5.

UNIVERSITY OF SANTO TOMAS - LEGAZPI

COLLEGE OF LAW

CORPORATION LAW
2nd Semester SY 2021-2022

ATTY. MARYLOU DUKA-CASTILLO

Professor

I. COURSE DESCRIPTION

A study about private corporations contemplated under the Revised Corporation Code of the
Philippines or Republic Act. No. 11232

II. CREDIT UNITS : 4

III. Time Allotment : 72 hours synchronous and asynchronous sessions

IV. General Objectives :

At the end of the course, the students are expected to :

1. Know the incorporation, organization and regulation of a private corporation, both stock and
nonstock, including religious, educational, foreign and one person corporations ;

2. Learn how to actually incorporate a corporation with the Securities and Exchange Commission
through its online services under the Electronic Simplified Processing of Application for
Registration of Company (sSPARC) and Online Submission Tool (OST)

3. Be informed of the powers, duties, responsibilities and liabilities of Directors, Trustees and officers
of the corporation, rights and liabilities of the stockholders or members, and conditions under
which the corporations may transact business ;

4. Be knowledgeable about acquisitions and mergers, consolidation, transfer or movement of shares

and other corporate transactions ;

5. Know about Dissolution, liquidation and winding up of corporate existence

6. Know the penalties for violations of the provisions of the RCC.

V. COURSE REQUIREMENTS
Online discussion, report and recitation 20%
Quizzes, Pre-lims, Mid-term and Final Examinations 60%
Project : Formulation of Article of Incorporation
and By-laws and actual filing with the S.E.C. 20%
100%
VI. COURSE METHODOLOGIES

1. Lectures via zoom

2. Online reporting
3. Case assignments
4. Webinars or lectures from guest lecturers

VII. REFERENCES

1. JAVIER, RUFINO SAN BUENAVETURA, THE REVISED CORPORATION CODE OF THE PHILIPPINES
ANNOTATED, 2019

2. AQUINO, TIMOTEO B. and AQUINO, MARIA MARGARET BERNADETTE A. REVISED

CORPORATION
CODE OF THE PHILIPPINES, A Short Introduction 2019 ;

NOTE : 1. RECORDING, TAKING PICTURES OR SCREENSHOTS ARE NOT ALLOWED

2. FB -GC shall record all attendance in the synchronous sessions
3. All submissions shall be through my email : maloucastle55@gmail.com

2) AQUINO, TIMOTEO B. PHILIPPINE CORPORATE LAW COMPENDIUM (2014)

VIII. COURSE OUTLINE
TITLE I
GNERAL PROVISIONS
CORPORATE CONCEPTS AND DOCTRINES

1. Sec. 2 Corporation defined.

A corporation is an artificial being created by operation of law, having the right of succession and
the powers, attributes and properties expressly authorized by law or incidental to its existance,

2. FOUR CORPORATE ATTRIBUTES BASED ON SECTION 2 DEFINITION:

a. An Artificial Being: “A corporation is granted a juridical capacity to own properties, to contract and
to enter into legal relationships.”

b. Creature of the Law: “Each corporation is created by operation of law pursuant to a covenant to
pursue a business enterprise.”

c. With a Right of Succession: “A corporation has a juridical personality separate and distinct from its
stockholder or members, officers and directors or trustees.”
d. Creature of Limited Powers: “A corporation has only such powers, attributes and properties as are
expressly authorized by law or incident to its existence.”

The Theory of Concession –

-“A corporation is an artificial being created by operation of law “

- It owes its life to the State and its birth is purely dependent on the States will.
- An artificial being invisible, intangible, and existing only in contemplation of law”
- A corporation is not in fact and in reality a person, but the law treats it as though it were a person
by process of fiction, or by regarding it as an artificial person distinct and separate from its
individual stockholders. (Fletcher)

The Theory of Enterprise Entity

- A corporation is an association of individuals or aggrupation of natural persons allowed to

transact business under one corporate name, with a personality separate and distinct from the
individuals who compose it.

3. ADVANTAGEOUS ATTRIBUTES AND DISADVANTAGES OF THE CORPORATION

a. PRIMARY ATTRIBUTES OF THE CORPORATION UNDER CORPORATE LAW FRAMEWORK:

(i) STRONG/SOLEMN JURIDICAL PERSONALITY (Sec. 2; Arts. 44[3], 45 and 46, Civil Code)

While not in fact a person, the corporation is treated through fiction by the law as though it
were a person—an artificial person distinct and separate from its stockholders. Remo, Jr. v.
IAC, 172 SCRA 405 (1989).

(ii) CENTRALIZED MANAGEMENT (Sec. 22)

Under [Section 22 of the Revised Corporation Code], save in those instances where the
Code requires stockholders’ approval for certain specific acts, it is the Board of
Directors/Trustees which exercises all the corporate powers in a corporation.

(iii) LIMITED LIABILITY TO STOCKHOLDERS AND NON-LIABILITY

TO
DIRECTORS/TRUSTEES AND OFFICERS FOR THE LIABILITIES OF THE CORPORATION

An important advantage of the corporation is the limitation of an investor’s liability to the

amount of investment, which flows from the legal theory that a corporate entity is separate and
distinct from its stockholders. San Juan Structural and Steel…, Inc. v. CA, 296 SCRA 631
(1998).

By virtue of the principle separate juridical personality, the corporate debts or credits are not
the those of the stockholders. This protection from corporate liability for shareholders is the
principle of limited liability. PNB v. Hydro Resources Contractors Corp., 693 SCRA 294 (2013).

(iv) FREE-TRANSFERABILITY OF “UNITS OF OWNERSHIP” (SHARES) (Sec. 62)

It is the inherent right of the stockholder to dispose of his shares of stock (which he owns as
any other property) anytime he so desires.
 No corporation can restrict the right of a stockholder to transfer shares, but merely has
authority to adopt regulations on the formalities and procedure to be followed in effecting such
sale or transfer.

Relationships among stockholders are less personal since stockholders who wish to transfer
shares can transfer od assign his shares to any individual or entity without any approval from
other stockholders.

There is fast movement of shares from the transferor to the transferee.

(v) Huge amount of capital contributions/big commercial transactions

A corporation can gather huge amount of capital and undertake big projects, engage in
big commercial transactions through the contributions of the investors/stockholders;

(vi) More permanent existence/perpetual existence/right of succession

The existence of the corporation has some degree of permanence due to perpetual
existence allowed by law, unless sooner dissolved.

The corporation can outlive the stockholders/directors composing it since it can exist
forever unless it decides to shorten its term.

Transfer of shares, death of a stockholder, change in the entire ownership of the

corporation does extinguish the life of the corporation.
b. Disadvantages of the Corporate Form of business:
(1) Agency Cost: Abuse of Management; Breach of Trust
(2) Abuse of Limited Liability Feature
(3) High Cost of Maintenance of the Corporate Medium
(4) Double Taxation:

• Dividends received by individuals from domestic corporations are subject to final 10% tax for
income earned on or after 01 January 1998. Sec. 24(B)(2), 1997 NIRC.

• However, inter-corporate dividends between domestic corporations are not subject to any
income tax. Sec. 27(D)(4), 1997 NIRC.

• Re-imposition of the 10% “improperly accumulated earnings tax” for holding companies.
Sec. 29, 1997 NIRC.

4. COMPARED WITH OTHER BUSINESS ORGANIZATION

Characteristic Sole Proprietorship Partnership Corporation

Method of Creation Created at will by owner
Created by agreement of Created by agreement of
the parties, for SEC’s the parties, subject to
recording only, not SEC’s approval
approval

Legal position No separate entity is A separate entity is A separate entity is

created created
Extent of liability Unlimited liability
Unlimited liability (except
limited partners)
Duration Determined by owner
Terminated by
agreement of the
partners
Transferability transferable
Partners’ interest can be
assigned, upon consent
of other partners
Management Ownership and Ownership and
management belong to management belong to
the owner the partners
created
Limited liability
With perpetual term
unless otherwise
provided in the charter
Shares can be
transferred anytime
without the consent of
other stockholders
Ownership and
management are
usually separate except
one person or close
corp.
 (Ownership belong o the
stockholders and board
of directors and
management of the
corporation belong to the
board of directors)

6. Practice of Profession not allowed in corporate form (Sec. 10, RCC)

Corporations cannot engage in the practice of a profession since they lack the moral and technical
competence required by the PRC. ULEP v. The Legal Clinic, 223 SCRA 378 (1993).

A practice of profession is not for commercial purpose and therefore should not be in corporate
form since corporations are generally created for profit.
*EO No.65 –11th Regular Foreign Investment Negative List provides:
Corporate practice is allowed in the following professions, subject to the requirements and
Conditions under the pertinent professional regulatory law:

* Aeronautical engineering (Sec. 28, PD No, 1570)

* Agricultural and bio systems engineering (Section R.A 10915)
* Architecture (Sec. 37, R.A. No. 9266)
* Chemistry (Sec. 35, R.A.No. 10657)
* Electronics engineering (Sec. 28, R.A. No.9292)
* Environmental Planning (Sec. 25, R.A. No.10587)
* Forestry (Sec. 25, R.A, 10690)
* Guidance and Counselling (Sec. 27, R.A No.9258)
* Interior design (Sec. 26, R.A. No. 10250)
* Landscape architecture (Sec. 26, R.A. No.9053)
* Naval architecture (Sec. 30 [g], R.A. No.10698)
* Psychology (Sec. 33, R.A. No. 10029)
* Real Estate service (real estate consultant, real estate appraiser, real estate assessor, real estate broker,
and real estate salesperson (Sec. 32, RA No, 9646)
* Sanitary engineering (sec. 30, R.A. No. 1364)
* Social Work (Sec. 1 {c}, R.A. No. 4373, as amended)

7. Generally, Corporations are Not Entitled to Moral Damages

A corporation, being and artificial person has no feelings, emotions nor senses, therefore it cannot
experience physical suffering and mental anguish. Mental suffering can be experienced only by one
having a nervous system and it flows from real ills, sorrows, and griefs of life—all of which cannot be
suffered by an artificial person Manila Electric Co.v. Nordec Philippines, 861 SCRA 515 2018

A corporation’s claim for moral damages arising from libel falls under Article 2219(7) of the Civil
Code, which expressly authorizes the recovery of moral damages in cases of libel, slander or any other
form of defamation, and does not qualify whether the plaintiff is a natural or juridical person. A juridical
person can validly complain for libel or any other form of defamation and claim for moral damages.
Filipinas Broadcasting Network v. Ago Medical and Educational Center, 448 SCRA 413 (2005).
A corporation, being an artificial person has no feelings, emotions nor senses; therefore, it cannot
experience physical suffering and mental anguish. Mental suffering can be experienced only by one
having a nervous system and it flows from real ills, sorrows, and griefs of life—all of which cannot be
suffered by an artificial person. Prime White Cement Corp. v. IAC, 220 SCRA 103 (1993); Manila
Electric Co. v. Nordec Philippines, 861 SCRA 515 (2018).

THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION

1. MAIN DOCTRINE: A Corporation Has a Personality Separate and Distinct from Its Directors or
Trustees, Officers, Its Stockholders or members

A corporation is a juridical entity with a legal personality separate and distinct from the people
comprising it,
The grant of legal or juridical personality, being a mere privilege, can be revoked anytime by the
sovereign power that granted the said privilege.

If the corporate fiction is used as a means to defeat public convenience, justify a wrong, protect
fraud or defend a crime; or if the veil is used as a vehicle to evade an obligation or a debt, the veil
may be pierced and disregarded and the courts will treat the corporation as a mere aggrupation of
persons and the liability shall directly be attached to them.

Classification of Piercing Cases:

• FRAUD PIERCING: When corporate entity is used to commit a crime, to undertake fraud
or do a wrong, or that the corporate veil is used as a means to evade the consequences of
one’s criminal or fraudulent acts;
• ALTER-EGO PIERCING: When the corporate entity merely a farce since the corporation is
merely the alter ego, business conduit, or instrumentality of a person or another entity;
 • DEFEAT OF PUBLIC CONVENIENCE (EQUITY PIERCING): When the application of the
separate corporate personality would be inconsistent with the business purpose of the legal
fiction or would merely confuse legitimate issues, or when piercing the corporate fiction is
necessary to achieve justice or equity for those who deal in good faith with the corporation.

c. Objectives and Effects of the Application of the Piercing Doctrine

The main effect of disregarding the corporate fiction is that stockholders will be held personally
liable for the acts and contracts of the corporation, whose existence, at least for the purpose of the
particular situation involved, is ignored.

Another formulation of this doctrine is that when two (2) business enterprises are owned,
conducted and controlled by the same parties, both law and equity will, when necessary to protect
the rights of third parties, disregard the legal fiction that two corporations are distinct entitled and
treat them as identical or one and the same. General Credit Corp. v. Alsons Dev. and Investment
Corp., 513 SCRA 225 (2007).

d. PIERCING DOCTRINE AS AN “EQUITABLE REMEDY”: Piercing the corporate veil is an equitable

doctrine developed to address situations where the separate corporate personality of a corporation is
abused or used for wrongful purposes.

(i) It Is a Remedy of Last Resort: Piercing the corporate veil is remedy of last resort and is not
available when other remedies are still available.
(ii) Available Only to Prevent Fraud or to Achieve an Equitable End: Piercing doctrine is meant
to prevent fraud, and cannot be employed when the net result would be to perpetrate fraud or a
wrong.

(iii) Piercing the Veil of Corporate fiction Is a Power Belonging to the Courts

2. FRAUD PIERCING CASES:

Guiding Principles in Fraud Cases: Why is there inordinate showing of alter-ego elements?

• There must have been fraud or an evil motive in the affected transaction, and the mere proof of
control of the corporation by itself would not authorize piercing;

* Corporate fiction is used as a means to commit the fraud or avoid the consequences thereof;
and

* The main action should seek for the enforcement of pecuniary claims pertaining to the
Corporation against corporate officers and stockholder

3. ALTER EGO PIERCING CASES:

a. Using the Corporation as a Mere Conduit or Alter Ego:
Guiding Principles in Alter-Ego Cases:
• Doctrine applies even in the absence of evil intent, because of the direct violation of a central
corporate law principle of separating ownership from management;
• Doctrine in such cased is based on estoppel: if stockholders do not respect the separate entity,
others cannot also be expected to be bound by the separate juridical entity;
•Piercing in alter ego cases may prevail even when no monetary claims are sought to be
enforced against the stockholders or officers of the corporation.
Section 3 - Classes of Corporation
Section 4 – Corporations created by special laws or charters
As to number of components
Corporation Sole
Corporation aggregate
As to functions:/in relation to the State
Public corporation (LGUs)
Private Corporation
Quasi-Public corporation.
-Local water districts -performing public services, supplying public wnts (organized and created
under PD 168); may also exercise the powers, rights and privileges given to private corps.
Government-owned and controlled corporations
As to legal status
De jure corporation - corporation organized in accordance with the requirements of the law
De facto corporation - formed where there exists a flaw in its incorporation but there is colorable
Compliance with the requirements of the law
Corporation by estoppel –a group of persons who misrepresent themselves as a corporation and
enter into contract with a third person on the strength of such
appearance cannot be permitted to deny its existence in an action under
said contract.
As to existence od stocks:
Stock
Non stock
As to laws of incorporation
Domestic
Foreign
As to relationship
Parent/holding corporation - a company who has control over another corporation directly or
indirectly through one or more intermediaries;
- a company which owns all or substantially or the controlling
shares In the subsidiary.

Subsidiary – a corporation more that 50% of the capital stocks is owned or controlled directly
or indirectly through one or more intermediaries by another corporation, which
there becomes a parent company;

Affiliate – a corporation that directly or indirectly, through one or more intermediaries, is

controlled or is under the control of another corporation, which hereby becomes the
parent company.

Special corporations under the corporation Code

One person corporation
Educational Corporation
Close corporation
Religious corporation
Ecclesiastical ( spiritual persons like bishops, deacons, etc) and Lay corporations
Eleemosynary (for charitable purposes) and civil

Sec. 5. Corporators, incorporators, Stockholders and members

Sec. 6. Classification of shares

Preferred Shares
1. Preferred shares have no voting rights but enjoy preferential rights in the
distribution of dividends and/or assets upon liquidation;
2. Issued only with a stated par value;
3. Terms and conditions of these shares should be clearly stated in the Articles of Incorporation
4. preferred shares, although non-voting, shall nevertheless be entitled to vote in the
following matters:
a. amendment of the articles of incorporation;
b. adoption and amendment of by-laws;
c. sale, lease, exchange, mortgage, pledge, or other disposition of all or substantially all of
the corporate property; (Sec. 39)
d. Incurring, creating, or increasing bonded indebtedness; (Sec. 37)
e. Increase or decrease of authorized capital stock (Sec.37)
f. Merger or consolidation of the corporation with another corporation or other
Corporations (Sec. 75)
g. Investment of corporate funds in another corporation or business in accordance with this
Code (Sec. 41)
h. Dissolution of the corporation

Common Shares
- Shares of stock with no preferences
- Have full voting rights
- Holders of this shares are residual owners
- In a failing business, they run the risks of not receiving anything, even their capital
contributions. The creditors and preferred shareholders who assume lesser risks earn
interest
- Common shareholders reap residual profits.
-In a successful business, common shareholders receive most of the venture’s
Profits
Par Value Shares
- These are shares of stock that have assigned money value that are stated in the articles of
incorporation
- The money value of each unit of share is determined by:
a) The incorporators during the incorporation period or
b) By the directors, after incorporation
No par value shares
- Shares issued with no money value but has an issued value
- Once issued, they are deemed to be fully paid and non-assessable.
Nature of shares; how classified
- Shares are intangible, indivisible, abstract and proof of ownership, once fully paid is the stock
Certificate
- shares are classified by the incorporators upon incorporation and by the board of directors
After incorporation.
Section 7. Founder’s Shares
-holders of these shares enjoy certain rights and privileges not enjoyed by other stockholders.
-where exclusive right to vote and be voted for in the election of directors is granted, it must be for a
limited period not to exceed five (5) years from the date of incorporation

Section 8. Redeemable shares

- should be expressly provided in the Articles of Incorporation;
- these are shares which were originally issued to stockholders but were repurchased or bought by the
corporation upon the expiration of a fixed period.
- once redeemed, the shares can no longer be re-issued
- the redemption can be made regardless of the existence of unrestricted retained earnings
- when corporations issue these kinds of shares with mandatory redemption features, they are required
-to set up or maintain a sinking fund;
- the sinking fund will be deposited with a trustee bank and should not be invested in risky or
speculative ventures.
-Exception from the rule of maintaining a sinking fund to purchase redeemable shares: “may still
be allowed for as long as the “trust Fund “ for creditors remain unimpaired”
would result to decrease of capital stock

THE TRUST FUND DOCTRINE

The principle that corporate assets are held as a TRUST FUND for the benefit of the shareholders and
creditors and that the corporate officers have the fiduciary duty to keep it intact and unimpaired.

The subscriptions to the capital stock of a corporation constitute a fund to which the creditors have a
right
to look for satisfaction of their claims. Until the liquidation of the corporation, no part pf the subscribed
capital stock may be turned over or released to the stockholders (except in the redemption of the
redeemable ) without violation the principle.

Section 9. Treasury Shares

- Issued and fully paid for but subsequently reacquired by the issuing corporation through purchase,
redemption, donation or some other legal means.
- once reacquired, will be place in the treasury and not considered outstanding
- it may be re-issued at a premium or over the par value stated in the Articles of Incorporation or it
could
be resold even below the stated par value;
- the corporation has the option to retire the treasury shares. Retirement of shares shall be effected by
decreasing the capital stock.

TITLE I
INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATION

IV. Pre-Incorporation/Promoter’s Contracts

a. Who Is a Promoter?
- “Promoter” is a person who, acting alone or with others, takes initiative in founding and organizing the
business or enterprise of the issuer [i.e., corporate enterprise whose shares are subscribed by
investors] and receives consideration therefor. Sec. 3.10, Securities Regulation Code (R.A. 8799;

- a promoter has no technical meaning, and applies to any person who takes an active part in
including the formation of a company, whether he becomes connected with the company or not;

- he brings together the persons interested in the enterprise , aids in procuring subscriptions, and sets
in motion the machinery that leads to the formation itself.
b. Liability Rules for Promoter’s Contracts:
A franchise granted to a corporation still in the process of incorporation would nevertheless
constitute a valid contractual commitment, with the acceptance thereof subsequent to the completion
of incorporation.
Sine the promoters of a corporation are not in any legal sense, its agents before it comes into
existence, it is well settled rule that a contract made by them, even though it may be made for and in
the name of the proposed corporation, in the absence of the subsequent adoption by the corporation,
is not binding on the corporation when formed, unless it is made co by the charter or statute.

c. Nature of Relations between a Promoter and the prospective Corporation

Promoters are not in any sense the agents of the corporation before it comes into existence, for
there cannot be an agency unless there is a principal .

d. Duties and Liabilities of Promoters

a) as a fiduciary, promoters must act in good faith;
b) must fully disclose all material facts involved;
c) must fully advise them of any interest he may have that may in any manner affect the proposed
corporation

e. Compensation and expenses promoters

Corporation is not under any liability to for the services rendered or expenses paid for or incurred by
 the promoters for pre-incorporation expenses or services, unless the corporation consents to pay.

INCORPORATION
-a performance of conditions, acts, deeds and writings be incorporators, and the official acts, records or
certifications which give the corporation its existence (Fletcher 445).

Effects if not incorporated.

* a group of individuals doing business together without incorporating do not have any juridical
personality to transact business under one corporate name; they are just a mere association of
persons;
* It is only through incorporation and registration with the Securities and Exchange Commission
( S.E.C.)
that the private corporation can acquire juridical personality under the Corporation Code.
* Mere signing of the Articles of Incorporation by the incorporators does not give live to the corporation.
*The corporate existence of the corporation commences once the S.E.C. issues the Certificate of
Registration.

What are the necessary steps and the documentary requirements for Incorporation?
* Note: manual filing is no longer accepted by the S.E.C.

* Log in into the S.E.C. website at www.sec. gov.ph and click eSPARC (Electronic Simplified
Processing of Application for Registration of Company)

* In this site the filer will be guided and informed what are the necessary steps to follow in registering a
stock and nonstock corporation.

General Requirements
1. Name Verification Slip;
2. Articles of Incorporation and By-laws;

*The old Corporation Code requires the submission of the Treasurer’s affidavit, but the RCC has
already incorporated its contents in the Articles of Incorporation

* The undertaking to change corporate name, should there be another corporation who has
acquired prior right to said name, is likewise incorporated in the Articles of Incorporation. It used
to be a separate documentary requirement;

* Both the Articles of Incorporation and By-laws, if filed at the same time should be signed by all
the incorporators who should indicate their Tax Identification Numbers for the notarization;

* Indorsements and clearances from other government agencies, if applicable;

3. For corporations with more than 40% foreign equity—application form required by the Foreign
Investment Act of 1991 plus filing fee;

4. Such other documents that the business and the S.E.C. may require.
5. Order of payment which is issued by the S.E.C. when the Filer-corporation is ready to pay the
filing/registration fee.
Note: Registration fee is computed based on the amount of authorized capital stock
stated in the Articles of Incorporation
6. Receipt of payment /deposit slip of the registration fee.

Section 10. Number and Qualifications of Incorporators

Incorporators
* Any person, partnership, association or corporation, singly or jointly with others but not more than 15.
* While the law limits the maximum number of incorporators, it does not limit the number of subscribers
or contributors, but with certain limitations as to the kind of corporation the incorporators intend to
establish
* The Old Corporation Code is specific that only natural persons can be incorporators.
* In all cases, the incorporators must be subscribers to at least one (1) share of the capital stock.
* They must have financial interest in the corporation
* Natural persons, partnerships or associations may only form a corporation for the exercise of
profession if so authorized by law.
* No residency requirement for incorporators
* natural persons who form the corporations should be of legal age and have the legal capacity to enter
into
a contract to sign the Articles of Incorporation.

Section. 11. Corporate Term

Read: S.E.C. MC 22 s. 2020 Guidelines of Corporate Term

Section 12. Minimum Capital Stock not required of Stock Corporations

 * While this provision does not require any minimum capital stock, some corporations, by the nature of their
businesses require specific amount of minimum paid-up capital stock.

Section 13. Contents of Articles of Incorporation

Section 14. Form of Articles of Incorporation

Section15. Amendment of Articles of Incorporation

Requirements and procedure

Section 16. Grounds when the Articles of Incorporation or Amendments May Be Disapproved

Section 17. Corporate Name

Read SEC MC 13 s, 2019 – Amended Guidelines and Procedures on the Use of Corporate Name

Sec. 18 Registration, Incorporation and Commencement of Corporate existence

Section 19. De Facto Corporation

*defective corporations
*Shall not be inquired collaterally in any private suit
*inquiry may be made by the Solicitor General in a quo warranto proceeding
*there is the attempt in good faith to incorporate; a colorable compliance of the requirements for
incorporation;
*there is a valid law
*there is the actual use of corporate powers

As distinguished from a De Jure corporation(which has complied with all the requirements to
be a valid corporation).

Section 20. Corporation by Estoppel

* Ostensible Corporation
* not a corporation in the real sense
* there is bad faith on the part of the persons misrepresenting to be a corporation
* there must be a third party who believed in the misrepresentation
* persons representing themselves as a corporation shall be liable as general partners
* third persons who contracted and assumes and obligation with this ostensible corporation is
estopped to resist performance thereof on the ground that there was in fact no corporation.

Section 21. Effects of non-use of corporate charter and continuous inoperation

* License deemed revoked- if not formally organized and has not commence business 5 yeas
from date of incorporation.
* Certification deemed revoked the day following the end of 5 -year period
* a corporation that commence operation but subsequently become inoperative shall be placed
under delinquent status
* Delinquent corporations have 2 years to resume operations and comply with the requirements;
once complied, the Commission shall lift delinquent status
* Failure to comply within the period granted can be a ground for revocation

TITLE III

BOARD OF DIRECTORS OR TRUSTEES

Section 22. Board of Directors/Trustees

- shall exercise powers, conduct all business, controls and holds all properties of the corporation
- a corporation can act only through its directors or officers; stockholders do not have a hand in running the
day-to-day operations of the business unless they are also the members of the board or officers of the
corporation;
-
“BUSINESS JUDGMENT RULE”
- under this rule, the will of the majority controls in corporate affairs, and contract intra vires entered
into by the Board of Directors are binding on the corporation and courts will not interfere
- unless such contracts are so unconscionable and oppressive as to amount to a wanton destruction
of rights of the majority.

Term of office
- BOD of stock corporation are elected at the annual meeting, from among the holders
of stock in the books of the corporation, they shall hold office for a term not exceeding
one year;
- BOT of nonstock corporation are elected at the annual meeting from among the
members; they shall hold office for a term not exceeding 3 years.
- a director who ceases to own at least one share or a trustee who ceases to
be a member of the corporation shall cease to be such

Corporations vested with public interest shall have Independent Directors constituting at
Least 20% of the members of the Board of Directors.
Corporations vested with public interest generally refers to:
a) corporations covered by Section 17.2 of R.A. 8799 ( Securities Regulation Code) namely:
1. those whose securities are registered with S.E.C.
2. those listed in an exchange
3. those with assets of at least FIFTY MILLION PESOS (PhP50,000,000) and having two hundred
(200) or more holders of shares, each holding at least one hundred (100) shares of a class of its
equity shares;
b) Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business,
preneed, trust insurance companies, and other financial intermediaries; and
c) Other corporations engaged in business vested with public interest similar to the above as determined
by the Commission, after taking into account relevant factors which are related of requiring the election
of an independent Director, such as the extent of minority ownership, type of financial products or
securities issued or offered to investors, public interest involved in the nature of business operations,
and other analogous factors.

Who is an INDEPENDENT DIRECTOR?

- A person who, apart from shareholdings and fees received from the corporation, is independent of
management and free from any business or other relationship which could,or could reasonably be perceived
to materially interfere with the exercise of independent judgement in carrying out the responsibilities as a
director.
- Must be elected by the shareholders present or entitled to vote in absentia during the election of directors.
- Subject to rules and regulations governing qualifications, disqualifications, voting requirements, duration of
term and term limit, maximum number of board membership and other requirements that the Commission
will prescribe to strengthen their independence and align with international best practices.

Powers of the board - original and undelegated

Section 23. Election of Directors or Trustees

- There must be present, either in person or through a proxy (with written proxy instrument) owners of
majority of the outstanding capital stock or majority of the members entitled to vote (for nonstock);
- The By-laws or by majority vote of the board of Directors may authorize voting through remote
communication or in absentia;
- Corporations vested with public interest may exercise the right to vote through remote communication
notwithstanding the absence of a provision in the by-laws of the corporation.
- A stockholder or member participating through remote communication or in absentia shall be deemed
present for purposes of quorum;
- Voting may be by show of hands; or by ballot if so requested by any stockholder or member.

Methods of Voting
 In non-stock corporations, one member is entitled to one vote, unless the articles of incorporation or by-laws
provide that a member may cast as many votes as there are trustees to be elected but may not cast more
than 1 vote for one candidate
 For stock corporations:
1. Straight Voting
A Stockholder entitled to vote shall have the right to vote the number of shares of stock standing in his own
name for as many persons as there are directors to be elected, distribute them on the same
principle among as many candidates as he may deem fit.
Illustration:
 Legazpi Trading and Manufacturing Corp. has 5 board nominees
 if stockholder Juan Teves has 100 shares registered in his name, he can cast not more than 500
votes (100 shares x 5 board seats)
 then Teves can cast 100 votes for each nominee/candidate

2. Cumulative Voting for one candidate

A stockholder entitled to vote shall have the right to vote the number of shares of stock
standing in his/her name for as many persons as there are directors to be elected, and cumulate
said shares and give one (1) candidate as many votes as the number of directors to be elected
multiplied by the number of the shares owned.
Illustration:
 In the above illustration, Juan Teves can cast all his 500 votes on one candidate

3. Cumulative voting by distribution

* A stockholder may distribute them on the same principle among as many candidates as may be seen
fit.
Illustration:
Juan Teves may give Nominee 1 - 50 votes.
Nominee 2 - 50 votes
Nominee 3 - 100 votes
Nominee 4 - 100 votes
Nominee 5 - 200 votes
_________
Total 500 votes (100 shares x 5 board seats)

*No delinquent stock can be voted.

Delinquent stocks defined
 These are stocks whose holders have failed to pay the balance of the subscription as provided in the
subscription agreement, after it has become due and payable; and after notice or call for payment
issued by the board of directors.

Section 24. Corporate Officers

For Stock Corporations, immediately after the election of the board of directors, the
corporation shall formally organize and elect the following:
a) President, who must be a director
b) Treasurer, who must be a resident of the Philippines
c) Secretary, who must be a citizen and resident of the Philippines;
d) Such other officers as may be provided in the by-laws.
e) Compliance Officer, if corporation is vested with public interest

*An officer may hold concurrent positions but no one shall act a President and Secretary or as
President and Treasurer at the same time, unless allowed by this Code.
Chairman
*is not a statutory corporate officer, in the sense that he is not among those who must be appointed by the
board in the absence of a provision in the by-laws stating the contrary.
* he may be an independent director, provided that he must hold an executive position and should not be
involved in the corporation’s day-to-day operations.
* he may be a non-Philippine national even in a corporation engaged in partially nationalized activity,
provided he limits his role to that of a presiding officer during meetings (SEC-OGC Opinion No. 07-07,
dated August 8, 2007)
President
*primary officer tasked to implement the decision of the board.
*regarded as the principal agent of the corporation
Treasurer
*control funds and/or other assets of the corporation. he has authority to receive subscriptions,
contributions, or donations paid or given by the subscribers or members.
Corporate Secretary
*is primarily responsible to the corporation and its shareholders and not to the Chairman or President;
*tasked to maintain corporate records including;
*upon order of the President, he/she sends notices, determines validity of proxy instruments
and quorum before the meeting;
*takes down the minutes, or for remote communication, takes care of all arrangements in internet
connectivity, etc.
Compliance officer
*to ensure that the members of the board and corporate officers comply with the law, the corporate charter
and by-laws.

Doctrine of Apparent Authority

*Corporate officers as agents of the corporation. They have apparent authority to bind the corporation on
matters that are generally within the domain of corporate business, and the scope of their usual duties

The officers shall manage the corporation and perform such duties as may be provided in the by-laws
and/or as resolved by the board of directors.

Section 25. Report od Election of Directors, Trustees and Officers, Non-holding of election and
Cessation from office
Within 30 days after election, the Secretary or other officer of the Corporation shall submit to the
Commission the names, nationalities, shareholdings, and residence addresses of the directors, trustees
and officers elected.
 Compliance through submission of the notarized General Information Sheet
 Submission of Affidavit of Non-holding of elections if no election is held with specification on the
new date of election which shall not be later than sixty (60) days from the scheduled date in the
by-laws

 S.E.C. has the power to summarily order that an election be held:

a) if no new date has been designated;
b) if the rescheduled election is likewise not held;
c) upon application of a stockholder, member director or trustee and after verification of the
unjustified non-holding of the election
 S.E.C., with the summary order to hold an election, may also issue order directing the issuance
of notice of meeting stating the time and place of election, the designated presiding and the
record date or dates for the determination of stockholders or members entitled to vote;
 The shares of stock or membership represented in such meeting and entitled to vote shall
constitute a quorum for purposes of conducting an election under this section.
 The secretary or director trustee or officer shall notify the Commission should a director, trustee
or officer of the corporation dies, resigns or in any many ceases to hold office within 7 days from
knowledge thereof
.
Section 26. Disqualification of Directors, Trustees or Officers
Grounds for disqualification
Section 27. Removal of Directors or Trustees
 May be with or without cause
 By a vote of at least 2/3 of the outstanding capital stock or 2/3 of the members entitled to vote
  at a regular meeting or special meeting called for that purpose
 notice of meeting should state the purpose of such meeting
Authority to call a special meeting:
a) President orders the secretary, upon written demand of at least majority of the
outstanding capital stock or majority of the members entitled to vote.
b) The stockholder of member signing the demand, by directly addressing the
stockholders or members
Notice by publication or written notice

 limited authority of the Commission to remove a director because of disqualification, whose

disqualification arose after election

Section 28. Vacancies in the Office of Director or Trustee; Emergency Board

Causes of vacancy
a) removal
b) disqualification
c) expiration of term
d) death
e) resignation
Filling up of vacancy
 If caused by expiration of term - vote of majority of the outstanding capital stock in an election
not later than the day of the expiration at a meeting called for that purpose;
 If caused by removal, elections should be held on the same day of the meeting authorizing the
removal and this fact must be stated in the agenda and notice of meeting
 If caused by reason other than removal or expiration of term---like death, resignation, or
disqualification---the vote of majority of the remaining directors if still constituting a quorum is
required to fill up the vacancy;
 or if there is no more quorum, by a vote of majority of the outstanding capital stock or members
entitled to vote in a regular or special meeting called for that purpose ;
 election should be held not later than 45 days from the time the vacancy arose

Creation of EMERGENCY BOARD

 A creation of an emergency board is necessary when there is no quorum and emergency action
is required to prevent grave, substantial and irreparable loss or damage.
 The action of the designated director-limited to emergency action necessary
 Term shall cease within reasonable time from the termination of the emergency or upon election
replacement director or trustee
 Vacancy may be temporarily filled from among the officers by unanimous vote of the remaining
board of directors or trustees.
 notice to the Commission - 3 days from the creation of emergency board stating the reason for
its creation.
 By Election –when filling up of vacancy by reason of increase in the number of directors or
trustees

Section 29. Compensation of Directors or Trustees

In the absence of any provision in the by-laws----NO compensation in their capacity as
such except reasonable per diem (not subject to tax)

 Grant of compensation over and above the reasonable per diems—by at least majority of the
outstanding capital stock or majority of the members
 Total yearly compensation of directors should not exceed 10% of net income before income tax of the
corporation during the preceding year
 Directors or trustees shall not participate in the determination of their own per diem
 Annual report of the total compensation of their directors should submitted to the Commission

Section 30. Liability of Directors, Trustees or Officers

Breach of duties of Directors or Trustees:
 Directors or trustees who willfully and knowingly vote or assent to patently unlawful acts of the
corporation;
 Those who are guilty of gross negligence;
* Those guilty of bad faith in directing the affairs of corporation;
 Those who acquire any personal or pecuniary interest in conflict with their duty as such
directors or trustees
Liability:
a) jointly and severally for all damages resulting therefrom suffered by the corporation,
its stockholders or members and other persons.
b) fiduciary liability as trustee for profits that would have accrued to the corporation
c) administrative and criminal liability

Section 31. Dealings of Directors, Trustees or Officers with the corporation

Self-dealing Directors
 those directors or trustees who personally contract with the corporation in which they are
directors, trustees or officers.
 This is discouraged because they have a fiduciary relationship with the corporation and there
can be no real bargaining where the same is acting on both sides of the business.
Status of contract between the corporation and the self-dealing director, trustee and officers—
VOIDABLE
  Contract is valid if the following requirements for its validity are:
a) Presence of the director or trustee in the board meeting –not necessary;
b) Vote of the director or trustee in the board meeting approving the contract is
not necessary;
c) the contract is fair and reasonable;
d) in case of corporation vested with public interest, material contracts are approved by at least
2/3 of the entire membership of the board, with at least majority of the independent directors
voting to approve the material contracts;
e) in case of an officer, the contract has been previously authorized by the board of directors.

*absent the first three conditions, the contract with the director or trustees MAY BE RATIFIED
by 2/3 of the outstanding capital stock or 2/3 of the members (if nonstock) provided:
1) full disclosure of the adverse interest of the directors or trustees is made in a meeting;
2) the contract is fair and reasonable

Section 32. Contracts between the Corporation with Interlocking Directorates

 Except in cases of fraud and provided the contract is fair and reasonable
Contracts between two or more corporations having interlocking directors shall
NOT be invalidated on that ground alone

Section 33. Disloyalty of a Director

Doctrine of Corporate opportunity

There is disloyalty when a director takes away for himself a business opportunity that properly
belongs to the corporation

Section 34. Executive, Management and other special committees

If the Bylaws of a corporation so provides, a corporation may create an executive committee
Composition: 3 Directors
Purpose: for operational efficiency, create internal protocol to guide its own internal processes , in
view of the many responsibilities and comprehensive duties of the Board, it may create committees that are
tasked to deliberate on specific matters or matters that can be delegated.

TITLE IV
POWERS OF THE CORPORATION

Section 35. Corporate Powers and Capacity

Express Powers – those power expressly provided by the Revised Corporation Code, applicable laws,
administrative regulations, and the Articles of Incorporation.
 The express powers under the Revised Corporation Code include:
a) the general powers under Sec. 35
b) specific powers under Section 11, 15, 35-43

Implied Powers
 recognized under paragraph 11 of Section 35 of the Revised Corporation Code;
 all powers that are reasonably necessary or proper for the execution of the powers expressly granted
and are not expressly or impliedly excluded
Incidental Powers
 they are powers that are deemed conferred and given to corporations because they are the
consequences of the fact that they exist as juridical persons
 these powers include:
a) the right to succession
b) the right to have a corporate name
c) the power to adopt and use a corporate seal
d) the right to adopt by-laws for its government
e) the right to sue and be sued
f) the right to acquire and hold properties for the purposes authorized by the charter
g) the power to enter into merger or consolidation
h) the power to make reasonable donations; donations to a political party or candidates or for
purpose of partisan political activity is not allowed;
i) the power to establish pension, retirement and other plans for the benefit of its directors,
trustees, officers and its employees.

Section 36. The Power to Extend or Shorten the Corporate Existence

 the vote required is majority of the board of directors or trustees, and ratified at a meeting by the
stockholders representing 2/3 of the outstanding capital stock or members;
 written notice of meeting stating the purpose, date and time should be sent to the stockholder or
members by mail through the post office or if allowed by the by-laws, sent through electronic mail.
 A dissenting stockholder may exercise his appraisal right.

Section 37. Power to Increase or Decrease Capital Stock, Incur, Create or Increase Bonded
Indebtedness
Increase of Capital Stock
 The Authorized Capital Stock as stated in the Articles of Incorporation can be increased or
decreased at any time during the corporate life of a corporation.
  Corporations may increase its capital stock if it needs more funds or capital in the course of its
operations.
 They may rely on borrowings or share offerings;
Approval: a) majority of the Board and 2/3 votes of the outstanding capital stock at a
Meeting held for that purpose;
b) by S.E.C. who shall issue the Certificate of Increase.

Increase can be done by:

a) increasing the number of shares with the same par value;
b) increasing the par value per unit of share without changing the
number of shares
c) by increasing both the number of shares and increasing the par
value per share.
Stock split
- Increasing the number of shares without increasing the authorized capital; but there is the decrease
in the par value

Example: XYZ Advertising Corporation has an Authorized Capital Stock of !M with 10,000 shares at
a par value of 100/share.
Stock split occurs when the Authorized Capital Stock remains at 1M but the number of shares are
increased to 20,000 shares at 50/share(20,000 x 50= 1M)

Reverse Stock Split

- Occurs when the number of issued share is decreased but the par value per share is increased
without increasing the authorized capital stock
-
Example: in the previous illustration, the XYZ Corporation may issue 5000 worth of shares with a par
value of 200 per share maintaining the authorized capital stock at 1M (5000X200=1M).

Payment of subscription to the Increase can be by way of cash, property of cash advances
from the stockholders or stock dividend

Decrease of Capital Stock

 Return of capital must not prejudice the to the rights of the creditors
 A corporation may not decrease its capital if its purpose is to relieve an existing stockholder of his
obligation to pay for his subscription;
 Creditors must be informed of the decrease of capital stock
 Consent of the stockholders is necessary

Incur Bonded Indebtedness

 the corporation has the power to borrow money secured by real or personal property

Treasurer’s affidavit
 should attest to the fact that 25% of the authorized capital has been subscribed and 25% of the
subscribed Capital stock has been paid either in cash or by way of property, the valuation has been
transferred to the corporation;

Section 38. The Power to Deny Pre-emptive right

 Right of Pre-emption is the right of a stockholder to subscribe to new issuance of shares
(that is, out of the increase of capital stock), or the right to subscribe to shares that belong to the
unsubscribed shares that are part of the original capital stock of the corporation (stated in the Articles
of Incorporation), in proportion to his shareholdings;
 The “right of first refusal” is available to all stockholders before the shares are offered to
other interested subscribers or third persons

 The right may be denied in the following instances:

a) such shares issued in compliance with laws requiring stock offerings or minimum stock
ownership by the public;
b) shares issued in good faith with the approval of the stockholders representing 2/3 of the
outstanding capital stock, in exchange for property needed for corporate purposes
c) or those issued in payment of a previously contracted debt.
 Share subscription gives the subscriber certain economic and political rights.
Economic rights--refers to the right to receive dividends
Political rights-- refers to the right to be nominated to the board and approve certain
actions (RCC Theories and Applications, Herbosa and Ricalde, 2019)
 Notably, the law uses the terms “all issues” and “disposition”
 Issues—are shares of stock that are offered for subscription or sale to subscribers or interested
individuals who wish to invest in the corporation

 Disposition--refers to the re-issuance of treasury shares. The law makes it clearer when it describes
pre-emptive right in close corporations, specifically: “the pre-emptive right in close corporations shall
extend to all stock to be issued, including reissuance of treasury shares xxxx”

S.E.C. Opinion No. 5-03, dated April 27, 2005

Opinion on “all issues”:
  pre-emptive right extends not only to issuance of new share resulting from an increase in capital
stock, but also to issuance of previously unsubscribed shares which formed part of the existing
capital stock

Section 39. Sale or Other Disposition of Assets

*for such terms and conditions and or other property or consideration and for such consideration, which
may be money, stocks , bonds or other instruments for the payment of money
* Sale of all or substantially all of the corporation’s properties and assets including its
goodwill
* Approval: vote required---majority vote of the board of directors authorized by 2/3 of the
outstanding capital stock or members
* For non-stock corporations where there are no members with voting rights, majority
vote of the board of trustees
* approval not necessary if the sale for the usual and regular course of the business, if the proceeds of
the sale will be appropriated for the conduct of its remaining business.
* Written notice of the proposed action and the time and place of meeting shall be addressed to
the
stockholders or members their places of residence served personally or electronically when the latter is
allowed by the laws or done with the consent of the stockholder/member
* any dissenting stockholder may exercise his appraisal right
* the Board may abandon such sale subject to the rights of third parties under any contact relating
therein
without further action or approval by the stockholders or members
* corporate reorganization: a de facto merger where the shares of the transferring corporation may later
be dissolved and the shares of the transferee corporation will be distributed as liquidating dividends to
the shareholders of the transferring corporation.
* the corporation is in a situation where its existence is in suspended animation

“Substantially all of corporation’s properties and assets”

---must be computed based on its net asset value as shown in the latest Financial Statement;
---deemed to cover all the corporate property and assets, thereby the corporation would be
rendered incapable of continuing the business or accomplishing the purpose for which it was
purpose for which it was incorporated

Section 40. Power to Acquire Own shares

 Unrestricted Retained Earnings required
 For a legitimate purpose including the following:
a) To eliminate fractional shares arising out of stock dividends
b) To collect or compromise se an indebtedness to the corporation, arising out of unpaid
subscription, in a delinquency sale, and to purchase delinquent shares sold during said sale; and
c) To pay dissenting or withdrawing stockholders entitled to payment for the shares
under this Code (exercise of Appraisal Right)
Section 41. Power to Invest funds in another Corporation or Business or for any other purpose
 Majority vote of the Board of Directors/Trustees and ratified by 2/3 of the outstanding capital stock or
members if non-stock corporations at a meeting called for that purpose.
 Notice of proposed investment with date and time of meeting, served personally or electronically,
when allowed in the by-laws.
 Any dissenting stockholder may exercise his appraisal right
 Approval of the stockholders or members not necessary if the investment is reasonably necessary to
accomplish the primary purpose of the corporation .

Section 42. Power to Declare Dividend

Dividends defined
* It is that portion of the corporate profits which is set aside, allocated and declared to be
distributed and paid proportionately to the stockholders on demand or at a fixed time.
* Out of the unrestricted retained earnings
* Payable in cash, property, or in stock
* Issued to all stockholders on the basis of outstanding stocks held by them
* Corporate earnings are not part of corporate trust fund.
Cash Dividends on delinquent stocks shall first be applied to the unpaid balance on the subscription plus
cost and expenses; may be declared by majority of the board of directors;
Stock Dividends shall be withheld from the delinquent stockholders until their subscription is fully paid.
*also declared by the board of directors but must be approved by 2/3 of the outstanding capital stock
at a regular or special meeting called for that purpose

Impt: Stock corporations are prohibited from retaining surplus profits in excess of one hundred
percent (100%) of their paid-in capital stock except:
a) when justified by definite corporate expansion projects or programs approved by the board of
directors; or
b) when the corporation is prohibited under any loan agreement with financial institutions or
creditors {local or foreign), from declaring dividends without their consent;
c) when it can be clearly shown that such retention is necessary under special circumstances
obtaining in the corporation, such as when there is need for special reserve for probable
contingencies
 The law allows the corporation to convert its earnings into capital.
  By way of declaration of stock dividend the profits become part of capital and can no longer be used
for dividend distribution.
Retained earnings defined:
--accumulated profits realized out of the normal and continuous operations of the business after
deducting therefrom distributions to the stockholders and transfers to capital stocks or other accounts

Section 43. Power to Enter into Management Contract.

1.management contract between a managing and a managed corporation; to be approved by majority
vote of the board of directors or trustees and majority of the outstanding capital stock
2.Votes required is 2/3 of the outstanding capital stock entitled to vote and majority of the Board :
a) where a stockholder or stockholders of both own or control more than 1/3 of the outstanding capital
stock entitled to vote of the managing corporation;
b)where majority of the members of the board of directors of the managing corporation also constitute
the majority of the members of the board of the managed corporation

*applies to any contract where a corporation undertakes to manage or operate all or substantially all of
the
business of another corporation, whether contracts are called service contracts, operating agreements
or
otherwise;

* service contracts or operating agreements relating to exploration, development, exploitation or

utilization
of natural resources may be entered into for such periods provided by pertinent laws or regulations;
* management contract – valid for 5 years for any 1 term.

Section 44. Ultra Vires Acts of Corporations

Ultra Vires Acts defined:
- corporate acts that are not within the powers stated in the Articles of Incorporation; acts which are not
covered in the purpose clauses in the Articles of Incorporation;
-other acts not conferred by law; illegal or unlawful acts
- A corporation may only be formed for a specific purpose;
-It shall have powers as may be essential or necessary to carry out its purpose or purposes as stated in
the Articles of Incorporation;
Types of ultra vires acts
1. Those which are contrary to law, morals, or public policy
2. Those performed merely outside the scope of the powers granted to the corporation.
Test of Ultra Vires character of the act
Querubin, et. al v. Comelec et. al. G.R. No 218787, December 8, 2015

TITLE V
BYLAWS
Section 45. Adoption of Bylaws
Bylaws defined:
--permanent and continuing rules of action adopted by the corporation for its own, internal government
and that of the individuals composing it and those having the direction
Concept
--rules and regulations or private laws enacted by the corporation to regulate, govern and control its
own its own actions, affairs and concerns and of its stockholders or members, directors and officers
in relation thereto and among themselves in their relation to the corporation.
(Loyola Grand Villas Homeowners (South) Association, Inc. v. Hon. Court
of Appeals, et.al., G.R. No. 117188, August 7, 1997, 276 SCRA 58)
Vote and signatures required for its approval I majority of the outstanding capital stock or majority of
the members for non-stock corporations
*Bylaws should be kept in principal office of the corporations, subject to inspection by the stockholders or
members during reasonable hours in any business day;
*Bylaws may be adopted and filed before incorporation in which case all incorporators should approved and
signed by all incorporators and submitted to the SEC together with the articles of incorporation.
* Bylaws of any bank, banking institution, building and loan association, trust company public utility,
educational institution, or other governed by special laws, should be accompanied by a certification of the
appropriate government agency that the bylaws or amendment are in accordance with law.

Section 46. Contents of Bylaws

a) Time, place and manner of calling and conducting regular or special meetings of the directors or
trustees;
b) Time, place and manner of call and conducting regular or special meetings and mode of
notifying. the stockholders or members thereof;
c) The required quorum in meetings of stockholders or members and the manner of voting therein;
d) The modes by which a stockholder, member, director or trustee may attend meetings and cast
their votes;
e) Form of proxies of stockholders and members and manner of voting them;
f) The directors’ or trustees’ qualifications, duties responsibilities, the guidelines for setting
compensation of directors or trustees and officers, and the maximum number of other board
representations that an independent director or trustee may have which shall, in no case be more
than the manner prescribed by the Commission;
 g) The time for holding the annual election of directors or trustees and the mode or manner of giving
notice thereof;
h) The manner of election or appointment and the term of office of all officers other than directors or
trustees;
i) The penalties for violation of the bylaws;
j) In the case of stock corporation, the manner of issuing stock certificates;
k) Such other matters as may be necessary for the proper or convenient transaction of its corporate
affairs for the promotion good governance.

Section 47. Amendment to Bylaws

Vote required: majority of the outstanding capital stock or members and majority of the members of
the
board or trustees at a regular or special meeting called for the may amend or repeal the bylaws

* The power to amend or repeal the bylaws or adopt new bylaws may be delegate to the board of
directors
or trustees by 2/3 of the outstanding capital stock or embers;
* This delegated authority may be revoked by a vote of majority of the stockholders representing 2/3 of
the outstanding capital stock or members.
* Amended or new bylaws together with te certificate of Amended bylaws, duly notarized should be
submitted to the SEC for approval.
Effectivity: upon the issuance of the certificate of amendment

TITLE VI
MEETINGS

Section 48. Kinds of Meetings

Meetings of directors, trustees, stockholders or members---regular or special

Sec 49. Regular and Special meetings Stockholders or members

1. Regular (Annual) meeting
a. The date fixed in the bylaws (Sec. 49)
b. If no date is fixed “ on any date after April 15 of every year”; April 15 being the last day
generally to file the annual tax return for corporate taxpayer
 Written notice of a regular meeting must be sent 21 days prior to the meeting unless a different
period is required in the bylaws
 Witten notice to all stockholders or members of record may be sent by electronic mail
or such other manner as the Commission shall allow under its guidelines
Documents to be presented at the regular meeting:
a. Minutes of the most recent regular meeting
Contents:
Procedure in voting;
Transcript of the proceedings;
Agenda
Voting results of each agenda item;
Attendance record;
Other items as the Commission may require for the protection of the minority stockholders
b. List of members for non-stock corporation and stockholders of record and their voting rights;
c. Financial report: latest financial statement, balance sheet
d. Assessment of Corporation’s performance;
e. Divided policy and p and non-payment of dividend payment;
f. Profile, qualifications and other material information of Directors or trustees for those who seek
re-election
g. Profile, qualification and other material information of stockholders or members who seek election;
h. Directors/trustees attendance report;
i. Appraisal and performance reports and criteria for assessment
j. Director or trustee compensation report;
k. Disclosures as self-dealing and related party transactions;
l. Other matters
Special meetings
-- held anytime deemed necessary or as provided in the bylaws;
-- at least 1 week written notice unless a different period is provided in the bylaws;
--a stockholder or member may propose the holding of the special meeting;

Notice of meeting may be waived expressly or impliedly

*General waivers in the articles of incorporation shall not be allowed
*Attendance at a meeting shall constitute a waiver of notice for such meeting, except when the person
attends to express his objection for the transaction of any business because the meeting is not lawfully
called or convened.
When may the S.E.C. issue an order to call a meeting?
* when there is no person to call a meeting;
*when the person authorized to call a meeting refuses to call a meeting.
Steps :
1. Stockholder or member may petition the S.E.C to order the call of the meeting;
2. The Commission shall order the petitioning stockholder or member to call a meeting for the
corporation by giving proper notice required by the Code or the bylaws;
3. Petitioning stockholder shall temporarily preside the meeting;
 4. Majority of the stockholders or members shall choose the presiding officer from among themselves,

Stock and Transfer Book

--contains the names of the stockholders of record, the number of shares held by him/her;
transfer or movement of shares from one stockholder to another, mode of payment of subscription, whether
in cash or in installment, signed by the Secretary and other data relative to shares and ownership.

Postponements
Written notice of postponement, stating the reason shall be sent to all stockholders or members of record 2
weeks prior to the date of meeting unless a period is required under the bylaws, law or regulation.

Right to vote may be exercised in person, through a proxy or when so authorized under the bylaws,
by remote communication or in absentia

The Commission shall issue the rules and regulation governing participation and voting through remote
communication or in absentia taking into account the scale, number of shareholders or members, structure
and other factors

Section 50. Place and Time of Meetings of Stockholders or Members.

---whether regular or special shall be held in
a) In the principal office of the corporation as set forth in the Articles of Incorporation
b) If not practicable, in the city or municipality where the principal office is located

 Any city or municipality, Metro Cebu, Metro Davao and other Metropolitan areas shall be
considered city or municipality.

Contents of Notice of meeting

Section 51. Quorum in Meetings

a) Majority of the outstanding capital stock or majority of the members in case of nonstock corporation,
unless otherwise provided in this Code or in the bylaws.
b) A meeting without a quorum cannot transact business and should not start. It is the responsibility;
c) In general, the bylaws may provide a greater (not lesser) quorum for the protection of the minority.
d) Where a quorum is once present to organize a meeting, it is not broken by the subsequent
withdrawal
of a part or a fraction of those present. ( S.E.C. Opinion addressed to Atty. Roberto C. Leong dated
January 25, 1990, citing 5 Fletcher Sec. 2013.1

Section 52. Regular or Special meetings of Directors or Trustees; Quorum

Unless the articles of incorporation provide for a greater majority, a majority of the directors or trustees as
stated in the articles of incorporation shall constitute a quorum to transact business and every decision
reached by majority of the directors or trustees constituting a quorum shall be a valid corporate act;
 in election of officers, the majority vote of all the members of the board is required.
Regular meetings- monthly unless the bylaws provide otherwise;
Special meetings- at anytime upon the call of the president as provided in the bylaws
 meetings of directors or trustees may be held in or outside the Philippines unless the bylaws
provide otherwise;
 notice of regular or special meeting stating the date, time and place must be sent to every
director 2 days prior to scheduled meeting unless a longer period is provided in the bylaws;
 notice of meeting may be waived expressly or impliedly;
 directors or trustees who cannot physically attend can vote or participate through remote
communication such as videoconferencing, teleconferencing or other alternative modes
 Directors or trustees CANNOT ATTEND OR VOTE BY PROXY at board meetings;
 Directors or trustees with potential interest in any related party transactions must not vote
on the approval on the related party transaction without prejudice to compliance with
Section 31 of the RCC.

Section 53. Who Shall Preside at Meetings

 The Chairman or in his absence, the President shall preside at all meetings of the directors
or trustees as well as of the stockholders or members, unless the bylaws provide otherwise.

Section 54. Right to Vote of Secured Creditors and Administrators.

a) The stockholder-grantor shall have the right to attend and vote at stockholders’ meeting, unless the
secured creditor is expressly given such right in writing by the stockholder-grantor which is recorded in
appropriate corporate books;
b) Executors, administrators, receivers and other legal representatives duly appointed by the court may
attend and vote in behalf of the stockholders or members without need of any written proxy

Rule in non-stock corporation

“Membership in and all rights arising from a nonstock corporation are personal and non-transferrable unless
the articles of incorporation or the bylaws of the corporation provide otherwise. In other words, the
determination on whether or not dead members are entitled to exercise their voting rights (through their
executor or administrator), depends on those articles of incorporation or bylaws”
(Tan, et. al. v. Sycip and Lim, G.R. 153468, dated August 17, 2006)
 Rule on Stock Corporation
a)The shares of the decedent still form part of the outstanding capital stock, and should be considered in
determining the prescribed quorum. In the absence of a court appointed executor or administrator, the heirs
may vote such share.
b) As a rule, the shareholder of record has the right to vote his corresponding shares.
In Batangas Laguna Tayabas Bus Company v. Bitanga, et. al., the Supreme Court sustained the ruling
of the Commission that the transferee is not yet entitled to vote the shares until the same are transferred in
his name in the corporation’s records.

Section 55. Voting in Case of Joint Ownership of Stock.

a) If shares are jointly owned by two or more persons
- all the co-owners must attend and cast their vote, unless there is a written proxy signed by all the
co-owners, authorizing one or some of them or any other person to vote such share or shares;
b. If shares are owned in an and/or capacity by the holder
- any one of the joint owners can vote said shares or appoint a proxy therefore.

Section 56. Voting Right for Treasury Shares.

a)Treasury shares shall have no voting rights as long as such shares remain in the treasury;
b) Regarded as property of the corporation
c) Merely issued but not outstanding shares
d) Only issued and outstanding shares have the right to vote

Section 57. Manner of Voting; Proxies

a) In person
b) By proxy
c) By remote communication or in absentia when so authorized by the bylaws or by majority
of Board of directors, stockholders or members; votes should be received before the
corporation finishes the tally of votes;
*the corporation should establish requirements and procedures for voting through remote communication
and in absentia taking into account the company’s scale, number of shareholders or members, structure
and other factors consistent with the basic right of corporate suffrage.

Proxy defined
- Written instrument executed by one person who is a stockholder- grantor that permits/authorizes
another to attend and vote the shares in the name of the said stockholder-grantor;
for stock, it is the same authority executed by a member of record authorizing another person to
attend and vote in the former’s behalf;
-it is also the term used to call the person chosen by stockholder-grantor or member-grantor to attend the
meeting and vote in his behalf;
-it is also used to describe the authority contained in the instrument itself.
-it must be in writing, signed and filed by the stockholder or member in any form authorized in the bylaws
and received by the corporate secretary within reasonable time before the scheduled meeting
-valid for 5 years

Section 58. Voting Trusts

Concept:
* A voting trust is an agreement whereby one or more stockholders of a stock corporation confers upon
a
voting trustee or trustees the right to vote and other rights pertaining to the shares for a period not
exceeding 5 years;

*when the voting trust is specifically required as a condition in a loan agreement, the period may exceed 5
years but will automatically expire upon full payment of the loan.

* A voting trust is created by the transfer of voting shares by shareholders to a voting trustee or trustees, to
hold and vote them, until the purpose is fulfilled or for a specified period pursuant to a voting trust
agreement;

* A voting trust agreement is not governed by the law on agency. Unlike agency, it is not revocable at will;
* sometimes called “Pooling Agreements”

Procedural Requirements:

1. Execution and notarization of the Voting Trust Agreement stating the terms and conditions thereof;
2. A certified copy of the agreement shall be filed with the corporation and with the S.E.C, otherwise the
agreement is ineffective and unenforceable;
3. the certificates of stock covered by the voting trust agreement shall be cancelled;
4. new certificates shall be issued in the name of the voting trustee or trustees stating that they are issued
pursuant to the voting trust agreement;
5. the voting trustee or trustees shall execute and deliver to the transferors, VOTING TRUST
CERTIFICATE which shall be transferrable in the same manner and with the same effect as the certificate
of stock.
 6. The transfer shall be noted in the books of the corporation, that it is made pursuant to the voting trust
agreement.

Purpose:
a) it is a device to concentrate shareholder control in one or few persons who, primarily through election
of director, can control corporate affairs;
b) it is also used in corporate reorganization where it may be used to give control to former creditors
reduced
to stockholder status;
c) it may also be used by the founders of the corporation to retain control;
d) it may be used to distribute voting power disproportionately to share ownership

Limitations:
a) The voting trust agreement must not exceed 5 years at any time;
b) When the voting trust is required as a condition in a loan agreement, said voting trust may be for period
exceeding 5 years but shall automatically expire upon full payment of the loan;
c)It must be in writing and notarized;
d) It shall apply the terms and conditions thereof.
e) No voting trust agreement shall be entered into for the purpose of circumventing the law against
monopolies and illegal combination in restraint of trade or used for purposes of fraud.

*The voting trust agreement does not entitle the voting trustee or trustees to possession and
control
of the properties of the corporation; the Voting Trust Agreement merely conveys to the voting
trustee
the right to vote the shares of the grantor (1992 Bar).

Rights of the Voting Trustee or Trustee

1) The trustee or trustees in a voting trust agreement acquires the right to vote and other rights pertaining
to the shares;
2) The trustee or trustees may exercise the right of inspection of all corporate books and records in
accordance with the provisions of the RCC;
3) The voting trustee or trustees may likewise vote by proxy unless the agreement provides otherwise;
4) The voting trustee or trustees acquire legal title to the shares so he/she or they can be elected as a
director or directors of the company;

Rights of the stockholder-grantor

1) Retains the right to inspect the corporate books together with the voting trustee or trustees;
2) The stockholder-grantor continues to be entitled to dividends and other economic rights

Voting Trust agreement and Proxy distinguished

VOTING TRUST AGREEMENT PROXY

Irrevocable
Legal title is transferred to the trustee
Stock Certificate is cancelled and transferred to
the trustee
It must be notarized
The trustor-stockholder cannot vote
It cannot be for a specific meeting
The trustee votes in his own right as holder of
legal title
The voting trustee can be elected as a director
Generally revocable
No transfer of title
No cancellation of the stock certificate shall be
made
It need not be notarized
The stockholder retains the right to vote
It can be for a specific meeting
The proxy is the agent of the shareholder
The proxy, as such, cannot be elected as a
director

TITLE VII
STOCKS AND STOCKHOLDERS

SECTION 59. Subscription Contract

Definition:
A contract by which the subscriber agrees to take a certain number of shares of the capital stock
of the corporation, paying the consideration therefor or expressly or impliedly promising to pay
for the same.

*Stock Subscription is a contract for the acquisition of shares between the existing corporation or a
corporation still to be formed and the subscriber.
 Parties may refer the contract as a purchase or some other contract
 The subscription contract provides for the terms and conditions on how the shares should be
paid, how much amount should be paid and the date when the payment shall become due, if
paid in installments.
 The subscriber promises to pay the full amount of his/her subscription as he would in any
other debt.

Section 60. Pre-Incorporation Subscription

 1) Preparatory contract among the incorporators and initial subscribers and the corporation about to be
formed;
2) Such contract is irrevocable for a period 6 months from the date of subscription.
3) A party may withdraw from the contract on the following instances:
(a) If all the other incorporators or subscribers consent;
(b) When the corporation fails to incorporate within the prescribed period

4) No pre-incorporation subscription may be revoked after the articles of incorporation is submitted to the
Commission.

Section 61. Consideration for Stocks

* Stocks shall not be issued for a consideration LESS than the par value or issued price thereof.
Consideration for stocks
a) Cash
b) Property (tangible or intangible)
c) Labor or services
d) Cash advances by the corporation or offset of liabilities
e) Stock dividend declaration
f) Conversion of outstanding shares to another set of shares (like preferred to common)
g) Shares of stock in another corporation;
h) Other generally accepted form of consideration.

* Where the consideration of stocks is other than cash like patents or copyrights, the valuation thereof shall
be determined by the stockholders or the BOD subject to the approval of the Commission.
* Shares shall not be issued in exchange for promissory notes or for future service.
*Same considerations in this section, insofar as applicable may be used for the issuance of bonds by the
corporation.
* The issue price of no-par value shares may be fixed in the Articles of Incorporation or the board of
directors pursuant to authority conferred by the articles of incorporation orby the bylaws, or if no so fixed, by
majority of the outstanding stock at a meeting called for the purpose.

Section 62. Certificate of Stock and Transfer of Shares

Stock Certificate
Certificate of Stock shall be issued for shares in the capital stock of the corporation which should be signed
by the President or vice president, countersigned by the secretary or assistant secretary with the seal of the
corporation in accordance with the bylaws.
* Stock Certificates are non-negotiable instruments
*Stock certificates are quasi-negotiable because they can be transferred by indorsement coupled with
delivery
Shares of Stock in Uncertificated or Scripless forms
*Issued shares of stock that are traded in the stock exchange by publicly listed corporations which may not
be required to issue stock certificates;
*This may be required of publicly listed corporation which can demonstrate capability to do so in
accordance
with rules of the Commission.
Transfer of Shares
*Shares of stock so issued are personal property and may be transferred by delivery of the certificate or
certificates endorsed by the owner, his attorney-in-fact or any other person authorized to make the
transfer;

*All transfers should be recorded in the stock and transfer book showing the names of the parties to the
transactions, the date of the transfer, the number of the certificate or certificates and the number of shares
transferred.
* Transfers not registered in the stock and transfer book shall not be valid to third persons and the
corporation itself.
Rationale of Registration Requirements
a) To enable the corporation to know at all times who its actual stockholders are because mutual rights and
obligations exists between the corporation and its stockholders;
b) To afford to the corporation the opportunity to object or refuse its consent to the transfer in case it has
any claim against the stock sought to be transferred or for any other reasons; and
c) To avoid fictitious or fraudulent transfers.

Section 63. Issuance of Stock Certificate

NO certificate of Stock shall be issued to a subscriber until the FULL amount of the subscription together
with interest and expenses (in case of delinquent shares), if any is due, has been paid

Rights of the shareholders

a) Political rights
1.The right to attend meetings
2.The right to elect and be elected as directors;
3.The right to approve the exercise of special of special corporate powers or those that fundamentally
alter the conditions when they joined the corporation;
4.The right to access basic corporate information and inspect the corporate records or books.
b) Economic rights
1.The right to dividends;
2. The right to transfer shares;
3. The right to receive residual assets, following the corporation’s partial or full liquidation
 c) Right to institute court action
1. Individual suit – is filed when the cause of action personally belongs to the shareholder or member
and must the action in his own name; for example: when the corporation denies his right to receive
dividends, or the right to inspect the books of the corporation.

2. Class Suit – is filed when the cause of action belongs to a group of shareholders or members similarly
situated. For example, claims of minority shareholders, proposed reorganization favoring one class of
shares over another, shareholder’s voting rights and pre-emptive rights.

3. Derivative Suit- an action initiated by the stockholders in the name and for the benefit of the
Corporation against the managements or controllers of the corporation. The shareholder are given the
right to institute such action for and in behalf of the corporation; the benefit will accrue to the
corporation
and not to the shareholders initiating such action.

Section 64. Liability of Directors for Watered Stocks

Watered Stocks
-are stocks issued for a consideration less than its par or issued value as stated in the articles of
incorporation;--stocks issued for a consideration other than cash, valued in excess of its fair value;
-stocks issued with insufficient consideration

Directors who consent to the foregoing acts, or having knowledge of such acts but does not file a written
objection with the corporate secretary shall be liable to the corporation or its creditors, solidarily with the
stockholder concerned for the difference between the value received at the time of the issuance of the stock
and the par or issued value of the same.

Section 65. Interest on Unpaid Subscription

Subscribers to stocks are liable to the corporation for interest on all unpaid subscriptions from the date of
subscription, if so required by and at the rate of interest fixed in the subscription contract. If no rate of interest
is fixed in the subscription contract, the prevailing legal rate shall apply.

Section 66. Payment of Balance of Subscription

1) Subscription must be paid in accordance with the terms and conditions of the subscription contract.
2) In the absence of such terms, the payment must be made upon CALL by the board and on the date
specified
in such call.
3) The corresponding interest, if stipulated, must be paid together with the unpaid subscription that is due on
the stipulated date or call.
4) Call for payment on installments may be allowed by the board

Effects of non-payment of subscription on due date

1) Non-payment of the amount due renders the entire balance due and payable and shall make the
stockholders liable for interest at legal rate on such balance, unless a different interest rate is provided in the
subscription contract;
2) The law gives the subscriber 30 days to pay the above amounts.
3) Failure to pay within the grace period of 30 days, ALL STOCKS COVERED BY THE SUBSCRIPTION
SHALL BECOME DELINQUENT and shall be subject to a delinquency sale, unless the board of directors
orders otherwise.

Section 67. Delinquency Sale

Available Remedies if the shareholder is in default in paying his subscription:
1) Delinquency sale
2) Court action (Section 69, RCC)

Procedure (Section 67) :

1. Resolution. The board declares delinquency, following the non-payment of subscription accrued
interest, if any, within the 30-day grace period;
2. Setting the details of the Delinquency Sale. The board shall offer the delinquent shares through a
public auction, set on a date, at a time and place, and in a manner that permits many persons to bid.
The auction date must not be earlier than 30 days nor more than 60 days from the date the shares
become delinquent, i. e. from the end of the grace period;
3. Notice. The corporation must send notice to the delinquent stockholder by personal service, by
registered mail or through other means sanctioned by the bylaws, of the fact of delinquency and the
plan for a delinquency sale of the delinquent shares in a public auction;
The notice shall state the details of the proposed public auction;
The delinquent stockholder shall be given all opportunities to stop the public auction, by paying the
entire amount prior to the date;
4. Delinquency Sale/Public Auction/Bidding.
The corporation can:
(a) recognize the winning bidder as the new owner for the shares sold;
(b) issue the corresponding stock certificate to the winning bidder or to the shareholder for the
remaining shares, if any.
5. Second Bid. If there is a failure of bidding, the corporation may bid provided it has sufficient
unrestricted retained earnings. If there is no other bidder, the corporation may be declared winner
and considered owner of the stock
 Winning (highest) bidder—is the one who pays the entire amount due, accrued interest, if any, costs of
advertisement and expenses of the sale, for the least number of shares.

Section 68. When Sale May Be Questioned

Within six (6) months from the date of sale on the ground of irregularity and defect in the notice of sale or in
the sale itself of the delinquent stock

The stockholder must first pay or tenders to pay the person holding the stock THE SUM OF WHICH THE
STOCK WAS SOLD with interest from the date of sale at the legal rate.

Section 69. Court Action to Recover Unpaid Subscription

1) The corporation has judicial remedy to collect payment for the unpaid subscription with accrued interest,
cost and expenses.
2) This is an alternative course of action if there is a failure of bidding in the delinquency sale and the
corporation cannot also bid due to lack of unrestricted retained earnings;
3) Normally, delinquency sale is the speedy or adequate remedy to collect payment for unpaid subscription
if the stockholder fails to pay within the period stated in the subscription contract of the call.

Section 70. Effect of Delinquency

All the rights of the subscriber, from the point of subscription are not impaired by the fact that has unpaid
subscription.
Delinquency suspends all rights of the subscriber, except the right to receive dividends. Dividends
corresponding to such shares, if any shall be applied against the unpaid amount plus accrued interest and
the costs and expenses for advertisement, if any.

Section 71. Rights of Unpaid Shares, Nondelinquent

Holders of subscribed shares not fully paid which are not delinquent shall have all the rights of a
stockholder.

Section 72. Lost or Destroyed Certificate

Procedure:
1. Affidavit of loss. The stockholder must submit an affidavit stating the circumstances of the loss, theft or
destruction of the stock certificate
2. Verification. The corporation verifies the information stated in the affidavit;
3. Publication of Notice of loss. The corporation, after verifying the affidavit and other information with
the books of the corporation, shall publish a notice of loss, once a week for three (3) consecutive weeks in a
newspaper of general circulation in the place where the corporation has its principal office;

The notice shall state the name of the corporation, the name of the registered owner, the serial number of the
certificate of stock, the number of shares represented by such certificate; and shall state that after the
expiration of one y(1) year from the date of the last publication if no contest has been filed or presented to
the corporation regarding the certificate of stock;

4. Cancellation of the lost, stolen or destroyed certificate. If there is no such contest filed or presented to
the corporation, the corporation shall cancel the lost, destroyed or stolen certificate;
5. Issuance of a new certificate of stock. In lieu of the lost, destroyed or stolen certificate , the corporation
shall issue a new certificate of stock one year after the last publication, unless the registered owner files a
bond or other security effective for a period of one(1) year,in which case the new certificate may be issued
even before the expiration of the one year period;

If there is a contest or if an action is pending in court regarding the ownership of the certificate of stocks, the
issuance of the new certificate of stock shall be suspended until the court renders a final decision regarding
the certificate of stock which has been lost, destroyed or stolen.

TITLE VIII
CORPORATE BOOK AND RECORDS

Section 73. Books to be kept. Stock Transfer Agent.

1. Articles of Incorporation and Bylaws of the corporation and all their amendments;
2. The current ownership structure and voting rights of the corporation, including lists of stockholders or
members, group structures, intra-group relations, ownership data, and beneficial ownership;
3. Names and addresses of all the members of the board of directors or trustees and executive officers;
4. A record of all business transactions;
5. Copies of GIS and FS;
6. Minutes of meeting of stockholders/members or BOD/BOT
a) agenda
b) notice of meeting;
c) the date, time and place of meeting;
d) the yeas and nays on any motion
7. Stock and Transfer Book
8. Membership Book
Who is a Stock Transfer Agent?
--engaged principally in the business of registering transfers of stocks in behalf of a stock corporation;
--licensed by SEC which license shall be renewable annually; a license fee fixed by the Commission shall
be
paid;
--SEC requires corporation which transfer and/or trade stocks in secondary markets to have an independent
 transfer agent.
Who may have access to the books and records of the corporation?
--all stockholders, as a matter of right, being owners of shares of stock, directors, trustees and members
have the right to inspect the books of the corporation at reasonable hours at business days.

Section 74. Right to Financial Statements

--A corporation shall furnish a stockholder or member copies of the most recent FS within 10 days from
receipt of a written request;
--Corporation shall present a financial report of the operations of the corporation for the preceding at regular
meeting of the stockholders or members;
--FS of corporations with a total assets or total liabilities are less the PhP600,000 shall be certified under
oath by the treasurer and the President.

TITLE IX
MERGER AND CONSLIDATION

Section 75. Plan of Merger or Consolidation

Merger - when a corporation absorbs another corporation and remains in existence while the other is
dissolved. The absorbing corporation is the surviving corporation.
Upstream Merger occurs when the union involves a parent company and a subsidiary, where the parent
corporation is the surviving entity and the subsidiary is the constituent corporation.
Consolidation – when two or more corporations unite and a new juridical entity is formed.

Procedure (under Section 75):

1.The majority vote of the board of Directors of each corporation, party a merger or consolidation, shall
approve the plan of merger or consolidation setting forth the following
a. Names of the corporations proposing to merger and consolidate hereinafter referred as the constituent
corporations;
b.The terms of the merger or consolidation and the mode of carrying into effect;
c.Statement of the changes in the articles of incorporation, if any of the surviving corporation in case of

merger and in the case of consolidation, all the statements required to be set forth in the articles of
incorporation for corporations organized under this Code;
d. Such other provisions with respect to the proposed merger or consolidation as are deemed necessary
or
desirable.

Section 76. Stockholders’ or Members’ Approval

Procedure:
1.Notice of meeting which shall state the purpose of the meeting including a copy or summary of the
plan of merger or consolidation shall be sent to the stockholders or members of the respective
corporations in the same manner as giving notice of regular or special meetings under Sec. 49 of this
Code.
2. Approval by stockholders representing 2/3 of the outstanding capital stock or 2/3 of the members of
Each of such corporations at separate meetings.
3. Any dissenting stockholder may exercise the right of appraisal in accordance with this Code; If after the
approval by the stockholder of such plan, the board of directors decides to abandon the plan, the right of
appraisal shall be extinguished;

4. Any amendment to the plan requires majority vote of the board of directors or board of trustees of all
constituent corporations and ratified by 2/3 of the outstanding capital stock or 2/3 of the members of
each
constituent corporation.
5. Upon approval by the stockholders or members as required by this Section, the Article of Merger or
Consolidation shall be executed by each constituent corporations to be signed by the president or vice-
president and certified by the corporate secretary or assistant secretary of each corporation (Section 77,
RCC)
6. The Articles of merger or of consolidation signed and certified and required by this Code shall be
submitted to the Commission for its approval. (Section 78, RCC)

Section 77. Articles of Merger or Consolidation

Contents:
a. The plan of merger or plan of consolidation;
b. Stock Corporation—number of shares outstanding
Nonstock corp.—number of members;
c. Number of shares or members voting for or against the plan, respectively;
d. Carrying Amounts and fair value s of the assets and liabilities of the respective companies as of the
agreed cut-off date;
e. The method to be used in the merger or consolidation of accounts of the companies;
f. The provisional or pro forma values, as merged or consolidated using the accounting method;
g. Such other information as may be prescribed by the Commission.

Section 78. Effectivity of Merger or Consolidation

1. The merger or consolidation shall take effect upon approval by the S.E.C. ;
2. The Commission shall issue a Certificate approving the Articles and Plan of Merger or
 Consolidation;
3. Merger or consolidation of banks or banking institutions, educational institutions, and other entities
governed by special laws, the favorable recommendations of the appropriate government agencies
shall
first be obtained.
Adverse Findings of the application for Merger
The Commission shall grant the corporation the opportunity to be heard.

Section 79. Effects of Merger or Consolidation

a. Constituent corporations shall become one—surviving corporation or consolidated corporation
b. Separate existence of the constituent corporations shall cease except the surviving or consolidated
corporation;
c. The surviving or consolidated corporation shall possess all the rights, privileges, immunities and
franchises of each constituent corporation; and all real or personal property, all receivables due on whatever
account, including subscriptions to shares and other choses in action, and every other interest of, belonging
to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or
consolidated corporation without further act or deed; and
d. The surviving or consolidated corporation shall be responsible for liabilities and obligations of each
constituent corporation
e. Any pending claim, action or proceeding brought by the constituent corporation may be prosecuted by or
against the surviving or consolidated corporation;
f. The rights of the creditors or liens upon the property of such constituent corporations shall not be impaired
by the merger or consolidation.

TITLE X
APPRAISAL RIGHT

Section 80. When the Right of Appraisal May Be Exercise

Any stockholder may exercise his right to dissent and demand payment of the fair value w of the shares in the
following instances:
(a) In case an amendment to the articles of incorporation has the effect of:
--changing or restricting the rights of any stockholder or class of shares;
--authorizing preferences in any respect superior to those of outstanding shares of any class;
--extending or shortening the term of existence;
(b) In case of sale lease, exchange, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property or assets as provided in this Code (Sec. 39, RCC)
(c) In case of merger of consolidation;
(d) In case of investment of corporate funds for any purpose other the primary purpose of the corporation

Section 81. How Right is Exercised

Procedure:
1) The stockholder should first attend the meeting where the corporate action is discussed and decided
upon;
2) If he is not in favor of the corporate action, he should vote against such action and register his
objection or dissent;
3) He shall make a written demand on the corporation for the payment of the fair value of his shares,
within 30 days from the date the vote was taken;
Failure on the part of the stockholder to make the demand within such period, shall be deemed a
waiver of the appraisal right;
4) Within 10 days from demanding payment for shares held, the stockholder shall present the stock
certificate to the corporation for notation that such shares are dissenting shares; failure to do so
shall, at the option of the corporation, terminate the rights under this Title (Sec. 85, RCC);
5) If the corporate action is implemented, the corporation shall pay the stockholder
6) The stockholder shall surrender his stock certificate representing his shares and transfer said shares
to the corporation;

Determination of the fair market value of the shares:

1. Fair value of the shares shall be determined as of the day before the vote was taken;
2. If the corporation and the stockholder cannot agree on the fair value of the shares, it shall be
determined by 3 disinterested persons: 1 named by the corporation, 1 named by the stockholder
1 named by the two thus chosen
3. The findings of the majority of the appraisers shall be final
4. The award shall be paid by the corporation within 30 days after such award is made;
5. Payment shall be out of the unrestricted retained earnings of the corporation;

Section 82. Effect of the Demand and Termination of Right

All rights accruing to such shares including voting and dividend rights shall be suspended from the time
thee demand was made until the abandonment of the corporate action or purchase of the shares by the
corporation

If the stockholder is not paid the value of said shares within 30 after the award, the voting and dividend
right shall immediately be restored.

Section 83. When Right to Payment Ceases

1. when the demand for such payment is withdrawn with consent of the corporation;
2. if the proposed corporate action is abandoned ;
3. if the proposed corporate action is rescinded;
 4. if the proposed corporate action is disapproved by the Commission, when such approval is
necessary;
5. if the Commission determines that such stockholder is not entitled to the appraisal right
--in this case, the status as the stockholder shall be restored, and all dividend distributions which would
have accrued on the shares shall be paid to the stockholder.

Section 84. Who Bears Cost of Appraisal

a) the corporation or
b) the stockholder, if the fair value ascertained by the appraisers is approximately the same as the price
offered to pay the stockholder

Section 85. Notation on certificate; Rights of Transferee

Within 10 days from the demand, the dissenting stockholder shall submit the stock certificate representing
the shares to the corporation for notation that such hares are dissenting shares;
Transferees of dissenting shares covered by certificates bearing such notation, shall have all the rights of a
regular stockholder and all dividend distributions which would have accrued on such shares shall be paid to
the transferee.
TITLE XI
NON-STOCK CORPORATIONS

Section 86. Definition

Section 87.
Purposes
Charitable, Religious, Educational , Profession, cultural, fraternal, literary, scientific, social, civic service,
trade, industry, agricultural and like chambers or any combination thereof.

Section 88. Right to vote

--may be limited, broadened or denied in the Articles of Incorporation
--members shall be entitled to one (1) vote
--a member may vote by proxy, unless otherwise provided in the Articles of Incorporation or Bylaws
--Bylaws may authorize voting by remote communication and/or in absentia

Determination of Quorum for a meeting

--actual members with voting rights should be counted (Tan, et al. v Sycip and Lim, G.R. No. 153468, dated
August 17, 2006).
--Quorum is determined by the majority of the living members with voting rights. Members without voting
rights shall not be considered for purposes of quorum, although they may attend the meeting (Lim v. Moldex
Land, Inc. G.R. No. 206038, January 25, 2017)

Section 89. Nontransferability of Membership

Generally, membership is non-tranferable The determination of whether or not dead members are entitled to
exercise their voting rights (through their executor administrator), depends on the corporation’s Articles of
Incorporation or Bylaws.

Section 90. Termination of Membership

*Membership – terminated in the manner and for causes provided in the AI or BL
*Termination of membership- extinguishes all rights of a member in the corporation or in its property, unless
otherwise provided in the AI or BL

Section 91. Election and Term of Trustees

Number of Trustees in Nonstock Corporations may or may not be more than 15.
Term of office—not more than 3 years until their successors are elected and qualified.

Section 92. List of Members and Proxies, Place of Meetings

--List of members and their proxies (form as required by the Commission) shall, at all times, be kept by the
corporation.
--the list shall be updated to reflect the members and their proxies or record twenty(20) days prior to the
scheduled meeting.
Place of regular or special meeting: at the principal office of the corporation
--it may also be held at any place even outside of the place where the principal office is located provided that
proper notice is sent to all members indicating the date, time, and place of meeting provided that it wis within
the Philippine territory.

Section 93. Rules of Distribution

How remaining assets are applied
1. Liabilities and obligations should be paid;
2. Assets help upon a condition requiting return, transferor conveyance---should comply with such
condition;
3. Assets received /held subject to limitations permitting their use only for charitable , religious,
benevolent, educational or similar purposes , but not held upon a condition---
Shall be transferred or conveyed to one or more corporations, societies or organizations with with
similar activities;
4. Assets other than those mentioned in the preceding paragraphs—should be distributed in
accordance with the provisions of the Articles of Incorporation or By-laws, to the extent that the
 Articles of Incorporation or by-laws determine the distributive rights of members, or any class or
classes of members, or provide for distribution; and
5. In any other cases, assets may be distributed to such persons, societies, organizations or
corporations, whether or not organized for profit, as may be specified in a plan of distribution adopted
pursuant to this Chapter.

Sec 94. Plan of Distribution of Assets

May be adopted by a corporation in the process of dissolution .
1) At a regular or special meeting a majority vote of the Board to adopt a resolution recommending a
plan of distribution;
2) Written notice shall be sent to each member entitled to vote setting forth the proposed plan of
distribution or a summary thereof, the date, time and place of such meeting within the time and in the
manner provided in this Code for giving of notice of meetings; and
3) Adoption of the Plan of distribution by a vote of at least 2/3 of the members having voting rights
present or represented by proxy at such meeting.

A nonstock corporation is generally regarded as trustee of the members’ capital contributions. Thus in case
of dissolution, its remaining assets ( following the satisfaction of the claims of creditors) must be in
accordance with the teems for which such assets are contributed ( RCC, Its Theories and Applications,
Herbosa).

Read also: SEC MC No. 15 -2018

Guidelines for the Protection of SEC Registered Non-Profit Organizations From Money Laundering and
Terrorist. Financing Abuse

TITLE XII
CLOSE CORPORATIONS

Section 95. Definition and Applicability of Title

Close Corporation- one whose Articles of Incorporation provides:
(a) All issued stocks of all classes, exclusive of treasury shares, shall be held of record by not more than
20 persons;
(b) All issued stocks of all classes shall be subject to one or more specified restrictions on transfer;
c) That the corporation shall not list in the stock exchange or make any public offering of its stocks of
any class.

Section 96.
(d) Classification of shares or rights
(e) Qualification of owing shares;
(f) Restrictions on the transfer of shares;
(g) Classification of directors into one or ore classes each of whom may be voted for or elected
solely a by a particular class of stock;
(f) Greater quorum or voting requirements in meetings of stockholders or directors than those provided
in this Code.
(g) May provide that the business of the corporation shall be managed by the stockholders rather than
by the directors ;
(h) That no meeting need be called if the articles of incorporation provides that the business of the
corporation shall be managed by the stockholders
(i) That if the stockholders shall be deemed to be directors for the purpose of applying the provisions of
this Code, they shall be subject to all liabilities of directors;
(j) That all officers and employees or that specified officers or employees shall be elected or appointed
by the stockholders, instead of by the board of directors.

A corporation NOT A CLOSE CORPORATION : if 2/3 of the voting stock /voting rights is owned by an
open corporation.

Following corporations---may not be registered as a close corporation:

a) Mining or oil companies;
b) Stock exchanges
c) Banks;
d) Insurance companies
e) Public utilities;
f) Educational institutions;
g) Corporations vested with public interest

Other provisions not covered by this title shall apply suppletorily to close corporations.

Section 97. Validity of Restrictions on Transfer of Shares

- Restrictions on the right to transfer must appear in the articles of incorporation, bylaws and stock
certificate, otherwise the same shall not be binding on any purchaser in good faith;
- Restrictions may involve in the granting the existing stockholders or corporation the option to
purchase the shares of the transferring stockholder with such reasonable terms, conditions or
period stated;
- Failure to exercise the option to purchase the shares within the period stated, the transferring
stockholder may sell their share to any third person.

Section 98. Effects of Issuance or Transfer of Stock in breach of Qualifying Conditions

Stock issued or transferred in violation of certain restrictions in a close corporation:
a) To any person not eligible to be a holder thereof under any provision of the articles of incorporation
and if the certificate for such stock conspicuously shows the qualifications;
b) If the articles of incorporation states the number of persons, not exceeding 20 who are entitled to be
stockholders of record and the certificate of such stock conspicuously states the number and the
issuance or transfer to any person would result to a violation of this restriction;
c) If the stock certificate conspicuously shows a restriction on transfer of the corporation’s stock and the
transferee acquires the stock in violation of such restriction;
In all the foregoing instances, the transferee is conclusively presumed to have notice of his/her
ineligibility. Under these circumstances, the corporation, at its option refuse to register the transfer
in the name of the transferee.

The corporation may nevertheless register said transfer or issuance though contrary to the qualifying
conditions if consented by all stockholders of the close corporation of if the corporation has amended its
articles of incorporation.

Transfer is not limited to transfer for value.

The transferee may rescind the transfer or recover the stock under any express or implied warranty,
Section 99. Agreements by Stockholders
a. Pre-incorporation agreements;
b. Voting/ Pooling agreements;
c. To make the stockholders partners among themselves;
d. Stockholders to interfere with the discretion of the board of directors in the conduct of the business
and affairs of the corporation;
e. Shall impose on the stockholders the liabilities for managerial accts imposed on the directors under
this Code;
f. Stockholders to actively engage in the management or operation of the business and affairs of the
corporation; shall be held to strict fiduciary duties to each other and among themselves;
g. Stockholders to be personally liable for corporate torts unless the corporation has obtained adequate
liability insurance.

Section 100. When Board Meeting is Unnecessary or Improperly held

Unless the bylaws provide otherwise, any action taken by the directors—VALID if:
a) Written consent is signed by all directors before or after such action is taken,;
b) All stockholders make no prompt objection in writing despite actual or implied knowledge of the action
taken;
c) Directors’ customary informal action with the express or implied acquiescence of the stockholders;

An action WITHIN THE CORPORATE POWERS taken at an improperly called meeting – deemed ratified by
an absentee director unless he promptly files his written objection with the secretary of the corporation.

Section 101. Preemptive Right In Close Corporations.

Applies to ALL STOCK TO BE ISSUED , INCLUDING TREASURY SHARES, whether for money, property
or personal service, or in payment of corporate debts unless the Articles of Incorporation provides otherwise.

Section 102. Amendment of Articles of Incorporation.

May consist of:
a) Deletion or removal of any provision required in this Title;
b) Reduce a quorum or voting requirement stated in the AI.
Vote required: 2/3 of ACS, with or without voting rights or of such greater proportion of shares as my be
specifically provided in the AI for amending, deleting or removing any of the aforesaid provisions, at a
meeting called for that purpose.

Section 103. Deadlocks.

-occurs when the directors or stockholders are so divided on the management of the corporation’s business
and affairs that the votes required for a corporate action cannot be obtained, with the consequence that the
business and affairs of the corporation can no longer be conducted to the advantage of the stockholders.

“Ordinarily, disputes between or among the stockholders do not paralyze the operations corporation.
However,
disputes aided by the rigid application of stipulated restrictions may result in deadlocks” ( Herbosa and
Ricalde, RCC, Its Theories and Applications)

Powers of the SEC to break the deadlock

It may take action and afford relief as circumstances warrant ; arbitrate the dispute, upon written petition by
any stockholder
Appropriate Orders:
a) Cancelling or altering any provision in the AI, BL or any stockholder’s agreement;
b) Cancelling, altering or enjoining a resolution or act of the corp. or its BOD, stockholders or
officers;
c) Directing or prohibiting any act of the corporation, or its BOD, stockholders officers or any
persons party to said action;
d) Requiring the purchase of shares of any stockholder either by the corporations with or
without unrestricted retained earnings, or by other stockholder ;
 e) Appointing a provisional receiver;
f) Dissolution of the corporation;
g) Other reliefs.

Provisional Director -an impartial person; not a stockholder or a creditor of the corp. or any of its
subsidiaries, affiliates;
-not a receiver; does not have the title and powers of a custodian or receiver
-qualifications to be determined by SEC;
-shall have all the rights and powers of a duly elected director, including the right
to be notified of and vote in a directors’ meeting;
-may be entitled to a compensation as determined by agreement between the
corporation and such director;
-SEC may also fix the compensation of the provisional director if no such
compensation is fixed in the agreement or in the event of disagreement between the
provisional director and the corporation;

Section 104. Withdrawal of Stockholder or Dissolution of Corporation

In close corporations, a stockholder may:
1. May, for any reason, compel the corporation to purchase shares held at fair value, which shall not be
less than the par or issued value , when the corporation has sufficient assets in its books to cover its
debts and liabilities exclusive of capital stock;
2. May compel the dissolution corporation, by written petition.
Grounds: a) whenever any acts of the directors, officers or those in control of the corporation are illegal,
fraudulent, dishonest, oppressive, or unfairly prejudicial to the corporation or any
stockholder;
b)whenever corporation’s assets are being misapplied or wasted;

TITLE XIII
SPECIAL CORPORATIONS

Section 105. Incorporation

Educational corporations-governed by special laws and the general provisions of this Code.

Section 106. Board of Trustees

1.Not less than 5 not more then 15
2.Should be in multiples of 5 ( 5, 10 or 15 only)
3.Classify the trustees with the term of 1/5 of its members expiring every year;
4.Trustees thereafter elected to fill the vacancies, occurring before the expiry of a particular term, shall hold
office for the unexpired period.
5.Trustee elected thereafter to fill vacancies caused by expiration of term shall hold office for 5 years.
6. Majority of the board shall constitute a quorum;
7.Powers and authority of trustees—defined by BL
8. For Stock Education Institutions—governed by provisions on stock corporations.

Section 107. Classes of Religious Corporations

1. Corporation Sole
2. Religious Societies or Corporation Aggregate
Governed by provisions of this Title and on Nonstock Corporations

Section 108. Corporation sole

May be formed by the Chief archbishop, bishop, priest , minister rabbi, or other presiding eld of a religious
denomination, sect or church.
Purpose: To administer and manage, AS TRUSTEE, the affairs. Property and temporalities of the church.

Section 109. Articles of Incorporation

Must be filled with the SEC.
Contents:
a) That the applicant represents the religious denomination;
b) Rules, regulations and discipline of the church are consistent with becoming a corporation sole and don’t
forbid it;
c) That such head of the church is charged with the administration of the temporalities and management of
the affairs , estate and properties of the church;
d)manner of filling up of vacancy ;
e)Principal office;
f) such other provisions not contrary to law

Section 110. Submission of the Articles of Incorporation

1. Articles of Incorporation must be verified by an affidavit executed by the applicant-head of the Church ;
2. Accompanied by certificate of election of letters of appointment
3. Approved name and cover sheet
4. Receipt of payment of filing fee

Section 111. Acquisition and Alienation of Property

Should be in accordance with the provision of the internal rules, regulations and discipline of the Church
A Corporation Sole may:
1.purchase and hold real and personal property for its church
2.receive bequests or gifts for the Church.
3. Sell or mortgage real property held by it by:
a) File a Petition in RTC of the province where the property is located;
b) Accompanied by a proof of Notice through publication to Sell or mortgage or as directed by the Court.

Section 112. Filling of Vacancies

In any vacancy in the office of the Corporation Sole, the person authorized by the rules, regulations or
discipline of the Church shall administer and manage the affairs, estate and properties and shall exercise the
powers and authority of the Head of the Church.

Section 113. Dissolution

Affidavit od Dissolution should be submitted to the SEC stating:
1.Name of the corporation;
2.Reason/s;
3.Authorization by the Church;
4.Names and addresses of the persons who are to supervise the winding up of the corporation.

Section 114. Religious Societies

Who can incorporate?
Any religious denomination, sect, or church, by affirmative vote of 2/3 of the membership
Purpose;
To administer its temporalities and manage the affairs, properties and estate of the Church
Documents to file:
1. Articles of Incorporation setting forth the ff:
a) The church is a religious of a religious denomination, sect or church;
b) Written consent of 2/3 of its membership;
c) That the incorporation of the church is not forbidden by competent authority or Constitution, rules,
regulations or discipline of the Church;
d) For administration of its affairs, properties and estate;
e) Principal office;
f) Names, nationalities and residence addresses of trustees (5 not more than 15)
2. Approved corporate name verification;
3. Cover sheet
4. Receipt of payment of filing fee

Section 115. Applicability of Provisions to One Person Corporations.

Provisions of this title shall primarily apply to OPCs and other provisions of this Code shall apply suppletorily,
except as otherwise provided in this Title.

Section 116. One Person Corporation

Who may register?
A natural person, trust or an estate
Who may not register as an OPC?
a) Banks and quasi-banks
b) Preneed
c) trust
d) Insurance
e) public and publicly-listed companies
f) non-chartered government-owned ans controlled corporations
g) natural person if the purpose is to practice his/her profession except as otherwise provided under special
laws.
Section 117. Minimum Capital not Required for OPCs
Section 118. Articles of Incorporation
Contents:
1.If single stockholder is a trust or a estate---nationality and residence address of the trustee, administrator ,
executor, guardian, conservator custodian, or other person exercising fiduciary duties together with proof od
such authority to act on behalf of the trust or estate;
2. Names and addresses of nominee and alternate nominee .

Section 119. Bylaws

Not required to submit bylaws

Section 120. Display of Name

Corporate name : shall indicate the letters “OPC” at the end of its name

Section 121. Single Stockholder as Director, President

Section 122. Treasurer, Corporate Secretary and other Officers
1.OPC shall appoint a Treasurer, corporate secretary and other officers within 15 days from the issuance of
Certificate of Incorporation;
2. OPC shall notify SEC within 5 days from appointment of such officers.
3. The single stockholder may not be appointed as corporate secretary;
4. In case, the single stockholder who is likewise a self-appointed treasurer:
a) the corporation shall give a BOND (to be renewed every 2 years or as often as may be required) to the
SEC;
b) undertake in writing to faithfully administer the OPC’s funds to be received by the Treasurer
c) to disburse and invest the same according to the Articles of Incorporation as approved by the SEC;
Section 123. Special Functions of Corporation Secretary
1) Maintain Minutes Book
2) Notify nominee or alternate nominee of death or incapacity of the single stockholder within 5 days
from the occurrence
3) Notify the SEC of the death or incapacity of the single stockholder within 5 day from such
occurrence and stating in such notice the names, addresses and contact details of all known legal
heirs
4) Call the nominee or alternate nominee and know legal heirs to a meeting and advise the legal heirs
re election of new director, amendment of the AI and other ancillary and/or consequential matters.

Section 124. Nominee of the single stockholder e and Alternate Nominee

1. Nominee and alternate nominee shall take the place of the single stockholder, as director , to
manage the affairs of the OPC, in case of the latter’s death or incapacity
2. The AI shall state the names, residence addresses contact details and extent of authority in
managing the affairs of the OPC of the nominee and alternate nominee;
3. Consent of the Nominee and Alternate Nominee to be attached to the application of OPC;
4. Consent of Nominee or alternate nominee may be withdrawn in writing any time before the death or
incapacity of the single stockholder.

Section 125. Term of Nominee and Alternate Nominee

1. If incapacity of the single stockholder is temporary—until the stockholder, by self-determination,
regains capacity to assume the duties and manage the affairs of the OPC;
2. In case of death of the single stockholder—until the legal heirs of the single nominee have been
lawfully determined and the heirs have designated one of them or have agreed that the estate shall
be the OPC;
3. The Alternate Nominee—for the same term and under same conditions applicable to the nominee.

Section 126. Change of Nominee or Alternate Nominee

1. Any time---by submitting to the SEC, the names, of the new nominees and their consent;
2. The AI need not be amended.

Section 127. Minutes Book

Shall contain:
a) All actions
b) Decisions
c) Resolutions

Section 128. Records in Lieu of Meetings

a) Written resolution recorded in the minutes book, signed and dated by the single stockholder –when
action is needed by the OPC
b) The date of recording in the minutes is deemed to be the date of meeting.

Section 129. Reportorial requirements

1. Annual AFS ;
2. FS under oath by the treasurer—if total assets or total liabilities are less that 600k pesos;
3. Disclosure of all self-dealings and related party transactions between the OPC and thr single
stockholder;
4. Other reports as the Commission may require ;

Fiscal year of the OPC—stated in the AI; in the absence thereof, the calendar year shall be the fiscal year.
OPC in delinquent status if it fails to submit reports 3 times, consecutively or intermittently within thwe
period of 5 years.

Section 130. Liability of a Single Stockholder

Jointly and Severally liable for the debts and other liabilities of the OPC ---if the stockholder fails to prove
that the property of the corporation is independent of the stockholder’s personal property.

If the stockholder claims limited liability—proof that the OPC is adequately financed;
Doctrine of Piercing the Veil of Corporate Fiction applies

Section 131. Conversion from Ordinary Corporation to One Person Corporation

1.The single stockholder may apply for an OPC if he acquires all the stocks of the ordinary corporation;
2. When so converted, the OPC shall legally be responsible of all the debts and liabilities of the ordinary
corporation.

Section 132. Conversion from One Person Corporation to an Ordinary Stock Corporation
1. Notice to SEC stating the facts and circumstances surrounding the conversion within 60 days from the
date of the occurrence of the circumstances leading to the conversion;
2. Comply with all the requirements for stock corporations under the RCC and file an amended Articles pf
Incorporation reflecting the conversion;
3. In case of death of the single stockholder, the nominee or alternate nominee shall transfer all the shares
to designated legal heir or estate within 7 days from receipt of affidavit of heirship or self adjudication
executed by the sole heir;
4. Within 60 days from the transfer, the legal heir shall notify the SEC to either dissolve the corporation or
convert it to ordinary stock corporation;
5. The ordinary stock corporation shall succeed the OPC and be legally responsible for the latter’s
outstanding liabilities as of the date of conversion.
Section 133. Methods of Dissolution
Voluntary of Involuntary

Section 134. Voluntary Dissolution Where No Creditors are Involved

How effected;
1. Notice stating the purpose, at least 20 days prior to the meeting sent to all stockholders or members
sent either personal or by mail;
2. Notice stating the time, place and object of meeting shall be published once prior to the meeting
3. Actual Meeting to be held for that purpose
4. Approval by majority vote of the Board of Directors or Trustees and by resolution of at least majority
of the OCS or members;
5. Petition for Dissolution to be submitted to the SEC:
(a) Stating the reason for dissolution;
(b) notice given/sent;
(c) names and addresses of the directors/trustees, stockholders/members who approved the
Dissolution; and
(d)details of publication
(e) proof of publication
(f)resolution approving the dissolution
(g) favorable recommendation from appropriate government agency when necessary.

Section 135. Voluntary Dissolution Where Creditors are Affected

How effected;
1. Notice of Meeting called for the purpose;
2. Meeting called for that purpose;
3. Approval by majority of the Board and at least 2’/3 of the OCS/members;
4. Verified petition setting forth all claims and demands against it, and that the dissolution was
approved by the required votes.
5. The petition shall be signed by the Board of Directors/trustees and verified by the President or
Secretary or any of its directors or trustees.
Contents of the Verified Petition:
a) Reason for dissolution;
b) Form, manner and time the notice was given;
c)Date, time and place of meeting;
6. Submit verified petition to SEC together with::
a) copy of the resolution authorizing the dissolution certified by majority of the board and
countersigned by the secretary;
b) List of creditors.
7. SEC fixes the deadline for filing objections to the petition for dissolution by virtue of an order : 30-
60 days from entry of the order;
8. SEC publishes the order at least once a week for 3 consecutive weeks
9. SEC hears the petition for dissolution and objections to the petition;
10. SEC shall render judgment dissolving the corporation and direct disposition of assets, if the
allegations
in the petition are true and no objections have been filed
11. SEC may appoint a receiver to collect assets ang pay debts;
12. SEC issues the certificate of dissolution.

Section 136. Dissolution by Shortening Corporate Term

1. A kind of voluntary dissolution.
2. How effected?
a) Amendment of Articles of Incorporation pursuant to the provisions of this Code ( Sec.15, RCC)
b) Submit AAI to SEC for approval;
c) Upon expiration of shortened term as per approved AAI, the corporation is deemed dissolved without
any further proceedings ;
d) SEC issues the Certificate of Amendment Shortening the corporate term;
e) In the case of expiration of corporate term—dissolution automatically takes effect on the day
following the last day of the corporate term without the need for the issuance of certificate of
dissolution.

Section 137. Withdrawal or Request and Petition for Dissolution

1.The corporation shall file a motion to withdrawal, verified and signed by any incorporator , director,
trustee,
stockholder or member;
2. The motion shall be submitted not later than 15 days from receipt by the SEC of the request for
dissolution;
3. SEC shall withhold action on the request for dissolution;
4. SEC shall investigate on the motion;
5. SEC makes a pronouncement that the request for dissolution is deemed withdrawn;
6. SEC directs the board and stockholders or trustees to ascertain whether to proceed with the dissolution;
7. SEC issues such other as it may deem fit.

Section 138. Involuntary Dissolution

How effected?
1. By SEC, motu proprio
 2. Filing Verified complaint by any interested party
Grounds:
a) Non-use;
b) Continuous inoperation;
c) Court order;
d) Upon finding by final judgment that the corporation procured its incorporation through fraud;
e) Upon finding by final judgment that the corporation:
1) Was created for the purpose of committing, concealing or aiding the commission of securities
violation, smuggling, tax evasion, money laundering or graft and corrupt practices;
2) Committed or aided in the commission of securities violation, smuggling tax evasion, money
laundering or graft and corrupt practices, and its stockholders knew of the same; and
3) Repeatedly and knowingly tolerated the commission of graft and corrupt practices or other
fraudulent
or illegal acts by its directors, trustees, officers or employees.

--Involuntary dissolution by final judgement on the grounds stated in subparagraph (e)—

Assets, after payment of liabilities, upon petition of the SEC, shall be forfeited to the government
--Forfeiture of assets shall be without prejudice to rights of innocent stockholders and employees and to
other
Penalties.
--SEC gives notice to appropriate regulatory agency prior to involuntary dissolution of companies

Section 139. Corporate Liquidation

A corporation whose charter expires, is annulled by forfeiture or whose term of existence is terminated shall
remain a body politic for 3 years after effective date of dissolution:
1. to prosecute of defend suits;
2. To settle and close its affairs;
3. Dispose of and convey its property;
4. distribute its assets;
5.to convey all of its property to trustees for the benefit of stockholders, members, creditors and other
persons in interest.
After Dissolution:
1. No new transactions shall be entered into or the business for which the corporation is established shall
cease.
2. All interest which the corporation has in the property is terminated;
3. The legal interest on the property /assets vests in the liquidating trustees;
4. The beneficial interest rests on the stockholders, members, creditors or other persons-in-interest.
5. Any asset distributable to a stockholder or creditor who is unknown or could not be found---escheated in
favor of national government;
6. All assets or property of a corporation shall be distributed only upon lawful dissolution, after payment of its
debts and liabilities, except by decrease of capital and as allowed by the Code.

TITLE XV
FOREIGN CORPORATIONS

Section 140. Definition and Rights of Foreign Corporations

Foreign corporation - one formed, organized or existing under laws other than those of the
Philippines,whose laws allow Filipino citizens and corporations to do business in its own country.
--have the right to transact business in the Philippines after obtaining a license for that purpose;
--it has a certificate from the appropriate government agency;
--it is a domestic entity, a duly registered company in its country of origin.

Section 141. Application to Existing /Foreign Corporations

Existing foreign corporations with a license to do business in the Philippines, at the date of the effectivity of
the RCC shall continue to have authority under such terms and conditions of the license, subject to the
provisions of the RCC.

Kinds:
1. Branch office
Representative office
Regional headquarters
Regional Operating headquarters
2. Subsidiary—a separate entity established to do business in the Philippines and operate under Philippine
laws.
The Omnibus Investment Code and Tax Code currently extend certain tax and non-tax incentives on the
limited branch activities, subject to compliance with certain requirements;
A tax treaty exempts the business profit of the qualified foreign corporations if it has limited presence or no
established branch office (or “permanent establishment”) in the Philippines

Section 142. Application for a License

How to apply for a license to do business?

I. For Stock and Non Stock Branch office/representative office

Requirements:
1. Cover Sheet;
2. Name verification slip;
3. Application form, under oath
i. F-103 for stock branch office;
ii. F-104 for stock representative office
iii. F-108 for nonstock branch/representative office, including foundations (NBO and NRO)
4. Authenticated of board resolution:
-authorizing the establishment of branch/representative office in the Phil;
-designating the Resident Agent
-stipulation that in the absence of a residence agent, summons and legal processes shall be served to
SEC (Section 145, RCC)

The Application shall contain the ff:

a) date and term of incorporation
b) complete address of the principal office of the corporation in its state of incorporation;
c) name and address of its resident agent authorized to accept summons and legal processes and all
notices affecting corporation pending establishment of a local office;
d) place of business in the Philippines;
e) specific purpose or purposes which the corporations intends to pursue in the transaction of its business
in the Phil; those purposes stated in the certificate of authority issued by the appropriate government
agency;
f) names and addresses of the present directors or officers;
g) authorized, subscribed and paid-up capital;
h) other information.
5..Affidavit of Reciprocity;
6. Affidavit of Solvency;
7. Previous authority from appropriate government agency, when necessary;
8. Special Power of Attorney designating its Resident agent (Section 145, RCC)
9. Authenticated Copy of the Articles of Incorporation and Bylaws as approved by its country of incorporation.
10.Latest financial statements;
11. Notarized Proof of Inward Remittance;
12 Affidavit of undertaking to change corporate name. (not required if already stated in the application form;
13. Filing fees;
14. other requirements as the SEC may require .

II. For Regional/Area and regional/area Operating headquarters

Requirements:
1. Cover Sheet;
2. Name verification slip;
3. Application Form;
4. Certification from the Philippine consulate/ embassy that the foreign corporations is engaged international
trade with affiliates or subsidiaries /branch offices in the Asia Pacific region;
5. Authenticated certification—that the foreign corporation has bee authorized by its board resolution to
establish RHQ or ROHQ;
6. Affidavit to change corporate name( not required if the same is stated in the Application form;
7. Endorsement of the Board of Investments;
8. Clearance from appropriate government agency;
9. Other requirements as the SEC may require;
10.Filing fees.

Section 143. Issuance of a License

1.SEC issues the license to do business in the Philippines after full compliance of the applicant
2. Within 60 days after issuance of license –licensee deposits securities satisfactory to SEC consisting of
Bonds other evidence of indebtedness with an actual market value of PhP500,000.00

Section 144. Who May Be a Resident Agent

a) an individual residing in the Philippines, with good moral character and of sound financial standing;
b) a domestic corporation lawfully transacting business in the Philippines, with sound financial standing and
in
good standing as certified by SEC.

Section 145. Resident Agent; Service of Process

To be submitted to SEC:
1. Special Power of Attorney
A Foreign corporation is required to submit to SEC an SPA designating a person who must be a resident of
the Philippines on whom summons and other legal processes may be served I all actions or other legal
proceedings against such corporation.

2. Agreement that should the foreign corporation cease to transact business in the Philippines or when it had
no Resident agent—summons ad other legal processes be made upon the SEC.

Section 146. Law Applicable

1. Philippines laws, rules and regulations—for business transactions lawfully entered into in the Philippines;
2. Laws of the place of incorporation or home country—relative to its creation, formation, organization
dissolution; or those which fix the relations, liabilities, responsibilities or duties of stockholders, members,
or officers of corporations to each other or to the corporation.

Section 147. Amendment to Articles of Incorporation

--A duly authenticated copy of the Amended Articles of Incorporation or bylaws should be filed with the SEC,
after 60 days after the amendment becomes effective
--amended provisions of the AI or BL –indicate changes in capital letters or underscoring the same

Section 148. Amended License

--apply for amended license if it changes its corporate name or purpose/purposes
--with favorable indorsement for appropriate government agency in proper case.

Section 149. Merger or Consolidation involving a Foreign Corporation Licensed in the Philippines
a) may merge with any domestic corporation/s provided all requirements on merger or consolidation as
provided in this Code are followed ;
b) When a licensed foreign corporation which a party to a merger or consolidation in its home country:
--submit to SEC a copy of articles of merger/consolidation, duly authenticated by proper officials of its home
country;
c) if absorbed corp. is the foreign corp, doing business in the Philippines, it shall file a petition for withdrawal
with SEC.

Section 150. Doing Business Without a License

--a foreign corporation transacting business without a license
1. shall not be allowed to maintain or intervene ina any action, suit or proceeding in any court or
administrative agency of the Philippines;
2. may be sued or proceeded against before Philippine Courts or administrative tribunals on any valid
cause
of action recognized under Philippine Laws.

Section 151. Revocation of License

Grounds:
1. Non-filing of reports or non-payment of any fees required by this Code;
2. Failure to appoint a resident agent;
3. Failure to report to SEC any change of its resident agent or address int he Philippines;
4. Failure to submit authenticated copy of its Amended Article of Incorporation or Bylaws;
5. Misrepresentation of any material fact in any application, report affidavit
6. Failure to pay taxes;
7. Commission of Ultra Vires acts;
8. Acting as agent of any foreign corporation not licensed to do business in the Philippines;
9.any other grounds—render it unfit to do business in the Philippines.

Section 152. Issuance of Certificate of Revocation

SEC issues Certificate of Revocation –copy furnished the appropriate government agency in the proper
cases.

Section 153, Withdrawal of Foreign Corporation

--A foreign corporation licensed to do business in the Philippine may officially cease to do business in the
Philippines;
--It may file a petition for withdrawal of license with the SEC:
1. upon payment of all claims which have accrued in the Philippines;
2. all taxes have been paid—BIR tax clearance is necessary
3. upon publication of petition for withdrawal once a week for thee consecutive weeks in a newspaper of
general circulation

SEC issues a Certificate of Withdrawal of License.

TITLE XVI
INVESTIGATIONS, OFFENSES AND PENALTIES

Section 154. Investigation and Prosecution of Offenses

Section 155. Administration of Oaths, Subpoena of witnesses and documents
Section 156. Cease and Desist Order
Section 157. Contempt
Section 158 Administrative Sanctions;
Section 159. Unauthorized use of corporate name; Penalties
Section 160. Violation of Disqualification Provision; Penalties
Section 161. Violation of Duty to Maintain Records, to Allow their Inspection or Reproduction
Section 162. Willful Certification on Incomplete, Inaccurate, False or Misleading Statements or
Reports;
Penalties
Section 163. Independent Auditor Collusion; Penalties
Section 164. Obtaining Corporate Registration Through Fraud; Penalties
Section 165. Fraudulent Conduct of Business; Penalties
Section 166. Acting as Intermediaries for Graft and Corrupt Practices: Penalties
Section 167. Engaging Intermediaries for Graft and Corrupt Practices; Penalties
Section 168. Tolerating Graft and Corrupt Practices; Penalties
Section 169. Retaliation Against Whistleblowers
Section 170. Other Violations of the Code; Penalties

SEC may:
a) investigate alleged violations of the RCC;
b) publish its findings, orders, pinions, advisories or information concerning any such violations;
c) shall reasonable notice to and coordinate with the proper regulatory agency prior to publication involving
companies under their regulatory jurisdiction.
d) through its designated officer, administer oaths and affirmations, issue subpoena and subpoena duces
tecum;
e) take testimony in any inquiry or investigation
f) order a person to desist from committing the act constituting the violation;
g) issue cease and desist order (for maximum period of 20 days), ex parte, o enjoin any fraudulent act or
practice can be reasonable or expected to cause significant, imminent and irreparable danger or injury to
the public
h) proceed administratively against the violator as provided under Section 158 of this Code; and/or
i) transmit evidence to the Department of Justice for preliminary criminal prosecution and/or initiate criminal
prosecution for any violation of this Code, rule or regulation;
k) after due notice and hearing, hold a person in contempt for failure or refusal to comply with any lawful
order,
decision ;
l). suspend or revoke the certificate of incorporation;
m) order the dissolution of the corporation and forfeiture of its assets.
n) issue permanent cease and desist order;
n) impose sanctions and penalties

OFFENSES FINES AND PENALTIES

1. Refusal by a corporation or persons concerned to Not exceeding 30,000
comply with lawful order, decision or subpoena issued by
the Commission
2. Clear and open defiance in relation to No 1. Daily fine of 1,000
3. Violation of the corporation of any provision of this 5000-2M;
Code, rules or regulations or any of the Commission’s Daily fine of 1000, not to exceed 2M
orders
4. Unauthorized use of corporate name 10,000-200,000
5. Willfull holding of office as a director, trustee or officer, 1.10,000-200,000.00 fine at the discretion
despite knowledge of his disqualification or willfully of the court
concealing such disqualification(Sec 160, RCC) 2. permanent disqualification from being a
director, trustee or officer of any
corporation
6. When the violation in no. 5 is injurious or detrimental to 20,000-400,000
the public
7. Violation of Duty to Maintain Records or to allow their 10,000-200,000
inspection or reproduction by the corporation and those
responsible officers (Sec. 161, RCC)
8. When the violation in no. 7 is injurious or detrimental to 20,000-400,000
the public
9. Willful Certification by any person of incomplete, false, 20,000-200,000
or misleading statements or reports
10. Wrongful certification is injurious or detrimental to the 40,000-400,000
public
11. Collusion of an independent auditor with the 80,000-5000,000
corporation’s director or representatives:
a) in certifying the corporation’s FS despite
incompleteness, inaccuracy;
b) failure to give a fair and accurate presentation of the
corporation’s condition or despite containing false of
misleading statements
12. when the statement or report in No. 11is injurious to 100,000-600,000
the public
13, Obtaining corporate registration through fraud 200,000-2M
14. Violation of No. 13 -when injurious or detrimental to the 400,000-5M
public
15 Fraudulent conduct of business 200,000-2M

16. when violation of No. 15 is injurious or detrimental to 400,000-5M

the public
17, Acting as intermediaries for Graft and corrupt practices 100,000-5M
18. Engaging Intermediaries for Graft and Corrupt 100,000-1M
practices
19, Tolerating Graft and Corrupt Practices 500,000-1M
20. Retaliation against whistleblowers 100,000-1M
21. Other violations of the Code 100,000-1M

Section 171. Liability of Directors, Trustees, Officers or Other Employees

Corporate offender—penalties be imposed on the corporation and/or upon the directors, trustees, members,
officers or employees responsible for the violation of indispensable of its commission.

Section 172 . Liability of Aiders and Abettors and Other Secondary Liability
--shall be punished with a fine not exceeding that imposed on the principal offenders

TITLE XVII
MISCELLANEOUS PROVISIONS

Section 173. Outstanding Capital Stock Defined

--total shares of stock issued under binding subscription contracts to stockholders, whether fully or partially
paid, except treasury shares.

Section 174. Designation of Governing Boards

--may be designated by any other name other than as board of trustees in nonstock or special corporations.

Section 175. Collection and Use of Registration, Incorporation and Other Fees
1. SEC is authorized to collect, retain and use fees, fines and other charges.
2. The amount collected shall be deposited and maintained in a separate account;
3. The separate fund shall be used for SEC’s :
a) modernization and to augment its operational expenses;
b) capital outlay;
c) increase in compensation and benefits comparable with prevailing rates in the private sector;
d)reasonable employee allowance;
e) employee health services and other insurance;
f) employee career advancement and professionalization;
g) employee legal assistance, seminars and other professional fees.

Section 176. Stock Ownership in Corporations

1. Stock ownership should , at all times be compliant with the nationality requirements under the Constitution
and laws.
2. Stock ownership should be regulated
3. The NEDA is mandated to regularly determine if the corporation is used to circumvent the provisions of
this Code or applicable laws and shall report its findings and recommendation for the their prevention or
correction.
4. Congress may set maximum limits for stock ownership in corporations vested with public interest by
individuals or groups of individuals related to each other by consanguinity or affinity or by close business
interests, to prevent anti-competitive practices as provided in the Philippine Competition Act and to
implement national economic policies designed to promote general welfare and economic development;

Section 177. Reportorial Requirements of Corporation

Annual reports
1. Audited Financial Statement
2. General Information Sheet
Additional requirements for corporations vested with public interest:
3. Director or trustee compensation report;
4. Director/trustee appraisal or performance report
5. Report on non-holding of meeting, if so is the case;
6. Creation of emergency board when necessary;
7. Voting Trusts;
8. successor in office in Corporation sole;
9. In case of OPCs:
a. election of Treasurer;
b. change of nominee or alternate nominee;
c. death of single stockholder;
d. decision of legal heirs in case of death of the single stockholder;
10. Name of Resident Agent in case of Foreign Corporations

For failure to submit reports 3x , consecutively or intermittently within 5 years--

SEC will :
1. give reasonable notice and coordinated with the appropriate regulatory agency that a corporation will be
placed under delinquent status;
2. place the corporation under delinquent status

Section 178. Visitorial Power and Confidential Nature of Examination Results

SEC shall exercise visitorial powers over all corporations which includes:
1. examination and inspection of records;
2. regulation and supervision of activities;
3. Enforcement of compliance; and
4. imposition of sanctions as provided in this Code.

SEC may revoke certificate of incorporation if the corporation, without justifiable cause refuse or obstruct the
Commission’s exercise of its visitorial power.

Results of any examination—strictly confidential .

Section 179. Powers, Functions, and Jurisdiction of the Commission

Consolidation powers of the SEC:
1. Residual powers under P.D.902-A
2. Securities Regulation Code
2. Revised Corporation Code of the Philippines

Section 180. Development and Implementation of Electronic Filing and Monitory System
Please refer to the SEC website particularly:
1. eSPARC
2. eFAST (Electronic Filing and Submission Tool

Section 181. Arbitration for Corporations

1. Arbitration agreement may be provided in the Articles of Incorporation or bylaws of the corporation;
If enforceable, arbitration should indicate:
a) number of arbitrators
b) procedure for their appointment
How arbitral tribunal is formed:
a) by designated third party;
b) by SEC if said third party fails to appoint the arbitrators within the period specified in the arbitration
agreement

2. Dispute is nonarbitrable when it involves criminal offenses and interests of third party
3. Powers of the Arbitral Tribunal:
a) rule on its own jurisdiction;
b) rule on questions relating to the validity of the arbitration agreement;
c) grant interim measures necessary to ensure enforcement of the award,
d) prevent the miscarriage of justice;
e) protect the rights of the parties.
4. Final arbitral award—executory after the lapse of 15 days from receipt thereof be the parties unless a
bond
is filed or an injunctive writ has been issued by the appellate court;
5. In case of intra-corporate dispute filed with the RTC, the court shall dismiss the case before the pretrial
conference if there is an arbitration agreement written in the articles of incorporation, bylaws or in a
separate
agreement.

Section 182. Jurisdiction Over Party-List Organizations

COMELEC has jurisdiction over these organizations.

Section 183. Applicability of the Code

The SEC exercises general authority of all corporations
The BSP or IC shall have jurisdiction over financial institutions and insurance companies which are regulated
and supervised by them.

Section 184. Effect of Amendment or Repeal of this Code or the Dissolution of a Corporation
1. This refers to the non-impairment of vested rights policy of the State.
2. As a rule, vested rights shall not be impaired by the dissolution of the corporation or the amendment or
repeal of a provision of the Code.n

Section 185. Applicability to Existing Corporations

Existing corporations affected by the effectivity of the RCC, shall be given 2 years from its effectivity to
comply.

Section 186. Separability Clause

Section 187. Repealing Clause
Section 188. Effectivity
Feb. 23, 2019

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