martin, m.d., public servant – a cont.

What are the revisions under the RCC on the amendment of AOI?
It appears that unless otherwise provided by the RCC or the
corporation’s bylaws, the AOI of a NON-STOCK corporation may be
amended by the vote or written assent of BOTH trustees, by majority
vote, and the members of the corporation, by at least 2/3s (thus,
majority plus 2/3s), unlike under the OCC where the option of written
assent is limited to the stockholders or members of the corporation.
While the requirements for amendment of the AOI are common for
both stock and non-stock corporations, the provision on requirements
for a stock corporation was separated from those of non-stock
corporation. As a consequence, it may be inferred that the remedy of
appraisal right ONLY APPLIES to a stock corporation.
What are the requisites to amend the AOI of a private corporation?
Any provision stated in the AOI may be amended provided there is no prohibition in
the RCC or special law and the amendment must be for legitimate purposes.
The amendment should be approved by at least a majority vote of the BOD/T and
the vote or written assent of the stockholders representing at least 2/3s of the
OCS. The AOI of a non-stock corporation may be amended by the vote or written
assent of (both) a majority of the trustees and at least 2/3s of its members.
The original and amended articles together shall contain all provisions required by
law to be set out in the AOI. Amendments to the articles shall be indicated by
underscoring the change or changes made, and a copy thereof duly certified under
oath by the corporate secretary and a majority of the directors or trustees, with a
statement that the amendments have been duly approved by the required vote of the
stockholders or members, shall be submitted to the SEC. (S15, RCC)
What are the requisites to amend the AOI of a private
corporation? (Cont.)
The amendments will take effect upon approval
of the SEC OR
from the date of filing with the SEC if not acted
upon within six (6) months from the date of filing
for a cause not attributable to the corporation.
May the amendments be done by the mere written assent of the board of directors or trustees and
stockholders or members of the corporation?
For a stock corporation, the amendment should be approved by at least a majority of
the board of directors and the vote or written assent of the stockholders
representing at least 2/3s of the OCS.
For a non-stock corporation, its AOI may be amended by the vote or written assent
of a majority of the trustees and at least 2/3s of its members. (S15, RCC)
In other words, it appears that for a stock corporation, the board of directors
should CONDUCT a meeting to vote on the proposed amendment while the
stockholders’ approval may be done by mere WRITTEN ASSET without having to
conduct a stockholders’ meeting for such purpose, unless the RCC or the by-laws of
the corporation require otherwise.
For a non-stock corporation, the proposed amendment may be approved by both the
board of trustees and the members without having to conduct meetings unless the
RCC or the by-laws require a meeting for that purpose.
What amendments to the AOI require stockholders’ or members’ meeting for approval?
The following amendments to the AOI require stockholders’ or members’
meeting for approval:
 Extension or shortening of corporate term. (S37, RCC)
 Increase or decrease of capital stock. (S38, RCC)
 Merger or consolidation. (S77, RCC)
 Amendment to the AOI of a close corporation, which seeks to delete
or remove any provision required to be contained in the AOI of a
close corporation OR to reduce a quorum or voting requirement stated
in said AOI. (S102, RCC)
 Voluntary dissolution of the corporation where no creditors are
affected. (S134, RCC)
 Voluntary dissolution where creditors are affected. (S135, RCC)
Required votes for the following:

Acts Vote required

Extension or shortening of corporate term. (S37, RCC) majority (BOD) + 2/3s OCS/ members
Increase or decrease of capital stock. (S38, RCC) majority (BOD) + 2/3s OCS/ members
Merger or consolidation. (S77, RCC) majority + 2/3s OCS/members
(of constituent corporations)
What is the remedy available to the stockholder in case of an amendment to the AOI?
He can exercise his appraisal right, meaning, get out of the corporation
and demand the payment of the fair value of his shares, AFTER
DISSENTING AGAINST THE PROPOSED AMENDMENT to the AOI in
the cases specified by law. (S15 in re to S80, S81 RCC)
Appraisal right cannot be exercised in all cases of an amendment to the
AOI BUT ONLY IN THE CASES provided by law. These are:
 In case an amendment to the AOI has the effect of changing or
restricting the rights of any stockholder or class of shares, OR of
authorizing preferences in any respect superior to those of
outstanding shares of any class, OR of extending or shortening the
term of corporate existence; and,
 In case of merger or consolidation.
What is the remedy available to the stockholder in case of an
amendment to the AOI? (Cont.)
The other instances of appraisal right such as in case
of SLEMPO of all or substantially all of the corporate
property and assents AND
investment of corporate funds for any purpose other
than the primary purpose of the corporation
DO NOT REQUIRE AN AMENDMENT TO THE AOI.
Under the RCC, what corporate acts should be approved in a meeting called for such purpose EVEN
THOUGH it does not refer to an amendment of the AOI?
Payment of compensation to directors. (S30, RCC)
Incurring, creating, and increasing bonded indebtedness. (S38, RCC)
SLEMPO (S40, RCC)
Investment of corporate funds in another corporation or business or for any other
purpose. (S42, RCC)
Stock dividend declaration. (S43, RCC)
Entering into a management contract with another corporation. (S44, RCC)
Amendment to by-laws. (S48, RCC)
Fixing the issued price for no-par value shares. (S62, RCC)
Approving a plan of distribution of assets in the process of dissolution for a non-stock
corporation. (S95 [2], RCC)
Required votes for the following:

Acts Vote required

Payment of compensation to directors. (S30, RCC) majority OCS
Incurring, creating, and increasing bonded indebtedness. (S38, RCC) majority BOD + 2/3 OCS/
members
SLEMPO (S40, RCC) majority BOD + 2/3 OCS/
members
Investment of corporate funds in another corporation or business or majority BOD + 2/3
for any other purpose. (S42, RCC) OCS/members
Stock dividend declaration. (S43, RCC) majority BOD (quorum) +
2/3 OCS/ members
Required votes for the following:

Acts Vote required

Entering into a management contract with majority BOD of both managing and managed
another corporation. (S44, RCC) corporation + majority OCS/members of both and in
some cases, 2/3 OCS/members
Amendment to by-laws. (S48, RCC) majority BOD + majority OCS
Fixing the issued price for no-par value majority OCS [if BOD is not authorized by the AOI) or
shares. (S62, RCC) majority BOD (quorum), if authorized by AOI or by-laws

Approving a plan of distribution of assets in majority BOT + 2/3 members

the process of dissolution for a non-stock
corporation. (S95 [2], RCC)
Are there items in the AOI which cannot be
amended?
Yes.
Matters of accomplished facts: Names
and addresses of the incorporators, date
and place of incorporation, and the
notary public before whom the AOI was
acknowledged.
What are the revisions under the RCC on the rejection of
the AOI or any amendments thereto?
Directors, trustees and officers were added to
incorporators as those who should be given a
REASONABLE TIME to modify the objectionable
portions of the AOI.
The reasonable time to modify the objectionable
portions of the AOI is RECKONED from RECEIPT
of disapproval from the SEC.
What are the grounds for disapproval of the AOI or any amendments thereto?
The SEC may disapprove the AOI or any amendment/s thereto if the same is NOT
COMPLIANT with the requirements of the RCC: Provided,
That the SEC shall give the incorporators, directors, trustees, or offices a
reasonable time from receipt of the disapproval within which to modify the
objectionable portions of the articles or amendment.
The following are grounds for such disapproval:
 The AOI or any amendment thereto is not substantially in accordance with the
FORM prescribed herein;
 The PURPOSE or purposes of the corporation are patently unconstitutional,
illegal, immoral or contrary to government rules and regulations;
 The CERTIFICATION concerning the amount of capital stock subscribed and/
or paid is false; and
 The required percentage of FILIPINO OWNERSHIP of the capital stock
under existing laws or the Constitution has not been complied with.
What are the grounds for disapproval of the AOI or any amendments thereto? (Cont.)
Additionally, no articles of incorporation or amendment to AOI of banks,
banking and quasi-banking institutions, preneed, insurance and trust
companies, NSSLAs, pawnshops, and other financial intermediaries (MAKE
A MNEM) shall be approved by the SEC UNLESS
ACCOMPANIED by a favorable recommendation of the appropriate
government agency to the effect
that such articles or amendment IS IN ACCORDANCE WITH LAW. (S16,
RCC)
Other grounds include non-compliance with conditions imposed by the SEC
in relation to the filing of the registration of the AOI or amendment
thereto AND violation by the corporation of any laws, rules, and
regulations administered by the SEC. (S158, RCC)
What are the revisions under the RCC on corporate name?
Detailed guidelines and more requirements for a corporate name
were added.
The SEC is granted the power to summarily order the corporation to
cease and desist from using a corporate name that did not observe
the guidelines set forth in the RCC. The liability of the corporation
and its responsible officers is also provided in case of failure to
comply with the SEC’s order.
The primary basis for not allowing corporate name is that it is not
distinguishable from another corporate name which is reserved or
registered for use of another corporation whereas under the OCC it
is identical or confusingly similar to a previously reserved or
registered corporate name.
What are the limitations on the adoption and use of corporate
name?
Under S17 of the RCC, any corporate name is allowed,
provided that none of the following disqualifications are
present, to wit:
 not distinguishable from that already reserved or
registered for the use of another corporation.
 name is already protected by law.
 use is contrary to existing law, rules and
regulations.
What are the remedies available to a corporation against the unauthorized
use of its corporate name?
File a petition with the SEC, to compel the other corporation
to change it.
 Court action is not necessary.
 The SEC may order a change of corporate name based on
its AUTHORITY under the RCC AND
 the UNDERTAKING of the corporation contained in its
AOI

 File a complaint against the unauthorized use of the

corporate name under S159 of the RCC.
Does a bank or any corporation for that matter have any obligation to
notify its debtor of its change of corporate name?
No, absent any law, circular, or regulation requiring it, as such
an act would be judicial legislation.
Unless there is a law, regulation or circular from the SEC or
BSP requiring the formal notification of all debtors of banks of
any change in corporate name, such notification remains to be a
MERE INTERNAL POLICY that banks may or may not adopt.
(Case law)
Public companies, though, are required to inform the SEC and
PSE (Philippine Stock Exchange) of change in the corporate
name, in accordance with their disclosure rules.
Discuss the authority of the SEC to order a change of corporate name.
The SEC, upon determination that the corporate name is: (1) not distinguishable from a
name already reserved or registered for the use of another corporation; (2) already
protected by law; or (3) contrary to law, rules and regulations,
may SUMMARILY ORDER the corporation to immediately cease and desist from using
such name and
REQUIRE the corporation to register a new one.
The SEC shall also CAUSE THE REMOVAL of all visible signages, marks, advertisements,
labels, prints, and other effects bearing such corporate name.
Upon the approval of the new corporate name, the SEC shall ISSUE a certificate of
incorporation under the amended name.
If the corporation fails to comply with the SEC’s order, the SEC may HOLD the
corporation and its responsible directors or officers IN CONTEMPT AND/OR HOLD
them administratively, civilly and. or criminally liable AND/ OR REVOKE the registration
of the corporation.
Is there any revision under the RCC
regarding registration and incorporation of
a private corporation?
It added the part which requires
person/s desiring to incorporate to
submit the intended corporate name
to the SEC for verification.
What are the procedural steps to be taken for the registration and incorporation of a
corporation?
A person or group pf persons desiring to incorporate shall submit the intended
corporate name to the SEC for verification. If the SEC finds that the name is
distinguishable from a name already reserved or registered for the use of
another corporation, not protected by law and is not contrary to law, rules and
regulations, the name SHALL BE RESERVED in favor of the incorporators.
The incorporators shall submit to the SEC the documentary requirements listed
below.
Payment of filing fees.

If the SEC finds that the submitted documents and information are fully
compliant with the requirements of the RCC, other relevant laws, rules and
regulations, the SEC shall issue the certificate of incorporation.
When does a corporation commence its corporate existence and juridical personality?
A PRIVATE corporation organized under the RCC commences its corporate
existence and juridical personality from the date the SEC issues the certificate
of incporation under its official seal and thereupon
the incorporators, stockholders/ members and their successors shall constitute
a body corporate under the name stated in the AOI for the period of time
mentioned therein, unless said period is extended or the corporation is sooner
dissolved in accordance with law. (S18, RCC)

A corporation created under a SPECIAL LAW acquires legal personality upon the
EFFECTIVITY of the special law creating it or compliance with the conditions
imposed by such law for the commencement of corporate existence.
Define a de facto corporation.
This is one that is organized with
COLORABLE compliance with the
requirements of incorporation under the law
and allowed to exist and exercise the powers
of a corporation until its corporate
existence is assailed by the State in a quo
warranto proceeding.
What are the powers of a de facto corporation?
A de facto corporation has ALL THE POWERS AND
AUTHORITY OF A DE JURE CORPORATION until it is
ousted of its corporate existence.
Its existence cannot be assailed collaterally in a
private suit but only in a quo warranto proceeding.
Illustrate the immediately preceding paragraph.
What are the elements of a de facto corporation?
The requisites of a de facto corporation are as follows:
 Existence of a valid LAW under which it may be
incorporated;
 ATTEMPT in good faith to incorporate; and
 ACTUAL use or exercise in good faith of corporate
powers.

 Discuss each of the requisites.

Are the stockholders of a de facto corporation liable as general
partners?
No, stockholders of a de facto corporation are liable in
the same way as stockholders of a de jure corporation.
They are liable only to the extent of their subscription
to the corporation.
This is different from a corporation by estoppel
wherein the persons who assume themselves to be a
corporation when they have no authority to do so shall
be liable as general partners.
Cite examples of defects in the formation of a corporation
which give rise to a de facto existence.
The treasurer’s affidavit on the amount of
subscription and payment is false.
The required percentage of Filipino ownership in
corporations engaged in nationalized activities is
not complied with.
Natural person incorporators misrepresented
their age.
What is a corporation by estoppel?
A corporation by estoppel is one
that exists when two or more
persons assume to act as a
corporation knowing it to be
without authority to do so.
What are the liabilities under the doctrine of 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: Provided,
however,
That when any such ostensible corporation is sued on any transaction
entered by it as a corporation or on any tort committed by it as such, it
shall not be allowed to use its lack of corporate personality as a defense.
(In the same way) Anyone who assumes an obligation to an ostensible
corporation as such cannot resist performance thereof on the ground that
there was in fact no corporation. (S20, RCC)
What are the revisions under the RCC regarding the non-use of corporate charter?
The period to organize and commence business is fixed at five (5) years
FROM INCORPORATION. Under the OCC, the corporation must organize
within two (2) from incorporation.
The SEC is given the authority to place a corporation UNDER DELINQUENT
STATUS but only after due notice and hearing, that is, if a corporation HAS
COMMENCED its business but SUBSEQUENTLY BECOMES INOPERATIVE
for a period of at least five (5) consecutive years.’
A delinquent corporation shall have a period of two (2) years TO RESUME
operations and comply with all requirements that the SEC shall prescribe.
Upon compliance by the corporation, the SEC shall issue an ORDER LIFTING
the delinquent status. Failure to comply with the requirements shall CAUSE
THE REVOCATION of the corporation’s COI.
What are the revisions under the RCC regarding
the non-use of corporate charter? – (Cont.)
The SEC shall also give reasonable notice
to, and coordinate with the appropriate
regulatory agency prior to the suspension
or revocation of the COI of companies
under heir regulatory jurisdiction.
When should the corporation formally organize and commence its business?
A corporation should formally organize and commence its business within five (5)
years from the date of its incorporation, otherwise, its certificate of
incorporation shall be DEEMED REVOKED ‘
as of the day following the end of the five (5)-year period. (S21, RCC)
However, if a corporation has commenced its business but subsequently becomes
inoperative for a period of at least five (5) consecutive years, the SEC may, after
due notice and hearing, place the corporation under delinquent status.
NB: The failure to formally organize and commence business within five years
from incorporation RESULTS TO AUTOMATIC REVOCATION of the certificate
of incorporation, WHEREAS
commencement of business but subsequent lack of operation for five consecutive
years DOES NOT.
When is a corporation considered to have formally organized and commenced its
business?
It can be said that a corporation has organized and commenced business
if the CONDITIONS SUBSEQUENT to the registration have been
complied with, to wit:
 it should adopt and file its bylaws;
 the BOD should meet, elect a set of officers, adopt pertinent board
resolutions and submit information sheet regarding its officers to
the SEC;
 its registration of corporate or business name;
 it should register itself with the BIR and SSS and secure municipal
and city license to operate its business; and
 it should establish an office and start its business operations. (SEC-
OGC Opinion)