitt seng
seng for
forth
th ho
howw member for damages, and in addion, shall
cercate were lost, stolen or destroyed, be gu
guililty
ty of an o oen
ense
se whic
which h shshal
alll be
the number of shares represented by each punishable under Secon 144 of this Code:
cer
cerc
cat
ate,
e, the
the se
seri
rial
al numb
number
erss of thethe Pr
Prov
ovid
ided
ed,, That
That if susuch
ch re refu
fusa
sall is made
made
cer
cerca
cate
te an
and
d na
name
me of the the corp
corpor
ora
aon
on pursua
pursuantnt to a res resolu
oluon
on or order
order of the
which issued the same. board of directors or trustees, the liability
under this secon for such acon shall be
The adavi shall be verifed imposed upon the directors or trustees who
Co
Corp
rpor
ora
aon
on shal
shalll pu
publ
blis
ish
h a no
noc
ce
e in a vote
votedd fo forr su
such
ch rerefu
fusa
sal:
l: and
and Pr Prov
ovid
ideded,,
newspaper in general circulaon published further, That it shall be a defense to any
in the place where the corporaon has its acon under this secon that the person
principal oce for 3 consecuve weeks. demanding to examine and copy excerpts
from the corporaon's records and minutes
Aer 1 year
Aer year from
from the
the date
date of the
the last
last has
has im imprprop
oper
erly
ly used
used anyany info
informrma
aon on
publicaon, if no contest presented to the secured through any prior examinaon of 
corporaon, corporaon shall cancel in the the records or minutes
minutes of such corpora
corporaon on
books
boo ks the los
lostt cerca
cercates
tes and issue new or of any
any ot othe
herr co
corp
rpor
ora
aonon,, or was
was no nott
cercates. acn
acng g in go good
od fait
faith
h or fo forr a legi
legim
mat ate
e
purpose in making his demand.
Sec.
Sec. 74
74.. Books to be kept; stock transfer 
age nt.  – Every corporaon shall keep and
agent. Stock corporaons must also keep a book to
careful
care fully
ly pre
preserv
serve
e at its princi
principal
pal oce a be known as the "stock and transfer book",
recor
recordd of all
all bu
busi
sine
ness
ss tr
tran
ansa
sac
con
onss and
and in which must be kept a record of all stocks
minutes of all meengs of stockholders or in the names of the stockholders
members, or of the board of directors or alphabecal
alpha becally
ly arran
arranged;
ged; the inst
installme
allments
nts
trustees, in which shall be set forth in detail pa
paid
id an
and
d un
unpapaid
id on all
all stoc
stock
k fo
forr whic
which
h
the me and place of holding the meeng, subscripon has been made, and the date
how authorized, the noce given, whether of payment of any installment; a statement
the meeng was regular or special, if special of every alienaon, sale or transfer of stock
its object, those present and absent, and made, the date thereof, and by and to
 

whom made; and such other entries as the 1. Cercated changing the
by-l
by-law
awss may
may pres
prescr
crib
ibe.
e. The
The ststoc
ock
k an
and
d composion of the board of  
transfer book shall be kept in the principal directors and ocers
oce of the corporaon or in the oce of  2. Cerca
Cercates
tes cha
changi
nging
ng tthe
he o
owne
wnersh
rship
ip
its stock transfer agent and shall be open of the con
contro
troll
lling
ing int
interes
erestt in the
for inspecon by any director or corporaon
stockholder of the corporaon at
reasonable hours on business days. Management contracts duly approved
Management approved by
the stockholders.
No stock
stock transfe
transferr agent
agent or one engag
engageded
princi
principal
pally
ly in the busine
business
ss of regist
registeri
ering
ng Sec.
ec. 75.
75. Rig
Right
ht to na
nanci
ncial
al sta
statem
tement s.  –
ents.
tr
tran
ansf
sfer
erss of st stoc
ocks
ks in bebeha
half
lf of a st stoc
ockk Wi
With
thin
in ten
ten (10)
(10) days
days frfrom
om rerece
ceip
iptt of a
corporaon shall be allowed to operate in wr
wri
ien
en re requ
ques
estt of any
any stoc
stockhkhol
olde
derr or
the Philippines unless he secures a license member
mem ber,, the cor
corpor
porao
aonn sha
shall
ll furnis
furnish
h to
from the Securies and Exchange him its mostmost recent
recent nanci
nancialal stateme
statement,nt,
Commission and pays a fee as may be xed which shall include a balance sheet as of the
by the Co Commmission, which shall be end of the last taxable year and a prot or
renewable annually: Provided, That a stock loss
loss stat
statem
emen
entt fo
forr sa
said
id taxa
taxablble
e year
year,,
cor
corporaon is not precl clu
uded from showing in reasonable detail its assets and
performing or making transfer of its own liabilies and the result of its operaons.
st
stoc
ocks
ks,, in whic
whichh case
case all
all the
the rule
ruless an
andd
regul
reg ula
aononss imimpo
pose
sedd on st stoc
ockk trtran
ansf
sfer
er At the regular meeng of stockholders or
agents, except the payment of a license fee members, the board of directors or trustees
herein provided, shall be applicable. sh
shal
alll pres
presen
entt to su
such
ch stoc
stockh
khol
olde
ders
rs or
members a nancial report of the
Books and records o be kep by op
oper
era
aon
onss of the
the corp
corpor
ora
aon
on fo
forr the
the
Corporaton preceding year, which shall include nancial
1. Record
Record of aall
ll busine
businessss tran
transac
sacon
onss statements, duly signed and cered by an
2. Minut
Minutes
es of
of all meeng
meengss of stoc
stockho
kholde
lders
rs independent cered public accountant.
or members, or of board of directors or
trustees Ho
Howe
wever
ver,, if the
the pa
paid
id-u
-up
p ca
capi
pita
tall of the
the
3. Stoc
Stock
kaand
nd tr
tran
ansf
sfer
er boo
booksks corpor
corporao
aonn is less
less tha
than
n P50
P50,00
,000.0
0.00,
0, the
4. Opo
Oponanall re
reco
cord
rdss an
andd susupp
pple
leme
mentntar
ary
y nancial statements may be cered under
books as many be necessary or required oath
oath by the treasu
treasurer
rer or any responsi
responsible
ble
by special laws ocer of the corporaon.

SEC Rules requiring ling of documents. The Sockholder’s righs o fnancial saemens
SE
SEC
C re req quires
ires al alll cocorprpor
ora
aoons whosehose and repors
securies are listed in any stock exchange 1. Ba
Bala
lanc
ncee sheet
sheet as of
of the e end
nd ooff the las
lastt
or with permits to sell shares to the public taxable year.
or with twenty or more stockholders shall 2. A pr pro
ot and
and loss
oss stat
statem
emenentt fo
forr sai
said
hereaer submit to this Commission within taxable year.
thir
thirty
ty (30)
(30) day ayss a aer
er ap appr
prov
oval
al of thethe 3. Th
Thee board
board of dir
direct
ector
orss or truste
trusteeses shall
shall
corporate
corpor ate ac
acon,
on, cered
cered true true copies
copies of  present “a nancial report” to
the follow
following
ing docume
documents nts evi
eviden
dencin
cingg the stockholders or members.
same, to wit:
a. MiMinu
nutete of mee
meeng ngss   SEC REPO
REPORTOR
RTORIALIAL REQUIREM
REQU IREMENTS
ENTS
1. Calling for payment of unpaid Period Requiremens
subscripons Wihin 30 days rom a) Set up books of 
2. InIncr
creas
easin
ing
g or decre
decreas asin
ing
g the capita
capitall regisraton o   accounts duly
stock artcles ona   re
regi
gist
ster
ered
ed with
with the the
3. ChCha angin
ging th the
e nomenclature of  incorporaton BIR wherein
wherein receip
receipts ts
sh
shar
ares
es of st stoc
ockk or cer
cerca
cate
tess of  and
and disbu isburs
rsem
emenents
ts
indebtedness made are
4. Authorizing the borrowing of   immediately
material sums of money recorded.
b. Ot
Othe
herr docu
docume
ment
nts,
s, suc
such
h as:
as:
b) Set up and
 

register with the SEC stockholder

its stock and Address


transfer book. Naonality



No. of shares


c) File its by-laws subscribed

with the Amt. subscribed


Commission. by each
Wihin 15 days rom Submitt a statement
Submi statement Shall be made for
end o 3 monhs of sources and inspecon.
rom regisraton applicaon
appl icaon of funds
funds Wihin 5 days Submit list of  
cered by an beore
beore he dae
dae o  stockholders/memb
independent CPA. annual meetng ers entled to vote
a) Wihin 105 days i) If pai
paid-u
d-upp capi
capital
tal > as of a date prior to
aer he end o is P50,000, le a copy the meeng.
fscal year of BS and P&L
statement. The SEC must be noed of any:
1. Chan
Changege o
orr tran
transf
sfer
er of a
add
ddres
ress.
s.
ii)
ii) If paid-u
paid-up
p cap
capita
itall 2. Any
Any inve
invest
stme
mentnt of corp
corpor
orat
atee fund
fundss in
< P50,000, same as any of the secondary purposes of the
(i) and cered corp
corpor
ora
aon
on by l lin
ing
g a copy
copy of the the
under
nder oath
oath by the re
reso
solu
luo
onn appr
approv
oved
ed by 2/32/3 of thethe
Treaeassurer or any subscribed capital stock entled to vote
responsible ocer. authorizing the BoD to invest in any of 
b) Wihin 45 days Cered under oath the secondary purposes.
by the Treasurer or
any responsible Sec. 76. Plan of merger or consolidaon. –
ocer. Two or more corporaons may merge into a
Wihin 30 days rom Submit: sing
single
le corp
corpor
ora
aon
on whic
which
h sh
shal
alll be one
one
he dae o annual
annual 1) General constuent corporaons or may
meetng informaon sheet consolida
conso lidate
te into a new single corporaon
corporaon
for the scal year. which shall be consolidated corporaon.

2) Minutes of   The board of directors or trustees of each

meeng of   co
corp
rpor
ora
aon
on,, par
arty
ty to the mer erg
ger or
stockholders/memb cons
consol
olid
ida
aon
on,, shal
shalll ap
appr
prov
ove
e a plan
plan of 
ers elecng the BoD merger
mer ger or consol
consolida
idaon
on seng
seng forth
forth the
cered by the following:
Secretary and
subscribed and 1. The names of the corporaons
sworn
worn to befo
before
re a pr
prop
opos
osin
ing
g to merg
merge
e or co
cons
nsol
olid
idat
ate,
e,
notary public. hereinaer referred to as the
constuent corporaons.
3) Minutes of  
meeng of BoD 2. The terms of the merger or
elecng
elecn g the ocer
ocers,
s, consolidaon and the mode of carrying
cered by the the same into eect.
secretary and
subscribed and 3. A state
stateme
ment
nt of the
the chang
changes
es.. If an
any,
y, in
sworn to before a the
the ar
arc
cle
less of inco
incorp
rpor
ora
aon
on of thethe
notary public surviving corporaon in case of merger;
Wihin 5 days rom Submit list of   and, with respect to the consolidated
sockholders/memb stockholders/memb corporaon in case of consolidaon, all
ers meetng ers as of the date of the statements required to be set forth
annual or special in the
the arc
arcleless of inco
incorp
rpor
ora
aonon fo
forr
stockholders/memb corporaons organized under this Code.
ers’ meeng,
showing:
    Name  of   the 
 

4. Such
Such ot
othe
herr prov
provis
isio
ions
ns with
with re
resp
spec
ectt to combinaon by consolidaon or merger are
the proposed merger or consolidaon called the “constuent” corporaons.
as are deemed necessary or desirable.
Sec. 78. Arcles of merger or consolidaon.
consolidaon.
Sec. 77. St Stoc
ockh
khol
olde
ders
rs’’ or me membmber ers’ 
s’   – Aer the approval by the stockholders or
approval. – Upon approval by majority vote memb
me mber
erss as re requ
quir
ired
ed by thethe pr
prece
ecedi
ding
ng
of each of the board of directors or trustees sec
secon
on,, ar
arcl
cles
es of merge
mergerr or ararc
cle
less of 
of the constuent corporaons of the plan consolidaon shall be executed by each of 
of merger or consolidaon, the same shall the constuent corporaons, to be signed
be submied for approval by the by the
the prpres
esid
iden
entt or vice-
vice-pr
pres
esid
iden
entt anand
d
stockholders or members of each of such cer
cere
ed
d by the the se secr
cret
etar
ary
y or assi
assist
stan
antt
co
corp
rpor
ora
aoons at se
seppar
arat
atee corp
corpororat
ate
e secretary of each corporaon seng forth:
meengs
mee ngs duly
duly called
called for stostockh
ckhold
olders
ers or
members of the respecve corporaons, at 1. The
The plan
plan of the
the merg
merger
er or the
the pla
plan
n of 
least two (2) weeks prior to the date of  the consolidaon.
meeng, either personally or by registered
mail. Said noce shall state the purpose of  2. As to
to stock
stock corpor
corporao
aons,
ns, the num
number
ber of 
of 
the meeng and shall include a copy or a shares outstanding, or in case of non-
summary of the plan of merger or stoc
stock
k corp
corpor
ora
aon
ons,
s, the
the numb
number
er of 
cons
consol
olid
ida
aon
on as thethe ca
casese may
may be be.. Th
Thee members.
armave vote of stockholders
represenng at least two-thirds (2/3) of the 3. As to eac
eachh cor
corpo
pora
rao
on,
n, the
the numbe
numberr of 
outstanding capital stock of each sh
shar
ares
es or memb
member erss von
vong g fo
forr and
and
corporaons in case of stock corporaons against such plan, respecvely.
or at least two-thirds of the members in
case
case of non
non-st
-stock
ock corpor
corporao
aons,
ns, sha
shall
ll be Sec. 79. Secu
Securri
ies
es and
and Ex
Exch
chanange
ge
necessary for the approval of such plan. Any Commis
Com missio
sion’s
n’s app
approvroval
al and ecvi
ecvityty of 
dissenng stockholder in stock corporaons mergerr or consolida
merge consolidaon. on.  – The arcles of 
may ex exe
ercise his appraisal right in merg
me rger
er or of consoconsoli lida
dao
on n sign
signed
ed anand
d
accordance with this Code; Provided , That if  cered as hereinabove required, shall be
aer the approval by the stockholders of  submied
subm ied to the Securies and Excha Exchange
nge
such
suc h plan,
plan, the boboard
ard of dir
direct
ectors
ors should
should Comm
Commiissi
ssion in quadr uadruuplic
plicat
ate
e foforr its
decide to abandon the plan, the appraisal ap
appr
prov
oval
al:: Provided , Thathat in the cas casee of 
right shall be exnguished. merger or consolidaon of banks or banking
instuons, building and loan associaons,
Any amendment to the plan of merger or trust
trust com
compan
panies
ies,, insura
insurance
nce compan
companies
ies,,
consolidaon may be made, provided such public ulies, educaonal instuons and
amendment is approved by majority vote of  ot
othe
herr speci
special
al cocorprpor
ora
aon
onss gover
governe
ned d by
the
the reresp
spec
ecv
ve
e boar
boards
ds of dire
directctor
orss or special laws, the favorable recommendaon
trustees
truste es of all the constuent
constuent corporaons
corporaons of the appropriate government agency shall
an
andd ra
ra
ed
ed by the
the a
arm
rmaave
ve vote
vote of  rst be obtained. Where the Commission is
stoc
stockh
khol
olde
ders
rs repr
repres
esen
enn
ngg at le leas
astt two-
two- sased that the merger or consolidaon of 
thirds (2/3) of the members of each of the the corporaons conce cerrned is not
cons
const
tue
uent
nt corp
corpor
ora
aon
ons.
s. Such
Such plan plan,, inconsistent with the provisions of this Code
togeth
tog ether
er with
with any amend
amendmenment,t, shall
shall be and exisng laws, it shall issue a cercate
considered as the agreement of merger or of merger or consolidaon, as the case may
consolidaon. be, at which me the merger or
consolidaon shall be eecve.
Defniton
Consolidaon – the uning or If, upo
uponn inves
invesga
gaon,
on, the Secu
Securi
ries
es and
amal
am alga
gama
maoonn of tw
twoo or mo
more
re exis
exisn
ng
g Exchange Commission has reason to believe
corpor
cor porao
aons
ns to form
form a new corpor
corporao
aon.
n. that the proposed merger or consolidaon
The united concern resulng from the union is cont
contra
rary
ry to or inco
incons
nsis
iste
tent
nt with
with the
the
is called the consolidated corporaon. provisions of this Code or exisng laws, it
Merger – a union eected by the absorbing shall set a hearing to give the corporaons
of one or more
more exisn
exisngg cor
corpor
porao
aons
ns by concerned
concern ed the opport
opportuni
unity
ty to be hea
heard.
rd.
another which survives and connues the Wrien noce of the date, me and place
combined business. The pares to a of said hearing shall be given to each
 

constuen
const uentt corpor
corporao
aon
n at least
least two (2) corp
corpor
ora
aon
on,, as the
the case
case ma
mayy be.
be.
weeks before said hearing. The Commission Neither the rights of creditors nor any
shall thereaer proceed as provided in this lien upon the property of any of such
Code. cons
const
tue
uent
nt corp
corpor
ora
aon
onss shshal
alll be
impaired by such merger or
Sec. 80. Eects of merger or consolidaon. consolidaon.
 – The merger or consolidaon, as provided
in the preceding
preceding sec
secon
onss shall
shall have
have the Seps o achieve merger or consolidaton
following eects: 1. Th
Thee BoD
BoD of each corcorpor
porao
aonn mu
mustst draw
draw
up a plan of merger or consolidaon.
1. The co con
nstuent corporaons shall 2. A plan
plan must
must be ssubm
ubmie
ied
d to the S/M of 
become a single corporaon which, in each corporaon for approval. The vote
case of merger, shall be the surviving or two-thirds (members) or two-thirds
corporaon designated in the plan of  of the outs utstand
tandiing capi
capita
tall stoc
stock
k
merger; and, in case of consolidaon, (stockholders) would be required.
shalll be the consol
shal consolidate
idatedd corporaon
corporaon 3. Therere
e has to be a forma ormall agr
gree
eeme
mennt
designated in the plan of consolidaon. known as the arcles of M/C by the
oce
o cers
rs of each
each of the the cons
consttue
uent
nt
2. The separate existence of the corporaons.
const
constuen
uentt corpor
corporao
aons
ns shall
shall cease,
cease, 4. Th
Thee arcl
arcles
es of M/C
M/C must
must be subsubmi
mie
edd
exce
except
pt that
that of the
the su
surv
rviv
ivin
ing
g or the
the to the SEC for approval.
consolidated corporaon. 5. Th
Thee SEC shall
shall if
if it deems
deems nneces
ecessar
sary
y set a
hearing giving noce to all corporaons
3. The surviving or the consolidated concerned.
corporaon shall possess all the rights, 6. The
The SE
SEC
C issu
issues
es the
the cer
cerc
cat
ate
e of M/
M/C.
C.
privileges, immunies and powers and Th
Thee M/C becomes
becomes eecve
eecve upo
upon
n the
shall be subject to all the dues and issuance of the corresponding
liabil
liabilie
iess of a cor
corpor
porao
aonn org
organi
anized
zed cercate.
under this Code.
Rem
Remedy o cr cre
edio
diors
rs o co connst
tu
uen
en
4. The surviving or the co connsolidated corporatons
corp
corpoorao
raon
n sh shal
alll there
hereuupon
pon and and The only remedy is either against the united
thereaer possess all the rights, corporaon, or to pursue the assets of the
privileges, immunies and franchises of  constuents into its hands on the ground of 
each
eac h of the con
const
stuen
uentt corpora
corporaon
ons;s; fraudulent conveyance.
and all property, real or personal, and
all receivables due on whatever Sec. 81. Instances of appraisal right.  – Any
acco
accoun
unt,
t, incl
includ
udin
ingg subs
subscr
crip
ipo
ons
ns to stockholde
stock holderr of a corporaon
corporaon shall have the
shares and other chooses in acon, and right to dissent and demand payment of the
all
all an
and d ever
everyy othe
otherr inte
intere
rest
st of
of,, or fair
fair va
valu
lue
e of his
his shar
shares
es in the
the fo
foll
llow
owin
ing
g
belonging to, or due to each constuent instances:
corporaon, shall be taken and deemed
to be transferred to and vested in such 1. In case
case an
any
y amend
amendme ment
nt to the
the ar
arclcles
es
surviving
survi ving or consolidat
consolidated
ed corporaon
corporaon of inco
incorp
rpo
orao
raonn has the e eec
ectt of 
without further act or dead. changing or restricng the rights of any
stockh
stockhold
olders
ers or class
class of shares
shares,, or of 
5. The surviving or consolidated authorizing preferences in any respect
corpor
cor porao
aonn sha
shall
ll be respo
responsi
nsible
ble and superior to those of outstanding shares
liable for all the liabilies and of any class, or of extending or
obligaons of each of the constuent sh
shor
orte
teni
ning
ng the
the term
term of corpcorpor
orat
ate
e
corporaons in the same manner as if  existence.
such surviving or consolidated
corpor
cor porao
aonn had its itself
elf inc
incurr
urred
ed such
such 2. In case of sale, lease, exchange,
liabilies or obligaons; and any claim, tr
tran
ansf
sfer,
er, mort
mortga
gage,
ge, pled
pledge
ge or otothe
herr
aco
acon n or prproc
oceed
eedining
g pen
pendi
ding
ng by or disposion of all or substanally all of 
against any of such constuent the cor
corpor
porate
ate pro
proper
perty
ty and assets as
corporaons may be prosecuted by or provided in this Code.
against the surviving or consolidated
 

3. In case
case of
of merge
mergerr o
orr conso
consolid
lidao
aon.
n.
Exercising he appraisal righ
Sec. 81, not exclusive. By one who has voted against the proposed
corp
corpororat
ate
e aco
acon,
n, by ma
makiking
ng a wrwri
ien
en
Such appraisal right may also be exercised demand on the corporaon within thirty
when
wh en a sto tock
ckh
hold
older dis
isssen
ents
ts when
when a (30)) days
(30 days aer the date on whiwhich
ch the vote
corpor
corporao
aon
n or busine
business
ss or for a purpo
purpose
se was taken for payment of the fair value of 
other than its main purpose. (Sec. 42) his
his shshar
ares
es.. Thos
Those
e who
who are
are abse
absent
nt and
and
pres
presen
entt abst
abstai
aine
nedd thei
theirr vote
ote cancannot
not
When a stockholder of a close corporaon exercise the appraisal right.
may for any reason compel the corporaon
to pu
purc
rcha
hase
se his
his shar
shares
es fr
from
om the
the pa
parr or Sec. 83. Eect of demand and terminaon
issu
issued
ed vavalu
lue,
e, when
when thethe corpo
corpora
rao
on
n hahass of righ t.  – From the me of demand for
right.
sucien
su cientt assets
assets in its books to cover
cover its payment of the fair value of a stockholder’s
debts
deb ts and lialiabil
bilie
ies,
s, exclus
exclusive
ive of cap
capita
itall shares unl either the abandonment of the
stock. (Sec. 105) corporate acon involved or the purchase
of the said shares by the corporaon, all
Sec. 82. HoHoww righ
rightt is exer
exerci
cised.  – The
sed. rights
rights accruin
accruingg to such
such shares,
shares, inclu
includin
ding
g
apprai
app raisal
sal right may be exerci
exercised
sed by any vo
von
ngg and
and divid
ividen
endd ri
righ
ghts
ts,, shall
hall be
stockholde
stock holderr who shall have voted against
against suspended in accordance with the
the proposed corporate acon, by making a provisions of this Code, except the right of 
wrien demand on the corporaon within such stockholder to receive payment of the
thirty (30) days aer the date on which the fair
fair valu
valuee ther
thereo
eof:
f: Prov
Provid
ided
ed,, That
That if the
the
vote
vote was
was ta
take
ken
n fo
forr pa
paym
ymen
entt of the
the fa
fair
ir dissenng stockholder is not paid the value
value of his shares: Provided, That failure to of his shares within 30 days aer the award,
make the demand within such period shall his
his von
vongg an
and
d divi
divide
dend
nd ri
righ
ghts
ts shal
shalll be
be deemed a waiver of the appraisal right. If  immediately be restored.
the proposed corporate acon is
implemented
impl emented or eected,
eected, the corporaon
corporaon Sec. 84. When right payment ceases.  –
right to payment
shal
shalll pay to such uch ststoock
ckho
hollder,
der, upon
pon No demand
demand for paymen
paymentt und
underer this
this Tit
Title
le
su
surr
rren
ender
der of the
the cecer
rca
cate
te(s
(s)) of ststoc
ock
k may be withdrawn unless the corporaon
repres
rep resen
enn
ng
g his
his shar
shares
es,, the
the fa fair
ir valu
valuee consents thereto. If, however, such demand
thereof as of the day prior to the date on for payment is withdrawn with the consent
which
whi ch the vote
vote was taken,
taken, exclud
excluding
ing any of the
the corp
corpor
ora
aon
on,, or if ththee prop
propososed
ed
appreciaon or depreciaon in ancipaon corporate acon is abandoned or rescinded
of such corporate acon. by the corporaon or disapproved by the
Securies and Exchange Commission where
If within a period of sixty (60) days from the such
such app
appro
rovval is nece
necesssary
sary,, or if the the
date the corporate acon was approved by Se
Secu
curi
rie
ess and
and Ex Exch
chan
ange
ge Co Comm
mmis issi
sion
on
the stock
ckh
holders, the withdrawing determ
det ermine
iness that
that such
such stockh
stockhold
older
er is not
stockh
sto ckhold
older
er and the corpor
corporao
aon
n cannot
cannot entled to the appraisal right, then the right
agree on the fair value of the shares, it shall of said stockholder to be paid the fair value
be determined and appraised by three (3) of his shares
shares sha
shall
ll cease, his sta
status
tus as a
disinterested persons, one of whom shall be stockholde
stock holderr shall
shall thereupon
thereupon be restorestored,
red,
named by the stockholder, another by the and all dividend distribuons which would
corporate and the third by the two (2) thus have accrued on his shares shall be paid to
chosen. The ndings of the majority of the him.
appraisers shall be nal, and their award
sh
shal
alll be papaid
id by thethe co
corp
rpor
ora
aon
on with
within
in Eec o reusal o corporaton o pay
thirty (30) days aer such award is made: I... Then...
Provided, That no payment shall be made to FV of the shares Restore all his rights
an
anyy di diss
ssen
enn
ngg ststoc
ockh
khol
olde
derr unle
unless
ss the
the within thirty (30) automacally.
corporaon has unrestricted retain earnings days from the award
in its books to cover such payment: and Insuciency of the Restore by
Provid
Pro vided,
ed, fur
furthe
ther,
r, Th
That
at upon
upon pay
paymen
mentt by unrestricted RE reacquiring his
the corporaon of the agreed or awarded for
orme
merr statu
tatuss as a
pric
price,
e, the
the st stoc
ockh
khol
olde
derr sh
shal
alll fo
fort
rthw
hwit
ith
h stockholder.
transfer his shares to the corporaon. Abandoned;
 

 The rate of dividends

Rescinded;
 Unsecured
The approval
regularity with which they have been paid
of the SEC;  The management and reputaon of 
Stockholder is not Same eects as the company
entled; above.  Its prospects for the future
Withdrawal  All other circumstances which will
(dissenng aid them in esma
esmangng the futu
future
re
stockholder with course of the stock in the market
consent of the corp)
Se
Sec.
c. 85.
85. Who bears
bears costs
costs of appraisa
appraisal. l.  – The important thing to consider in arriving
The costs and expenses of appraisal shall be at the
the appr
apprai
aisa
sall valu
value
e is whet
whetheherr the
the
borne by the corporaon, unless the fair valuaon arrived at is a air
ir,, ju
jus
s an
and
d
valu
valuee ascer
ascerta
tain
ined
ed by thethe apappr
prai
aise
sers
rs is reasonable to all pares concerned.
approximat
appro ximately
ely the same as the price which
the corporaon may have oered to pay Oher insances when appraisal righ may
the stockholder, in which case they shall be be graned
borne by the laer. In case of an acon to 1. Amendm
Amendment ent of
of “any
“any prov
provisi
ision
on o
orr maer
maer
re
reco
cove
verr su
such
ch fafair
ir valu
value,
e, all
all cost
costss an and d stated in the arcles of incorporaon.”
expen
exp ense
sess shal
shalll be asasse
sess
ssed
ed agai
agains
nstt the
the 2. When
When ththe
e co
corpo
rporat
rate
e term
term iiss extend
extended.
ed.
corp
corpor
ora
aon
on,, unle
unless
ss the
the re refu
fusa
sall of the the 3. Any
Any purp
purpos
ose
e otothe
herr than
than the
the prim
primar
aryy
stoc
stockkhol
holder
der to re rece
ceiv
ive
e payme
aymen nt waswas purpose.
unjused. 4. Cl
Clos
ose
e corpor
corpora
aonon – a stoc
stockh
khol
olde
derr may
compell the corporaon to purch
compe purchase
ase FV
Consideraton o he coss o appraisal “for any reasons.”
Expenses of appraisal: Exercise o appraisal righ provided
 Appraisers’ fees compensaory alernatve o invesor
 Aorneys’ fees Appraisal statutes extending to corporate
 Expert accountants’ fees purpose or duraon amendments would
 Witnesses before the appraisers’ seem to be of limited value.
fees
Thus, claries an otherwise delicate aspect Appraisal rights cannot challenge this power
of appraisal proceeding. but
but they
they can
can prov
provid
ide
e a comp
compenensa
sato
tory
ry
alternave to an investor faced with a loss
Sec. 86. Notaon on cercate(s); right of  of exisn
exisngg stock
stock rights
rights and should
should be so
transf
tra nsfere e.  – Within ten (10) days aer
eree. employed.
dema
demandndiningg paym
paymenentt fo
forr his
his shshar
ares
es,, a
dis
dissen
senng
ng sto stockh
ckhold
older
er shall
shall submit
submit the When ri
When righ
gh o soc
sockh
khol
olde
derr o paym
paymenen
cer
cer ca
cate
te(s
(s)) of st stoc
ockk repre
represesen
nng
ng his his ceases
sh
shar
ares
es to the the corpo
corpora
rao
onn fo
forr no
nota
tao
on n 1. Th
The
e deman
demand d for pa
paym
ymen
entt is wit
withd
hdra
rawn
wn
thereo
the reonn that
that such
such sha
shares
res are disdissen
senng
ng
sh
shar
ares.
es. His fa fail
ilur
ure
e to do so shalshall,
l, at the
the with the consent of the corporaon.
2. The proposed corporate acon is
opon
op on of the corpor corporao
aon, n, termin
terminate
ate his abandoned or resci escin nded by the
rights under this Title. If shares represented corporaon.
by the cercate(s) bearing such notaon 3. Pr
Prop
opos
osed
ed acon
acon is di
disa
sapp
ppro
rove
ved
d by the
are
are trtran
ansf
sfer
erre
red,
d, an
andd thethe cer
cerccat
ate(
e(s)
s) SEC where such approval is necessary.
consequent
conse quently ly cancelled,
cancelled, the rights
rights of the 4. Such stockckh
holder is not entled to
transferor as a dissenng stockholder under exercise his appraisal right.
this Title shall cease and the transferee shall
have all the rights of a regular stockholder; Sec.
Sec. 87. De
Deni on.  – For the purposes of 
nion.
and all dividend distribuons which would this Code, a non-stock corporaon is one
have accrued on such shares shall be paid where no part of its income is distributable
to the transferee. as dividends to its members, trustees, or
ocers
oc ers,, sub
subject
ject to the pro
provis
vision
ionss of this
this
Valuaton o shares o dissentng Co
Code
de on diss
dissol
olu
uon
on:: Prov
Provid
ided
ed,, That,
That, any
any
shareholders prot which a non-stock corporaon may
Appraiser
Apprai serss should
should consid
consider
er the element
elementss obtain as an incident to its operaon shall,
that tend to aect market quotaons: whenever necessary or proper, be used for
 

the furtherance of the purpose or purposes unde

underr su
such
ch cond
condi
ion
onss wh
whic
ich
h may
may be,
be,
for which the corporaon was organized, prescribed by, the Securies and Exchange
subject to the provisions of this Title. Commission.

The provisions governing stock Votng by proxy may be denied in artcles

corp
corpor
ora
aon
ons,
s, when
when pe per
rne
nent
nt,, shal
shalll be or by-laws
ap
appl
plic
icab
able
le to no non-
n-st
stoc
ock
k co corp
rpor
ora
aon
ons,
s, Th
Thee law
law make
makess vo
von
ngg by prprox
oxyy merel
merely
y
ex
exce
cept
pt as maymay be cove covere
red
d by sp spec
eci
icc directo
torry in the case of non-stock
provisions of this Title. corporaons and even allows the arcles of 
incorp
incorpora
oraon
on or by-law
by-lawss the
thereo
reoff to deny
deny
Defniton proxy vong.
Non-stock corporaon – one where no part
of its income is distributable as dividends to If proxy vong may be denied outrightly in
its members, trustees, or ocers. the
the ar ar
cles
cles or by-l
by-law
awss of non-
non-st
sto
ock
corporaons, it necessarily follows that the
Sec. 88. Purposes. – Non-stock corporaons qualicaons or limitaons on who should
may be formed or organized for charitable, be appoin
appointed
ted pro
proxie
xiess may also be made
made
religious, educaonal, professional, cultural, therein.
frater
fraternal
nal,, literar
literary,
y, sci
scien
enc,
c, social
social,, civic
civic
se
serv
rvic
ice,
e, or si simi
mila
larr pu
purp
rpos
oses
es,, like
like tr
trad
ade,
e, Sec.90. Non-transferability of membership.
industry, agricultural and like chambers, or  – Membership in a non-stock corporaon
any combin
combinaoaonn thereo
thereof,f, subject
subject to the and all rights arising therefrom are personal
specia
spe ciall provis
provision
ionss of this
this Ti
Title
tle govern
governing
ing and non-transferabl
non-transferable, e, unles
unlesss the arcles
arcles of 
parcular classes of non-stock corporaons. incor
incorpo
pora
rao
on
n or thethe by-l
by-law
awss ot
othe
herw
rwisise
e
provide.
Distncton beween a sock corporaton
and a non-sock corporaton Sec.91. Term
Terminina
aonon of memb
member ership..  –
ship
Poin o  Sock Non-Sock Memb
Me mbers
ershi
hip
p shal
shalll be term
termin
inat
ated
ed in thethe
Comparison Corporaton Corporaton manner and for the causes provided in the
Membership Ownership Consent of   arcl
arcles
es of incor
incorpo
porarao
onn or the
the by
by-l
-law
aws.
s.
of stock the Terminaon of membership shall have the
associates e
eec
ectt of exexn
ngu
guiishi
shing all
all ri
righ
ghts
ts of a
mem
embeberr in the
the co corp
rpor
ora
aoon or in its its
Soliciaton o gis, donatons or property, unless otherwise provided in the
conributons by non-sock corporatons arcles of incorporaon or the by-laws.
A cercate of registraon must be secured
from th
the
e Ins
Insurance Commissioner Sec.
Sec.92
92.. Elec
Eleco
onn an
and
d te
term
rm of tr trus
uste es..  –
tees
ot
othe
herw
rwis
ise
e the
the ar
arc
cle
less of inco
incorp
rpor
ora
aon
on Unless otherwise provided in the arcles of 
cannot be led. incorpora
incor poraon
on or the by-laws,
by-laws, the board of 
trustees
trustees of non-stock
non-stock corporaon
corporaonss , whiwhich
ch
Sec.
Sec. 8989.. Rig
Right vote..  – The right of the
ht to vote may be more than een (15) in number as
members of any class or classes to vote may may be xed in their arcles of  
be limi
limited
ted,, br
broa
oade
dene
ned
d or de deni
nied
ed to thethe incorporaon or by-laws, shall, as soon as
extent specied in the arcles of  organized, so classify themselves that the
in
inco
corp
rpor
ora
aon
on or the
the byby-l
-law
aws.
s. Unle
Unless
ss so term
ter m of oce
oce of one-thir
one-third d (1/3)
(1/3) of their
limi
limite
tedd, bro road
aden
ened
ed or den enie
ied,
d, ea each
ch num
umbe
berr shall
all ex
expi
pire
re every
very yearyear;; and
and
memb
me mber er,, re
rega
gard
rdle
less
ss of clasclass,
s, sh
shal
alll be subsequent elecons of trustees comprising
entled to one vote. one-third (1/3) of the board of trustees shall
be hel
heldd ann
annual
ually
ly and tru
truste
stees
es so elected
elected
Unless otherwise provided by the arcles of  shall have a termterm ofof thre
threee (3)
(3) ye year
arss .
incorp
incorpora
oraon
on or the by-law
by-laws,
s, a member
member Trustees
Trus tees thereaer elected to ll vacancies
may vote by proxy in accordance with the occur
ccurri
ring
ng befor
efore
e the
the ex exppir
ira
aoon of a
provisions of this Code. parcular term shall hold oce only for the
unexpired period.
Vong by mail or other similar means by
members of non-stock corporaons may be No person shall be elected as trustee unless
au
auth
thor
oriz
ized
ed by the
the by
by-l
-law
awss of no
non-
n-st
stoc
ock
k he is a member of the corporaon.
corporaons with the approval of, and
 

Unless otherwise provided in the arcles of  “RES

“RESOL
OLVEVED,
D, that
that the
the corp
corpor
ora
aon
on or
incorporaon or the by-laws, ocers of a associ
associan
an wil
willl comply
comply wit
with h the S.E
S.E.C.
.C.
no
non-
n-st
stoc
ock
k corp
corpor
ora
aon
on ma
may y be dire
direct
ctly
ly REQUIREMENTS FOR NON-STOCK
elected by the members. CORPORATION
CORPO RATION dated
dated May 24, 1963 , in
the course of its operaon.”
Three-year erm or rusees in non-sock 4. LIST
LIST OF MEMMEMBE BERS
RS of thethe associ
associa
aon
on
corporaton containing their manual signature and
The term of trustees in non-stock aested by the Acng Secretary, if the
cor
corporaon is th
thrree (3) years excep incorporators are the present members
educaonal corporaons where the term is so far, state such fact in wring and
ve (5) years. further state that the list of addional
mem
emb ber
erss who
who wi will
ll be adm admied
ied in
Electons o direcors
Electons direcors by regions
regions in non-
non- ac
acco
cord
rdan
ance
ce with
with the
the byby-l
-law
awss of the
the
sock corporatons no allowed asso
associ
cia
aon
on shal
shalll e subm
submiied
ed to thethe
The Securies and Exchange Commission in Co
Comm
mmisissi
sion
on fr from
om me
me to me. me. (3
an op
opin
inio
ion
n st
stat
ated
ed that
that the
the “Ele
“Eleco
con
n of  Copies)
members of the Board of Directors of a non
stock corporaon by zones or regions would Sec.
ec. 94
94.. Ru
Rule
less of dist
distri
ribu
buon.  – In case
on.
violate the law which requires that at all dissol
dissoluo
uonn of a non-st
non-stock
ock corpor
corporao
aonn in
elec
eleco
ons
ns of dire
direct
ctor
ors,
s, ther
there
e must
must be accordance with the provisions of this Code,
present a majority of the members entled its assets shall be applied and distributed as
to vote. ” follows:

Sec.
Sec.93.
93. Pl
Plac
ace
e of me
mee
engs.  – The by-laws
ngs. 1. Al
Alll liab
iabili
ilies
es and
and obli
obliga
gao
ons
ns of the
the
may provide that the members of a non- corporaon shall be paid, sased and
stock corporaon may hold their regular or discharged, or adequate provision shall
special meengs at any place even outside be made therefore.
the place where the principal oce of the
cor
corporaon is locate ted
d: Provided , That 2. As
Asset
setss hel
held
d by ththe
e cor
corpo
pora
rao
onn upon
upon a
pro
proper
per noce
oce is sesent
nt to al alll memb
embererss condion
condi on requiring
requiring return,
return, transfer
transfer or
indicang the date, me and place of the co
conv
nvey
eyan
ance,
ce, a and
nd whic
which h co
cond
ndi
ion
on
meeng:
mee ng: and Provid
Provided,
ed, further
further,, Th
Thatat the occurs
occurs by reason
reason of the dissol
dissoluo
uon,
n,
plac
placee of meeeen
ngg sh
shal
alll be with withiin the
the shal
hall be re retu
turn
rned
ed,, trtra
ansfer
sferre
red
d or
Philippines. conv
convey
eyed
ed in acco
accord
rdan
ance
ce with
with such
requirements.
Supportng papers required o be
submied o he Securites and Exchange 3. Assets received and held by the
Commission: corp
corpor
ora
aon
on susubj
bjec
ectt to limi
limita
tao
ons
ns
1. LETTER
LETTER OF UNDEUNDERTARTAKIN
KINGG addre
addresse
ssed
d to perming their use only for charitable,
th
thee Co
Comm
mmisissi
sion
on sisign
gned
ed by at leleas
astt a
majori
maj ority
ty of the incor
incorpor
porato
ators
rs or by a rel
religi
igious
similarous,
, benevo
benevolen
purposes, lent,
butt, not
edu
educa
caona
held onal l or
upon a
duly authorized representave, to the condion
condi on requiring
requiring return,
return, transfer
transfer or
eect that the associaon will change conveyance by reason of the
its corporate name in the event another diss
dissol
olu
uon
on,, shal
shalll be tr tran
ansf
sferr
erred
ed or
person, rm or enty has acquired a conveyed to one or more corporaons,
prior right to use the same name or socie
soc iees
es or organi
organiza
zaons
ons eng
engage
agedd in
similar to it. (3 copies) acvies in the Philippines substanally
2. MODUS OPERANDI or a detailed simi
imilar to tho those of the the diss
dissol
olvi
ving
ng
explanaon as to how the associaon corp
corporora
aonon acco
accordrdin
ingg to a planplan of 
shall carry out its objecves signed by distribu
distr ibuon
on adopted
adopted pursupursuant
ant to this
atleast a majority of the incorporators Chapter.
or by a duly authorized representave.
(3 Copies) 4. Asse
Assets
ts other
other than
than thos
those
e men
menononed
ed in
3. RESO
RESOLULUTITION
ON of the Bo Boar
ard
d si
sign
gned
ed by the preceding paragraphs, if any, shall
atl
atleas
eastt a majori
majorityty of the Direct
Directors
ors or be distributed in accordance with the
cered under oath by the Secretary in provisions of the arcles of  
the following tenor to wit: (3 Copies) incorpora
incorp oraon
on or the by-law
by-laws,
s, to the
extent that the arcles of incorporaon
 

or the by-laws, determine the shal

shalll be he
held
ld of re
recor
cord
d by no
nott more
more
distribuve rights of members, or any than a specied number of persons, not
class or classes of members, or provide exceeding twenty (20).
for distribuon.
2. All the
the issue
issued
d st
stock
ock o
off all cclas
lasses
ses shal
shalll be
5. In any other case, assets may be subje
ubjectct to oneone or more more specspeci
ieded
distributed to such persons, sociees, restri
res tricon
conss on trans
transfer
fer permie
permied d by
organizaons or corporaons, whether this Title.
or not organized for prot, as may be
sp
spec
eci
ied
ed in a plan
plan of dist
distri
ribu
buo
on
n 3. The cocorp
rpor
ora
aon
on sh
shal
alll not list in anyany
adopted pursuant to this Chapter. stoc
stockk exch
exchanange
ge or make
make an any
y pu
publ
blic
ic
oering of any of its stock of any class.
Sec. 95. Plan of distribuon
distribuon of assets.  – A Notw
No twit
iths
hsta
tand
ndin
ing
g the
the fo fore
rego
goin
ing,
g, a
plan providing for the distribuon of assets, corporaon shall not be deemed a close
not inconsistent with the provisions of this corpor
corporao
aon n when
when at lea least
st two
two-th
-third
irdss
Ti
Titl
tle,
e, may
may be adadop
opte
ted
d by a non-
non-st
stoc
ock
k (2/3) of its vong stock or vong rights
corporaon in the process of dissoluon in is owne
owned d or cont
contro
rolllled
ed by anot
anothe
herr
the following manner: co
corp
rpoorao
raon n which
hich is not a clo close
corporaon within the meaning of this
The board
board of truste
trustees
es shall,
shall, by majori
majority
ty Code.
vote, adopt a resoluon recommending a
plan
plan of didist
stri
ribu
buo
onn anand
d dire
direc
cng
ng the
the Any corporaon may be incorporated as a
submission thereof to a vote at a regular or cl
clos
ose
e co
corp
rporora
aon
on,, excep
exceptt mini
mining
ng or oil
oil
special meeng of members having vong co
commpani
panies
es,, stoc
stockk ex
exch
chan
ange
ges,
s, bank
banks,
s,
righ
rights
ts.. Wr
Wri
ien
en no
noce
ce se
sen
ngg fofort
rth
h the
the insu
insura
ranc
ncee comp
compan
anie
ies,
s, publ
public
ic uli
ulie
es,
s,
proposed plan of distribuon or a summary educaonal
educa onal instuons
instuons and corpo
corporaons
raons
th
ther
ereo
eoff an
andd the
the da
date,
te, m
me
e and
and plac
place
e of  declared to be vested with public interest in
such
such me mee
enng shall
hall be give
given
n to ea each
ch accordance with the provisions of this Code.
member entled to vote, within the me The provisions of this Title shall primarily
and in the manner provided in this Code for govern
gov ern close
close cor
corpor
porao
aons:
ns: Provided , That
the giving of noce of mee enngs to the provisions of other Titles of this Code
members. Such plan of distribuon shall be shall
sha ll apply
apply sup
supple
pletor
torily
ily except
except insofa
insofarr as
adopte
ado pted d upon
upon approv
approval
al of at least
least two-
two- this Title otherwise provides.
thirds (2/3) of the members having vong
rights present or represented by proxy at Sec.
ec. 97.  Arcles of incorporaon.  – The
such meeng. arcl
cle
es of incorporaon of a clo close
corporaon may provide:
Disr
isrib
ibut
uto on o as asse
ses
s o no non-
n-sso
occk
corporatons to the members on dissoluon 1. Fo
Forr a clas
classi
sic
ca
aon
on of share
sharess or right
rightss
is not forbidden,
forbidden, unl ess it holds its assets
unless
upon some trust, public or private, in which and
holdin
hol the
ding quali
quasam
g the lica
caons
same e ons
and for
res owning
own
restri
tricoing
cons or
ns on
case the claims of the state, the their transfers as may be stated therein,
be
bene
nec
cia
iari
ries
es,, or of the
the fofoun
unde
derr an
andd his
his subject to the provisions of the
successors may have to be considered. following secon.
A non-stock
non-stock (non-prot)
(non-prot) corporaon
corporaon may
not ordinarily organ ganize as a stock 2. For a classi
classica
caon
on of ddire
irecto
ctors
rs into
into one
one
corporaon, authorized to issue shares of  or more classes, each of whom may be
stock, but may issuissue
e memb
membe ers
rsh
hip vo
vote
ted
d for andand elec
electe
tedd sol
solely
ely by a
cer
cerc
cat
ates
es whic
whichh do notnot en
ent
tle
le to th thee parcular class of stock.
holder to dividends.
3. For a greater quorum or vong
Sec. 96. Deni
Denion
on and applicabil
applicability
ity of  requirements in meengs of  
Title.  – A close corporaon, within the stockh
stockhold
olders
ers or dir
directo
ectors
rs than
than tho
those
se
meaning of this Code, is one whose arcles provided in this Code.
of incorporaon provide that:
Th
Thee ar
arcl
cles
es of incor
incorpo
pora
rao
on
n of a cl
clos
ose
e
1. All
All the cor
corpo
pora
rao
on'
n'ss issued
issued stock
stock of all corporaon may provide that the business
classes, exclusive of treasury shares, of the corporaon shall be managed by the
 

stockholders of the corporaon rather than identy and personality of each shareholder
by a bo
boar
ard
d of dire
directo
ctors
rs.. So lo
long
ng as this
this are
are im
impo
port
rtan
antt to his
his asso
associ
ciat
ates
es,, so that
that
provision connues in eect: although they may consider their business
as corporaon in their dealings with third
1. No mee een
ngg of stotock
ckho
hold
lder
erss nee
eed
d be persons, among themselves the
called to elect directors. stockholders act and feel as partners.”

2. Unl
Unles
esss the
the co
cont
ntexextt clea
clearl
rly
y re
requ
quiire
ress Enttes which may no be organi
Enttes organized
zed as
ot
othe
herw
rwisise,
e, the
the st stoc
ockh
khol
olde
ders
rs of the
the close corporatons
co
corp
rpor
ora
aonon shal
shalll be de
deem
emeded to be  Mining or oil companies
dir
directo
ectors
rs for the purpos
purposee of app
applyi
lying
ng  Stock exchanges
the provisions of this Code.  Banks
 Insurance companies
3. The
The ststoc
ockh
khol
olde
ders
rs of the
the corp
corporora
aon
on
 Public ulies
sh
shal
alll be su
subj
bjec
ectt to all
all liab
liabil
ili
ies
es of 
 Educaonal instuons
directors.
 Corporaons declared to be vested
with public interest
The arcles of incorporaon may likewise
provid
pro vide
e that
that all ocers
ocers or employ
employees
ees or
Sockholders
Sockhold ers auhorize
auhorized d o man
manage
age close
close
that specied ocers or employees shall be
corporatons
elected or appointed by the stockholders,
As a rule, management of stock corporaon
instead of by the board of directors.
is normally given to board of directors or
truste
trustees.
es. However
However,, the Cor Corpor
porao
aonn Code
Code
Requisies o Close Corporaton
provides: “The arcles of incorporaon of a
Within the meaning of a close corporaon cl
clos
ose
e co
corp
rpor
ora
aon
on maymay prov
provid
ide
e that
that the
the
under the Corporaon Code the following
busi
busine
ness
ss of the co corp
rpor
ora
aoon shal
hall be
are its aributes:
mana
ma nage
gedd by the the st sto
ock
ckho
hold
lder
erss of thethe
1. Its stockholders are limited not
corp
corpor
ora
aon
on rath
rather
er than
than by a bo boar
ard
d of 
exceeding 20 persons.
directors.” Also, “The arcles of  
2. Its shar
shares
es o
off stock
stock are subject
subject to oneone oorr
incorporaon may likewise provide that all 
more restricons on transfer.
oce
o cers
rs or empl
employoyee
eess or that
that spec
speci
ied 
ed 
3. Its shar
shares
es of sstoc
tock
k are
are not llist
isted
ed iin
n an
any
y
ocers
oc ers or employ
employeesees shall
shall be electe
elected
d or 
stock exchange.
appointed by the stockholders, instead of by 
the board of directors.” 
Salien Feaure o Close Corporatons
1. It has
has on
only
ly a fe
few
w st
stoc
ockh
khol
olde
dersrs,, who
who if 
Sec. 98. Validity of restricons on transfer 
Sec.
not related by blood or marriage, know
of share s.  – Restricons on the right to
shares.
each other well and are aware of each
transfer shares must appear in the arcles
other’s business skills.
of incorporaon and in the by-laws as well
2. Al
Alll or mo
morere of th
them
em a are
re ac
acve in in th
the
e
corporate
corpo rate busi
business,
ness, either as directors,
directors, as in the cercate of stock; otherwise, the
same shall not be binding on any purchaser
ocers or as key men in management.
thereof in good faith. Said restricons shall
3. The
The ststoc
ocks
ks of the
the cor
corpo
pora
rao
on n are not
not
no
nott be mo morere on
onero
erous
us than
than gran
granng
ng the
the
list
listed
ed on thethe exch
exchan
ange
ge nonorr is ther
there
e
exisng stockholders or the corporaon the
tr
trad
adin
ing
g in them
them ou outs
tsid
ide
e the
the st stoc
ockk
opo
opon n to pur urch
chas
ase
e the share
haress of the
the
market.
tr
tran
ansf
sfer
erri
rin
ng sto
stock
ckho
hollder
der with
with such
such
*I
*Itt woul
wouldd seseem
em that
that base
base on thes thesee
reas
reason
onab
ablele ter
terms
ms,, cond
condiion
onss or peperi
riod
od
fe
feat
atur
ures
es mamanyny corp
corpor
ora
aon
onss in the the
stated therein. If upon the expiraon of said
Philippines wou
would be close
pe
peri
riod
od,, the
the exis
exisn
ngg stoc
stockh
khol
olde
ders
rs or the
the
corporaons.
corporaon fails to exercise the opon to
purchase, the transferring stockholder may
Reasons  or ormaton o close
sell his shares to any third person.
corporatons
“The existence of close corporaons can be
Sec.
Sec. 99. Eects of issuance or transfer of 
aributed to the desire of inmate groups
stock in breach of qualifying condions.  –
of busi
usiness
ness asso
associ
ciat
ates
es to obta
obtaiin the
the 1. If stoc
stock
k of a close
close corp
corpor
ora
aon
on is iiss
ssue
ued
d
advantages of a corporate organizaon, like
or transferred to any person who is not
that of limited liability. However, the
entled under any provision
provision of the
 

arcles of incorporaon to be a holder 6. The term

term "t
"tra
rans
nsffer
er",
", as used
sed in this
his
of reco
corrd of its sto
tock
ck,, and if the secon, is not limited to a transfer for
cercate for such stock conspicuously value.
shows the qualicaons of the persons
entled to be holders of record thereof, 7. Th
The
e provis
provisio
ions
ns of thi
thiss secon
secon sh
shal
alll not
such person is conclusively presumed to impair any right which the transferee
have noce of the fact of his ineligibility may have to rescind the transfer or to
to be a stockholder. recover under any applicable warranty,
express or implied.
2. If the arclcles
es of incorporaon of a
close corporaon states the number of  Resrictons on ranser o shares o sock
person
per sons,
s, not exceed
exceeding
ing twe
twenty
nty (20),
(20), The corporaon may provide in its arcles
who are entled to be holders of record of incorporaon, in its by-laws as well as in
of its stock, and if the cercate for the cercate of stock restricons on the
t he
such
suc h sto
stock
ck con
conspi
spicuo
cuousl
usly
y states
states such
such right of stockholders to transfer their shares
number, and if the issuance or transfer of stocks. If not so provided as aforesaid the
of stock to any person would cause the same “shall not be binding on any
stoc
stockk to be heheld
ld by more thanthan such  purchaser thereof
thereof in good faith.” Charter
nu
numb
mber
er of pers
person
ons,
s, the
the pers
person
on to restricons on the transfer of shares are
whom such stock is issued or binding on all who become shareholders, as
transferred is conclusively presumed to they become pares to the charter contract
have noce of this fact. and take their shares subject to it.
Considerable latude allowed
3. If a stock cercate of any close inco
incorp
rpor
orat
ator
orss and sha
share
reho
hold
lder
erss
co
corp
rpor
ora
aon
on cons
conspi
picu
cuou
ouslsly
y show
showss a in imposing transfer
restricon on transfer of stock of the restricons in the arcles of incorporaon
corporaon, the transferee of the stock and they will not usually be declared
is conclusively presumed to have noce against public policy unless palpably
of the fact that he has acquired stock in unreasonable under the circumstances.
viol
viola
aon
on of thethe rerest
stri
ric
con
on,, if su
such
ch
acquision violates the restricon. “Sto
“Stock
ck in thethe corp
corpor
ora
aon
on is not merely 
merely 
 property . It also creates a personal relaon
4. Whenev
Whenever er a
any
ny pers
person
on to
to wh
whom
om stock
stock of 
of  analogous otherwise than technically to a
a close corporaon has been issued or partnership. There seems to be no greater
tr
tran
ansf
sfer
erre
red
d has,
has, or is conc conclu
lusi
sive
vely
ly objecon
objec on to retaining
retaining the right of choosing
choosing
presumed under this secon to have, one’s associates in a corporaon than in a
noce either (a) that he is a person not rm.”
eligible to be a holder of stock of the
corporaon, or (b) that transfer of stock Reasons or resricton on shares o sock
to him would cause the stock of the
corporaon to be held by more than In a close
other corporaon,
stockholders the identy
is important of thethe
to each;
the number of persons permied by its incorporators have condence in one
arcles of incorporaon to hold stock of  another which they may not have in an
the corporaon, or (c) that the transfer outsider. Furthermore, the incorporators
of stock is in violaon of a restricon on may feel that the success of the enterprise
ente rprise
transfer of stock, the corporaon may, depends upon the retenon of the
at it
itss op
opo
on,
n, re
refu
fuse
se to regi
regist
ster
er the
the personnel who formed it, or they may be
tr
tran
ansf
sfer
er of st
stoc
ock
k in the
the name
name of thethe manufacturing under secret processes
transferee. which they do not want outsiders to learn.
In the family corporaon it is oen the
5. The
The prov
provis
isio
ions
ns of su
subs
bsec
eco
onn (4)
(4) sh
shal
alll desire of he father to pass the corporaon
not applicable if the transfer of stock, to his son without interference from other
though contrary to subsecons (1), (2) outside the family. Any one of these factors
of (3), has been consented to by all the may induce the incorporators to aempt to
stockhold
stock holders
ers of the close corporaon,
corporaon, restrict the transfer of stock.
or if the close corporaon has amended
its arcles of incorporaon in Eec o he ranser o sock in breach o 
accordance with this Title. qualiying conditons
 

Unless “consented to by all the operaon of the business and aairs of 
stockholders or if the close corporaon has a close
close cor
corpor
porao
aon,
n, the sto
stockh
ckhold
olders
ers
amende
ame nded d its arcles
arcles of incorp
incorpora
oraon
on,”
,” a shall be held to strict duciary dues to
tr
tran
ansf
sfer
er of shar
shares
es of st
stoc
ock
k in br
brea
each
ch of  each other and among themselves. Said
qu
qual
alif
ifyi
ying
ng cocond
ndi
ion
onss woul
wouldd jus
jusfy
fy the
the stockhold
stock holders
ers shall
shall be personally
personally liab
liable
le
cor
corporaon through the corporate for corporate torts unless the
secretary to refuse to register the transfer corpor
cor porao
aonn has obtain
obtained
ed rea
reason
sonabl
ably
y
of stock
stock.. Su
Such
ch tr
tran
ansf
sfer
er ne
need
ed no
nott be foforr adequate liability insurance.
valu
value,
e, henc
hencee it may
may be the
the re
resu
sult
lt of a
donaon. Eec o he Sockholders’ agreemen
beore and aer ormaton o corporaton
Sec. 100. Agreements by stockholders. – Stockholders’ agreements before and aer
1. Agreem
Agreement entss by aand
nd aamon
mong g stockh
stockhold
olders
ers formaon and organizaon of the
execu
executetedd be befo
fore
re the
the foform
rma
aon
on anandd corporaon survive incorporaon and shall
or
organ
ganiz
iza
aon on of a cl clos
ose
e cocorp
rpor
ora
aon
on,, be valid and binding for as long as they are
signed by all stockholders, shall survive not inconsistent with the arcles of  
the incorpora
incorporaon on of such corporaon
corporaon incorporaon. Agreements made prior to
an
andd shshal
alll con
connunuee to be vali valid
d an
andd incorporaon require fairly literal
bi
bind
ndin
ingg betw
betweeeenn anandd amon
among g susuch
ch performance. There must be an actual
stockholders, if such be their intent, to contractual relaon. Given such relaon,
the exte
extentnt that
that suc
suchh agreem
agreemententss are the pre-incorporators
the pre-incorporators are promoters and
not incon
inconsissisten
tentt with
with the arcle
arcless of  may arrange agreements to form and
incorporaon, irrespecve of where the manage the corporaon.
pr
prov
ovis
isio
ions
ns of such such ag agre
reem
emen
ents
ts ar
aree
contained
contai ned,, exce
except
pt those
those requir
required
ed by Sec. 101. When board meeng is
this Title to be embodied in said arcles unnecessar
unnec essaryy or improperly held..  – Unless
improperly held
of incorporaon. the by-laws provide otherwise, any acon
by the
the direc
directo
tors
rs of a cl
clos
ose
e cor
corpo
pora
rao
on
n
2. An agre
agreem
emenentt betw
betwee
eenn two
two or mo
more
re withou
withoutt a mee
meengng shall
shall nev
nevert
erthel
heless
ess be
stockholders, if in wring and signed by deemed valid if:
the pares thereto, may provide that in
exercising any vong rights, the shares 1. Befo
efore or aer
aer such
such aco
aconn is tak
taken,
en,
held by them shall be voted as therein wrien consent thereto is signed by all
provided, or as they may agree, or as the directors.
det
eter
erm
mined in acco corrdance with a
procedure agreed upon by them. 2. All
All the
the sto
stockho
ckhollders
ders have
have actu
ctual or
3. No prov
provis
isio
ion
n in any wrie
wrienn agr
agreem
eemen
entt impli
imp lied
ed knowle
knowledge
dge of the ac
acon
on and
signed by the stockholders, relang to make no prompt objecon thereto in
any phase of the corporate aairs, shall wring.
be invalidated as between the pares
on the ground that its eect is to make 3. The
The dire
direct
ctor
orss are
are accu
accust
stom
omed
ed to take
take
them partners among themselves. info
inform
rmal
al aco
acon n with
with the
the expr
expres
esss or
implied acquiescence of all the
4. A wrie
wrienn agree
agreemen
mentt amon
among g so
some
me oorr all
all stockholders.
of the stockholders in a close
corporaon shall not be invalidated on 4. All the dire
director
ctorss have
have ex
expre
press
ss or
or implie
implied
d
th
the
e gr
grou
ound
nd that
that it so rela
relate
tess to the
the knowledge of the acon in queson and
conduct of the business and aairs of  none of them makes prompt objecon
the corporaon as to restrict or thereto in wring.
interfere with the discreon or powers
of th
the
e bo
boar
ard
d of diredirect
ctor
ors:
s: Prov
Provid
ided
ed,, If a dire
direct
ctor
or's
's mee
meeng
ng is held
held with
withou
outt
That such agreement shall impose on prop
proper
er call
call or noc
noce,
e, an aco
acon
n take
takenn
the stockholders who are pares there
therein
in with
within
in the
the corp
corpor
orat
ate
e po
powe
wers
rs is
thereto
the reto the lia
liabil
bilie
iess for manager
managerial ial deemed raed by a director who failed to
acts imposed by this Code on directors. aend, unless he promptly les his wrien
objec
jecoon with the secreta etary of the
5. To the
the exte
extent
nt that
that the
the stock
stockho
hold
lders
ers are
are co
corp
rpor
ora
aon
on aer er havi
aving knowl
nowled
edge
ge
acvely engaged in the management or thereof.
 

Sec. 102. Pre-Pre-em

emp
pve
ve righ
rightt in cl clos
ose
e un
unne
neces
cessa
sary
ry or even
even if im
impr
prop
operl
erly
y he
held
ld
corpor
corporao
aons.ns. - Th
Thee pr
pre-
e-em
emp
pveve righ
rightt of  would be valid. The by-laws, however, may
stockh
stockhold
olders
ers in close
close corpor
corporao
aons
ns shall
shall provided otherwise or a stockholder may
extend to all stock to be issued, including le his wrien
wrien objec
objecon
on in wring
wring aer
reissuance of treasury shares, whether for having
having know
knowledge
ledge of
of the acon
acon take
takenn by
money, property or personal services, or in the directors.
paymen
pay mentt of corpor
corporate
ate debts,
debts, unless
unless the
arcles of incorporaon provide otherwise. Pre-empt
Pre-em ptve
ve rig
righ
h in close
close cor
corpor
porato
atons;
ns;
Issuance o new Sock
Exceptons in Secton 39, no applicable A stockholder in a close corporaon has a
It is submied that in a close corporaon, right to purchase his pro rata share of the
the excepons provided in Sec 39 are not new
new stoc
stock.
k. If the
the pre-
pre-em
emp
pve
ve ri
righ
ghtt is
applicable.
appli cable. The rst excepon
excepon menoned
menoned viol
violat
ated
ed he ca cann suesue the
the corp
corpor
ora
aon
on foforr
th
ther
erei
einn re
rega
gard
rdin
ing
g the
the shar
shares
es isissu
sued
ed in damages, enjoin the stock issue, obtain an
comp
compli lian
ance
ce with
with laws
laws re requ
quir
irin
ingg ststoc
ock
k order perming him to subscribe, or obtain
oerings or minimum stock ownership by cancellaon of the issue. But even where
the public cannot by its very nature refer to the
the stoc
stockh
khololde
der’
r’ss pr
pre-e
e-emp
mpv
vee ririgh
ghtt is
a close corporaon. The pre-empve right preserved. The right may be inadequate as
of shareholders in close corporaon is thus a protecve devise for the stockholder in a
broadened to include all issues without any cl
clos
osee corp
corpor
ora
aon
on be beca
caus
usee the
the lack
lack of a
excepo
exce pon, n, unless
unless of course
course,, restri
restricte
cted
d by market for his stock leaves him with the
the arcles of incorporaon and printed in altern
alternav
aves
es of invinvesn
esngg more
more capita
capitall or
the stock cercates. It may be menoned having the value of his stock diluted.
howe
howeve ver,
r, that
that an
anyy prio
priorr waiv
waiver
er of pre-
pre-
empve right must be expressly provided Sec. 104. Deadlocks. - Notwithstanding any
for in the arcles of incorporaon and not co
con
ntr
trar
ary
y pr proovis
vision
ion in the the ararcles
cles of 
in an ordinary agreement executed by the incorporaon or by-laws or agreement of 
par
pareses.. This
This rule
rule howe
howeve
ver,
r, woul
would
d not
not stockholders of a close corporaon, if the
militate against the unanimous agreement dir
directo
ectorsrs or stockh
stockhold
olders
ers are so divid
divided
ed
of all the stockholders. respecng the manageme ement of the
corporaon's business and aairs that the
Sec. 103.  Amendment of arcles of  vo
vote
tess re
requ
quirired
ed foforr an
any
y co
corp
rpor
orate
ate acaco
on
n
incorp
incorpora on..  – Any amendment to the
oraon cannot be obtained, with the consequence
arcl
arcles
es of inco
incorprpor
ora
aon
on whic
which
h se
seek
ekss to tha
that thethe busi usiness
ness and aai aairs
rs of thethe
delete or remove any provision required by corporaon can no longer be conducted to
this Title to be contained in the arcles of  the advantage of the stock ckh
holders
incorp
incorpora
oraon
on or to reduce
reduce a quoru
quorum
m or gener
gen eral
ally
ly,, the
the SecSecur
uri
ies
es and
and ExExch
chan
ange
ge
vong requirement stated in said arcles of  Commission, upon wrien peon by any
incorporaon shall not be valid or eecve stoc
stockh
khol
olde
der,r, sh
shal
alll have
have the
the powe
powerr to
unless approved by the armave vote of 
at least two-thirds (2/3) of the outstanding arbitrate
 power, the
the dispute. In shall
Commission the exercise of such
have authority 
capi
capita
tall stoc
stock,
k, wheth
whetherer with
with or with
withou
outt to make such order as it deems appropriate,
vong rights, or of such greater proporon
proporon including an order:
of shares as may be specically provided in
the arcles of incorporaon for amending, 1. Canc
Cancel
elin
ing
g or alt
alter
eriing any pr
proovis
vision
ion
deleng or removing any of the aforesaid contained in the arcles of  
provisions, at a meeng duly called for the incorporaon, by-laws, or any
purpose. stockholder's agreement.

Rule and Exceptons when board meetng 2. Canc

Cancel
elin
ing,
g, alte
alteri
ring
ng or enjoi
njoini
ning
ng any
any
unnecessary resoluon
resoluon or act of the corporaon
corporaon or
General Rule: the directors of a corporaon its board of directors, stockholders, or
cann
cannot
ot act
act indi
indivi
vidu
dual
ally
ly or se
sepa
para
ratel
tely
y in ocers.
order to bind the corporaon. They must
act as a board at a meeng duly called for 3. Direc
Direcn
ngg or pro
prohi
hibi
bin
ng
g any act
act of the
the purpose. corpor
corporao
aonn or its boa
board
rd of dire
directo
ctors
rs,,
Excepton:
Excep ton: Secon 101. It enumerates the stockhold
stockholders,
ers, ocers,
ocers, or other persons
instances when a board at a meeng is party to the acon.
 

4. Re
Reqquiri
uirin
ng the
the pur
purch
chas
ase
e at thei
theirr fa
faiir provided eithe
provided eitherr for directoria
directoriall disputes
disputes or
va
valu
lue
e of shar
shares
es of anany
y ststock
ockho
holdlder
er,, for stockhol
stockholder
der dis
disputes
putes.. Altho
Although
ugh there
either by the corporaon regardless
regardless of  are
are sosome
me disa
disadv
dvan
anta
tages
ges of ar arbi
bitr
tra
aon
on
the availability of unrestricted retained proceedings, nevertheless, the advantages
earnings in its books, or by the other of arbitr
arbitrao
aon,
n, in sav
saving
ing both money
money and
stockholders. hard feelings, would seem to outweigh the
disadvantages in most cases.
5. Appoin
Appoinng
ng a pr
provi
ovisio
sional
nal dir
direct
ector.
or.
Provision
Provis ional
al direc
direcor
or and SEC super
supervis
vised
ed
6. Diss
Dissol
olvi
ving
ng the
the corpo
corpora
rao
on.
n. managemen
In accord
accordanc
ance
e wit
with
h Sec
Secon
on 104,
104, the SEC
7. Granng such other relief as the may
ma y in case
case of dead
deadlo
lock
ckss in the
the clos
close
e
circumstances may warrant. corporaon appoint a provisional director.
“A provisional direcor shall be an imparal
A provisional director shall be an imparal person who is neither a stock-holder nor a
person who is neither a stockholder nor a creditor of the corporaon and whose other
cred
credit
itor
or of thethe corp
corporora
aon
on or of an any
y quali
qua lica
caons
ons,, may be det
determ
ermine
inedd by the
subsid
subsidiar
iary
y or al
aliat
iatee of the corp
corpora
oraon
on,, SEC.”
and whose
whose furthe
furtherr qua
quali
lica
caons
ons,, if any,
any,
may be determined by the Commission. A Under Secon 2 (Pres Decree No. 1653), the
provisional director is not a receiver of the SEC has the power
the power “to create and appoint a
corporaon and does not have the tle and management commiee, board, or body to
powe
powersrs of a cuscusto
todi
dian
an or re rece
ceiive
ver.
r. A undertake the management of  
provisional director shall have all the rights corporaons, partnership or other
and powers of a duly elected director of the associaonss in appropriat
associaon appropriate
e cases wherein
corporaon, including the right to noce of  there
there is immin
imminent
ent dan
danger
ger or dis
dissip
sipao
aon,
n,
and to vote at meengs of directors, unl loss or wastage or destrucon of assets or
such me as he shall be removed by order other properes or paralizaon of business
of the Commission or by all the operaons of such corporaons or enes
stockh
stockhold
olders
ers.. His
His compen
compensa
saon
on shall
shall be prejudicial to the interest of the minority,
determ
det ermine
ined
d by agreemen
agreementt between
between him party-ligants or the general public.”
and the corporaon subject to approval of 
the Commission, which may x his Sec. 105. WitWithdr
hdrawa
awall of sto
stockh
ckhold
older
er or 
compensaon in the absence of agreement dissoluo
dissoluon n of corpo
corporao
raon n.  – In addion
or in the event of disagreement between and without prejudice to other rights and
the provisional director and the remedies available to a stockholder under
corporaon. this
this Ti
Titl
tle,
e, any
any stoc
stockh
khol
olde
derr of a clos
close
e
corpor
corporao
aon n may
may,, for any reason,
reason, compel
compel
Deadlock – Deadlock signies a standsll in the said corporaon to purchase his shares
the man
manage
agemen
mentt of the corpor
corporate
ate aairs
aairs
resulng from the evenly divide acon of  at
thantheir fairpar
their value, which value,
or issued shall not be less
when the
dire
direct
ctor
orss or st
stoock
ckho
hold
lder
erss in a clos
closee corporaon has sucient assets in its books
corporaon. to cover its debts and liabilies exclusive of 
capital stock: Provided, That any
In hhe
e even
en o de dead
adlloc
ocks
ks SEC may stockholder of a close corporaon may, by
arbirae wr
wri
ien
en pe
peonon to the the Secu
Securi
rie
ess and
and
In th
thee eveven
entt of a dea eadl
dloc
ockk in a clos
close
e Excha
change Co
Com mmission, compel th
the
e
corp
corpor
ora
aon
on,, the
the SE
SECC ha
hass the
the po power
wer to dissoluo
diss oluonn of such corporaon whenever
arbi
arbitr
trat
atee the
the dead
deadlolock
ck “upo
“upon n wri
wrien
en any of acts of the directors, ocers or those
pe
peonon of an any
y ststoc
ockh
khol
olde
der.
r.”” In clos
close
e in control of the corporaon is illegal, or
corporaons that are subject to a checks fraudulent, or dishonest, or oppressive or
and balanc
balances
es system
system becaus
because e of contro
controll unfair
unf airly
ly prejud
prejudici
icial
al to the cor
corpor
porao
aonn or
devices there are bound to be deadlocks, any stockh
stockhold
older,
er, or whenev
wheneverer corpor
corporate
ate
and some steps must be taken to cope with assets are being misapplied or wasted.
them. Many of the problems that arise can
be seled
seled by arbit
arbitraon,
raon, Arbitra
Arbitraon
on (the • Apprai
Appraisal
sal rights
rights in regula
regularr corpor
corporao
aons
ns
de
dete
term
rmin
ina
aon
on of a mae
maerr of die
dieren
rence
ce can be opted by the dissenng stockholder
between contending pares) may be only in cases where the fundamental
 

chan
changege in thethe corp
corpororat
atee st
stru
ruct
ctur
ure
e or or other
other instu
instuon
onss of learni
learningng shall,
shall, as
operaons is involved, whereas a soon as organi
organized,
zed, so classify
classify themselve
themselvess
stockholder of a close corporaon may, for that the term of oce of one-h (1/5) of 
any reason, compel the said coporaon to thei
theirr numb
number er shshalalll ex
expi
pire
re ever
everyy year
year..
purchase his shares at their par value, when Trustees thereaer elected to ll vacancies,
the corporaon has sucient assets in its occur
ccurri
ring
ng beforefore
e the the ex exppir
ira
aoon of a
bo
book
okss to cove
coverr his
his de
debt
btss an
andd liab
liabil
ili
ies
es parcular term, shall hold oce only for the
exclusi
excl usive
ve of capita
capitall sto
stock.
ck. ( In App
Apprai
raisal
sal unexp
nexpiire
redd per
eriiod.
od. Tr
Trus
uste
tees
es elec
electe
ted
d
right, fair value of shares is given but in ther
therea
eae
err to l lll vaca
vacanc
ncie
iess caus
caused
ed by
Withdrawal Right, the fair value cannot be expiraon of term shall hold oce for ve
le
less
ss th
than
an th
the
e pa
parr or isissu
sued
ed va
valu
lue
e of thethe (5) years. A majority of the trustees shall
shares;
sha res; In Apprai
Appraisal
sal right,
right, ther
there
e must
must be constute a quorum for the transacon of 
presentt unrestricte
presen unrestricted d retained
retained earnings
earnings in bu
busi
sine
ness
ss.. Th
The
e popowewers rs an
and d auauth
thor
orit
ity
y of 
the books of the corporaon) trustees shall be dened in the by-laws.

• The corp
corporaon
oraon is not
not a close corporaon
corporaon For instuons organized as sto tock
ck
even
even if the
the sh
shar
ares
es belo
belong
ng to less
less than
than co
corp
rpor
ora
aon
ons,
s, the
the nunumb
mber
er an
and
d term
term of 
twenty if not all the requisites are present. directo
torrs shall be governed by the
San Juan Structural and Steel Fabricators v. provisions on stock corporaons.
CA (1998)

EDUCATIONAL CORPORATIONS
For Educao
Educaonal
nal corpor
corporao
aons,
ns, where
where the
trustees should be divided into mulples of 
ve. So you should have ve, ten or een
trustees if they are organized as non-stock
corporaon. And unless otherwise provided
in the arcles of incorporaon or by-laws,
the terms of the trustees should be ve
years, and every year only one h (1/5) is
elected, again to provide for connuity in
policies. But you can provide that they will
be all elected instead for a term of one
year, everybody has to be elected.

Sec. 106. Inco

Incorp
rpor
ora on..  – Educaonal
aon
corporaons shall be governed by special
laws and by the general provisions of this
Code.

Sec. 107. Pre-requisites to incorporaon. –

Except upon favourable recommendaon of 
the Ministry of Educaon and Culture, the
Securies
Securies and Exchange
Exchange Commissio
Commission n shall
shall
not
not ac
acce
cept
pt or apappr
prov
ove
e the
the arc
arcle
less of 
incorporaon an d by-laws of any
educaonal instuon.

Sec.
Sec. 108. Board of trustees.  – Trustees of 
educaonal
educa onal instuons
instuons organized
organized as non-
stock
stock corp
corpora
oraon
onss shall
shall not be less
less tha
than
n
ve (5) nor more than een (15) 15):
Provid
Pro vided,
ed, how
however
ever,, Th
That
at the number
number of 
trustees shall be in mulples of ve (5).

Unless otherwise provided in the arcles of 

incorporaon on the by-laws, the board of 
trustees of incorporated schools, colleges,
 

avit. The adavit will state that the aant is the head of a religious denominaon or sect and would want to become a corporaon sole
 of the posion. The Iglesia ni Kristo is incorporated as a corporaon sole.
perty really
 

 property and that is usually the case. Who may form and for what purpose? 
st 2/3 of the members have agreed Seto
agre ed to incorporate, that the rules allow them c. incorporate
110. Co Corpthey
rpor
ora desire
aon
on so  – For theto manage their
to. incorporate
sole
le.
purpose of administering and managing, as
trustee, the aairs, property an d
temporalies of any religious
denominaon, sect or church, a corporaon
sole may be formed by the chief 
archbishop
archb ishop,, bishop, pri
priest,
est, minister,
minister, rabbi
or other
other prpresi
esidin
ding
g elder
elder of such
such rel
religi
igious
ous
denominaon, sect or church. (154a)

How formed? 
Se
Sec. 111.  Arcles of incorporaon.  – In
c. 111.
order
ord er to becom
become e a corpor
corporao
aonn sol
sole,
e, the
chief archbishop
archbishop,, bishop,
bishop, priest,
priest, minister,
minister,
rabbi
rab bi or presid
presiding
ing elder
elder of any rel religi
igious
ous
denominaon, sect or church must le with
the Securi
Securies
es and Exchan
Exchange
ge Commis
Commissio sion
n
arcles
ar cles of incorp
incorpora
oraon
on seng
seng forth
forth the
following:

1. Th
That
at he is
is the chief
chief ar
archb
chbish
ishop,
op, bis
bishop
hop,,
RELIGIOUS CORPORATIONS priest, minister, rabbi or presiding elder
Sec. 109. Classes of religious corporaons. of his rel
religi
igious
ous denomi
denomina
naon,
on, sect
sect or
 – Religious corporaons may be church and that he desires to become a
incorporated by one or more persons. Such corporaon sole.
corporaons may be classied into
corporaons sole and religious sociees. 2. That the rules, regulaons and
Religious corporaons shall be governed by discipline of his religious denominaon,
this Chapter and by the general provisions sect or church are not inconsistent with
on non-stock corporaons insofar as they his becoming a corporaon sole and do
may be applicable. not forbid it.

a) Corporaton Sole 3. Th
That
at as such chief
chief archb
archbis
isho
hop,
p, bis
bisho
hop,
p,
 Corpor
Cor porato
atonn sole
sole is a special form of  pr
prie
iest
st,, mini
minist
ster
er,, rabb
rabbii or prpres
esid
idin
ing
g
corporaon usually associated with the elder, he is charged with the
clergy and consists of one person only administraon of the temporalies and
and his successors, who are the management of the aairs, estate
and properes of his religious
incorporated
capacies andby law to give some legal
advantages. denominaon, sect or church within his
 Natonaliy. A corporaon sole does not territoria
territoriall juris
jurisdicon
dicon,, describin
describing
g such
have any naonality but for purposes of  territorial jurisdicon.
ap
appl
plyi
ying
ng ou ourr nao
naona
naliliza
zao
onn laws,
aws,
naona
na onalit
lity
y is det
determ
ermine
ined d not by the 4. The manner in which any vacancy
naon
aonal alit
ity
y of its head
head but by the the occurring in the oce of chief 
naonality of the members constung archbi
archbisho
shop,
p, bishop
bishop,, priest
priest,, min
minist
ister,
er,
the sect in the Philippines even if it is rabbi of presiding elder is required to
headed by the Pope. (Roman Catholic be lled
lled,, acco
accord
rdiing to the the ru
rulles
es,,
Apostolic Church v. LRC, 1957) regulaons or discipline of the religious
 E
Eec
ec o Se Sepa
para
rato
tonn o Mem Membebers
rs.. denominaon, sect or church to which
Members of the sect who le and who he belongs.
formed a separate religious group are
not entled to any right to vote over 5. Th
The
e place
place wh
where
ere the
the pr
prin
inci
cipa
pall o
oce
ce of 
th
the
e prprop
oper
eres
es of thei
theirr foform
rmer
er se
sect
ct.. the corporaon sole is to be established
(Canete v. CA, 1989) and located, which place must be within
 Dissoluton. By ling a veried the Philippines.
declaraon of dissoluon. (JRS at 323)
 

The arcles of incorpora

incorporaon
on may include as said court may have directed, and that it
any other provision not contrary to law for is to the interest of the corporaon that
the reg
egu
ulaon of th the
e aairs of the leave to sell or mortgage should be granted.
corporaon. The applicaon for leave to sell or mortgage
must be made by peon, duly veried, by
Sec. 112. Su Subm
bmis
issi
sion
on of the
the ararc
cle
less of  the
the ch chie
ieff ar arch
chbbisho
ishop p, bisho
ishop,p, priest,
incorporaon.  – The arcles of  minister, rabbi or presiding elder acng as
in
inco
corp
rpor
ora
aon
on mu must
st be veri
veried
ed,, be
befo
fore
re corporaon sole, and may be opposed by
ling, by adavit or armaon of the chief  any member of the religious denominaon,
archbishop
archb ishop,, bishop,
bishop, priest, minister,
minister, rabbi sect or ch chu urch repr epresen
esentted by the
or presiding elder, as the case may be, and corpor
cor porao
aon n sol
sole:
e: Pro
Provid
vided,
ed, Tha
Thatt in cases
cases
accompanied by a copy of the commission, where the rules, regulaons and discipline
cercate of elecon or leer of  of the
the rereli
ligi
giou
ouss de
deno nomi
mina
naoon,n, sect
sect or
ap
appo
poin
intm
tment
ent of suchsuch ch
chie
ieff ar
arch
chbi
bish
shop
op,, church, religious society or order concerned
bishop, priest, minister, rabbi or presiding re
repr
pres
esen
ente
tedd by su such
ch corp
corporora
aon
on so sole
le
elder, duly cered to be correct by any regulate the method of acquiring, holding,
notary public. sell
sellin
ing
g anandd mo mort
rtga
gagi
ging
ng rereal
al esta
estate
te anand d
personal
person al prope
property,
rty, such rules, regulaons
regulaons
From and aer the ling with the Securies and
and disc
discip
ipli
line
ne shshal
alll cont
controrol,
l, and
and thethe
an
andd Exch
Exchan
ange
ge Comm
Commis issi
sion
on of the
the sa
said
id inter
interve
ven
non
on of the the co cour
urts
ts shal
shalll no
nott be
ar
arc
clles of inco
incorp
rpor
ora
ao on, ve
veri
ri
ed by necessary.
adavit
adav it or armaon,
armaon, and accom
accompanie
paniedd
by ththe
e docu
docume
mennts men eno
one
ned
d in the Filling o vacancies
preceding paragraph, such chief archbishop, Sec. 114. FillFillin
ing
g of vaca
vacanciess.  – The
ncie
bishop, priest, minister, rabbi or presiding successors in oce of any chief archbishop,
elder shall become a corporaon sole and bishop, priest, minister, rabbi or presiding
all temporalies, estate and properes of  elder in a corporaon sole shall become the
the religious denominaon, sect or church corporaon sole on their accession to oce
thereto
the retofor
fore
e admini
administe
stered
red or managed
managed by and shall be permied to transact business
him as such chief archbishop, bishop, priest, as such on the ling with the Securies and
minister, rabbi or presiding elder shall be Exchan
Exc hange
ge Commis
Commissio
sion
n of a copy
copy of their
their
held in trust by him as a corporaon sole, co
comm
mmis issi
sion
on,, ce
cer
rc
cat
ate
e of elec
elecon
on,, or
fo
forr the
the us
use,
e, purp
purposose,
e, beha
behalf
lf an
and
d so
sole
le leers of appointment, duly cered by any
benet of his religious denominaon, sect notary public.
or chu
church
rch,, inclu
includin
dingg hos
hospit
pitals
als,, school
schools,
s,
colleges,
colleg es, orph
orphan
an asylu
asylums,
ms, parsonages
parsonages and During any vacanc
During vacancy
y in the oce
oce of chief 
cemeteries thereof. archbishop
archbishop,, bishop, pri
priest,
est, minister,
minister, rabbi
rabbi
or presiding elder of any reli eligi
gio
ous
Need for by-laws denominaon, sect or church incorporated
 No need for by-laws since the business
is conducted by only one man. as a corporaon sole, the person or persons
author
aut horize
ized
d and emp
empowe
owered
red by the rules,
rules,
regula
regu laons
ons or discip
disciplin
line
e of the rel
religi
igious
ous
Power o acquire and alienae propery denominaon, sect or church represented
Sec. 113. Acquision and alienaon of by the corporaon sole to administer the
 property. – Any corporaon sole may tempo
tem pora
rali
lie
ess an
and
d mamana
nagege the aair
aairs,
s,
purchase and hold real estate and personal estate
estate and proper
properes
es of the corcorpor
porao
aonn
property for its church, charitable, sole during the vacancy shall exercise all the
benevolent or educaonal purposes, and powers
pow ers and aut
author
hority
ity of the cor
corpor
porao
aonn
may receive bequests or gis for such sole during such vacancy.
purposes. Such corporaon may sell or
mortgage real property held by it by Dissoluton
obtaining an order for that purpose from Sec. 115. Dissoluon.  – A corporaon sole
the Court of First Instance of the province may
ma y be diss
dissol
olve
ved
d an
and
d its
its aai
aairs
rs sel
seled
ed
where the property is situated upon proof voluntarily by subming to the Securies
made to the sasfacon of the court that and
and Excxchhange
ange Comm
Commisissi
sion
on a veri
verie
ed
d
noce of the applicaon for leave to sell or declaraon of dissoluon.
mortgage has been given by publicaon or
otherwise in such manner and for such me
 

Th
Thee de
decl
clar
ara
aon
on of diss
dissol
olu
uon
on shal
shalll set
set at a duly
duly convened me
meeng
eng of the
forth: body.

1. Th
The
e name
name o
off th
the
e corp
corpor
ora
aon
on.. 3. Th
That
at the inco
incorp
rpor
ora
aonon of the relig
religio
ious
us
societ
societyy or rel
religi
igious
ous order,
order, or dioces
diocese,e,
2. Th
The
e reas
reason
on for
for dissol
dissolu
uon
on and wind
windin
ing
g synod, or district organizaon desiring
up. to inco
incorp
rpor
orat
ate
e is not not fo
forb
rbid
idde
denn by
competent authority or by the
3. The
The aut
author
horiza
izaon
on ffor
or the
the dis
dissol
soluo
uon
n of  cons
const
tu
uon
on,, rule
rules,s, reregu
gula
lao
ons
ns or
the corcorporaon by the parcular discipline of the religious
re ligious denominaon,
religious denominaon, sect or church. sect, or church of which it forms a part.

4. The names and addresses of the 4. That

That the
the re
reli
ligi
giou
ouss soci
societ
ety
y or re
reli
ligi
giou
ouss
pe
pers
rson
onss who
who are
are to su
supe
perv
rvis
ise
e the
the or
orde
der,
r, or dioc
dioceseese,, syno
synod,
d, or dist
distri
rict
ct
winding up of the aairs of the organizaon desires to incorporate for
corporaon. the admi
admin
nistr
istraaon
on of its aai aairsrs,,
properes and estate.
Upon ap
Upon appr
prov
oval
al of su
such
ch decl
declar
ara
aon
on of 
dissoluon by the Securies and Exchange 5. Th
Thee place
place wh
where
ere the
the pr
prin
inci
cipa
pall o
oce
ce of 
Commission, the corporaon shall cease to the corporaon is to be established and
carr
carry
y on its
its op
oper
era
aon
onss ex
exce
cept
pt fo
forr the
the located, which place must be within the
purpose of winding up its aairs. Philippines.

Reli
Relig
gio
iou
us so
soci
cie
etes or co
corp
rpo
orat
ratons 6. The names, naonalies, and
aggregae residence
reside ncess of the truste
trustees
es ele
electe
ctedd by
Sec. 116. Religious sociees. – Any religious the religious society or religious order,
society or religious order, or any diocese, or the
the dioc
dioces
ese,
e, syno
synod,
d, or dist
distri
rict
ct
syno
synod,d, or distdistri
rict
ct orga
organi
niza
zao
on
n of an anyy organizaon to serve for the rst year
rel
religi
igious
ous denomi
denominanaon,
on, sect
sect or church
church,, or such other period as may be
unless forbidden by the constuon, rules, prescribed
presc ribed by the laws of the religi
religious
ous
regula
regu laons
ons,, or dis
discip
ciplin
line
e of the relreligi
igious
ous so
soci
ciety
ety or rereli
ligi
giou
ouss or
orde
der,
r, or of thethe
denominaon, sect or church of which it is a diocese, synod, or district organizaon,
part, or by competent authority, may, upon the
the bo
boar
ard
d of trtrus
uste
tees
es to be nonott less
less
wrien
wri en con
consen
sentt and/or
and/or by an ar arma
mave ve than ve (5) nor more than een (15).
vote at a meeng called for the purpose of 
at least two-thirds (2/3) of its membership,
incorp
inc orpora
orate
te for the admini
administr
strao
aon
n of its
temporalies or for the management of its
aairs, properes and estate by ling with
the Securies
Securies and Excha Exchange
nge Commi
Commission
ssion,,
arcl
arcleses of inco
incorp
rporora
aonon veri
veried
ed by the the
adavit of the presiding elder, secretary, or
clerk
cler k or other
other member
member of suc such
h rel
religi
igious
ous
society or religious order, or diocese, synod,
or dist
distri
rict
ct or
organ
ganiziza
aon
on of the the relig
religio
ious
us
denominaon, sect or church, seng forth
the following:

1. Th
That
at the relig
religio
ious
us socie
society
ty or religi
religiou
ouss
or
order
der,, or dioc
dioces
ese,
e, sy
syno
nod,
d, or dist
distri
rict
ct
organizaon is a religious organizaon
of a relig
SEC Opinion religio
No. ious
us de
04-45,deno
nomi
mina
(Nov. nao
28,on,
n, se
sect
2004) ct or
church.
Re: Term of Existence of Religious Corporaons
Secon 116 (as well as Sec. 160 of the former Corporaon Law) does not provide for a term of existence of religiou
2. That at lea
east
st two-t
wo-thi
hird
rdss (2/3
(2/3)) of its
membershi
member ship
p have
have given
given their
their wrien
wrien
consent or have voted to incorporate,
 

Case
Long v. Basa (2001)
Sincein maers purely

vil tribunals, then a church member who is expelled from the membership by the church authories, or a priest or minister who is by the
, Nov.28, 2004 to Ferrer and Ferrer Law Oce re term of existence of religious corporaon.
 

corporaon sole or a corporaon aggregate. As such, the islaw

disso intends
sollve the that
the religious
juri
juridi call eorgani
dica organizaons
nty.. zaons
nty Forr may exist perp
Fo
disso
issolluon
uon to be e eec
ecvvee “[t]h
[t]he
e
requirements ents mandated by th
the
e
Corpor
Cor porao
aonn Code
Code should
should have
have bee beenn
strictly complied with.” Vesagas v. Court
of Appeals, 371 SCRA 509, 516 (2002).
A corporaon cannot extend its life by


amendment of its arcles of  

incorporaon eected during the three-
yearr statut
yea statutory
ory period
period for liquiliquida
daon on
when its original term of existence had
DISSOLUTION alre
alreadady y expi
expire
red,
d, as thethe same
same woulwould d
Dissoluon of a corporaon is the co
consnst
tutute
e neneww bu busi
sine
ness
ss.. Alha
Alhambmbra
ra
ex
exn
ngu
guis
ishm
hmen
entt of the the fran
franch
chis
ise
e of a Ci
Ciga
garr & Ci Ciga
gare
ree
e Manuf anufa actur
cturiing
cor
corporaon and terminaon of its Co
Compmpan any,
y, Inc.
Inc. v. SESEC,
C, 24 SC SCRA
RA 269269
corporate existence. (1968).
When
 hen the the peri
perio
od of co corp
rpor
orat
atee life
Modes o Dissoluton: expires, the corporaon ceases to be a
1. Volu
Volunt
ntar
aryy Diss
Dissol
olu
uon
on body
body corp corpor
orat
ate
e foforr the
the purp
purpos
ose e of 
2. In
Invo
volu
lunt
ntar
aryy Dis
Disso
solu
luo
onn connuing the business for which it was
3. Shor
Shorte
teni
ning
ng of te
term
rm organized. PNB v. Court of First Instance
4. Ex
Expi
pira
rao
onn of tter
erm
m (JRS
(JRS a
att 311)
311) of Rizal, Pasig, Br. XXI, 209 SCRA 294
5. Failure to organize and co commmence (1992).
business within two years from the date
of issuance of cercate of  
incorporaon
6. Legi
Legisl
sla
aveve Diss
Dissol
olu
uonon (CLV
(CLV’s
’s CLR
CLR at
936)

Eecs o Dissoluton:
Dissoluton:
1. Trans
ransfe
ferr of Lega
Legall t
tle
le to cocorp
rpo
orate
rate
property.
2. The corporaon ceases as a body
corporate to connue the business for
which it was established.
3. Connu
Connuaoaon
n of a bod
bodyy corpo
corpora
raon
on (the
(the
corp
corpoorao
raon
n cocon
nn
nue
uess as a body
corporate for 3 years for purposes of 
winding up or liquidaon).
4. Aer the expiraon of the 3 year
wind
windin
ingg up peperi
riod
od,, the
the corp
corpor
ora
aon
on
ceases to exist for all purposes. (JRS at
314).

 The terminaon of the life of a juridical

ent
entyy do
does
es not
not by itse
itself
lf caus
cause
e the
the
exnc
ex ncon
on or dim
diminu
inuon
on of the rights
rights
and liability of such enty, since it is
allowed to connue as a juridical enty
for 3 years for the purpose of  
prosecung and defending suits by or
against it and enabling it to sele and
clos
close
e its
its a
aai
airs
rs,, to disp
dispos
ose
e of anandd
convey its property, and to distribute its
assets. Republic v. Tancinco, 394 SCRA
386 (2002).
 A boarard
d re
reso
solluo
uon to diss
dissol
olve
ve the
corporaon does not operate to so
 

oluon approved by a majority of directors and a resoluon approved by at least 2/3 of the t he stockholders In Secon 118, where no credit
ll indicate the claims of creditors. That will be set for hearing and not less than thirty (30) days nor more than sixty (60) days aer the ent
 

places like the bullen board of a municipal

hall, post
oing to dissolve a corporaon oce,that
because the isplaza
a legaland then the SEC
requirement?
m the public, the court will set thatthat
considered for hearing
as a serious and violaon.
determineWhen w/n a minority stockholder les a case and asks to dissolve the corpora
issoluon was approvedthe corporaon
by the SEC evenshould be dissolved.
if the directors and stockholders pass a resoluon dissolving the corporaon that is not eecve
Th
The
 example renew its contract e ofth
thirird
d on
lease one e yo
you
becauseu will
wi ll no
it is just
just shor
shorte
longer atenn the
theconcern.
going
distribute balance to thecorporate
stockholders. life and this is the simplest and
fastes
fas
r they may appoint a trusteetestlike
t way when of Ford
dis
dissol
solvin
ving g the cor
Philippines corpor
porao
decided aon
tonclose its subsidiary here one of the last acts of the BOD was tto
o pass a
volu
voluntntar
arilily
y like
like wh whenen Ford Ford PhilPhilip
ippi
pine
ness
decided to close its subsidiary they simply
amende
ame nded d the ar arcles
cles of cor corpor
porao
aon n tha
thatt
the cor
corporporao
aon n wil
willl exi
existst unl
unl Decemb
December er
31, 1978.
The SEC will require geng a tax clearance
from the BIR and the stockholders will be
required to sign an undertaking that they
will answer for the claim of the creditors to
the extent of the liquidang dividends they
will receive.
Then you can have an involuntary
dissoluon. This could be done by ling a
quo warranto case under rule 66 of the ROC
on th thee grouground nd menmeno on ned therthere
e or a
corpor
cor poraoaon n can be dis dissol
solved
ved for cert
certain
ain
viol
viola
aonon of the the co corp
rporora
ao on cod
code as
menoned in the Corporaon Code or PD
902-A and also a minority stockholder may
le a peon to dissolve the corporaon
wher
wh ere e th
the
e majo
majori rity
ty is mism
misman anag
agin
ing
g the
the
assets
ass ets of the corporcorporaoaon,n, disdissip
sipan
angg its
assets
ass ets,, and frafraudu
udulenlently
tly dis
dispos
posing
ing of its
properes and a receiver may be appointed
in an acon for involuntary dissoluon.
The SC held in the leading case of El Hogar
Fil
Filip
ipin
inoo, 50 Phi Phil. 39 399(9(19
192727)) the rs rst
corporaon organized under the
Corpor
Cor poraoaonn Act,
Act, the govern
governmen mentt led
led a
ca
case
se to diss disso
olve
lve tha that co corprpor
ora
aoon and
in
invo
vokeked d 17 grou
ground nds,s, the
the SC de deni
nied
ed the
the
peon.
Building and loans associaon like banks are
required to dispose of within 5 years of any
properes they foreclosed they disposed of 
th
thee proproper
ere
ess aer
aer 6 year yearss but they they
exerted their best eorts, they hired real
est
estate broker erss, they adversed in
newspa
new spaper
perss but they jus justt could
could notnot nd
buyers, they acquired this land and building,
the SC held that it is not illegal, that they
leased the space that they did not need for
th
thei
eirr o
oce,
ce, that
that is no nott ille
illegal
gal they
they ar are
e
maxi
ma ximi
mizi
zing
ng the
theirir prope
propert rty,
y, that
that they
they
pr
prov
ovidide
e a pr prov
ovis
isio
ion
n in thethe by by-l
-law
awss that
that
stockholders can be compelled to surrender
their shares, to be bought out well the court c ourt
sai
said th that
at that
that is void void butbut that
that is not
sucient ground to dissolve the
corpor
corporao n. In oher words he cour is
aon.
saying ha you do no dissolve a
 

Supposed to be, this was the rule beore if  object of the meen eng for three (3)
any case is not nished within the three consecu
cuve week eeks in a newsp wspaper
year period, the case will be abated published in the place where the principal
whet
wh ethe
herr the
the corp
corporora
aon
on is plai
plain
n or oce of said corporaon is located; and if 
whether it is def efe
endant but recen entt no newspaper is published in such place,
 jurisprudence has rendered that obsolete. then in a newspaper of general circulaon
That rule is applicable if it is the directors in the Philippines, aer sending such noce
winding up th thee corporaon. if the to each stockholder or member either by
corporaon is under receivership, it is the registered mail or by personal delivery at
receiver who may wind up the aair of the least thirty (30) days prior to said meeng.
corporaon. But if it is the trustee that will A copy
copy of the resresolu
oluon
on author
authoriziizing
ng the
not apply, the trust will subsist unl the dissoluon shall be cered by a majority of 
aairs of the corporaon are wound up and the
the bo
boarard
d of dire
directo
ctors
rs or tr
trus
ustee
teess an
and
d
un
unl
l an
anyy cred
credit
itor
or can
can susue
e the
the trtrus
uste
tee
e coun
counter
tersi
sign
gned
ed by the the secr
secreta
etary
ry of thethe
provided
provi ded that the applicabl
applicable
e presc
prescripv
ripve
e corporaon.
corpo raon. The Securies
Securies and Exchange
period has not yet lapsed. So if his cause of  Co
Comm
mmisissi
sion
on shal
shalll ther
thereu
eupo
pon
n issu
issuee the
the
acon is based on a wrien contract he has cercate of dissoluon.
ten (10) years to sue the trustee.
The Court has said that the remedy there if   When a cor
When corpor
porao
aonn is contem
contempla
plang
ng
the three years will end and there are sll dissoluon, it must submit tax return on
pending cases, is for the board to appoint a the inco
ncome earearned by it frfrom
om the
the
trustee but more recent jurisprudence has beginning of the year up to the date of 
fashioned a praccable soluon to that the its dissoluon and pay the
lawyer handling the cases may be corresponding tax due. BPI v. Court of 
considered
considered as truste
trustee
e of the cor
corpor
porao
aonn Appeals, 363 SCRA 840 (2001).
and therefore the cases will not be abated
but should connue. Requiremens where crediors are aeced
In one case, the SC held that the directors Sec. 119. VolVolunt
untary
ary dissol
dissoluo
uon n where
where
may be considered as trustees aer three cr
cred
edit
itor
orss ar
are
e aaec
ecte d .  – Where the
ted 
years so that they can connue to wind up dissoluon of a corporaon may prejudice
the aairs of the corporaon and in eect the rights of any creditor, the peon for
the three year period has beco com
me dissoluon shall be led with the Securies
ineectual. and Exchan
Exchange
ge Commis
Commissio
sion.
n. The peon
peon
shall be signed by a majority of its board of 
Wha are he various mehods o  directors or trustees or other ocers having
dissolving corporatons? the management of its aairs, veried by its
Sec. 117. Met
Method
hodss of dissol
dissoluon.  – A
uon president or secretary or one of its directors
corporaon formed or organized under the or trustees, and shall set forth all claims and
provis
provision
ionss of this
this Cod
Code
e may be dis
dissol
solved
ved demands against it, and that its dissoluon

voluntarily or involuntarily. was resolved

of the sto
stockhupon
ckhold ersbyrepres
olders the
rep armave
resenn
enngg at vote
least
least
Volunary two-thirds (2/3) of the outstanding capital
Requirements where no creditors are stock or by at least two-thirds (2/3) of the
aected. members at a meeng of its stockholders or
members called for that purpose.
Sec.
Sec. 118
118.. Volun
Voluntary
tary dissoluo
dissoluon
n where
where no
creditors
credi aected.  – If dissoluon of a
tors are aected. If the
the pe
peonon is su
suc
cie
ient
nt in fo
form
rm and
and
corporaon does not prejudice the rights of  substa
sub stance
nce,, the Com
Commis
missio
sion
n sha
shall,
ll, by an
any creditor having a claim against it, the order recing the purpose of the peon,
dis
dissol
soluo
uonn may be eeceected
ted by majori
majority
ty x a date on or before which objecons
vote of the board of directors or trustees, thereto may be led by any person, which
and by a resoluon duly adopted by the date shall not be less than thirty (30) days
armave vote of the stockholders owning no
norr more
more than
than sixty
sixty (60)
(60) da
days
ys aer
aer the
the
at least two-thirds (2/3) of the outstanding entry of the order. Before such date, a copy
capital stock or of at least two-thirds (2/3) of the order shall be published at least once
of the members of a meeng to be held a week for three (3) consecuve weeks in a
upon call of the directors or trustees aer newspaper of general circulaon published
publicaon of the noce of me, place and in the municipality or city where the
 

pri
princip
ncipal
al o
oce ce of the
the co
corp
rpor
ora
ao
on is 6. Ad
Adavi
avit of stoc stock
khol
holders
ders/d
/diirect
rector
orss/
situated, or if there be no such newspaper, ocers/memb
ocer s/members
ers regard
regarding
ing any vali
validd
then in a newspaper of general circulaon claim against the corporaon.
in the Philippines, and a similar copy shall 7. Late
Latest
st balan
alance
ce shee
sheett which
hich must ust be
be posted for three (3) consecuve weeks earlier than the date of the meeng of 
in three (3) public places in such the stockh
ckholders approving the
municipality or city. amendment of the arcles of  
incorporaon.
Upon ve (5) days’ noce, given aer the
date on which the right to le objecons as 8.
9. Noc
No
Taxxce
Ta cleeara
cleaof diss
di
rancssol
nceeolu
uon
fromon.
from . BIR
tthe
he BIR..
xed in the order has expired, the 10.
10. A
Adadavivitt of thethe pu
publblis
isher
her an
anen
entt the
the
Co
Comm
mmisissi
sion
on shal
shalll pr
prococeed
eed to he hearar the
the publicaon of the noce of the
pe
pe
on
on an andd tr
try
y anany
y isissu
sue
e made
made by the the dissoluon once a week for three (3)
objecons led; and if no such objecon is consecuve weeks in two (2)
sucien
su cient,t, and the materi
materialal allega
allegaons
ons of  newspapers of general circulaon in the
th
the
e peeoonn ar
aree trtru
ue, it shal alll re
ren
nder Philippines.
 judgment dissolving the corporaon and
dir
direcn
ecng g such
such dis
dispos
posio
ionn of its assets
assets as The SEC may appoint a receiver to collect
 jusce requires, and may appoint a receiver su
such
ch asse
assets
ts and
and paypay the
the debt
debtss of the
the
to collect such assets and pay the debts of  corporaon.
the corporaon. It ha
hass be
been
en he
held
ld that
that wh
wher
ere
e cocorp
rpor
orat
ate
e
directors are guilty of a breach of trust and
Sec. 120. Diss
Dissol
olu
uon
on by sh shor
orte
teni
ning
ng intracorporate remedy is fule, the minority
corpor
corporate term.  – A volu
ate term. voluntary
ntary diss
dissoluo
oluonn stockholders may resort to the courts for
may be eected by amending the arcles of  appropriate relief and, incidentally, as for
in
inco
corp
rpor
ora
aon
on to shor shorten
ten thethe corpo
corpora rate
te the
the appo
appoin
intm
tmen
entt of a re rece
ceiv
iver
er fo
forr the
the
term
term pupurs
rsua
uant
nt to thethe pr
prov
ovisisio
ions
ns of thisthis protecon of their rights.
Code. A copy of the amended arcles of 
in
inco
corp
rpor
ora
aon
on shal
shalll be subm
submi ied
ed to the the Secton 121. Invo
Secton Involunta
luntary
ry dissoluo
dissoluon n. – A
Secur
Securi
ies
es anandd Ex
Exch
chan
ange
ge CoComm mmisissi
sion
on in corp
corpor
ora
aon
on may
may be diss dissol
olve
vedd by the the
accordance with this Code. Upon approval Securies and Exchange Commission upon
of the amended arcles of incorporaon of  l
lin
ing
g of a veri
verie
ed d comp
complalain
intt and
and aer
aer
the expiraon of the shortened term, as the proper noce and hearing on the grounds
case
case may
may be,be, the
the corp
corpor
ora
aon on shshal
alll be pro
provid
vided by exexiisn
sng laws
laws,, rurule
less and
and
de
deem
emeded diss
dissol
olve
ved
d with
withououtt any
any furt
furtheherr regulaons.
proceed
pro ceeding
ings,
s, subject
subject to the pro provis
vision
ionss of 
this Code on liquidaon. Rules o Cour provides ha a quo
warra
arranto pro
nto procee
ceedin
dings
gs may
may be bro
brough
ugh
SEC requiremens on shorening corporae agains a corporaton:
erm
1. Amended arcle of incorporaon 1. When it has oended against a
provision of an Act for its creaon or
short
horten
eniing it itss corp
corpororat
ate
e ter erm
m in renewal.
accordance with Secon 16 of the Code. 2. When
When it has forf
forfei
eited
ted its
its pri
privi
vile
leges
ges an
andd
2. A direct
director’
or’ss cer
cerca
catete signe
signed d by aatt lea
least
st franchises by non-user.
a majority of the directors/trustees and 3. When
When it has
has com
commi mie
edd or omie
omied d an
a
aeseste
tedd by the the sesecr
cret
etar
ary,
y, cer
cered act which amounts to a surrender of its
under oath, stang that the amended corporate rights, privileges, or
arcle
ar cless of incorp
incorpora
oraon
on is a truetrue and
and franchises.
corr
correc
ectt co
copypy as amen amende ded d by the the 4. When
When it has misu
misusesedd a ri
righ
ght,
t, privi
privile
lege
ge,,
stockholders represenng at least 2/3 or franchise conferred upon it by law,
of the outstanding capital stock or at or whenhen it has ex exer
erci
cise
sed
d a ri righ
ght,
t,
le
leas
astt 2/3
2/3 of the the memb
member erss in case of  privilege or franchise in contravenon
non-stock corporaons. of law.
3. A cer
cercacao
on n tha
thatt no cre
credi
dito
torr shall
shall be
prejudiced by the dissoluon. Secton 122. Corporate liquidaon.  – Every
4. A list
list of
of cr
cred
edit
itor
ors,
s, if
if any.
any. corpor
corporao
aonn whose
whose cha
charter
rter expire
expiress by its
5. Co
Cons
nsen
entt of the cred
credititor
orss with
with regar
regard
d to own limitaon or is annulled by forfeiture
the dissoluon. or otherwise, or whose corporate existence
 

for oth
other
er purpos
purposeses is termin
terminate
atedd in any 5. Dissoluon and liquidaon
othe
otherr mann
manner er,, sh
shal
alll neve
nevert
rthe
heleless
ss be
connued as a body corporate for three (3) A corporaon that has a pending acon and
years aer the me when it would have whic
wh ich
h cann
cannot
ot be term
termin
inat
ated
ed with
within
in the
the
been
been so diss dissol
olve
ved,
d, fo
forr the
the purp
purpos ose
e of  thre
three-e-ye
year
ar peri
period
od aer
aer diss
dissol
olu
uon
on is
pr
prososecu
ecun
ng g and
and dedefe
fendndin
ing
g suit
suitss by or au
auth
thor
oriz
ized
ed to co
conv
nvey
ey all
all its
its pr
prop
opert
ertyy to
against it and enabling it to sele and close tr
trus
uste
tees
es to enab
enable
le it to pros
prosecu
ecute
te an
and
d
it
itss a
aai
airs
rs,, to disp
dispos
ose
e of an and
d conv
convey ey it
itss defend suits by or against the corporaon
property and to distribute its assets, but not
for the purpose of connuing the business beyond the three-year period.
for which it was established. Disributon o Asses
Dist
Distri
ribu
buo
onn am
amon
ong
g the
the shar
shareh
ehol
olde
ders
rs of th
the
e
At any me during said three (3) years, the assets in winding up, formal or informal may be
corporaon is authorized and empowered made only to the prior claim of creditors and
to convey all of its property to trustees for aer all debts have been paid or provided for.
th
the
e bebene
net
t of st stoc
ockh
khol
olde
ders
rs,, memb
memberers,
s, This is somemes expressed in terms of the trust 
credito
creditors,
rs, and other
other persons
persons in int
interes
erest.
t.  fund doctrine.
From and aer any such conveyance by the
corporaon of its property in trust for the
bene
benet
t of itsits ststoc
ockh
khol
olde
ders
rs,, memb
memberers,
s, Liquidaton Rehabiliaton
creditors and others in interest, all interest - Connotes a winding - Connotes a
which the corporaon had in the property up or seng with reopening of 
terminates, the legal interest vests in the creditors and reorganizaon
trustees, and the benecial interest in the debtors. .
stockholders, members, creditors or other
persons in interest. - It is a winding up of  - Contemplates
a corporaon so a connuance
Up
Upon
on th the
e wind
windin
ing
g up of the the corp
corpor
oratate
e that assets are of corporate
a
aai
airs
rs,, an
any
y as
asse
sett dist
distri
ribu
buta
tabl
ble
e to an anyy distributed to those life and
creditor or stockholder or member who is entled to receive acvies in an
unkn
unknowown n or cann
cannotot be fo foun
und
d shshal
alll be them. eort to
escheated to the city or municipality where restore and
such assets are located. - It is
i s th
t he p
prrocess of
of   reinstate the
re
redu
duci
cing
ng asse
assets
ts to corporaon in
Except by decrease of capital stock and as cash, discharging its former
othe
otherw
rwis
ise
e al
alllowed
owed by thisthis Code
Code,, no liabilies and posion of  
corporaon shall distribute any of its assets divi
dividi
ding
ng surp
surplu
luss or successful
or property except upon lawful dissoluon loss. operaon and
an
and
d aaer
er paym
paymen entt of all
all its
its debt
debtss an
and
d solvency.

liabilies. Sect
Secton
on 12
123 3. Den
Deniion
on and ri righ
ghts
ts of 
 foreign corporaons.  – For the purposes of 
Mehods o Liquidaton this Code, a foreign corporaon iiss one
1. Liquidaon by the directors themselves.
2. Liquidaon by a duly appointed formed,, organi
formed organized
zed or exisn
exisng g under
under any
receiver. laws other than those of the Philippines and
3. Liqu
Liquid
ida
aon
on by trust
trustee
eess to whom
whom the
the whos
wh osee laws
laws allo
allow
w Fi
Fili
lipi
pino
no ciciz
zen
enss and
and
board
boa rd of dir
directo
ectors
rs had convey
conveyed
ed the
the co
corp
rpor
ora
aon
onss to do bubusisine
ness
ss in its
its own
own
corporate assets. country or state. It shall have the right to
transact business in the Philippines aer it
Rules o corporae recovery shall
sha ll have
have obt
obtain
ained
ed a lic
licens
ense
e to transa
transact
ct
The SEC approved the Rules of Procedure business in this country in accordance with
on Corporate recovery eecve on January
January this Code and a cercate of authority from
15, 2000. the appropriate government agency.
1. It gove
governs
rns the rules
rules o
on
n den
denio
ion
n of
terms Defniton
2. Comm
Commonon prov
provis
isio
ions
ns Fo
Fore
reig
ign
n CoCorp
rpor
ora
aon
on is on one
e foform
rmed
ed,,
3. Su
Susp
spen
ensi
sion
on of pa
paym
ymenents
ts organized or exisng under any laws other
4. Re
Rehhabi
abilita
litao
onn than those of the Philippines and whose
 

laws allow Filipino cizens and corporaons 3. The

The name
name and
and addr
addresesss of its
its re
resi
side
dent
nt
to do business in its own country or state. agent
agent aut
author
horize
ized
d to accept
accept sum
summon
monss
and process in all legal proceedings and,
Secton 124. Applicaon to exisng foreign pendin
pen ding
g the est
establ
ablish
ishmen
mentt of a local
local
corpor
cor porao ns.  – Every foreign corporaon
aons. oce, all noces aecng the
which on the date of the eecvity of this corporaon.
Code is authorized to do business in the
Philippines under a license therefore issued 4. Th
The
e place
place in the
the Phi
Phili
lipp
ppin
ines
es wh
where
ere the
the
to it, shall connue to have such authority
under the terms and condion of its license, corporaon intends to operate.
subject to the provisions of this Code and 5. Th
Thee speci
specic
c p
purp
urpose
ose or purp
purpose
osess which
which
other special laws. the corporaon intends to pursue in the
tr
tra
ansa
nsacon
con of its busi usiness
ness in thethe
A foreig
foreignn corpor
corporao
aon
n can have no leg legal
al Philippines: Provided, That said purpose
existence beyond the bounds of the state or or purposes are those specically stated
sovereignty by which it is created. It exists in the cercate of authority issued by
only in contemplaon of law and by force of  the appropriate government agency.
the
the law,
law, an
and
d wher
where
e that
that law
law ceas
ceases
es to
oper
operat
ate,
e, the
the corp
corpor
ora
aon
on cancan have
have no 6. The names and addresses of the
existence. It must dwell in the place of its presen
presentt dir
directo
ectors
rs and ocers
ocers of the
creaon
crea on,, and cannot
cannot migrat
migrate e to anothe
anotherr corporaon.
sovereignty.
7. A stat
statem
emen
entt of its auth
author
oriz
ized
ed capi
capita
tall
Foreign corporaons may do business in the stoc
stock
k an
and
d the
the agaggrgrega
egate
te nunumb
mber
er of 
Philippines either by directly entering into shar
ares
es whi
which thethe co corp
rpoorao
raon
n has
transacons with resident persons, rms or authority to issue, itemized by classes,
corp
corpor
ora
aon
onss or by crea
creang
ng a dodome
mes
scc par value of shares, shares without par
subsidiary corporaon which would have its value, and series, if any.
own disnct personality.
8. A statem
statemen entt of its
its outst
outstan
andi
ding
ng cap
capit
ital
al
Licensed foreign corporaons is authorized stoc
stockk an
andd the
the ag
aggrgrega
egate
te nu
numb
mber
er of 
to do bubusi
sine
ness
ss in the
the Phil
Philip
ippi
pines
nes shal
shalll shar
ares
es whiwhich thethe co corp
rpoorao
raonn has
connue to have such authority under the issued, itemized by classes, par value of 
terms and condion of its license, subject to shares,
shar es, shares without
without par value, and
the provisions of the Code and other special series, if any.
laws.
9. A stat
statem
emen
entt of the
the amo
amount
unt actu
ctually
ally
Secton 125.  Applicaon for a license.  – A
Secton paid in.
foreign corporaon applying for a license to

tra
transa
subnsact
mitct tbusine
bus
o tiness
he ssSecuri
in ries
Secu theesPhi
Philip
lippin
and pines
eshange
sha
shall
Exchan
Exc gell 10. Such
Such addiona
addionall inf
inform
ormao
aonn as may be
necess
nec essary
ary or approp
appropria
riate
te in order
order to
Comm
Commiissi
ssion a copy of its arcles of  enab
enable
le the
the Se
Secu
curi
rie
ess an
andd Exch
Exchan
ange
ge
inco
incorp
rpor
ora
aon
on anandd by-l
by-law
aws,
s, cer
cere
edd in Commission to determine whether such
accordance with law, and their translaon corporaon is entled to a license to
to an ocial language of the Philippines, if  transact business in the Philippines, and
necessary. The applicaon shall be under to dete
deterrmi
min
ne and
and assasses
esss the
the fees
fees
oath
oath anand,
d, unle
unless
ss alre
alread
adyy stat
stated
ed in its
its payable.
arcless of incorporao
arcle incorporaon, n, shal
shalll specicall
specicallyy
set forth the following: Aached to the applicaon for license shall
be a duly executed cercate under oath by
1. The
The da
date
te a
and
nd term of inco
incorpo
rpora
raon.
on. the aut
author
horize
ized
d ocial
ocial or ocial
ocialss of the
 jurisdicon of its incorporaon, aesng to
2. The addres
esss, including the strtre
eet the
the fact
fact that
that the
the laws
laws of thethe coun
countr
tryy or
number, of the principal oce of the state of the applicant allow Filipino cizens
corporaon in the country or state of  and cor
corpor
porao
aonsns to do busine
business
ss the
therei
rein,
n,
incorporaon. and that
that the
the appli
pplica
can
nt is an ex exiisng
sng
corp
corpor
ora
aon
on in go good
od stan
standi
ding
ng.. If susuch
ch
cercate is in a foreign language,
language, a
 

translaon thereof in English under oath of  Se

Secu
curi
rie
ess and
and ExExch
chan
ange
ge CoComm
mmisissi
sion
on,,
the translator shall be aached thereto. consis
con sisng
ng of bonds
bonds or other
other eviden
evidencece of 
indebt
ind ebtedn
edness
ess of the Govern
Governmen
mentt of the
The appli
applicao
caon n for a lic
licens
ense
e to tratransa
nsact
ct Philip
Phi lippin
pines,
es, its pol
polic
ical
al subdiv
subdivisi
isions
ons and
business in the Philippines shall likewise be instrumentalies, or of government-owned
accompanied by a statement under oath of  or cocont
ntro
roll
lled
ed corp
corpor
ora
aononss an
and
d en
eneses,,
the presiden entt or any other person shares of stock in “registered enterprises”
authorized by the corporaon, showing to as this term is dened in Republic Act No.
the
the sasas
sfa
fac
con
on of thethe Secu
Securirie
ess an
and
d
Exchange Commission an d other 5
co1rpor
86ora
corp , ao
sohns
ares re ofster
regi
gist sed
eredtock in in the
the domstoc
eock
st skc
governmental agency in the proper cases exchang
exch ange,e, or shares
shares of stock
stock in domes
domescc
that the applicant is solvent and in sound insura
insurance nce compan
companies ies and ban banks,
ks, or any
nanci
na ncial
al con
condi
dion,
on, and seseng
ng forth
forth the combin
com binao
aon n of these
these kinkinds
ds of securi
securies
es,,
assets and liabilies of the corporaon as of  with an actual market value of at least one
th
the
e date
date notnot exexce
ceed
ediing one
one (1)(1) yea
earr hu
hundndre redd thouthousa
sand
nd (P10(P100,
0,000
000.) .) pe peso
sos;s;
imme
immedidiat
atel
elyy prio
priorr to the
the lin
lingg of the
the Pr
Prov
ovid ided,
ed, ho howe
weve
ver,
r, Th
Thatat with
withinin sixsix (6)
(6)
applicaon. mon
mo nths
ths aer
aer ea each
ch sc
scal yea earr of the the
lice
licens
nsee ee,, the
the Secu
Securirie
ess and
and Ex Exch
chan
angege
Foreign
Foreig n bankin
banking,
g, na
nanci
ncial
al and ins
insura
urance
nce Commis
Com missio
sion
n sha
shall
ll requir
require e the licen
licensee
see to
corporaons shall, in addion to the above deposit
depos it addional
addional securies
securies equiv
equivalent
alent in
requirements, comply with the provisions of  actual market value to two (2%) percent of 
exisng laws applicable to them. In the case the amount by which the licensee’s gross
of al
alll othe
otherr fo
fore
reiign co
corp
rpo
orao
raons
ns,, no inco
income me fo forr that
that ssca
call year
year excee
exceeds ds v
ve e
applicaon for license to transact business mi
milllliion (P5,0
P5,000
00,0
,000
00.0
.00)
0) peso
pesos. s. The
in the Philippines shall be accepted by the Securies
Securi es and Exchange
Exchange Commission
Commission shall
Secu
Securi
rie
ess an
andd Exch
Exchan
ange
ge Comm
Commis
issi
sion
on also require deposit of addional securies
wi
with
thou
outt pr
prev
evio
ious
us auauth
thor
orit
ity
y from
from the
the if the actual market value of the securies
appropriate government agency, whenever on deposit has decreased by at least ten
required by law. (10%) percent of their actual market value
at the the m me e they
they were
were depo
deposi site
ted.
d. The
The
Securies and Exchange Commission may at
Secton 126. Issuance
Issuance of a licen se.  – If the
license. its discreon release part of the addional
Secur
Securiies
es and
and Ex Exch
chan
ange
ge Co Comm
mmisissi
sion
on is secu
securi ries
es de depo
posi
site
tedd with
with it if the the gross
gross
sase
sa sed d that
that the appappli
lican
cantt has com
compli
plied
ed income of the licensee has decreased, or if 
with all the requirements of this Code and the
the actua ctuall mamarkrket
et valvalue of the tot total
other
oth er specia
speciall laws,
laws, rules
rules and reguregula
laons
ons,, securi
sec uries
es on deposi
depositt has increa
increasedsed,, by
the Commission shall issue a license to the more than ten (10%) percent of the actual
ap
appl
plic
ican
antt to trantransa
sact
ct busi
busineness
ss in the the market value of the securies at the me
Philip
Philippin
pines
es for the purpos
purpose e or purpo
purposes
ses they
the y werwere e deposi
deposited
ted.. The Securi
Securieses and

specied in such
the license, such license.
foreign Upon issuance
corporaon of 
may Exchange
Exchan ge Com
Commis
missio
sionn may
may,, fro
from
m me to
me, allow the licenlicensee
see to subs
substute
tute other
comm
commen ence
ce to tr tran
ansa
sact
ct bubusi
sine
ness
ss in the
the securies for those already on deposit as
Philippines and connue to do so for as long long as the licensee is solvent. Such licensee
as it rereta
taiins its auth
autho
ority
rity to act as a shall be entled to collect the interest or
corporaon under the laws of the country dividends on the securies deposited. In the
or sta
state
te of its incor
incorpor
porao
aon,n, unl
unless
ess such
such event the licensee ceases to do business in
lic
licens
ense
e is soosooner
ner surren
surrender
dered,
ed, rev
revoke
oked,
d, the Philippines, the securies deposited as
suspended or annulled in accordance with afor
afores
esai
aid
d shshal
alll be re retu
turn
rned
ed,, upon
upon the
the
this Code or other special laws. lic
licens
ensee’
ee’ss app
applic
licao
aonn the
theref
refor
or and upo upon
n
proof to the sasfacon of the Securies
Within sixty (60) days aer the issuance of  and Exchange Commission that the licensee
th
the
e licen
license
se to trtran
ansa
sact
ct bu
busi
sine
ness
ss in the
the ha
hass no liab
liabil
ilit
ity
y to PhilPhilip
ippi
pine
ne resid
residen
ents
ts,,
Ph
Phil
ilip
ippi
pine
nes,
s, the
the lice
licens
nse,
e, exce
except
pt fo
forei
reign
gn including
including the GovGovernmen
ernmentt of the Republic
Republic
bankin
ban king g or ins
insura
urance
nce corpora
corporaon
on,, shall
shall of the Philippines.
deposi
dep ositt with
with the Securi
Securies
es and Exc
Exchan
hange
ge
Commission for the benet of present and Defniton
fu
futu
ture
re cred
credit
itor
orss of the
the lice
licens
nsee
ee in the
the Transacng business means the carrying on
Philippines, securies sasfactory to the of the operaons of the corporaon, or
 

so
some
me po
por
ron
on of them
them,, in the
the us
usua
uall an
and
d 1. That the opera
operao
on n or acvi
acvity
ty is not
regular
regular course
course of the prose
prosecu
cuon
on of the inco
incons
nsis
iste
tent
nt with
with the the Inve
Invest
stme
mentnt
corporate enterprise for prot. Priories Plan.
2. Th
That
at the busi
busines
nesss or econ
econom
omic
ic ac
acvvit
ity
y
The Corporaon Code outlines the will contribute to the sound and
procedural requirements for the applicaon balanced development of the naonal
and issuance of a license before a foreign economy on a self-sustaining basis.
corpor
corporao
aonn may tra
transa
nsactct busine
businessss in the 3. That
That the acvi
acvity
ty wi
will
ll no
nott con
conic
ictt with
with
Philip
Philippin
pines.
es. Except
Except in the case
case of foreig
foreign
n
banking, nancial and insurance the
th e Cons
Const
Philippines.tu
uon
on and laws laws of the the
corporaons
corpor aons and other subject to speci special
al 4. Th
That
at the
the nnos
osin
ines
esss or econ
econom
omicic acvi
acvity
ty
laws, rules and regulaons, if the applicant is not one (1) adequately exploited by
foreign corporaon has complied with all Philippine Naonals.
the requirements of issuance of a license, 5. Th
That
at the
the entry
entry of th the
e appli
applica
cant
nt wi
will
ll not
not
th
the
e SEC
SEC sha
shall is
issu
suee such licenicense
se and
and pose
pose a clea
clearr and
and pres
presen
entt dang
danger
er of 
th
ther
erea
eaer
er the
the fo
fore
reig
ign
n corp
corpor
ora
aon
on may
may promong monopolies or combinaon
transact business in the Philippines. in restraint of trade.

Republic Ac No. 5455 . Regulates the entry Presidental

Presiden tal Decree No. 151 allows cizens
of foreig
foreign
n inv
invest
estmen
ments
ts whenev
whenever
er foreig
foreign
n of the Phi
Philip
lippin
pines
es or corpor
corporao
aons
ns whi
which
ch
equity parcipaon exceeds 30 percent of  have acquired lands of the public domain or
the capital stock. which or any other law, to enter into service
co
con
ntracts
cts for nancial, technical,
Unde
Underr Re
Repu
publ
blic
ic Ac no
no.. 5455
5455 “doi
“doing
ng management or other forms of assistance
business includes”: with any foreign person or enty whenever
a. Sol
Solici
icin
ng orde
orders
rs,, purc
purchases, service
hases and wherever
wherever such
such contra
contracts
cts are vital
vital to
contracts, op open
enin
ingg o
oces
ces whet
whetheherr achi
achiev
evee sosoun
und
d andand momorere exexpe
pedi
dio
ous
us
called liaison oces or branches. exploraon,
explor aon, devel
developmen
opment,t, explo
exploitao
itaonn or
b. Appoinng representaves or uliza
ulizaon
on of such
such lan
lands
ds own
owned,
ed, held
held or
distribut
distributors
ors who are domiciled
domiciled in the controlled by such cizens or corporaons.
Philippines or who in any calendar year
stay in the Philippines for a period or Secton 127. Who may be a resident agent.
period
per iodss totall
totalling
ing one hunhundre
dred
d eigh
eighty
ty  – A resident agent may be either an
days or more. individua
individuall residing
residing in the Philippi
Philippines
nes or a
c. Parcipang in the management, domesc
domes c corporaon
corporaon lawfully
lawfully transacng
transacng
supervision, or control of any domesc business in the Philippines: Provided, That
business rm, enty, or corporaon in in the case of an individual, he must be of 
the Philippines. good moral character and of sound nancial
d. Any other act or acts that imply a standing.

con
connu
nuity
arrang
arr ity nts,
angeme of , com
ements commer
andmercia
cialtempla
con l dealin
contem dealings
gs or
plates
tes to Sect
ecton 128.
128. Res
Reside
ident
nt age
agent;
nt; ser
servic
vice
e of 
that extent the performance of acts or  process.  – The Securies and Exchange
works, or the exercise of some of the Commis
Com missio
sion
n sha
shall
ll req
requir
uire
e as a condi
condionon
funcon
fun con nor
normal
mally
ly inc
incide
ident
nt to, and in precedent to the issuance of the license to
progressive prosecuon of, commercial transact business in the Philippines by any
gain or of the purpose and object of the foreign
foreig n corporaon
corporaon that such corporaon
business organizaon. l
lee with
with the
the SeSecu
curi
rie
ess and
and ExExch
chan
ange
ge
Commis
Com missio
sion
n a wri
wrien
en power
power of aorn
aorney
ey
The Board of Investments requires license designang some person who must be a
not only of corporaons
corporaons organized
organized abr
abroad
oad resident of the Philippines, on whom any
but also of domesc corporaons, if more summons and other legal processes may be
than
than 40% of its vo
vongng shares
shares are owned
owned served in all ac coons or other legal
and held by aliens or more than 30% of its proceedings against such corporaon, and
total capitalizaon is in the hands of aliens. consenng that service upon such resident
agent shall be admied and held as valid as
Guideline
Guideliness or issuan
issuance
ce o cer
certfc
tfcae
ae o  if served upon the duly authorized ocers
auhoriy o do business under BOI (Rep. of the
the fofore
reig
ign
n corpo
corporarao
on
n at its
its ho
home
me
Ac No.5455) oce. Any such foreign
foreign corporaon shall
 

likewise execute and le with the Securies Secton 129. Law applicable.
applicable.  – Any foreign
and Exchange Commission an agreement or corporaon lawfully doing business in the
sp
spula
ulaon
on,, ex
exec
ecu
ute
ted
d by the the prop
proper
er Philippines shall be bound by all laws, rules
authories of said corporaon, in form and an
and
d regul
regula
aon
onss ap
appl
plic
icab
able
le to dodome
mes
scc
substance as follows: corporaons of the same class, except such
only as provide for the creaon, formaon,
“The (name
“The (name of for foreig
eign
n corpora
corporaon
on)) does
does organizaon or dissoluon of corporaons
hereby spulate and agree, in consideraon or those which x the relaons, liabilies,
of its being granted by the Securies and
Exchange Commission a license to transact respon
responsibi
memb
me sibilies
mber s, lies,
ers, or ,ocer
orcers
o dues
s of of stockhold
stock
corp
corpor
oraholders,
onssers,
aon to
business in the Philippines, that if at any each other or to the corporaon.
me said corporaon shall cease to transact
bu
busi
sines
nesss in the
the Phil
Philip
ippi
pine
nes,s, or shal
shalll be Licensed foreign corporaons lawfully doing
without any resident agent in the business in the Philippines shall be subject
Philippines on whom any summons or other to our laws just like domesc corporaons
legal processes may be served, then in any of the same class.
acon
ac on or pr proc
oceed
eedin
ing
g ar
aris
isin
ing
g ou
outt of anany
y
business or transacon which occurred in Philippine laws will not apply when it refers
the Philippines, service of any summons or to the creaon, formaon, organizaon or
other legal process may be made upon the dissoluon of corporaons or such as fux
Securies
Securi es and Exchange
Exchange Commi
Commissio
ssion
n and the relaons, liabilies, responsibilies, or
that such service shall have the same force dues of stockholders, members, or ocers
and
and eeecectt as if made
made upon pon the
the dul
duly- of corp
corpor
ora
aon
onss to each
each othe
otherr or to the
the
authorized ocers of the corporaon at its corporaon.
home oce.”
Se
Sect
cton
on 130.
130.  Amendments to arcles of 
Wheneve
When everr such
such ser
servi
vice
ce of summ
summon onss or inco
incorrpor
poraon
aon or by- y-la
law
ws of for foreign
eign
ot
othe
herr pr
proce
ocess
ss shal
shalll be made
made upuponon the
the corpor
cor porao ns.  – Whenever the arcles of 
aons.
Securies
Securies and Exchange
Exchange Commi
Commissio
ssion,
n, the inco
incorp
rpor
ora
aonon or by-l by-law
awss of a fo fore
reig
ign
n
Co
Comm
mmisissi
sion
on shal
shall,
l, with
within
in teten
n (10)
(10) days
days corporaon authorized to transact business
thereaer, transmit by mail a copy of such in the
the PhPhil
ilip
ippi
pine
ness are
are amamenende
ded,
d, su
such
ch
su
summ
mmon
onss or otothe
herr le
lega
gall pr
proc
oces
esss to the
the foreign corporaon shall, within sixty (60)
corporaon at its home or principal oce. day
days aer
aer the ame mendndme
mentnt beco
becommes
The sending of such copy by the e
eeecve
cve,, l
le e wi
with
th the
the Secu
Securi
rie
ess and
and
Commission shall be necessary part of and Exchan
Exc hange
ge Commis
Commissio sion,
n, and in the pro proper
per
shall complete
complete such service. All expenses
expenses cases
cas es wit
withh the approp
appropriariate
te govern
governmen
mentt
incurred by the Commission for such service agency, a duly authencated copy of the
shall be paid in advance by the party at arcl
arcles
es of incoincorp
rpor
ora
aon
on or by-l
by-law
aws,
s, as
whose instance the service is made. amended, indicang clearly in capital leers

In ca
case
se agent,
resident of a chchan
it ange
ge be
shall of his
addre
dd ress
or ss duty
its of the
thto
e or by underscoring the change or changes
made
ma de,, du
duly
ly cer
cered
ed by the the auth
author
oriz
ized
ed
immediately nofy in wring the Securies ocial or ocials of the country or state of 
an
and
d Exch
Exchan
ange
ge Comm
Commis issi
sion
on of thethe new
new incorporaon. The ling thereof shall not of 
address. itse
itself
lf enla
enlarg
rgee or alte
alterr the
the purp
purpos
ose
e or
pu
purp
rpos
oses
es foforr whic
which
h such
such cocorp
rpor
ora
aon
on is
Th
Thee SE
SECC shal
shalll re
requ
quiire as a condondion
ion au
auth
thor
oriz
ized
ed to tr tran
ansa
sact
ct busi
busine
ness
ss in the
the
precedent to the issuance of the license to Philippines.
transact business in the Philippines by any
foreign
foreign corporaon
corporaon that such corporaon Secton 131.  Amended license.  – A foreign
Secton
le
le wi
with
th the SE SEC,
C, a wriwrie
en
n power
ower of  corporaon authorized to transact business
a
aor
orne
neyy dedesi
sign
gna
ang
ng so some
me pe
pers
rson
on who
who in the Philippines shall obtain an amended
must be a resident of the Philippines, on license in the event it changes its corporate
whom
wh om any any summo
ummons ns andand oth
other lega
legall name, or desires to pursue in the
processes may be served in all acons or Philippines other or addional purposes, by
othe
otherr lega
legall proc
procee
eedi
ding
ngss ag
agai
ains
nstt su
such
ch submi
sub ming ng an appli
applicao
caonn the
theref
refor
or to the
corporaon. Se
Secu
curi
rie
ess and
and ExExch
chan
ange
ge CoCommmmis
issi
sion
on,,
favo
favora
rabl
bly
y endo
endors
rsed
ed by thethe appr
approp
opri
riat
ate
e
government agency in the proper cases.
 

Sect
Secton
on 13 132
2. Merg
Mergerer or cons
consololid
ida
aon
on Sect
ecton 133.
133. Doin
Doing g bu
busi
sine
ness
ss with
withou
outt a
involving a foreign corporaon licensed in license.  – No foreign corporaon
the
the Ph
Phil
ilip
ippi
pines.  – One or more foreign
nes. tr
tran
ansa
sac
cng
ng bubusi
sine
ness
ss in thethe Phil
Philip
ippi
pines
nes
co
corp
rpor
ora
ao ons auth
author
oriize
zed
d to tr
tran
ansa
sact
ct with
withou
outt a lice
licens
nse,
e, or its
its succ
succes
esso
sors
rs or
business in the Philippines may merge or assigns, shall be permied to maintain or
consolidate with any domesc corporaon intervene in any acon, suit or proceeding
or corporaons if such is permied under in any court or administrave agency of the
Phi
Philip
ipp
pin
inee laws
aws and
and by thethe law
law of its Philippi
Philippines;
nes; but such corpora
corporaon on may be
incorporaon: Provided , That the
requirements on merger or consolidaon as sued or proceeded against before Philippine
courts
cou rts or admini
administr
strav
ave
e tribun
tribunals
als on any
provided in this Code are followed. va
vali
lid
d caus
cause
e of aco
aconn reco
recogn
gniz
ized
ed un
unde
derr
Philippine laws.
Whenever a foreign corporaon authorized
to transact business in the Philippines shall Unlicensed foreign corporaons doing
be a party to a merger or consolidaon in business in the Philippine do not have the
its home country or state as permied by capacity to sue before the local court is
the law of its incorporaon, such foreign well-established.
corpor
cor porao
aonn sha
shall
ll,, within
within six
sixty
ty (60)
(60) days
days
aer such merger or consolidaon becomes A foreign corporaon which is not licensed
e
eec
ecv
ve,
e, le
le wi
withth the
the Secu
Securi
rie
ess and
and to transact business therein can maintain an
Exchange
Exchan ge Commissio
Commission, n, and in proper
proper cases acon in the courts of the Philippines for
with the appropriate government agency, a the pur
purpos
posee of protec
protecng
ng its rep
reputa
utaon
on,,
copy of the arcles of merger or corporate name and goodwill.
consol
con solida
idaon
on duly
duly authen
authenca
cated
ted by the
proper ocial or ocials of the country or A foreign corporaon doing business in the
state under the laws of which merger or Philippines without a license may maintain
cons
consol
olid
ida
aon
on was
was eect
eected
ed:: Pr Prov
ovid
ided
ed,, suit in the Philippines against a domesc
however, That if the absorbed corporaon corporaon or person who is party
is the foreign corporaon doing business in to a contract as the domesc corporaon or
the Philippines, the laer shall at the same person is deemed estopped from
me
m e le
le a pe
pe
on
on fo
forr with
withdr
draw
awalal of it chall
cha llengi
enging
ng the person
personali
ality
ty of the fo
forei
reign
gn
license in accordance with this Title. corporaon.

Secton 132 covers wo legal siuatons : Secton 134. Re Revo

voca
cao
on
n of lice
license. –
nse
1. Th
The
e mer
merger
ger of a lic
licen
ense
sed
d Wi
With
tho
out prereju
judi
dice
ce to othe
otherr grgro
ounds
unds
foreign corporaon with a provided by special laws, the license of a
domesc corporaon. foreign corporaon to transact business in
 Must be accomplished by the Philippines may be revo evoked or
complying with the provisions suspended by the Securies and Exchange

The of
2. The me the
merger Corporaon
rger of a lice
licenseCode.
nsed
d fore
foreign
ign Co
Comm
mmis
issi
sion
grounds:
on up
upon
on an
any
y of the
the fo
foll
llow
owin
ing
g
corporaon with another corporaon in
its country of origin which is not doing 1. Fa
Fail
ilur
ure
e to le
le its
its annua
annuall rep
repor
ortt or pay
pay
business in the Philippines. any fees as required by this Code.
 If the licensed foreign corporaon is
absorbed by merger or 2. Failure to appoint and maintain a
consolidaon, it must withdraw its re
resi
side
dent
nt ag
agen
entt in the
the Phil
Philip
ippi
pine
ness as
license to do business in the required by this Title.
Philippines.
 Nevertheless, if the foreign 3. Fai
Failur
ure,
e, aer
aer ch
chan
angge of its re
resi
side
dent
nt
absorbing corporaon desire to agent or of his address, to submit to the
connue the business of the Securies and Exchange Commission a
absorbed corporaon in the statement of such change as required
Philippines, it has to le an by this Title.
applicaon for a license to do
business pursuant to the 4. Fa
Fail
ilur
ure
e to submi
submitt to the Se
Secu
curi
rie
ess and
requirements of Philippines law on Exchange Commission an authencated
the maer. copy of any amendment to its arcles of 
 

inco
incorp
rporora
aon
on or by-l
by-law
awss or of an anyy 1. Al
Alll clai
claims
ms whic
which
h have
have ac
accr
crue
ued
d in the
the
ar
arc
cle
less of merg
merger
er or co cons
nsol
olid
ida
aon
on Philippines have been paid,
within the me prescribed by this Title. compromised or seled.

5. A mimisr
srep
epre
rese
sent
nta
aon
on of anany
y mate
materi
rial
al 2. Al
Alll taxe
taxes,
s, im
impo
post
sts,
s, asse
assess
ssme
mentnts,
s, and
and
ma
ma er in anyany appl
applic
ica
aon
on,, rep
epo
ort, pe
penanal
les
es,, if an
any,
y, lawf
lawful
ully
ly du
duee to the
the
adavit or other document submied Phili
Phi lippi
ppine
ne Govern
Governmen
mentt or any of its
by such
such corpor
corporao
aonn pursua
pursuant
nt to this
this agencies
agenci es or polical
polical subd
subdivis
ivisions
ions have
Title.
been paid.
6. Failure to pay any and all taxes, 3. The
The pe
peon
on for with
withdr
draw
awal
al of lice
licens
nse
e
impost
imp osts,
s, assess
assessmen
ments
ts or penal
penales,
es, if  has been publish
published
ed once
once a week
week for
any,
any, lawf
lawful
ully
ly du
duee to the
the Ph
Phil
ilip
ippi
pine
ne thre
threee (3) cocon
nsecu
secuv
ve
e weweek
ekss in a
Government or any of its agencies or newspaper of general circulaon in the
polical subdivisions. Philippines.

7. Tran
Transa
sacn
cng g bu
busi
sine
ness
ss in the
the Phil
Philip
ippi
pine
ness Sec. 137. Ou Outs
tsta
tand
ndin
ing
g ca
capi
pita
tall ststoc
ock 
k 
outside of the purpose or purposes for de
den ed..  – The term "outstanding capital
ned
which
which such
such corpor
corporao
aonn is author
authorize
ized
d stock", as used in this Code, means the total
under its license. sh
shar
ares
es of stoc stock
k issu
issued
ed unde
underr bind
bindining
g
subscripo
subs cripon n agreements
agreements to subscriber
subscriberss or
8. Tran
Transa
sacn
cngg bu
busi
sine
ness
ss in the
the Phil
Philip
ippi
pine
ness stoc
stockh
khol
olde
ders
rs,, wh
whet
ethe
herr or not
not full
fully
y or
as agent of or acng for and in behalf of  parally paid, except treasury shares.
any foreign
foreign corpor
corporao
aonn or en
entyty no
nott
du
duly
ly lice
licens
nsed
ed to do bu
busi
sines
nesss in the
the Sec. 138. Designaon of governing boards.
Philippines.  – The provisions of specic provisions
provisions of
this Code to the contrary notwithstanding,
9. Any
Any oth
other
er grou
ground
nd as woul
would
d re
rend
nder
er it non-stock or special corporaons may,
unt
nt to tr tran
ansa
sact
ct busi
busine
nesss in the
the through their arcles of incorporaon or
Philippines. their by-laws, designate their governing
boards by any name other than as board of 
Sec. 135. Iss ssu
uance
ance of cer cerc
ca
ate of  trustees.
revocaon.  – Upon the revocaon of any
such
suc h licen
license
se to tra
transa
nsact
ct bus
busine
iness
ss in the Sec.
Sec. 139
139.. Incor
Incorpora on and other fees.  –
poraon
Philip
Philippin
pines,
es, the Sec
Securi
uries
es and ExcExchan
hange
ge The Securies and Exchange Commission is
Commis
Com missio
sion
n shall
shall iss
issue
ue a corresp
correspond
onding
ing hereby
hereby aut
author
horize
izedd to collec
collectt and rec
receiv
eive
e
cercate of revocaon, furnishing a copy fees as authorized by law or by rules and
thereo
the reoff to the approp
appropria
riate
te gov
govern
ernmen
mentt regulaons promulgated by the
agency in the proper cases. The Securies Commission.

and Exchange Commission

the corporaon shall oce
at its registered also mail to
in the Sec. 140. St Stoc
ockk owne
owners rshi
hip
p in ce cert
rtai
ainn
Ph
Phil
ilip
ippi
pine
ness a no
noc
cee of such
such rerevo
voca
caonon co
corp
rporora
aon s.  – Pursuant to the dues
ons.
accompanied by a copy of the cercate of  specied by Arcle XIV of the Constuon,
revocaon. the Naon
Naonalal Econo
Economic
mic and Developmen
Developmentt
Authority shall, from me to me, make a
Sec. 136. With
Wi thdr
dra
awa
wall of forei
oreign
gn determ
determinainaon
on of whethe
whetherr the corpor
corporate
ate
corporaons.  – Subject to exisng laws and vehicle has been used by any corporaon or
regulaons, a foreign corporaon licensed by busi
busine
ness
ss or indu
indust
stry
ry to frfrus
ustr
trat
ate
e the
the
to transact business in the Philippines may provisions thereof or of applicable laws, and
be allowed to withdraw from the shall
sha ll sub
submit
mit to the Batasa
Batasangng Pamban
Pambansa, sa,
Philippines by ling a peon for whenever deemed necessary, a report of its
with
withdr
draw
awal
al of licen
license
se.. No cer
cerca
cate
te of  nding
nd ings,
s, inc
includ
luding
ing recomme
recommenda ndaon
onss for
withdrawal shall be issued by the Securies their prevenon or correcon.
and Exchan
Exchange
ge Commis
Commissio sion
n unless
unless all the Maximum limits may be set by the Batasang
following requirements are met: Pambansa for stockholdings in corporaons
declared by it to be vested with a public
interest pursuant to the provisions of this
secon, belonging to individuals or groups
 

of in
indi
divi
vidu
dual
alss re
rela
lated
ted to each
each otothe
herr by Sec. 143. Rule
Rule ma
maki
king
ng powe
powerr of ththee
co
cons
nsan
angu
guiinity
nity or ani anity
ty or by clos close
e Securies and Exchange Commission.  – The
busi
busine
ness
ss inte
intere
rest
sts,
s, or when
whenevever
er it is Securies
Securies and Exchange
Exchange Commissio
Commission n shall
necess
nec essary
ary to achiev
achievee naona
naonall objec
objecves
ves,, have the power and authority to implement
prevent illegal monopolies or combinaons the provisions of this CodCode, and to
in re
rest
stra
rain
intt or trad
trade,
e, or to imimpl
plem
emen
entt promulgate rules and regulaons
naonal economic policies declared in laws, re
reas
ason
onab
ably
ly nece
necess
ssar
ary
y to enab
enable
le it to
rules and regulaons designed to promote perform its dues hereunder, parcularly in
the gen
genera
erall welfar
welfare
e and fos
foster
ter econom
economicic
development. the prevenon of fraud and abuses on the
part
part of the
the cont
controroll
llin
ing
g stoc
stockh
khol
olde
ders
rs,,
members, directors, trustees or ocers.
In recommending to the Batasang
Pa
Pamb
mbanansa
sa corp
corpor
ora
aon
ons,s, busi
busine
ness
ss or Sec. 144. Violaons of the Code. –
in
indu
dust
stri
ries
es to be dedecl
clar
ared
ed ve
vest
sted
ed with
with a Violaons of any of the provisions of this
public interest and in formulang proposals Code or its amendments not otherwise
fo
forr limi
limita
tao
ons
ns on ststoc
ockk owne
ownersrshi
hip,
p, the
the specically penalized therein shall be
Nao
Naonanall Econ
Econom
omic
ic an andd Deve
Develolopm
pmen
entt punished by a ne of not less than one
Authority shall consider the type and nature thousand (P1,000.00) pesos but not more
of the industry, the size of the enterprise, than ten thousand (P10,000.00) pesos or by
th
thee eco
econo
nomi
mies
es of sc
scal
ale,
e, the
the geogr
geograpaphi
hicc imprisonment for not less than thirty (30)
locaon, the extent of Filipino ownership, days but not more than ve (5) years, or
the labor intensity of the acvity, the export both, in the discreon of the court. If the
potenal, as well as other factors which are violaon is commied by a corporaon, the
germane to the realizaon and promoon same may, aer noce and hearing, be
of business and industry. dissolved in appropriate proceedings before
the Securies and Exchange Commission:
corporaons.  –
Sec. 141. Annual report or corporaons. Provided , That such dissoluon shall not
Every corporaon, domesc or foreign, preclude the instuon of appropriate
lawfully doing business in the Philippines acon against the director, trustee or ocer
shall submit to the Securies and Exchange of the corporaon responsible for said
Commission an annual report of its violaon: Provided ,  further , That
operaons, together with a nancial nothing in this secon shall be construed to
statement of its assets and liabilies, repeal the other causes for dissoluon of a
cered by any independent cered
cered corporaon provided in this Code.
public accountant in appropriate cases,
covering the preceding scal year and such Sec. 145. Amendment or repeal.  – No right
other requirements as the Securies and or re
reme
medy dy in favo
favorr of or aga gain
inst
st any
any
Exchange Commission may require. Such corpor
corporao
aon,n, its sto
stockh
ckhold
olders
ers,, mem
members
bers,,
report shall be submied within such dire
directo
ctors
rs,, tr
trus
uste
tees
es,, or o
ocer
cers,
s, no
norr an
any
y
period as may
Securies be prescribed
and Exchange by the
Commission. liability incurred by any such corporaon,
stockholders, members, directors, trustees,
or ocers, shall be removed or impaired
Sec. 142. Confdental naure o   either by the subsequent dissoluon of said
exami
exa minat
naton
on resul
resuls.
s.  – All interrogatories corporaon or by any subsequent
propounded by the Securies and Exchange amendment or repeal of this Code or of any
Commis
Com missio
sion
n and the ans answers
wers thereto
thereto,, as part thereof.
well as the results of any examinaon made
by the Commission or by any other ocial Sec.
ec. 146.
46. Re
Repe
peal
alin
ing
g clau se..  – Except as
clause
authorized by law to make an examinaon expressly provided by this Code, all laws or
of the operaons, books and records of any par
arts
ts ther
thereo
eoff incon
nconssist
isten
entt wi with
th any
any
cor
corporaon, shall be kept strict
ctlly pr
prov
ovis
isio
ion
n of this
this Co
Code
de shal
shalll be de
deem
emed
ed
condenal, except insofar as the law may repealed.
requi
req uire
re th
the
e sa
same
me to be made made pu publ
blic
ic or
where
whe re such
such intinterr
erroga
ogator
tories
ies,, answer
answerss or Sec. 147. Sepa
Separa
rabi
bili
lity
ty of prprov
ovis
isions..  –
ions
result
resultss are necess
necessary
ary to be presen
presented
ted as Should any provision of this Code or any
evidence before any court. part thereof be decl cla
ared invalid or
unconstuonal, the other provisions,
provisions, so
 

far as they are separable, shall remain in

force.

Sec. 148.  Applicability to exisng

co
corp
rpor
ora
aon s.  – All corporaons lawfully
ons.
exi
exisng and doing business in th the
e
Philippines on the date of the eecvity of 
this
this Code
Code an andd here
hereto
tofo
fore
re auauth
thor
oriz
ized
ed,,
licensed
licens ed or registered
registered by the Securies and
Exchange Commission, shall be deemed to
have been authorized ed,, licen enssed or
regis
reg iste
tered
red un
unde
derr the
the prprov
ovis
isio
ions
ns of this
this
Code, subject to the terms and condions
of its license, and shall be governed by the
provis
pro vision
ionss her
hereof
eof:: Provid
Provided,
ed, Tha
Thatt if any
such
suc h corpor
corporao
aonn is aecte
aected d by the new
requirements of this Code, said corporaon
shall, unless otherwise herein provided, be
given a period of not more than two (2)
year
yearss from
from the
the eec
eecv
vit
ity
y of this
this Code
Code
within which to comply with the same.

Sec. 149.
Sec. 149. Eecvity .  – This Code shall take
eect
ee ct imme
immedi
diat
atel
ely
y up upon
on ititss appr
approv
oval
al..
Approved: May 1, 1980