THE REVISED

CORPORATION CODE OF
THE PHILIPPINES
TITLE 1: GENERAL
PROVISIONS
BASIS

 Republic Act No. 11232

 The Revised Corporation Code of the Philippines
 Approved on February 20, 2019
 CORPORATION
 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 existence.
 CORPORATION IS AN ARTIFICIAL BEING
A corporation is a juridical entity vested with a legal personality
separate and distinct from those acting for and in its behalf and, in
general, from the people compromising it.
 CHARACTERISTICS OF A CORPORATION
1. It is an artificial being;
2. Created by operation of law;
3. It has the right of succession; and
4. It has the powers, attributes, and properties expressly authorized by
law or incidental to its existence.
 GOVERNMENT-OWNED OR
CONTROLLED CORPORATION (GOCC)
 Government-owned and controlled corporation refers to any agency organized as a
stock or non-stock corporation, vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the Government directly or
through its instrumentalities either wholly, or, where applicable as in the case of
stock corporations, to the extent of at least fifty-one (51) percent of its capital stock.
 Thus, for an entity to be considered as a GOCC, it must either be organized as a stock
or non-stock corporation.
 Two requisites must concur before one may be classified as a stock corporation,
namely;
1. That it has capital stock divided into shares, and
2. That it is authorized to distribute dividends and allotments of surplus and profits to
its stockholders.
 As for non-stock corporations, they must have members and must not distribute any
part of their income to said members.
 PIERCING THE VEIL OF CORPORATE
FICTION OR ALTER EGO DOCTRINE
 Doctrine dictates that a corporation is invested by law with a personality
separate and distinct from those of the persons composing it, such that, save
for certain exceptions, corporate officers who entered into contracts in behalf
of the corporation cannot be held personally liable for the liabilities of the
latter.
 ELEMENTS OF PIERCING THE VEIL OF CORPORATE FICTION
1. Control - not mere stock control, but complete domination – not only of
finances, but of policy and business practice in respect to the transaction
attacked, must have been such that the corporate entity as to this transaction
had at the time no separate mind, will or existence of its own;
2. Such control must have been used by the defendant to commit a fraud or a
wrong to perpetuate the violation of a statutory or other positive legal duty,
or a dishonest and an unjust act in contravention of plaintiff’s legal right; and
3. The said control and breach of duty must have proximately caused the injury
or unjust loss complained of.
 POWERS OF CORPORATION

 HOW POWERS ARE EXERCISED

Unless otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held
by the board of directors and/or its duly authorized officers and
agents.
 RIGHT OF A CORPORATION TO OWN PROPERTY
Property acquired by a corporation is the property of a corporation
and not the property of stockholders or members.
 STOCK VS NON-STOCK CORPORATIONS
 STOCK CORPORATION
Corporations which have capital stock dividend into shares and are
authorized to distribute to the holders of such shares dividends or
allotments of the surplus profits on the basis of the shares held are stock
corporations.

 NON-STOCK CORPORATION
A non-stock corporation is one where no part of its income is
distributable as dividends to its members, trustees, or officers. Any
profit which a non-stock corporation may obtain as in incidental to its
operations shall, whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which the corporation was
organized.
 OTHER CLASSES OF CORPORATION
As to Purpose
Public Corporation
A corporation organized for the
government of a portion of the State for
the general good and welfare.
Government-owned or Controlled
Corporation
A corporation owned by the Government
directly or through its instrumentalities
either wholly, or, where applicable as in
the case of stock corporations, to the
extent of at least 51% of its capital stock.
Private Corporation
A corporation formed for some private
purpose, benefit or end.
Quasi-Public Corporation
A private corporation which has
accepted from the State the grant of
franchise or contract involving the
performance of public duties but which
is organized for profit.
 OTHER CLASSES OF CORPORATION
As to Legal Rights to Corporate Existence
De Jure Corporation
A corporation created in strict or
substantial conformity with the
mandatory statutory requirements for
incorporation and the right of which to
exist as a corporation cannot be
successfully attacked or questioned by
any party even in a direct proceeding for
that purpose by the State.
Corporation by Estoppel
All persons who assume to act as a
corporation knowing it to be without
authority to do so shall be liable as
general partners for all debts, liabilities
and damages incurred or arising as a
result thereof.
De Facto Corporation
The due incorporation of any
corporation claiming in good faith to be
a corporation under this Code, and its
right to exercise corporate powers, shall
not be inquired into collaterally in any
private suit to which such corporation
may be a party. Such inquiry may be
made by the Solicitor General in a quo
warranto proceeding.
Corporation by Prescription
One which has exercised corporate
powers for an indefinite period without
interference on the part of the
government.
 OTHER CLASSES OF CORPORATION
As to Whether They are Open to the Public or Not
Open Corporation
A corporation which is open to any
person who may wish to become a
stockholder or member thereto.
Close Corporation
A close corporation is one whose articles
of incorporation provide that:
(1) All the corporation’s issued stock of
all classes, exclusive of treasury
shares, shall be held of record by not
more than a specified number of
persons, not exceeding 20;
(2) All the issued stock of all classes shall
be subject to one or more specified
restrictions on transfer;
(3) The corporation shall not list in any
stock exchange or make any public
offering of any of its stock of any
class.
 OTHER CLASSES OF CORPORATION
As to Relationship of Management and Control
Parent or Holding Corporation Subsidiary Corporation
A corporation that hold stocks in another A corporation more than 50% of the
corporation for purposes of control. voting stock of which is controlled
directly or indirectly by another
corporation, which thereby becomes its
parent corporation.
As to Number of Persons who Compose Them
Corporation Aggregate Corporation Sole
A corporation consisting of more than A corporation consisting of only one
one member. member for the purpose of administering
and managing, as trustee, the affairs,
property and temporalities of any
religious denomination, sect or church.
 OTHER CLASSES OF CORPORATION
As to Whether They are for Religious Purposes or Not
Ecclesiastical Corporation Lay Corporation
A corporation organized for religious A corporation organized for a purpose other
purposes. than for religion.
As to Whether They are for Charitable Purposes or Not
Eleemosynary Corporation Civil Corporation
A corporation organized for charitable A corporation organized for business or
purposes. profit.
As to Laws of Incorporation
Domestic Corporation Foreign Corporation
A corporation incorporated under the laws A corporation is formed, organized or
of the Philippines. existing under any laws other than those
of the Philippines and whose laws allow
Filipino citizens and corporations to do
business in its own country or State.
 GENERAL LAW vs. SPECIAL LAW

 A corporation is created by operation of law. It acquires juridical

personality either by special law or a general law.
 GENERAL LAW
The general law under which a private corporation may be formed or
organized is the Corporation Code, the requirements of which must be
complied with by those wishing to incorporate. Only upon such
compliance will the corporation come into being and acquire a juridical
personality, thus giving rise to its right to exist and act as a legal entity.
 SPECIAL LAW
The Constitution expressly authorizes the legislature to create
“government-owned or controlled corporations” through special charters
only if these entities are required to meet the twin conditions of
common good and economic viability.
 COMPONENTS OF A CORPORATION
1. Corporators – Those who compose a corporation, whether as
stockholders or as members.
2. Incorporators – The stockholders or members mentioned in the
articles of incorporation as originally forming and composing the
corporation and who are signatories thereof.
3. Stockholders – The owner of shares of stock in a stock corporation.
4. Members – The corporators of a non-stock corporation.
5. Board of Directors or Board of Trustees – The board of directors is the
governing body in a stock corporation, while the Board of Trustees is
the governing body in a non-stock corporation.
6. Corporate Officers – The president, who shall be a director, a
treasurer who may or may not be a director, a secretary who shall be
a resident and citizen of the Philippines, and such other officers as
may be provided for in the by-laws. If the corporation is vested with
public interest, the board shall also elect a compliance officer.
 COMPONENTS OF A CORPORATION
7. Subscribers - Persons who have agreed to take and pay for original,
unissued shares of a corporation formed or to be formed.
8. Underwriter – A person who guarantees on a firm commitment and/or
declared best effort basis the distribution and sale of securities of any
kind by another company. A person or entity, especially an
investment banker, who guarantees the sale of newly issued securities
by purchasing all or part of the shares for resale to the public.
9. Promoter – Is a person who brings about or cause to bring about the
formation and organization of a corporation by:
a. Bringing together the incorporators or the persons interested in the
enterprise;
b. Procuring subscriptions or capital for the corporation; and
c. Setting in motion the machinery which leads to the incorporation of
the corporation itself.
 CLASSIFICATION OF SHARES
 DOCTRINE OF EQUALITY OF SHARES
Under the doctrine of equality of shares — all stocks issued by the corporation are
presumed equal with the same privileges and liabilities except as otherwise
provided in the articles of incorporation and stated in the certificate of stock.
 Who may classify shares?
1. Incorporators – It is to be determined by the incorporators by stating it in their
articles of incorporation which will be filed with the Securities and Exchange
Commission.
2. Board of Directors and Stockholders – The original classification of shares made
by the incorporators which was stated in the articles of incorporation can be
amended by a majority vote of the board of directors and the vote or written
assent of the stockholders representing at least 2/3 of the outstanding capital
stock.
 What are voting rights?
Shares with a right to vote. There shall always be a class or series of shares which
have complete voting rights.
 CLASSIFICATION OF SHARES
 RIGHT TO VOTE IN STOCK CORPORATIONS
The right to vote is inherent in and incidental to the ownership of
corporate stocks. It is settled that unissued stocks may not be voted or
considered in determining whether a quorum is present in a stockholder’s
meeting, or whether a requisite proportion of the stock of the corporation
is voted to adopt a certain measure or act.
Only stock actually issued and outstanding may be voted.
 RIGHT TO VOTE IN NON-STOCK CORPORATIONS
In non-stock corporations, the voting rights attach to membership.
Members vote as persons, in accordance with the law and the by-laws of
the corporation. Each member shall be entitled to one vote unless so
limited, broadened, or denied in the articles of incorporation or by-laws.
Only those who are actual members with voting rights should be counted.
 CLASSIFICATION OF SHARES
 What are non-voting shares?
Shares without a right to vote. The law provides that shares classified and
issued as preferred or redeemable shares may be deprived of voting right.
 COMMON STOCK
A class of stock entitling the holder to vote on corporate matters, to receive
dividends after other claims and dividends have been paid (especially to
preferred shareholders), and to share in assets upon liquidation.
 PREFERRED STOCK
A preferred share of stock , on one hand, is one which entitles the holder
thereof to certain preferences over the holders of common stock. The
preferences are designed to induce persons to subscribe for shares of a
corporation.
 CLASSIFICATION OF SHARES
Common forms of preferred stock:
a. Preferred shares as to assets – is a share which gives the holder thereof
preference in the distribution of the assets of the corporation in case of
liquidation.
b. Preferred shares as to dividends – is a share the holder of which is
entitled to receive dividends on said share to the extent agreed upon
before any dividends at all are paid to the holders of common stock.
 REDEEMABLE SHARES
Redeemable shares may be issued by the corporation when expressly
provided in the articles of incorporation. They may be purchased or taken
up by the corporation upon the expiration of a fixed period, regardless of
the existence of unrestricted retained earnings in the books of the
corporation, and upon such other terms and conditions as may be stated in
the articles of incorporation, which terms and conditions must also be
stated in the certificate of stock representing said shares.
 CLASSIFICATION OF SHARES
 Instances when holders of non-voting shares are allowed to vote:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of authorized capital stock;
6. Merger or consolidation of the corporation with another corporation
or other corporations;
7. Investment of corporate funds in another corporation or business in
accordance with this Code; and
8. Dissolution of the corporation.
 CLASSIFICATION OF SHARES
 PAR VALUE SHARES
Shares with a value fixed in the articles of incorporation and the certificate of stock.
 NO PAR VALUE SHARES
Shares with no par value.
 Limitations on no par value shares
1. The no-par value shares must be issued for a consideration of at least P5.00 per share;
2. It is deemed fully paid and non-assessable;
3. The entire consideration for its issuance constitutes capital so that no part of it should
be distributed as dividends;
4. It cannot be issued as preferred shares;
5. It cannot be issued by banks, trust, insurance, and preneed companies, public utilities,
building and loan associations, and other corporations authorized to obtain or access
funds from the public whether publicly listed or not; and
6. The articles of incorporation must state the fact that it is issued no par value shares as
well as the number of said shares.
 CLASSIFICATION OF SHARES
 PROMOTION/AL SHARE
A share issued to promoters or those in some way interested in the company, for
incorporating the company, or for services rendered in launching or promoting
the welfare of the company.
 SHARE IN ESCROW
A share subject to an agreement by virtue of which the share is deposited by the
grantor or his agent with a third person to be kept by the depositary until the
performance of certain condition or the happening of a certain event contained
in the agreement.
 FRACTIONAL SHARE
A share that is less than one full share.
 OVER-ISSUED STOCK
It is a stock or share issued in excess of the authorized capital stock. Such
issuance is null and void.
 CLASSIFICATION OF SHARES
 CONVERTIBLE SHARE
a share that is convertible by the stockholder from one class to another class at
a certain price and within a certain period.
 FOUNDER’S SHARE
Shares classified as such in the articles of incorporation which may be given
certain rights and privileges not enjoyed by the owners of other stocks.
Limitation on founder’s share:
The exclusive right to vote and be voted for in the election of directors, if
granted, must be for a limited period not to exceed 5 years from the date of
incorporation.
 REDEEMABLE SHARES
Redeemable shares are shares usually preferred, by which their terms are
redeemable at a fixed date, or at the option of either issuing corporation, or the
stockholder, or both at a certain redemption price. A redemption by the
corporation of its stock is, in a sense, a repurchase of it for cancellation.
 CLASSIFICATION OF SHARES
Limitation on redeemable shares:
1. It must be expressly provided in the articles of incorporation;
2. The terms and conditions affecting said shares must be stated both in the articles
of incorporation and in the certificate of stock;
3. It may be deprived of voting rights in the articles of incorporation; and
4. Redemption cannot be made if it will cause insolvency of the corporation.
 RETAINED EARNINGS
A corporation’s accumulated income after dividends have been distributed. Also
termed earned surplus; undistributed profit.
 Kinds of Redeemable Shares
1. Compulsory - The corporation is required to redeem the shares.
2. Optional – the corporation is not mandated to redeem the shares.
 Can redeemable shares be reissued?
Redeemable shares, once redeemed are retired unless reissuance is expressly allowed
in the articles of incorporation.
 CLASSIFICATION OF SHARES
 TREASURY SHARES
Treasury shares are shares of stock which have been issued and fully paid
for, but subsequently reacquired by the issuing corporation by purchase,
redemption, donation or through some other lawful means.
 Rights that are denied to the treasury shares
1. Voting rights
2. Right to dividends
 WATERED STOCKS
Stocks issued for a consideration less than the par or issued price thereof
or in any other form other than cash valued in excess of its fair value.