PROVISIONS
Amend the articles of incorporation
Becoming an incorporator
Revival of corporate existence
Election of BOD/BOT
Removal of BOD/BOT
The special meeting of the stockholders or members of a
corporation for the purpose of removal
Grant BOD/BOT compensation
Ratification
Executive committee required to approve any act within its
competency
Extend or shorten corporate life
Increase or decrease capital stock and bonded indebtedness
Sell or dispose all or substantially all its corporate assets
Corporation invest its corporate funds in another corporation or
for a purpose other than its main purpose
Declaration of stock dividends
Ratification for non-stock for both managing and managed
Approval of managed corporation
Post-incorporation filing
Amendment of bylaws
Delegate power to amend or adopt new by to the BOD/BOT
Accomplish a merger or consolidation
Special corporation for a favorable recommendation
Plan of distribution of assets
Amendment of close corporations
Voluntary dissolution no creditors affected
Voluntary dissolution creditors affected
VIOLATIONS
SEC. 157. Contempt
MAJORITY VOTE
2/3 VOTE
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DEFINITION
FINES
 fails or refuses to comply with
any lawful order, decision, or
subpoena
issued
by
the
Commission
 not exceeding (P30,000)
 may impose a daily fine of (P1,000)
 P10,000 to P200,000
Sec. 159. Unauthorized Use
of Corporate Name
Sec. 160. Violation of
Disqualification Provision
 director, trustees or officer
willfully conceals disqualification
such director, trustees or officer
 P10,000 to P200,000 and shall be
permanently disqualified on their
current position
 P20,000 to P400,000 if injurious or
detrimental to the public,
Sec. 161. Violation of Duty
to Maintain Records , to
Allow their Inspections or
Reproduction
 The unjustified failure or refusal
by the corporation or those
responsible for keeping and
maintaining corporate records
 P10,000 to P200,000 and shall be
permanently disqualified on their
current position
 P20,000 to P400,000 if injurious or
detrimental to the public,
VIOLATIONS
DEFINITION
FINES
Sec.
162.
Willful
Certification
of
Incomplete,
Inaccurate, False, or
Misleading Statements
or Reports
 who certifies the false, misleading,
incomplete or inaccurate information
 P10,000 to P200,000 and shall be
permanently disqualified on their
current position
 P20,000 to P400,000 if injurious
or detrimental to the public,
Sec 163. Independent
Auditor Collusion
 collusion with the corporation's  P80,000 to P500,000
directors or representatives, certifies  P100,000
to
P600,000
if
the corporation's FS
despite its
fraudulent or causing injury to
incompleteness/inaccuracy/containing
the general public
false or misleading statement
SEC. 164. Obtaining
corporate registration
through fraud
 Responsible for the formation of a
corporation through fraud, or who
assisted directly or indirectly therein
 P200,000 to P2,000,000
 P400,000 to P5,000,000 if
injurious or detrimental to the
public
SEC. 165. Fraudulent
Conduct of Business;
Penalties
 corporation that conducts its business
through fraud
 P200,000 to P2,000,000
 P400,000 to P5,000,000 if
injurious or detrimental to the
public
SEC. 166. Acting as
Intermediaries
for
Graft and Corrupt
Practices; Penalties.
 corporation used for fraud, or for
committing or concealing graft and
corrupt practices
 P100,000 to P5,000,000
SEC
167
Engaging
intermediaries
for
graft and corrupt
practice
 corporation
that
appoints
an
intermediary who engages in graft
and corrupt practices
 P100,000 to P1,000,000
SEC 168.
Tolerating
graft and corrupt
practices
 director, trustee, or officer who
knowingly fails to sanction, report or
file allows or tolerates the graft and
corrupt practices or fraudulent acts
committed
by
a
corporation’s
directors, trustees, officers, or
employees
 P500,000 to P1,000,000
SEC 169 Retaliation
against whistleblowers
 knowingly and with intent to retaliate,
commits acts detrimental to a
whistleblower
 P100,000 to P1,000,000
SEC
170.
Other
violations of the code
 amendments
not
otherwise
specifically penalized therein
 P10,000 to P1,000,000
 committed by a corporation, the
same may, after notice and
hearing,
be
dissolved
in
appropriate proceedings before
the Commission
PROCEDURES FOR VOLUNTARY DISOLUTION
Where No Creditors Are Affected
Where Creditors Are Affected
1. A meeting must be held upon call of the directors or The petition for dissolution shall be filed with
trustees;
the Securities and Exchange Commission;
2. At least 20 days prior to the meeting, notice shall be 2. The petition shall be signed by a majority
given to each shareholder or member of record
of its board of directors or " trustees and
personally, by registered mail, or by any means
that its dissolution was resolved upon by
authorized under its bylaws, whether or not entitled
the affirmative vote of the stockholders
to vote at the meeting: Notice of the time, place, and
representing at least 2/3 of the outstanding
object of the meeting shall be published once prior
capital stock or by at least 2/3 of the
to the date of the meeting in a newspaper published
members at a meeting of its stockholders
in the place where the principal office of said
or members called for that purpose.;
corporation is located, or if no newspaper is 3. The SEC shall, by an order reciting the
published in such place, in a newspaper of general
purpose of the petition, fix a date on or
circulation in the Philippines;
before which objections thereto may be
3. A resolution to dissolve must be approved by majority
filed by any person, which date shall not be
vote of the board of directors or trustees, and by a
less than 30 days nor more than 60 days
resolution duly adopted by the affirmative vote of
after the entry of the order;
the stockholders owning at least majority of the 4. The copy of the order shall be published at
outstanding capital stock or of at least majority of
least once a week for 3 consecutive weeks
the members;
in a newspaper of general circulation
4. A verified request for dissolution shall be filed with
published in the municipality or city where
the Commission stating:
the principal office of the corporation is
(a) the reason for the dissolution;
situated, or if there be no such newspaper,
(b) the form, manner, and time when the notices were
then in a newspaper of general circulation
given;
in the Philippines, and a similar copy shall
(c) names of the stockholders and directors or members
be poster for 3 consecutive weeks in 3
and trustees who approved the dissolution;
public places in such municipality or city;
(d) the date, place, and time of the meeting in which 5. The SEC shall proceed to hear the petition
the vote was made; and
and try any issue made by the objections
(e) details of publication.
filed;
5. The corporation shall submit the following to the 6. If no such objection is sufficient, and the
Commission:
material allegations of the petition are true,
(1) a copy of the resolution authorizing the dissolution,
the SEC shall render judgment dissolving
certified by a majority of the board of directors or
the corporation and directing such
trustees and countersigned by the secretary of the
disposition of its assets as justice requires,
corporation;
and may appoint a receiver to collect such
(2) proof of publication; recommendation from and
assets and pay the debts of the
(3) favorable necessary; and the appropriate regulatory
corporation; and
agency, when necessary; and
7. The dissolution shall take effect only upon
6. The Securities and Exchange Commission shall
the issuance by the Commission of a
thereupon issue the certificate of dissolution.
certificate of dissolution.
Shortening Corporate Term
1. A voluntary dissolution may be effected by amending the articles of incorporation;
2. A copy of the amended articles of incorporation shall be submitted to the SEC; and
3. Approval of the SEC of the amended articles of incorporation.
Dissolution automatically take effect on the day following the last day of the corporate term stated
in the AOI, without need of issuance by the Commission of a certificate of dissolution
Stock Corporation
Close Corporation
Its articles of incorporation need only contain the Its articles of incorporation must contain the provisions required by
general matters enumerated in Sec. 13 of the Sec. 96 as well as the general matters enumerated in Sec. 13 of
Revised Corporation Code. (name of corporation, the Revised Corporation Code. (#4)
purpose, place, term, incorporators, directors)
The business of the Corporation is managed by the The business of the corporation is managed by the board of
board or directors.
directors; however, it may be managed by the stockholders if the
articles of incorporation so provide, but they are liable as directors.
The corporate officers are elected by a majority vote The corporate officers may be elected or appointed by the
of all the members of the board of directors.
stockholders, if provided in its articles of incorporation.
Arbitration in case of deadlock by the SEC is not a Arbitration in case of deadlock by the SEC is a remedy in case the
remedy in case the directors are so divided with directors are so divided respecting the management of the
respect to the management of the corporation.
corporation.
The purchase by the corporation of its own stock The corporation may be ordered by the SEC in case of deadlock to
must always be made from the unrestricted retained purchase its own shares from the stockholders regardless of the
earnings, except as regards redeemable shares.
availability of unrestricted retained earnings.
a)
b)
c)
d)
e)
CORPORATE DISSOLUTION
Voluntary Dissolution
Involuntary Dissolution
By the vote of the BOD or trustees and a) By expiration of corporate term provided for in the
the resolution adopted by the
AOI
stockholder/member where no creditors b) By legislative enactment
are affected.
c) Upon receipt of lawful court dissolving the
By the judgment of the SEC after
corporation
hearing of a petition for voluntary d) By failure to formally organize and commence its
resolution where creditors are affected.
business with 5 years from the date of incorporation.
By amending articles of incorporation to e) Failure to comply with the requirements and resume
shorten the corporate term.
operations within the period given by SEC shall cause
In case of a corporation sole, by
revocation of the corporation’s certificate of
submitting to the SEC a verified
incorporation.
declaration of the dissolution approval  If a corporation commenced business but
and
subsequently becomes inoperative within the
In case of merger or consolidation
consecutive period of 5 years, the SEC after due
notice and hearing may place the corporation under
delinquent status.
 Delinquent Corporation shall have 2 years to resume
operations and comply with all the requirements from
SEC.
f) By order of SEC on grounds under existing laws.
STOCK CORPORATION
NON-STOCK CORPORATION
Has capital stock divided into shares.
Has no capital stock
Organized for profit
Not organized for profit
Profits are distributed to the stockholders through
dividends.
Profits are not distributed to members
Directors cannot exceed 15 in number
Trustees may exceed 15 in number
The term of a director is 1 year
The term of a trustee is not more than 3 years
Officers are elected by the Board of Directors
Officers may be directly elected by the members unless
otherwise provided in the articles of incorporation or by-laws.
Stockholders' meetings shall be held in the city or
municipality where the principal office of the
corporation is located, and if practicable in the
principal office.
Members' meetings may be held at any place outside the
principal office of the corporation provided it shall be within the
Philippines.
Shares may be transferred by the stockholder with or
without the consent of the corporation.
Membership is personal in character and is not transferable
unless allowed by the articles of incorporation or by-laws.
MANAGEMENT RIGHTS
1. To attend and vote in person or by proxy at stockholders’ meetings
2. To elect and remove directors
3. To approve certain corporate acts
4. To adopt and amend or repeal the by-laws or adopt new by-laws
5. To compel the calling of the meetings
6. To enter into a voting trust agreement
7. To have the corporation voluntarily dissolved
PROPRIETARY RIGHTS
1. To transfer stock in the corporate book
2. To receive dividends when declared
3. To issuance of certificate of stock
4. To participate in the distribution of corporate assets upon dissolution
5. To pre-emption in the issue of shares
REMEDIAL RIGHTS
1. To inspect corporate books
2. To recover stock unlawfully sold for delinquent payment of subscription
3. To be furnished with most recent financial statements
4. To bring suits (derivative, individual, and representative suit)
5. To demand payment in the exercise of appraisal right
KINDS OF SUBSCRIPTION
Pre- incorporation subscription
Post-incorporation subscription
Rules:
Rules:
1.
A pre-incorporation subscription is irrevocable for a A subscriber becomes a stockholder upon
period of at least 6 months from the date of subscription. the perfection of the subscription
Exceptions:
contract even though he has not paid for
a.
All of the other subscriber’s consent to the his shares.
revocation.
As long as the shares are not
b. The corporation fails to incorporate within the same considered delinquent, stockholders are
period or within a longer period stipulated in the entitled to all rights granted to it whether
contract of subscription.
2. No pre-incorporation subscription may be revoked after
the submission of the articles of incorporation to the SEC.
or not subscribed capital stocks are fully
paid.
Voting Trust Agreement
Proxy
Law on trust
Governed by law on agency
Trustee acquires legal title to the shares of the transferring
shareholder; only beneficial title remains with the
shareholder
Proxy has no legal title to the shares of the principal
Vote as owner
The proxy vote as agent
Agreement must be notarized
Need not to be notarized
May vote in person/proxy
The proxy must vote in person
Not limited to act at any particular meeting
The proxy can only act at a specified stockholder’s
meeting
Vote even when the stockholder is present
Can only vote in the absence of the owners of a stock
Agreement must not exceed 5 years at any one time except
the same is made a condition of a loan
Valid only for the meeting which it is intended and it
cannot exceed 5 years at any one time
VTA is intended to be irrevocable for a definite and limited
period of time
As a rule, a proxy is revocable
Has right to inspect corporate books
A proxy does not have a right of inspection of
corporate books
Stock certificate shall be cancelled and a new one in the
name of the trustee shall be issued stating that they are
issued pursuant to a VTA.
There is no cancellation of the stock certificate
MEETINGS FOR DIRECTORS OR TRUSTEES
Regular Meetings
Special Meeting
Schedule
Monthly, unless the by-laws provide otherwise
Any time upon the call of the president or as provide
in the by-laws
Place
Anywhere in or outside of the Philippines, unless the
by-laws provide otherwise
Anywhere in or outside of the Philippines, unless th
by-laws provide otherwise
Notice
Notice stating the date, time and place of the meeting
must be given to the directors or trustees at least 2
days prior to the scheduled meeting unless a longer
time is provided in the bylaws. A director or trustee
may waive this requirement, either expressly or
impliedly.
Notice stating the date, time and place of the meetin
must be given to the directors or trustees at least
days prior to the scheduled meeting, unless a longe
time is provided in the bylaws. A director or truste
may waive this requirement, either expressly o
impliedly.
Articles of Incorporation
Stock and Transfer Book
The articles of incorporation
have been described as one that
defines the charter of the
corporation and the contractual
relationships between the State
and the
corporation,
the
stockholders and the State, and
between the corporation and its
stockholders.
A stock and transfer book is the book which records the names and addresses of
all stockholders arranged alphabetically, the installments paid and unpaid on all
stock for which subscription has been made, and the date of payment thereof; a
statement of every alienation, sale or transfer of stock made, the date thereof and
by and to whom made; and such other entries as may be prescribed by law.
However, a stock and transfer book, is not a public record, and thus is not exclusive
evidence of the matters and things which ordinarily are or should be written therein.
Not conclusive even against the corporation but are prima facie evidence only and
may be impeached or even contradicted by other competent evidence.
MEETINGS FOR STOCKHOLDER’S OR MEMBERS
Regular Meetings
Special Meeting
Schedule
Annually on a date fixed in the by-laws or If not so fixed,
on any date after April 15 of every year as determined by
the board of directors or trustees.
Any time deemed necessary or as provided
in the by-laws
Place
Principal office of the corporation as set forth in the
articles of incorporation, or, if not practicable, in the city
or municipality where the principal office of the
corporation is located
Principal office of the corporation as set forth
in the articles of incorporation, or, if not
practicable, in the city or municipality where
the principal office of the corporation is
located
Notice
Shall be sent to all stockholders or members of record at
least twenty-one (21) days prior to the meeting, unless a
different period is required in the bylaws, law, or
regulation.
At least one (1) week written notice shall be
sent to all stockholders or members, unless
a different period is provided in the bylaws,
law or regulation.
Articles of Incorporation
By-laws
It is a condition precedent in the acquisition of
corporate existence.
It is a condition subsequent. Its absence merely
furnishes a ground for the revocation of the
franchise or certificate of registration.
It constitutes the charter or fundamental law of the
corporation
It is the rules and regulations adopted by the
corporation
It is executed before incorporation
It is executed before or after incorporation.
It is amended by a majority of the board of
directors or trustees and stockholders representing
⅔ of the outstanding capital stock, or ⅔ of the
members in case of non-stock corporation.
It may be amended by a majority vote of the
board of directors and majority vote of the
outstanding capital stock or a majority of the
members in non-stock corporation.
The power to amend and repeal the articles of
incorporation cannot be delegated by the
The power to amend or repeal by-laws or adopt
new by-laws may be delegated by the ⅔ of the
stockholders or members to the board of directors
or trustees
outstanding capital stock or ⅔ of the members
in the case of non-stock corporation
I. By the stockholders or Members
1. Removal by the stockholders or members
2. Expiration of term
3. Increase in the number of directors or trustees due to amendment of the articles of incorporation
4. Other than the removal or expiration of term, like death, resignation, abandonment, or
disqualification, if the remaining directors or trustees do not constitute a quorum for the purpose of
filling the vacancy
II. By the members of the board of directors or trustees
If still constituting a quorum, at least a majority of them are empowered to fill any vacancy occurring
in the board other than by removal by the stockholders or by expiration of term
As to purpose
Public corporation
Private Corporation
A corporation organized for the government of
a portion of the State for the general good and
welfare
Ex: CDO, Makati city (reason why we celebrate
charter day)
A corporation formed for some private purpose,
benefit, or end
Ex: Philippine airlines
Government-owned
corporation
Quasi-public corporation
or
controlled
Owned by the Government directly or through
its instrumentalities wither wholly, or, where
applicable as in the case of stock corporations,
to the extent of at least 51% of its capital stock
Ex: public transit, GSIS, postal services
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
Ex: Cepalco, water district, oil, gas
As to legal right to corporation existence
De jure corporation
De facto corporation
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
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
Corporation by estoppel
Corporation by prescription
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
One which has exercised corporate powers for an
indefinite period without interference on the part of
the government
Ex: roman catholic church
As to laws of incorporation
Domestic corporation
Foreign corporation
Incorporated under the laws of the Philippines
Formed, organized, or 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
As to whether they are open to the public or not
Open corporation
Close corporation
Corporation which is open to any person who
may wish to become a stockholder or member
thereto
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 (family corporations); (2) all the issued
stock of all classes shall be subject to one or more
specified restrictions on transfer; and (3) the
corporation shall not list in any stock exchange or
make any public offering of any of its stock of any
class
As to relationship of management and control
Parent or holding corporation
Subsidiary corporation
Hold stocks in another corporation for the
purpose of control
More than 50% of the voting stock of which is
controlled directly or indirectly by another corporation,
which thereby becomes its parent corporation
As to the number of persons who compose them
Corporation aggregate
Corporation sole
Corporation consisting of more than one
member
Consisting of only one member for the purpose of
administering and managing, as trustee, the affairs,
property and temporalities of any religious
denomination, sect, or church
Ex: archbishop of metropolitan cathedral of CDO
As to whether they are for religious purposes or not
Ecclesiastical corporation
Lay corporation
A corporation organized for religious purposes
Organized for purpose other than for religion
As to whether they are for charitable purpose or not
Eleemosynary corporation
Civil corporation
A corporation organized for charitable purposes
Corporation organized for business or profit
CONTROL TEST (LIBERAL RULE)
GRANDFATHER RULE (STRICTER TEST)
- when the place of incorporation test indicates - if Filipino ownership is less than 60%, only the
that the subject corporation is organized under
number of shares corresponding to this
Philippine laws. (considered as Philippine
percentage shall be declared as Filipino
nationality)
- at least 60% of the share capital is owned by
Filipino citizens