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BATAS PAMBANSA BILANG. 68BATAS PAMBANSA BLG. 68 - THE
CORPORATION CODE OF THE PHILIPPINES
TITLE
I — GENERAL PROVISIONS DEFINITIONS AND CLASSIFICATIONS
Section 1. Title of the Code. — This Code shall be
known as "The Corporation Code of the Philippines." (n)
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 incident to its existence. (2)
Sec. 3. Classes of corporations. — Corporations
formed or organized under this Code may be stock or non-stock
corporations. Corporations which have capital stock divided 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. All other corporations are
non-stock corporations. (3a)
Sec. 4. Corporations created by special laws or
charters. — Corporations created by special laws or charters shall be
governed primarily by the provisions of the special law or charter
creating them or applicable to them, supplemented by the provisions of
this Code, insofar as they are applicable. (n)
Sec. 5. Corporators and incorporators,
stockholders and members. — Corporators are those who compose a
corporation, whether as stockholders or as members. Incorporators are
those stockholders or members mentioned in the articles of
incorporation as originally forming and composing the corporation and
who are signatories thereof.
Corporators in a stock corporation are called stockholders or
shareholders. Corporators in a non-stock corporation are called
members. (4a)
Sec. 6. Classification of shares. — The shares of
stock of stock corporations may be divided into classes or series of
shares, or both, any of which classes or series of shares may have such
rights, privileges or restrictions as may be stated in the articles of
incorporation: Provided, That no share may be deprived of voting rights
except those classified and issued as "preferred" or "redeemable"
shares, unless otherwise provided in this Code: Provided, further, That
there shall always be a class or series of shares which have complete
voting rights. Any or all of the shares or series of shares may have a
par value or have no par value as may be provided for in the articles
of incorporation: Provided, however, That banks, trust companies,
insurance companies, public utilities, and building and loan
associations shall not be permitted to issue r some other contract. (n)
Sec. 61. Pre-incorporation subscription. — A
subscription for shares of stock of a corporation still to be formed
shall be irrevocable for a period of at least six (6) months from the
date of subscription, unless all of the other subscribers consent to
the revocation, or unless the incorporation of said corporation fails
to materialize within said period or within a longer period as may be
stipulated in the contract of subscription: Provided, That no
pre-incorporation subscription may be revoked after the submission of
the articles of incorporation to the Securities and Exchange
Commission. (n)
Sec. 62. Consideration for stocks. — Stocks shall
not be issued for a consideration less than the par or issued price
thereof. Consideration for the issuance of stock may be any or a
combination of any two or more of the following:
1. Actual cash paid to the corporation;
2. Property, tangible or intangible, actually
received by the corporation and necessary or convenient for its use and
lawful purposes at a fair valuation equal to the par or issued value of
the stock issued;
3. Labor performed for or services actually rendered
to the corporation;
4. Previously incurred indebtedness of the
corporation;
5. Amounts transferred from unrestricted retained
earnings to stated capital; and
6. Outstanding shares exchanged for stocks in the
event of reclassification or conversion.
Where the consideration is other than actual cash, or consists of
intangible property such as patents of copyrights, the valuation
thereof shall initially be determined by the incorporators or the board
of directors, subject to approval by the Securities and Exchange
Commission.
Shares of stock shall not be issued in exchange for promissory notes or
future service.
The same considerations provided for in this section, insofar as they
may be applicable, may be used for the issuance of bonds by the
corporation.
The issued price of no-par value shares may be fixed in the articles of
incorporation or by the board of directors pursuant to authority
conferred upon it by the articles of incorporation or the by-laws, or
in the absence thereof, by the stockholders representing at least a
majority of the outstanding capital stock at a meeting duly called for
the purpose. (5 and 16)
Sec. 63. Certificate of stock and transfer of
shares. — The capital stock of stock corporations shall be divided into
shares for which certificates signed by the president or vice
president, countersigned by the secretary or assistant secretary, and
sealed with the seal of the corporation shall be issued in accordance
with the by-laws. Shares of stock so issued are personal property and
may be transferred by delivery of the certificate or certificates
indorsed by the owner or his attorney-in-fact or other person legally
authorized to make the transfer. No transfer, however, shall be valid,
except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate or
certificates and the number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim
shall be transferable in the books of the corporation. (35)
Sec. 64. Issuance of stock certificates. — No
certificate of stock shall be issued to a subscriber until the full
amount of his subscription together with interest and expenses (in case
of delinquent shares), if any is due, has been paid. (37)
Sec. 65. Liability of directors for watered
stocks. — Any director or officer of a corporation consenting to the
issuance of stocks for a consideration less than its par or issued
value or for a consideration in any form other than cash, valued in
excess of its fair value, or who, having knowledge thereof, does not
forthwith express his objection in writing and file the same with the
corporate secretary, shall be solidarily, liable with the stockholder
concerned to the corporation and its creditors for the difference
between the fair value received at the time of issuance of the stock
and the par or issued value of the same. (n)
Sec. 66. Interest on unpaid subscriptions. —
Subscribers for stock shall pay to the corporation interest on all
unpaid subscriptions from the date of subscription, if so required by,
and at the rate of interest fixed in the by-laws. If no rate of
interest is fixed in the by-laws, such rate shall be deemed to be the
legal rate. (37)
Sec. 67. Payment of balance of subscription. —
Subject to the provisions of the contract of subscription, the board of
directors of any stock corporation may at any time declare due and
payable to the corporation unpaid subscriptions to the capital stock
and may collect the same or such percentage thereof, in either case
with accrued interest, if any, as it may deem necessary.
Payment of any unpaid subscription or any percentage thereof, together
with the interest accrued, if any, shall be made on the date specified
in the contract of subscription or on the date stated in the call made
by the board. Failure to pay on such date shall render the entire
balance due and payable and shall make the stockholder liable for
interest at the legal rate on such balance, unless a different rate of
interest is provided in the by-laws, computed from such date until full
payment. If within thirty (30) days from the said date no payment is
made, all stocks covered by said subscription shall thereupon become
delinquent and shall be subject to sale as hereinafter provided, unless
the board of directors orders otherwise. (38)
Sec. 68. Delinquency sale. — The board of
directors may, by resolution, order the sale of delinquent stock and
shall specifically state the amount due on each subscription plus all
accrued interest, and the date, time and place of the sale which shall
not be less than thirty (30) days nor more than sixty (60) days from
the date the stocks become delinquent.
Notice of said sale, with a copy of the resolution, shall be sent to
every delinquent stockholder either personally or by registered mail.
The same shall furthermore be published once a week for two (2)
consecutive weeks in a newspaper of general circulation in the province
or city where the principal office of the corporation is located.
Unless the delinquent stockholder pays to the corporation, on or before
the date specified for the sale of the delinquent stock, the balance
due on his subscription, plus accrued interest, costs of advertisement
and expenses of sale, or unless the board of directors otherwise
orders, said delinquent stock shall be sold at public auction to such
bidder who shall offer to pay the full amount of the balance on the
subscription together with accrued interest, costs of advertisement and
expenses of sale, for the smallest number of shares or fraction of a
share. The stock so purchased shall be transferred to such purchaser in
the books of the corporation and a certificate for such stock shall be
issued in his favor. The remaining shares, if any, shall be credited in
favor of the delinquent stockholder who shall likewise be entitled to
the issuance of a certificate of stock covering such shares.
Should there be no bidder at the public auction who offers to pay the
full amount of the balance on the subscription together with accrued
interest, costs of advertisement and expenses of sale, for the smallest
number of shares or fraction of a share, the corporation may, subject
to the provisions of this Code, bid for the same, and the total amount
due shall be credited as paid in full in the books of the corporation.
Title to all the shares of stock covered by the subscription shall be
vested in the corporation as treasury shares and may be disposed of by
said corporation in accordance with the provisions of this Code.
(39a-46a)
Sec. 69. When sale may be questioned. — No action
to recover delinquent stock sold can be sustained upon the ground of
irregularity or defect in the notice of sale, or in the sale itself of
the delinquent stock, unless the party seeking to maintain such action
first pays or tenders to the party holding the stock the sum for which
the same was sold, with interest from the date of sale at the legal
rate; and no such action shall be maintained unless it is commenced by
the filing of a complaint within six (6) months from the date of sale.
(47a)
Sec. 70. Court action to recover unpaid
subscription. — Nothing in this Code shall prevent the corporation from
collecting by action in a court of proper jurisdiction the amount due
on any unpaid subscription, with accrued interest, costs and expenses.
(49a)
Sec. 71. Effect of delinquency. — No delinquent
stock shall be voted for or be entitled to vote or to representation at
any stockholder's meeting, nor shall the holder thereof be entitled to
any of the rights of a stockholder except the right to dividends in
accordance with the provisions of this Code, until and unless he pays
the amount due on his subscription with accrued interest, and the costs
and expenses of advertisement, if any. (50a)
Sec. 72. Rights of unpaid shares. — Holders of
subscribed shares not fully paid which are not delinquent shall have
all the rights of a stockholder. (n)
Sec. 73. Lost or destroyed certificates. — The
following procedure shall be followed for the issuance by a corporation
of new certificates of stock in lieu of those which have been lost,
stolen or destroyed:
1. The registered owner of a certificate of stock in
a corporation or his legal representative shall file with the
corporation an affidavit in triplicate setting forth, if possible, the
circumstances as to how the certificate was lost, stolen or destroyed,
the number of shares represented by such certificate, the serial number
of the certificate and the name of the corporation which issued the
same. He shall also submit such other information and evidence which he
may deem necessary;
2. After verifying the affidavit and other
information and evidence with the books of the corporation, said
corporation shall publish a notice in a newspaper of general
circulation published in the place where the corporation has its
principal office, once a week for three (3) consecutive weeks at the
expense of the registered owner of the certificate of stock which has
been lost, stolen or destroyed. The notice shall state the name of said
corporation, the name of the registered owner and the serial number of
said certificate, and the number of shares represented by such
certificate, and that after the expiration of one (1) year from the
date of the last publication, if no contest has been presented to said
corporation regarding said certificate of stock, the right to make such
contest shall be barred and said corporation shall cancel in its books
the certificate of stock which has been lost, stolen or destroyed and
issue in lieu thereof new certificate of stock, unless the registered
owner files a bond or other security in lieu thereof as may be
required, effective for a period of one (1) year, for such amount and
in such form and with such sureties as may be satisfactory to the board
of directors, in which case a new certificate may be issued even before
the expiration of the one (1) year period provided herein: Provided,
That if a contest has been presented to said corporation or if an
action is pending in court regarding the ownership of said certificate
of stock which has been lost, stolen or destroyed, the issuance of the
new certificate of stock in lieu thereof shall be suspended until the
final decision by the court regarding the ownership of said certificate
of stock which has been lost, stolen or destroyed.
Except in case of fraud, bad faith, or negligence on the part of the
corporation and its officers, no action may be brought against any
corporation which shall have issued certificate of stock in lieu of
those lost, stolen or destroyed pursuant to the procedure
above-described. (R.A. 201a)
TITLE VIII — CORPORATE BOOKS AND
RECORDS
Sec. 74. Books to be kept; stock transfer agent. —
Every corporation shall keep and carefully preserve at its principal
office a record of all business transactions and minutes of all
meetings of stockholders or members, or of the board of directors or
trustees, in which shall be set forth in detail the time and place of
holding the meeting, how authorized, the notice given, whether the
meeting was regular or special, if special its object, those present
and absent, and every act done or ordered done at the meeting. Upon the
demand of any director, trustee, stockholder or member, the time when
any director, trustee, stockholder or member entered or left the
meeting must be noted in the minutes; and on a similar demand, the yeas
and nays must be taken on any motion or proposition, and a record
thereof carefully made. The protest of any director, trustee,
stockholder or member on any action or proposed action must be recorded
in full on his demand.
The records of all business transactions of the corporation and the
minutes of any meetings shall be open to inspection by any director,
trustee, stockholder or member of the corporation at reasonable hours
on business days and he may demand, in writing, for a copy of excerpts
from said records or minutes, at his expense.
Any officer or agent of the corporation who shall refuse to allow any
director, trustees, stockholder or member of the corporation to examine
and copy excerpts from its records or minutes, in accordance with the
provisions of this Code, shall be liable to such director, trustee,
stockholder or member for damages, and in addition, shall be guilty of
an offense which shall be punishable under Section 144 of this Code:
Provided, That if such refusal is made pursuant to a resolution or
order of the board of directors or trustees, the liability under this
section for such action shall be imposed upon the directors or trustees
who voted for such refusal: and Provided, further, That it shall be a
defense to any action under this section that the person demanding to
examine and copy excerpts from the corporation's records and minutes
has improperly used any information secured through any prior
examination of the records or minutes of such corporation or of any
other corporation, or was not acting in good faith or for a legitimate
purpose in making his demand.
Stock corporations must also keep a book to be known as the "stock and
transfer book", in which must be kept a record of all stocks in the
names of the stockholders alphabetically arranged; the installments
paid and unpaid on all stock for which subscription has been made, and
the date of payment of any installment; 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 the by-laws may prescribe.
The stock and transfer book shall be kept in the principal office of
the corporation or in the office of its stock transfer agent and shall
be open for inspection by any director or stockholder of the
corporation at reasonable hours on business days.
No stock transfer agent or one engaged principally in the business of
registering transfers of stocks in behalf of a stock corporation shall
be allowed to operate in the Philippines unless he secures a license
from the Securities and Exchange Commission and pays a fee as may be
fixed by the Commission, which shall be renewable annually: Provided,
That a stock corporation is not precluded from performing or making
transfer of its own stocks, in which case all the rules and regulations
imposed on stock transfer agents, except the payment of a license fee
herein provided, shall be applicable. (51a and 32a; P.B. No.
268.)
Sec. 75. Right to financial statements. — Within
ten (10) days from receipt of a written request of any stockholder or
member, the corporation shall furnish to him its most recent financial
statement, which shall include a balance sheet as of the end of the
last taxable year and a profit or loss statement for said taxable year,
showing in reasonable detail its assets and liabilities and the result
of its operations.
At the regular meeting of stockholders or members, the board of
directors or trustees shall present to such stockholders or members a
financial report of the operations of the corporation for the preceding
year, which shall include financial statements, duly signed and
certified by an independent certified public accountant.
However, if the paid-up capital of the corporation is less than
P50,000.00, the financial statements may be certified under oath by the
treasurer or any responsible officer of the corporation. (n)
TITLE IX — MERGER AND
CONSOLIDATION
Sec. 76. Plan or merger of consolidation. — Two or
more corporations may merge into a single corporation which shall be
one of the constituent corporations or may consolidate into a new
single corporation which shall be the consolidated corporation.
The board of directors or trustees of each corporation, party to the
merger or consolidation, shall approve a plan of merger or
consolidation setting forth the following:
1. The names of the corporations proposing to merge
or consolidate, hereinafter referred to as the constituent
corporations;
2. The terms of the merger or consolidation and the
mode of carrying the same into effect;
3. A statement of the changes, if any, in the
articles of incorporation of the surviving corporation in case of
merger; and, with respect to the consolidated corporation in case of
consolidation, all the statements required to be set forth in the
articles of incorporation for corporations organized under this Code;
and
4. Such other provisions with respect to the proposed
merger or consolidation as are deemed necessary or desirable. (n)
Sec. 77. Stockholder's or member's approval. —
Upon approval by majority vote of each of the board of directors or
trustees of the constituent corporations of the plan of merger or
consolidation, the same shall be submitted for approval by the
stockholders or members of each of such corporations at separate
corporate meetings duly called for the purpose. Notice of such meetings
shall be given to all stockholders or members of the respective
corporations, at least two (2) weeks prior to the date of the meeting,
either personally or by registered mail. Said notice shall state the
purpose of the meeting and shall include a copy or a summary of the
plan of merger or consolidation. The affirmative vote of stockholders
representing at least two-thirds (2/3) of the outstanding capital stock
of each corporation in the case of stock corporations or at least
two-thirds (2/3) of the members in the case of non-stock corporations
shall be necessary for the approval of such plan. Any dissenting
stockholder in stock corporations may exercise his appraisal right in
accordance with the Code: Provided, That if after the approval by the
stockholders of such plan, the board of directors decides to abandon
the plan, the appraisal right shall be extinguished.
Any amendment to the plan of merger or consolidation may be made,
provided such amendment is approved by majority vote of the respective
boards of directors or trustees of all the constituent corporations and
ratified by the affirmative vote of stockholders representing at least
two-thirds (2/3) of the outstanding capital stock or of two-thirds
(2/3) of the members of each of the constituent corporations. Such
plan, together with any amendment, shall be considered as the agreement
of merger or consolidation. (n)
Sec. 78. Articles of merger or consolidation. —
After the approval by the stockholders or members as required by the
preceding section, articles of merger or articles of consolidation
shall be executed by each of the constituent corporations, to be signed
by the president or vice-president and certified by the secretary or
assistant secretary of each corporation setting forth:
1. The plan of the merger or the plan of
consolidation;
2. As to stock corporations, the number of shares
outstanding, or in the case of non-stock corporations, the number of
members; and
3. As to each corporation, the number of shares or
members voting for and against such plan, respectively. (n)
Sec. 79. Effectivity of merger or consolidation. —
The articles of merger or of consolidation, signed and certified as
herein above required, shall be submitted to the Securities and
Exchange Commission in quadruplicate for its approval: Provided, That
in the case of merger or consolidation of banks or banking
institutions, building and loan associations, trust companies,
insurance companies, public utilities, educational institutions and
other special corporations governed by special laws, the favorable
recommendation of the appropriate government agency shall first be
obtained. If the Commission is satisfied that the merger or
consolidation of the corporatino-par value shares of
stock.
Preferred shares of stock issued by any corporation may be given
preference in the distribution of the assets of the corporation in case
of liquidation and in the distribution of dividends, or such other
preferences as may be stated in the articles of incorporation which are
not violative of the provisions of this Code: Provided, That preferred
shares of stock may be issued only with a stated par value. The board
of directors, where authorized in the articles of incorporation, may
fix the terms and conditions of preferred shares of stock or any series
thereof: Provided, That such terms and conditions shall be effective
upon the filing of a certificate thereof with the Securities and
Exchange Commission.
Shares of capital stock issued without par value shall be deemed fully
paid and non-assessable and the holder of such shares shall not be
liable to the corporation or to its creditors in respect thereto:
Provided; That shares without par value may not be issued for a
consideration less than the value of five (P5.00) pesos per share:
Provided, further, That the entire consideration received by the
corporation for its no-par value shares shall be treated as capital and
shall not be available for distribution as dividends.
A corporation may, furthermore, classify its shares for the purpose of
insuring compliance with constitutional or legal requirements.
Except as otherwise provided in the articles of incorporation and
stated in the certificate of stock, each share shall be equal in all
respects to every other share.
Where the articles of incorporation provide for non-voting shares in
the cases allowed by this Code, the holders of such shares shall
nevertheless be entitled to vote on the following matters:
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 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.
Except as provided in the immediately preceding paragraph, the vote
necessary to approve a particular corporate act as provided in this
Code shall be deemed to refer only to stocks with voting rights. (5a)
Sec. 7. Founders' shares. — Founders' shares
classified as such in the articles of incorporation may be given
certain rights and privileges not enjoyed by the owners of other
stocks, provided that where the 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 subject to the approval of the
Securities and Exchange Commission. The five-year period shall commence
from the date of the aforesaid approval by the Securities and Exchange
Commission. (n)
Sec. 8. Redeemable shares. — Redeemable shares may
be issued by the corporation when expressly so 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. (n)
Sec. 9. 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. Such shares
may again be disposed of for a reasonable price fixed by the board of
directors. (n)
TITLE II — INCORPORATION AND
ORGANIZATION OF PRIVATE CORPORATIONS
Sec. 10. Number and qualifications of
incorporators. — Any number of natural persons not less than five (5)
but not more than fifteen (15), all of legal age and a majority of whom
are residents of the Philippines, may form a private corporation for
any lawful purpose or purposes. Each of the incorporators of stock
corporation must own or be a subscriber to at least one (1) share of
the capital stock of the corporation. (6a)
Sec. 11. Corporate term. — A corporation shall
exist for a period not exceeding fifty (50) years from the date of
incorporation unless sooner dissolved or unless said period is
extended. The corporate term as originally stated in the articles of
incorporation may be extended for periods not exceeding fifty (50)
years in any single instance by an amendment of the articles of
incorporation, in accordance with this Code; Provided, That no
extension can be made earlier than five (5) years prior to the original
or subsequent expiry date(s) unless there are justifiable reasons for
an earlier extension as may be determined by the Securities and
Exchange Commission. (6)
Sec. 12. Minimum capital stock required of stock
corporations. — Stock corporations incorporated under this Code shall
not be required to have any minimum authorized capital stock except as
otherwise specifically provided for by special law, and subject to the
provisions of the following section.
Sec. 13. Amount of capital stock to be subscribed
and paid for the purposes of incorporation. — At least twenty-five
percent (25%) of the authorized capital stock as stated in the articles
of incorporation must be subscribed at the time of incorporation, and
at least twenty-five (25%) per cent of the total subscription must be
paid upon subscription, the balance to be payable on a date or dates
fixed in the contract of subscription without need of call, or in the
absence of a fixed date or dates, upon call for payment by the board of
directors: Provided, however, That in no case shall the paid-up capital
be less than five Thousand (P5,000.00) pesos. (n)
Sec. 14. Contents of the articles of
incorporation. — All corporations organized under this code shall file
with the Securities and Exchange Commission articles of incorporation
in any of the official languages duly signed and acknowledged by all of
the incorporators, containing substantially the following matters,
except as otherwise prescribed by this Code or by special law:
1. The name of the corporation;
2. The specific purpose or purposes for which the
corporation is being incorporated. Where a corporation has more than
one stated purpose, the articles of incorporation shall state which is
the primary purpose and which is/are the secondary purpose or purposes:
Provided, That a non-stock corporation may not include a purpose which
would change or contradict its nature as such;
3. The place where the principal office of the
corporation is to be located, which must be within the Philippines;
4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the
incorporators;
6. The number of directors or trustees, which shall
not be less than five (5) nor more than fifteen (15);
7. The names, nationalities and residences of persons
who shall act as directors or trustees until the first regular
directors or trustees are duly elected and qualified in accordance with
this Code;
8. If it be a stock corporation, the amount of its
authorized capital stock in lawful money of the Philippines, the number
of shares into which it is divided, and in case the share are par value
shares, the par value of each, the names, nationalities and residences
of the original subscribers, and the amount subscribed and paid by each
on his subscription, and if some or all of the shares are without par
value, such fact must be stated;
9. If it be a non-stock corporation, the amount of
its capital, the names, nationalities and residences of the
contributors and the amount contributed by each; and
10. Such other matters as are not inconsistent with
law and which the incorporators may deem necessary and convenient.
The Securities and Exchange Commission shall not accept the articles of
incorporation of any stock corporation unless accompanied by a sworn
statement of the Treasurer elected by the subscribers showing that at
least twenty-five (25%) percent of the authorized capital stock of the
corporation has been subscribed, and at least twenty-five (25%) of the
total subscription has been fully paid to him in actual cash and/or in
property the fair valuation of which is equal to at least twenty-five
(25%) percent of the said subscription, such paid-up capital being not
less than five thousand (P5,000.00) pesos.
Sec. 15. Forms of Articles of Incorporation. —
Unless otherwise prescribed by special law, articles of incorporation
of all domestic corporations shall comply substantially with the
following form:
ARTICLES OF INCORPORATION OF
__________________________
(Name of Corporation)
KNOW ALL MEN BY THESE PRESENTS:
The undersigned incorporators, all of legal age and a majority of whom
are residents of the Philippines, have this day voluntarily agreed to
form a (stock) (non-stock) corporation under the laws of the Republic
of the Philippines;
AND WE HEREBY CERTIFY:
FIRST: That the name of said corporation shall be
"_____________________, INC. or CORPORATION";
SECOND: That the purpose or purposes for which such
corporation is incorporated are: (If there is more than one purpose,
indicate primary and secondary purposes);
THIRD: That the principal office of the corporation
is located in the City/Municipality of ________________________,
Province of _______________________, Philippines;
FOURTH: That the term for which said corporation is
to exist is _____________ years from and after the date of issuance of
the certificate of incorporation;
FIFTH: That the names, nationalities and residences
of the incorporators of the corporation are as follows:
NAME NATIONALITY
RESIDENCE
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
SIXTH: That the number of directors or trustees of
the corporation shall be _______; and the names, nationalities and
residences of the first directors or trustees of the corporation are as
follows:
NAME NATIONALITY
RESIDENCE
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
SEVENTH: That the authorized capital stock of the
corporation is ______________________ (P___________) PESOS in lawful
money of the Philippines, divided into __________ shares with the par
value of ____________________ (P_____________) Pesos per share.
(In case all the share are without par value):
That the capital stock of the corporation is ______________ shares
without par value. (In case some shares have par value and some are
without par value): That the capital stock of said corporation consists
of _____________ shares of which ______________ shares are of the par
value of _________________ (P____________) PESOS each, and of which
_________________ shares are without par value.
EIGHTH: That at least twenty five (25%) per
cent of the authorized capital stock above stated has been subscribed
as follows:
Name of Subscriber
Nationality No of Shares Amount
Subscribed Subscribed
_________________ __________
____________ ____________
_________________ __________
____________ ____________
_________________ __________
____________ ____________
_________________ __________
____________ ____________
_________________ __________
____________ ____________
NINTH: That the above-named subscribers have paid at
least twenty-five (25%) percent of the total subscription as follows:
Name of Subscriber Amount
Subscribed Total Paid-In
_________________
___________________ _______________
_________________
___________________ _______________
_________________
___________________ _______________
_________________
___________________ _______________
_________________
___________________ _______________
(Modify Nos. 8 and 9 if shares are with no par value. In case the
corporation is non-stock, Nos. 7, 8 and 9 of the above articles may be
modified accordingly, and it is sufficient if the articles state the
amount of capital or money contributed or donated by specified persons,
stating the names, nationalities and residences of the contributors or
donors and the respective amount given by each.)
TENTH: That _____________________ has been elected by
the subscribers as Treasurer of the Corporation to act as such until
his successor is duly elected and qualified in accordance with the
by-laws, and that as such Treasurer, he has been authorized to receive
for and in the name and for the benefit of the corporation, all
subscription (or fees) or contributions or donations paid or given by
the subscribers or members.
ELEVENTH: (Corporations which will engage in any
business or activity reserved for Filipino citizens shall provide the
following):
"No transfer of stock or interest which shons concerned is not inconsistent with
the provisions of this Code and existing laws, it shall issue a
certificate of merger or of consolidation, at which time the merger or
consolidation shall be effective.
If, upon investigation, the Securities and Exchange Commission has
reason to believe that the proposed merger or consolidation is contrary
to or inconsistent with the provisions of this Code or existing laws,
it shall set a hearing to give the corporations concerned the
opportunity to be heard. Written notice of the date, time and place of
hearing shall be given to each constituent corporation at least two (2)
weeks before said hearing. The Commission shall thereafter proceed as
provided in this Code. (n)
Sec. 80. Effects of merger or consolidation. — The
merger or consolidation shall have the following effects:
1. The constituent corporations shall become a single
corporation which, in case of merger, shall be the surviving
corporation designated in the plan of merger; and, in case of
consolidation, shall be the consolidated corporation designated in the
plan of consolidation;
2. The separate existence of the constituent
corporations shall cease, except that of the surviving or the
consolidated corporation;
3. The surviving or the consolidated corporation
shall possess all the rights, privileges, immunities and powers and
shall be subject to all the duties and liabilities of a corporation
organized under this Code;
4. The surviving or the consolidated corporation
shall thereupon and thereafter possess all the rights, privileges,
immunities and franchises of each of the constituent corporations; and
all property, real or personal, and all receivables due on whatever
account, including subscriptions to shares and other choses in action,
and all and every other interest of, or 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
5. The surviving or consolidated corporation shall be
responsible and liable for all the liabilities and obligations of each
of the constituent corporations in the same manner as if such surviving
or consolidated corporation had itself incurred such liabilities or
obligations; and any pending claim, action or proceeding brought by or
against any of such constituent corporations may be prosecuted by or
against the surviving or consolidated corporation. The rights of
creditors or liens upon the property of any of such constituent
corporations shall not be impaired by such merger or consolidation. (n)
TITLE X — APPRAISAL RIGHT
Sec. 81. Instances of appraisal right. — Any
stockholder of a corporation shall have the right to dissent and demand
payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of
incorporation 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;
2. In case of sale, lease, exchange, transfer,
mortgage, pledge or other disposition of all or substantially all of
the corporate property and assets as provided in the Code; and
3. In case of merger or consolidation. (n)
Sec. 82. How right is exercised. — The appraisal
right may be exercised by any stockholder who shall have voted against
the proposed corporate action, by making a written demand on the
corporation within thirty (30) days after the date on which the vote
was taken for payment of the fair value of his shares: Provided, That
failure to make the demand within such period shall be deemed a waiver
of the appraisal right. If the proposed corporate action is implemented
or affected, the corporation shall pay to such stockholder, upon
surrender of the certificate or certificates of stock representing his
shares, the fair value thereof as of the day prior to the date on which
the vote was taken, excluding any appreciation or depreciation in
anticipation of such corporate action.
If within a period of sixty (60) days from the date the corporate
action was approved by the stockholders, the withdrawing stockholder
and the corporation cannot agree on the fair value of the shares, it
shall be determined and appraised by three (3) disinterested persons,
one of whom shall be named by the stockholder, another by the
corporation, and the third by the two thus chosen. The findings of the
majority of the appraisers shall be final, and their award shall be
paid by the corporation within thirty (30) days after such award is
made: Provided, That no payment shall be made to any dissenting
stockholder unless the corporation has unrestricted retained earnings
in its books to cover such payment: and Provided, further, That upon
payment by the corporation of the agreed or awarded price, the
stockholder shall forthwith transfer his shares to the corporation. (n)
Sec. 83. Effect of demand and termination of
right. — From the time of demand for payment of the fair value of a
stockholder's shares until either the abandonment of the corporate
action involved or the purchase of the said shares by the corporation,
all rights accruing to such shares, including voting and dividend
rights, shall be suspended in accordance with the provisions of this
Code, except the right of such stockholder to receive payment of the
fair value thereof: Provided, That if the dissenting stockholder is not
paid the value of his shares within 30 days after the award, his voting
and dividend rights shall immediately be restored. (n)
Sec. 84. When right to payment ceases. — No demand
for payment under this Title may be withdrawn unless the corporation
consents thereto. If, however, such demand for payment is withdrawn
with the consent of the corporation, or if the proposed corporate
action is abandoned or rescinded by the corporation or disapproved by
the Securities and Exchange Commission where such approval is
necessary, or if the Securities and Exchange Commission determines that
such stockholder is not entitled to the appraisal right, then the right
of said stockholder to be paid the fair value of his shares shall
cease, his status as a stockholder shall thereupon be restored, and all
dividend distributions which would have accrued on his shares shall be
paid to him. (n)
Sec. 85. Who bears costs of appraisal. — The costs
and expenses of appraisal shall be borne by the corporation, unless the
fair value ascertained by the appraisers is approximately the same as
the price which the corporation may have offered to pay the
stockholder, in which case they shall be borne by the latter. In the
case of an action to recover such fair value, all costs and expenses
shall be assessed against the corporation, unless the refusal of the
stockholder to receive payment was unjustified. (n)
Sec. 86. Notation on certificates; rights of
transferee. — Within ten (10) days after demanding payment for his
shares, a dissenting stockholder shall submit the certificates of stock
representing his shares to the corporation for notation thereon that
such shares are dissenting shares. His failure to do so shall, at the
option of the corporation, terminate his rights under this Title. If
shares represented by the certificates bearing such notation are
transferred, and the certificates consequently cancelled, the rights of
the transferor as a dissenting stockholder under this Title shall cease
and the transferee 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. (n)
TITLE XI — NON-STOCK
CORPORATIONS
Sec. 87. Definition. — For the purposes of this
Code, a non-stock corporation is one where no part of its income is
distributable as dividends to its members, trustees, or officers,
subject to the provisions of this Code on dissolution: Provided, That
any profit which a non-stock corporation may obtain as an incident to
its operations shall, whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which the corporation was
organized, subject to the provisions of this Title.
The provisions governing stock corporation, when pertinent, shall be
applicable to non-stock corporations, except as may be covered by
specific provisions of this Title. (n)
Sec. 88. Purposes. — Non-stock corporations may be
formed or organized for charitable, religious, educational,
professional, cultural, fraternal, literary, scientific, social, civic
service, or similar purposes, like trade, industry, agricultural and
like chambers, or any combination thereof, subject to the special
provisions of this Title governing particular classes of non-stock
corporations. (n)
CHAPTER I
Members
Sec. 89. Right to vote. — The right of the members
of any class or classes to vote may be limited, broadened or denied to
the extent specified in the articles of incorporation or the by-laws.
Unless so limited, broadened or denied, each member, regardless of
class, shall be entitled to one vote.
Unless otherwise provided in the articles of incorporation or the
by-laws, a member may vote by proxy in accordance with the provisions
of this Code. (n)
Voting by mail or other similar means by members of non-stock
corporations may be authorized by the by-laws of non-stock corporations
with the approval of, and under such conditions which may be prescribed
by, the Securities and Exchange Commission.
Sec. 90. Non-transferability of membership. —
Membership in a non-stock corporation and all rights arising therefrom
are personal and non-transferable, unless the articles of incorporation
or the by-laws otherwise provide. (n)
Sec. 91. Termination of membership. — Membership
shall be terminated in the manner and for the causes provided in the
articles of incorporation or the by-laws. Termination of membership
shall have the effect of extinguishing all rights of a member in the
corporation or in its property, unless otherwise provided in the
articles of incorporation or the by-laws. (n)
CHAPTER II
Trustees and Offices
Sec. 92. Election and term of trustees. — Unless
otherwise provided in the articles of incorporation or the by-laws, the
board of trustees of non-stock corporations, which may be more than
fifteen (15) in number as may be fixed in their articles of
incorporation or by-laws, shall, as soon as organized, so classify
themselves that the term of office of one-third (1/3) of their number
shall expire every year; and subsequent elections of trustees
comprising one-third (1/3) of the board of trustees shall be held
annually and trustees so elected shall have a term of three (3) years.
Trustees thereafter elected to fill vacancies occurring before the
expiration of a particular term shall hold office only for the
unexpired period.
No person shall be elected as trustee unless he is a member of the
corporation.
Unless otherwise provided in the articles of incorporation or the
by-laws, officers of a non-stock corporation may be directly elected by
the members. (n)
Sec. 93. Place of meetings. — The by-laws may
provide that the members of a non-stock corporation may hold their
regular or special meetings at any place even outside the place where
the principal office of the corporation is located: Provided, That
proper notice is sent to all members indicating the date, time and
place of the meeting: and Provided, further, That the place of meeting
shall be within the Philippines. (n)
CHAPTER III
Distribution of Assets in Non-Stock Corporations
Sec. 94. Rules of distribution. — In case
dissolution of a non-stock corporation in accordance with the
provisions of this Code, its assets shall be applied and distributed as
follows:
1. All liabilities and obligations of the corporation
shall be paid, satisfied and discharged, or adequate provision shall be
made therefore;
2. Assets held by the corporation upon a condition
requiring return, transfer or conveyance, and which condition occurs by
reason of the dissolution, shall be returned, transferred or conveyed
in accordance with such requirements;
3. Assets received and held by the corporation
subject to limitations permitting their use only for charitable,
religious, benevolent, educational or similar purposes, but not held
upon a condition requiring return, transfer or conveyance by reason of
the dissolution, shall be transferred or conveyed to one or more
corporations, societies or organizations engaged in activities in the
Philippines substantially similar to those of the dissolving
corporation according to a plan of distribution adopted pursuant to
this Chapter;
4. Assets other than those mentioned in the preceding
paragraphs, if any, shall be distributed in accordance with the
provisions of the articles of incorporation or the by-laws, to the
extent that the articles of incorporation or the by-laws, determine the
distributive rights of members, or any class or classes of members, or
provide for distribution; and
5. In any other case, 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. (n)
Sec. 95. Plan of distribution of assets. — A plan
providing for the distribution of assets, not inconsistent with the
provisions of this Title, may be adopted by a non-stock corporation in
the process of dissolution in the following manner:
The board of trustees shall, by majority vote, adopt a resolution
recommending a plan of distribution and directing the submission
thereof to a vote at a regular or special meeting of members having
voting rights. Written notice setting forth the proposed plan of
distribution or a summary thereof and the date, time and place of such
meeting shall be given to each member entitled to vote, within the time
and in the manner provided in this Code for the giving of notice of
meetings to members. Such plan of distribution shall be adopted upon
approval of at least two-thirds (2/3) of the members having voting
rights present or represented by proxy at such meeting. (n)
TITLE XII — CLOSE CORPORATIONS
Sec. 96. Definition and applicability of Title. —
A close corporation, within the meaning of this Code, 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 twenty (20); (2) all the issued stock of all classes shall be
subject to one or more specified restrictions on transfer permitted by
this Title; and (3) The corporation shall not list in any stock
exchange or make any public offering of any of its stock of any class.
Notwithstanding the foregoing, a corporation shall not be deemed a
close corporation when at least two-thirds (2/3) of its voting stock or
voting rights is owned or controlled by another corporation which is
not a close corporation within the meaning of this Code.
Any corporation may be incorporated as a close corporation, except
mining or oil companies, stock exchanges, banks, insurance companies,
public utilities, educational institutions and corporations declared to
be vested with public interest in accordance with the provisions of
this Code.
The provisions of this Title shall primarily govern close corporations:
Provided, That the provisions of other Titles of this Code shall apply
suppletorily except insofar as this Title otherwise provides.
Sec. 97. Articles of incorporation. — The articles
of incorporation of a close corporation may provide:
1. For a classification of shares or rights and the
qualifications for owning or holding the same and restrictions on their
transfers as may be stated therein, subject to the provisions of the
following section;
2. For a classification of directors into one or more
classes, each of whom may be voted for and elected solely by a
particular class of stock; and
3. For a greater quorum or voting requirements in
meetings of stockholders or directors than those provided in this Code.
The articles of incorporation of a close corporation may provide that
the business of the corporation shall be managed by the stockholders of
the corporation rather than by a board of directors. So long as this
provision continues in effect:
1. No meeting of stockholders need be called to elect
directors;
2. Unless the context clearly requires otherwise, the
stockholders of the corporation shall be deemed to be directors for the
purpose of applying the provisions of this Code; and
3. The stockholders of the corporation shall be
subject to all liabilities of directors.
The articles of incorporation may likewise provide that all officers or
employees or that specified officers or employees shall be elected or
appointed by the stockholders, instead of by the board of directors.
Sec. 98. Validity of restrictions on transfer of
shares. — Restrictions on the right to transfer shares must appear in
the articles of incorporation and in the by-laws as well as in the
certificate of stock; otherwise, the same shall not be binding on any
purchaser thereof in good faith. Said restrictions shall not be more
onerous than granting the existing stockholders or the corporation the
option to purchase the shares of the transferring stockholder with such
reasonable terms, conditions or period stated therein. If upon the
expiration of said period, the existing stockholders or the corporation
fails to exercise the option to purchase, the transferring stockholder
may sell his shares to any third person.
Sec. 99. Effects of issuance or transfer of stock
in breach of qualifying conditions. —
1. If stock of a close corporation is issued or
transferred to any person who is not entitled under any provision of
the articles of incorporation to be a holder of record of its stock,
and if the certificate for such stock conspicuously shows the
qualifications of the persons entitled to be holders of record thereof,
such person is conclusively presumed to have notice of the fact of his
ineligibility toall reduce the ownership of
Filipino citizens to less than the required percentage of the capital
stock as provided by existing laws shall be allowed or permitted to be
recorded in the proper books of the corporation and this restriction
shall be indicated in all stock certificates issued by the corporation."
IN WITNESS WHEREOF, we have hereunto signed these Articles of
Incorporation, this __________ day of ________________, 19 ______ in
the City/Municipality of ____________________, Province of
________________________, Republic of the Philippines.
_______________________ _______________________
_______________________ _______________________
________________________________
(Names and signatures of the incorporators)
SIGNED IN THE PRESENCE OF:
_______________________ _______________________
(Notarial Acknowledgment)
TREASURER'S AFFIDAVIT
REPUBLIC OF THE PHILIPPINES )
CITY/MUNICIPALITY
OF
) S.S.
PROVINCE
OF
)
I, ____________________, being duly sworn, depose and say:
That I have been elected by the subscribers of the corporation as
Treasurer thereof, to act as such until my successor has been duly
elected and qualified in accordance with the by-laws of the
corporation, and that as such Treasurer, I hereby certify under oath
that at least 25% of the authorized capital stock of the corporation
has been subscribed and at least 25% of the total subscription has been
paid, and received by me, in cash or property, in the amount of not
less than P5,000.00, in accordance with the Corporation Code.
____________________
(Signature of Treasurer)
SUBSCRIBED AND SWORN to before me, a Notary Public, for and in the
City/Municipality of ___________________ Province of
_____________________, this _______ day of ___________, 19 _____; by
__________________ with Res. Cert. No. ___________ issued at
_______________________ on ____________, 19 ______
NOTARY PUBLIC
My commission expires on
_________, 19 _____
Doc. No. _________;
Page No. _________;
Book No. ________;
Series of 19____ (7a)
Sec. 16. Amendment of Articles of Incorporation. —
Unless otherwise prescribed by this Code or by special law, and for
legitimate purposes, any provision or matter stated in the articles of
incorporation may be amended by a majority vote of the board of
directors or trustees and the vote or written assent of the
stockholders representing at least two-thirds (2/3) of the outstanding
capital stock, without prejudice to the appraisal right of dissenting
stockholders in accordance with the provisions of this Code, or the
vote or written assent of at least two-thirds (2/3) of the members if
it be a non-stock corporation.
The original and amended articles together shall contain all provisions
required by law to be set out in the articles of incorporation. Such
articles, as amended 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 stating
the fact that said amendment or amendments have been duly approved by
the required vote of the stockholders or members, shall be submitted to
the Securities and Exchange Commission.
The amendments shall take effect upon their approval by the Securities
and Exchange Commission or from the date of filing with the said
Commission if not acted upon within six (6) months from the date of
filing for a cause not attributable to the corporation.
Sec. 17. Grounds when articles of incorporation or
amendment may be rejected or disapproved. — The Securities and Exchange
Commission may reject the articles of incorporation or disapprove any
amendment thereto if the same is not in compliance with the
requirements of this Code: Provided, That the Commission shall give the
incorporators a reasonable time within which to correct or modify the
objectionable portions of the articles or amendment. The following are
grounds for such rejection or disapproval:
1. That the articles of incorporation or any
amendment thereto is not substantially in accordance with the form
prescribed herein;
2. That the purpose or purposes of the corporation
are patently unconstitutional, illegal, immoral, or contrary to
government rules and regulations;
3. That the Treasurer's Affidavit concerning the
amount of capital stock subscribed and/or paid is false;
4. That the percentage of ownership of the capital
stock to be owned by citizens of the Philippines has not been complied
with as required by existing laws or the Constitution.
No articles of incorporation or amendment to articles of incorporation
of banks, banking and quasi-banking institutions, building and loan
associations, trust companies and other financial intermediaries,
insurance companies, public utilities, educational institutions, and
other corporations governed by special laws shall be accepted or
approved by the Commission unless accompanied by a favorable
recommendation of the appropriate government agency to the effect that
such articles or amendment is in accordance with law. (n)
Sec. 18. Corporate name. — No corporate name may
be allowed by the Securities and Exchange Commission if the proposed
name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or
is patently deceptive, confusing or contrary to existing laws. When a
change in the corporate name is approved, the Commission shall issue an
amended certificate of incorporation under the amended name. (n)
Sec. 19. Commencement of corporate existence. — A
private corporation formed or organized under this Code commences to
have corporate existence and juridical personality and is deemed
incorporated from the date the Securities and Exchange Commission
issues a certificate of incorporation under its official seal; and
thereupon the incorporators, stockholders/members and their successors
shall constitute a body politic and corporate under the name stated in
the articles of incorporation for the period of time mentioned therein,
unless said period is extended or the corporation is sooner dissolved
in accordance with law. (n)
Sec. 20. De facto corporations. — 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. (n)
Sec. 21. 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 as a defense its lack of corporate
personality.
On who assumes an obligation to an ostensible corporation as such,
cannot resist performance thereof on the ground that there was in fact
no corporation. (n)
Sec. 22. Effects on non-use of corporate charter
and continuous inoperation of a corporation. — If a corporation does
not formally organize and commence the transaction of its business or
the construction of its works within two (2) years from the date of its
incorporation, its corporate powers cease and the corporation shall be
deemed dissolved. However, if a corporation has commenced the
transaction of its business but subsequently becomes continuously
inoperative for a period of at least five (5) years, the same shall be
a ground for the suspension or revocation of its corporate franchise or
certificate of incorporation. (19a)
This provision shall not apply if the failure to organize, commence the
transaction of its businesses or the construction of its works, or to
continuously operate is due to causes beyond the control of the
corporation as may be determined by the Securities and Exchange
Commission.
TITLE III — BOARD OF
DIRECTORS/TRUSTEES AND OFFICERS
Sec. 23. The board of directors or trustees. —
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 or trustees to be elected from among the holders
of stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year until their
successors are elected and qualified. (28a)
Every director must own at least one (1) share of the capital stock of
the corporation of which he is a director, which share shall stand in
his name on the books of the corporation. Any director who ceases to be
the owner of at least one (1) share of the capital stock of the
corporation of which he is a director shall thereby cease to be a
director. Trustees of non-stock corporations must be members thereof. A
majority of the directors or trustees of all corporations organized
under this Code must be residents of the Philippines.
Sec. 24. Election of directors or trustees. — At
all elections of directors or trustees, there must be present, either
in person or by representative authorized to act by written proxy, the
owners of a majority of the outstanding capital stock, or if there be
no capital stock, a majority of the members entitled to vote. The
election must be by ballot if requested by any voting stockholder or
member. In stock corporations, every stockholder entitled to vote shall
have the right to vote in person or by proxy the number of shares of
stock standing, at the time fixed in the by-laws, in his own name on
the stock books of the corporation, or where the by-laws are silent, at
the time of the election; and said stockholder may vote such number of
shares for as many persons as there are directors to be elected or he
may cumulate said shares and give one candidate as many votes as the
number of directors to be elected multiplied by the number of his
shares shall equal, or he may distribute them on the same principle
among as many candidates as he shall see fit: Provided, That the total
number of votes cast by him shall not exceed the number of shares owned
by him as shown in the books of the corporation multiplied by the whole
number of directors to be elected: Provided, however, That no
delinquent stock shall be voted. Unless otherwise provided in the
articles of incorporation or in the by-laws, members of corporations
which have no capital stock may cast as many votes as there are
trustees to be elected but may not cast more than one vote for one
candidate. Candidates receiving the highest number of votes shall be
declared elected. Any meeting of the stockholders or members called for
an election may adjourn from day to day or from time to time but not
sine die or indefinitely if, for any reason, no election is held, or if
there are not present or represented by proxy, at the meeting, the
owners of a majority of the outstanding capital stock, or if there be
no capital stock, a majority of the member entitled to vote. (31a)
Sec. 25. Corporate officers, quorum. — Immediately
after their election, the directors of a corporation must formally
organize by the election of a 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. Any two (2) or more positions may be
held concurrently by the same person, except that no one shall act as
president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the
duties enjoined on them by law and the by-laws of the corporation.
Unless the articles of incorporation or the by-laws provide for a
greater majority, a majority of the number of directors or trustees as
fixed in the articles of incorporation shall constitute a quorum for
the transaction of corporate business, and every decision of at least a
majority of the directors or trustees present at a meeting at which
there is a quorum shall be valid as a corporate act, except for the
election of officers which shall require the vote of a majority of all
the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
(33a)
Sec. 26. Report of election of directors, trustees
and officers. — Within thirty (30) days after the election of the
directors, trustees and officers of the corporation, the secretary, or
any other officer of the corporation, shall submit to the Securities
and Exchange Commission, the names, nationalities and residences of the
directors, trustees, and officers elected. Should a director, trustee
or officer die, resign or in any manner cease to hold office, his heirs
in case of his death, the secretary, or any other officer of the
corporation, or the director, trustee or officer himself, shall
immediately report such fact to the Securities and Exchange Commission.
(n)
Sec. 27. Disqualification of directors, trustees
or officers. — No person convicted by final judgment of an offense
punishable by imprisonment for a period exceeding six (6) years, or a
violation of this Code committed within five (5) years prior to the
date of his election or appointment, shall qualify as a director,
trustee or officer of any corporation. (n)
Sec. 28. Removal of directors or trustees. — Any
director or trustee of a corporation may be removed from office by a
vote of the stockholders holding or representing at least two-thirds
(2/3) of the outstanding capital stock, or if the corporation be a
non-stock corporation, by a vote of at least two-thirds (2/3) of the
members entitled to vote: Provided, That such removal shall take place
either at a regular meeting of the corporation or at a special meeting
called for the purpose, and in either case, after previous notice to
stockholders or members of the corporation of the intention to propose
such removal at the meeting. A special meeting of the stockholders or
members of a corporation for the purpose of removal of directors or
trustees, or any of them, must be called by the secretary on order of
the president or on the written demand of the stockholders representing
or holding at least a majority of the outstanding capital stock, or, if
it be a non-stock corporation, on the written demand of a majority of
the members entitled to vote. Should the secretary fail or refuse to
call the special meeting upon such demand or fail or refuse to give the
notice, or if there is no secretary, the call for the meeting may be
addressed directly to the stockholders or members by any stockholder or
member of the corporation signing the demand. Notice of the time and
place of such meeting, as well as of the intention to propose such
removal, must be given by publication or by written notice prescribed
in this Code. Removal may be with or without cause: Provided, That
removal w be a stockholder.
2. If the articles of incorporation of a close
corporation states the number of persons, not exceeding twenty (20),
who are entitled to be holders of record of its stock, and if the
certificate for such stock conspicuously states such number, and if the
issuance or transfer of stock to any person would cause the stock to be
held by more than such number of persons, the person to whom such stock
is issued or transferred is conclusively presumed to have notice of
this fact.
3. If a stock certificate of any close corporation
conspicuously shows a restriction on transfer of stock of the
corporation, the transferee of the stock is conclusively presumed to
have notice of the fact that he has acquired stock in violation of the
restriction, if such acquisition violates the restriction.
4. Whenever any person to whom stock of a close
corporation has been issued or transferred has, or is conclusively
presumed under this section to have, notice either (a) that he is a
person not eligible to be a holder of stock of the corporation, or (b)
that transfer of stock to him would cause the stock of the corporation
to be held by more than the number of persons permitted by its articles
of incorporation to hold stock of the corporation, or (c) that the
transfer of stock is in violation of a restriction on transfer of
stock, the corporation may, at its option, refuse to register the
transfer of stock in the name of the transferee.
5. The provisions of subsection (4) shall not be
applicable if the transfer of stock, though contrary to subsections
(1), (2) or (3), has been consented to by all the stockholders of the
close corporation, or if the close corporation has amended its articles
of incorporation in accordance with this Title.
6. The term "transfer", as used in this section, is
not limited to a transfer for value.
7. The provisions of this section shall not impair
any right which the transferee may have to rescind the transfer or to
recover under any applicable warranty, express or implied.
Sec. 100. Agreements by stockholders. —
1. Agreements by and among stockholders executed
before the formation and organization of a close corporation, signed by
all stockholders, shall survive the incorporation of such corporation
and shall continue to be valid and binding between and among such
stockholders, if such be their intent, to the extent that such
agreements are not inconsistent with the articles of incorporation,
irrespective of where the provisions of such agreements are contained,
except those required by this Title to be embodied in said articles of
incorporation.
2. An agreement between two or more stockholders, if
in writing and signed by the parties thereto, may provide that in
exercising any voting rights, the shares held by them shall be voted as
therein provided, or as they may agree, or as determined in accordance
with a procedure agreed upon by them.
3. No provision in any written agreement signed by
the stockholders, relating to any phase of the corporate affairs, shall
be invalidated as between the parties on the ground that its effect is
to make them partners among themselves.
4. A written agreement among some or all of the
stockholders in a close corporation shall not be invalidated on the
ground that it so relates to the conduct of the business and affairs of
the corporation as to restrict or interfere with the discretion or
powers of the board of directors: Provided, That such agreement shall
impose on the stockholders who are parties thereto the liabilities for
managerial acts imposed by this Code on directors.
5. To the extent that the stockholders are actively
engaged in the management or operation of the business and affairs of a
close corporation, the stockholders shall be held to strict fiduciary
duties to each other and among themselves. Said stockholders shall be
personally liable for corporate torts unless the corporation has
obtained reasonably adequate liability insurance.
Sec. 101. When board meeting is unnecessary or
improperly held. — Unless the by-laws provide otherwise, any action by
the directors of a close corporation without a meeting shall
nevertheless be deemed valid if:
1. Before or after such action is taken, written
consent thereto is signed by all the directors; or
2. All the stockholders have actual or implied
knowledge of the action and make no prompt objection thereto in
writing; or
3. The directors are accustomed to take informal
action with the express or implied acquiescence of all the
stockholders; or
4. All the directors have express or implied
knowledge of the action in question and none of them makes prompt
objection thereto in writing.
If a director's meeting is held without proper call or notice, an
action taken therein within the corporate powers is deemed ratified by
a director who failed to attend, unless he promptly files his written
objection with the secretary of the corporation after having knowledge
thereof.
Sec. 102. Pre-emptive right in close corporations.
— The pre-emptive right of stockholders in close corporations shall
extend to all stock to be issued, including reissuance of treasury
shares, whether for money, property or personal services, or in payment
of corporate debts, unless the articles of incorporation provide
otherwise.
Sec. 103. Amendment of articles of incorporation.
— Any amendment to the articles of incorporation which seeks to delete
or remove any provision required by this Title to be contained in the
articles of incorporation or to reduce a quorum or voting requirement
stated in said articles of incorporation shall not be valid or
effective unless approved by the affirmative vote of at least
two-thirds (2/3) of the outstanding capital stock, whether with or
without voting rights, or of such greater proportion of shares as may
be specifically provided in the articles of incorporation for amending,
deleting or removing any of the aforesaid provisions, at a meeting duly
called for the purpose.
Sec. 104. Deadlocks. — Notwithstanding any
contrary provision in the articles of incorporation or by-laws or
agreement of stockholders of a close corporation, if the directors or
stockholders are so divided respecting the management of the
corporation's business and affairs that the votes required for any
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 generally, the Securities and
Exchange Commission, upon written petition by any stockholder, shall
have the power to arbitrate the dispute. In the exercise of such power,
the Commission shall have authority to make such order as it deems
appropriate, including an order: (1) cancelling or altering any
provision contained in the articles of incorporation, by-laws, or any
stockholder's agreement; (2) cancelling, altering or enjoining any
resolution or act of the corporation or its board of directors,
stockholders, or officers; (3) directing or prohibiting any act of the
corporation or its board of directors, stockholders, officers, or other
persons party to the action; (4) requiring the purchase at their fair
value of shares of any stockholder, either by the corporation
regardless of the availability of unrestricted retained earnings in its
books, or by the other stockholders; (5) appointing a provisional
director; (6) dissolving the corporation; or (7) granting such other
relief as the circumstances may warrant.
A provisional director shall be an impartial person who is neither a
stockholder nor a creditor of the corporation or of any subsidiary or
affiliate of the corporation, and whose further qualifications, if any,
may be determined by the Commission. A provisional director is not a
receiver of the corporation and does not have the title and powers of a
custodian or receiver. A provisional director shall have all the rights
and powers of a duly elected director of the corporation, including the
right to notice of and to vote at meetings of directors, until such
time as he shall be removed by order of the Commission or by all the
stockholders. His compensation shall be determined by agreement between
him and the corporation subject to approval of the Commission, which
may fix his compensation in the absence of agreement or in the event of
disagreement between the provisional director and the corporation.
Sec. 105. Withdrawal of stockholder or dissolution
of corporation. — In addition and without prejudice to other rights and
remedies available to a stockholder under this Title, any stockholder
of a close corporation may, for any reason, compel the said corporation
to purchase his shares at their fair value, which shall not be less
than their par or issued value, when the corporation has sufficient
assets in its books to cover its debts and liabilities exclusive of
capital stock: Provided, That any stockholder of a close corporation
may, by written petition to the Securities and Exchange Commission,
compel the dissolution of such corporation whenever any of acts of the
directors, officers or those in control of the corporation is illegal,
or fraudulent, or dishonest, or oppressive or unfairly prejudicial to
the corporation or any stockholder, or whenever corporate assets are
being misapplied or wasted.
TITLE XIII — SPECIAL
CORPORATIONS
CHAPTER I
Educational Corporations
Sec. 106. Incorporation. — Educational
corporations shall be governed by special laws and by the general
provisions of this Code. (n)
Sec. 107. Pre-requisites to incorporation. —
Except upon favorable recommendation of the Ministry of Education and
Culture, the Securities and Exchange Commission shall not accept or
approve the articles of incorporation and by-laws of any educational
institution. (168a)
Sec. 108. Board of trustees. — Trustees of
educational institutions organized as non-stock corporations shall not
be less than five (5) nor more than fifteen (15): Provided, however,
That the number of trustees shall be in multiples of five (5).
Unless otherwise provided in the articles of incorporation on the
by-laws, the board of trustees of incorporated schools, colleges, or
other institutions of learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of their number
shall expire every year. Trustees thereafter elected to fill vacancies,
occurring before the expiration of a particular term, shall hold office
only for the unexpired period. Trustees elected thereafter to fill
vacancies caused by expiration of term shall hold office for five (5)
years. A majority of the trustees shall constitute a quorum for the
transaction of business. The powers and authority of trustees shall be
defined in the by-laws.
For institutions organized as stock corporations, the number and term
of directors shall be governed by the provisions on stock corporations.
(169a)
CHAPTER II
Religious Corporations
Sec. 109. Classes of religious corporations. —
Religious corporations may be incorporated by one or more persons. Such
corporations may be classified into corporations sole and religious
societies.
Religious corporations shall be governed by this Chapter and by the
general provisions on non-stock corporations insofar as they may be
applicable. (n)
Sec. 110. Corporation sole. — For the purpose of
administering and managing, as trustee, the affairs, property and
temporalities of any religious denomination, sect or church, a
corporation sole may be formed by the chief archbishop, bishop, priest,
minister, rabbi or other presiding elder of such religious
denomination, sect or church. (154a)
Sec. 111. Articles of incorporation. — In order to
become a corporation sole, the chief archbishop, bishop, priest,
minister, rabbi or presiding elder of any religious denomination, sect
or church must file with the Securities and Exchange Commission
articles of incorporation setting forth the following:
1. That he is the chief archbishop, bishop, priest,
minister, rabbi or presiding elder of his religious denomination, sect
or church and that he desires to become a corporation sole;
2. That the rules, regulations and discipline of his
religious denomination, sect or church are not inconsistent with his
becoming a corporation sole and do not forbid it;
3. That as such chief archbishop, bishop, priest,
minister, rabbi or presiding elder, he is charged with the
administration of the temporalities and the management of the affairs,
estate and properties of his religious denomination, sect or church
within his territorial jurisdiction, describing such territorial
jurisdiction;
4. The manner in which any vacancy occurring in the
office of chief archbishop, bishop, priest, minister, rabbi of
presiding elder is required to be filled, according to the rules,
regulations or discipline of the religious denomination, sect or church
to which he belongs; and
5. The place where the principal office of the
corporation sole is to be established and located, which place must be
within the Philippines.
The articles of incorporation may include any other provision not
contrary to law for the regulation of the affairs of the corporation.
(n)
Sec. 112. Submission of the articles of
incorporation. — The articles of incorporation must be verified, before
filing, by affidavit or affirmation of the chief archbishop, bishop,
priest, minister, rabbi or presiding elder, as the case may be, and
accompanied by a copy of the commission, certificate of election or
letter of appointment of such chief archbishop, bishop, priest,
minister, rabbi or presiding elder, duly certified to be correct by any
notary public.
From and after the filing with the Securities and Exchange Commission
of the said articles of incorporation, verified by affidavit or
affirmation, and accompanied by the documents mentioned in the
preceding paragraph, such chief archbishop, bishop, priest, minister,
rabbi or presiding elder shall become a corporation sole and all
temporalities, estate and properties of the religious denomination,
sect or church theretofore administered or managed by him as such chief
archbishop, bishop, priest, minister, rabbi or presiding elder shall be
held in trust by him as a corporation sole, for the use, purpose,
behalf and sole benefit of his religious denomination, sect or church,
including hospitals, schools, colleges, orphan asylums, parsonages and
cemeteries thereof. (n)
Sec. 113. Acquisition and alienation of property.
— Any corporation sole may purchase and hold real estate and personal
property for its church, charitable, benevolent or educational
purposes, and may receive bequests or gifts for such purposes. Such
corporation may sell or mortgage real property held by it by obtaining
an order for that purpose from the Court of First Instance of the
province where the property is situated upon proof made to the
satisfaction of the court that notice of the application for leave to
sell or mortgage has been given by publication or otherwise in such
manner and for such time as said court may have directed, and that it
is to the interest of the corporation that leave to sell or mortgage
should be granted. The application for leave to sell or mortgage must
be made by petition, duly verified, by the chief archbishop, bishop,
priest, minister, rabbi or presiding elder acting as corporation sole,
and may be opposed by any member of the religious denomination, sect or
church represented by the corporation sole: Provided, That in cases
where the rules, regulations and discipline of the religious
denomination, sect or church, religious society or order concerned
represented by such corporation sole regulate the method of acquiring,
holding, selling and mortgaging real estate and personal property, such
rules, regulations and discipline shall control, and the intervention
of the courts shall not be necessary. (159a)
Sec. 114. Filling of vacancies. — The successors
in office of any chief archbishop, bishop, priest, minister, rabbi or
presiding elder in a corporation sole shall become the corporation sole
on their accession to office and shall be permitted to transact
business as such on the filing with the Securities and Exchange
Commission of a copy of their commission, certificate of election, or
letters of appointment, duly certified by any notary public.
During any vacancy in the office of chief archbishop, bishop, priest,
minister, rabbi or presiding elder of any religious denomination, sect
or church incorporated as a corporation sole, the person or persons
authorized and empowered by the rules, regulations or discipline of the
religious denomination, sect or church represented by the corporation
sole to administer the temporalities and manage the affairs, estate and
properties of the corporation sole during the vacancy shall exercise
all the powers and authority of the corporation sole during such
vacancy. (158a)
Sec. 115. Dissolution. — A corporation sole may be
dissolved and its affairs settled voluntarily by submitting to the
Securities and Exchange Commission a verified declaration of
dissolution.
The declaration of dissolution shall set forth:
1. The name of the corporation;
2. The reason for dissolution and winding up;
3. The authorization for the dissolution of the
corporation by the particular religious denomination, sect or church;
4. The names and addresses of the persons who are to
supervise the winding up of the affairs of the corporation.
Upon approval of such declaration of dissolution by the Securities and
Exchange Commission, the corporation shall cease to carry on its
operations except for the purpose of winding up its affairs. (n)
Sec. 116. Religious societies. — Any religious
society or religious order, or any diocese, synod, or district
organization of any religious denomination, sect or church, unless
forbidden by the constitution, rules, regulations, or discipline of the
religious denomination, sect or church of which it is a part, or by
competent authority, may, upon written consent and/or by an affirmative
vote at a meeting called for the purpose of at least two-thirds (2/3)
of its membership, incorporate for the administration of its
temporalities or for the management of its affairs, properties and
estate by filing with the Securities and Exchange Commission, articles
of incorporation verified by the affidavit of the presiding elder,
secretary, or clerk or other member of such religious society or
religious order, or diocese, synod, or district organization of the
religious denomination, sect or church, setting forth the following:
1. That the religious society or religious order, or
diocese, synod, or district organization is a religious organization of
a religious denomination, sect or church;
2. That at least two-thirds (2/3) of its membership
have given their written consent or have voted to incorporate, at a
duly convened meeting of the body;
3. That the incorporation of the religious society or
religious order, or diocese, synod, or district organization desiring
to incorporate is not forbidden by competent authority or by the
constitution, rules, regulations or discipline of the religious
denomination, sect, or church of which it forms a part;
4. That the religious society or religious order, or
diocese, synod, or district organization desires to incorporate for the
administration of its affairs, properties and estate;
5. The place where the principal office of the
corporation is to be established and located, which place must be
within the Philippines; and
6. The names, nationalities, and residences of the
trustees elected by the religious society or religious order, or the
diocese, synod, or district organization to serve for the first year or
such other period as may be prescribed by the laws of the religious
society or religious order, or of the diocese, synod, or district
organization, the board of trustees to be not less than five (5) nor
more than fifteen (15). (160a)
TITLE XIV — DISSOLUTION
Sec. 117. Methods of dissolution. — A corporation
formed or organized under the provisions of this Code may be dissolved
voluntarily or involuntarily. (n)
Sec. 118. Voluntary dissolution where no creditors
are affected. — If dissolution of a corporation does not prejudice the
rights of any creditor having a claim against it, the dissolution may
be effected by majority vote of the board of directors or trustees, and
by a resolution duly adopted by the affirmative vote of the
stockholders owning at least two-thirds (2/3) of the outstanding
capital stock or of at least two-thirds (2/3) of the members of a
meeting to be held upon call of the directors or trustees after
publication of the notice of time, place and object of the meeting for
three (3) consecutive weeks in a newspaper published in the place where
the principal office of said corporation is located; and if no
newspaper is published in such place, then in a newspaper of general
circulation in the Philippines, after sending such notice to each
stockholder or member either by registered mail or by personal delivery
at least thirty (30) days prior to said meeting. A copy of the
resolution authorizing the dissolution shall be certified by a majority
of the board of directors or trustees and countersigned by the
secretary of the corporation. The Securities and Exchange Commission
shall thereupon issue the certificate of dissolution. (62a)
Sec. 119. Voluntary dissolution where creditors
are affected. — Where the dissolution of a corporation may prejudice
the rights of any creditor, the petition for dissolution shall be filed
with the Securities and Exchange Commission. The petition shall be
signed by a majority of its board of directors or trustees or other
officers having the management of its affairs, verified by its
president or secretary or one of its directors or trustees, and shall
set forth all claims and demands against it, and that its dissolution
was resolved upon by the affirmative vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock
or by at least two-thirds (2/3) of the members at a meeting of its
stockholders or members called for that purpose.
If the petition is sufficient in form and substance, the Commission
shall, by an order reciting the purpose of the petition, fix a date on
or before which objections thereto may be filed by any person, which
date shall not be less than thirty (30) days nor more than sixty (60)
days after the entry of the order. Before such date, a copy of the
order shall be published at least once a week for three (3) consecutive
weeks in a newspaper of general circulation published in the
municipality or city where the principal office of the corporation is
situated, or if there be no such newspaper, then in a newspaper of
general circulation in the Philippines, and a similar copy shall be
posted for three (3) consecutive weeks in three (3) public places in
such municipality or city.
Upon five (5) day's notice, given after the date on which the right to
file objections as fixed in the order has expired, the Commission shall
proceed to hear the petition and try any issue made by the ithout cause may not be used to deprive minority stockholders
or members of the right of representation to which they may be entitled
under Sec. 24 of this Code. (n)
Sec. 29. Vacancies in the office of director or
trustee. — Any vacancy occurring in the board of directors or trustees
other than by removal by the stockholders or members or by expiration
of term, may be filled by the vote of at least a majority of the
remaining directors or trustees, if stiobjections
filed; and if no such objection is sufficient, and the material
allegations of the petition are true, it shall render judgment
dissolving the corporation and directing such disposition of its assets
as justice requires, and may appoint a receiver to collect such assets
and pay the debts of the corporation. (Rule 104, RCa)
Sec. 120. Dissolution by shortening corporate
term. — A voluntary dissolution may be effected by amending the
articles of incorporation to shorten the corporate term pursuant to the
provisions of this Code. A copy of the amended articles of
incorporation shall be submitted to the Securities and Exchange
Commission in accordance with this Code. Upon approval of the amended
articles of incorporation of the expiration of the shortened term, as
the case may be, the corporation shall be deemed dissolved without any
further proceedings, subject to the provisions of this Code on
liquidation. (n)
Sec. 121. Involuntary dissolution. — A corporation
may be dissolved by the Securities and Exchange Commission upon filing
of a verified complaint and after proper notice and hearing on the
grounds provided by existing laws, rules and regulations. (n)
Sec. 122. Corporate liquidation. — Every
corporation whose charter expires by its own limitation or is annulled
by forfeiturll constituting a quorum;
otherwise, said vacancies must be filled by the stockholders in a
regular or special meeting called for that purpose. A director or
trustee so elected to fill a vacancy shall be elected only or the
unexpired term of his predecessor in office.
Any directorship or trusteeship to be filled by reason of an increase
in the number of directors or trustees shall be filled only by an
election at a regular or at a special meeting of stockholders or
members duly called for the purpose, or in the same meeting authorizing
the increase of directors or trustees if so stated in the notice of the
meeting. (n)
Sec. 30. Compensation of directors. — In the
absence of any provision in the by-laws fixing their compensation, the
directors shall not receive any compensation, as such directors, except
for reasonable per diems: Provided, however, That any such compensation
other than per diems may be granted to directors by the vote of the
stockholders representing at least a majority of the outstanding
capital stock at a regular or special stockholders' meeting. In no case
shall the total yearly compensation of directors, as such directors,
exceed ten (10%) percent of the net income before income tax of the
corporation during the preceding year. (n)
Sec. 31. Liability of directors, trustees or
officers. — Directors or trustees who wilfully and knowingly vote for
or assent to patently unlawful acts of the corporation or who are
guilty of gross negligence or bad faith in directing the affairs of the
corporation or acquire any personal or pecuniary interest in conflict
with their duty as such directors or trustees shall be liable jointly
and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.
When a director, trustee or officer attempts to acquire or acquires, in
violation of his duty, any interest adverse to the corporation in
respect of any matter which has been reposed in him in confidence, as
to which equity imposes a disability upon him to deal in his own
behalf, he shall be liable as a trustee for the corporation and must
account for the profits which otherwise would have accrued to the
corporation. (n)
Sec. 32. Dealings of directors, trustees or
officers with the corporation. — A contract of the corporation with one
or more of its directors or trustees or officers is voidable, at the
option of such corporation, unless all the following conditions are
present:
1. That the presence of such director or trustee in
the board meeting in which the contract was approved was not necessary
to constitute a quorum for such meeting;
2. That the vote of such director or trustee was not
necessary for the approval of the contract;
3. That the contract is fair and reasonable under the
circumstances; and
4. That in case of an officer, the contract has been
previously authorized by the board of directors.
Where any of the first two conditions set forth in the preceding
paragraph is absent, in the case of a contract with a director or
trustee, such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock
or of at least two-thirds (2/3) of the members in a meeting called for
the purpose: Provided, That full disclosure of the adverse interest of
the directors or trustees involved is made at such meeting: Provided,
however, That the contract is fair and reasonable under the
circumstances. (n)
Sec. 33. Contracts between corporations with
interlocking directors. — Except in cases of fraud, and provided the
contract is fair and reasonable under the circumstances, a contract
between two or more corporations having interlocking directors shall
not be invalidated on that ground alone: Provided, That if the interest
of the interlocking director in one corporation is substantial and his
interest in the other corporation or corporations is merely nominal, he
shall be subject to the provisions of the preceding section insofar as
the latter corporation or corporations are concerned.
Stockholdings exceeding twenty (20%) percent of the outstanding capital
stock shall be considered substantial for purposes of interlocking
directors. (n)
Sec. 34. Disloyalty of a director. — Where a
director, by virtue of his office, acquires for himself a business
opportunity which should belong to the corporation, thereby obtaining
profits to the prejudice of such corporation, he must account to the
latter for all such profits by refunding the same, unless his act has
been ratified by a vote of the stockholders owning or representing at
least two-thirds (2/3) of the outstanding capital stock. This provision
shall be applicable, notwithstanding the fact that the director risked
his own funds in the venture. (n)
Sec. 35. Executive committee. — The by-laws of a
corporation may create an executive committee, composed of not less
than three members of the board, to be appointed by the board. Said
committee may act, by majority vote of all its members, on such
specific matters within the competence of the board, as may be
delegated to it in the by-laws or on a majority vote of the board,
except with respect to: (1) approval of any action for which
shareholders' approval is also required; (2) the filing of vacancies in
the board; (3) the amendment or repeal of by-laws or the adoption of
new by-laws; (4) the amendment or repeal of any resolution of the board
which by its express terms is not so amendable or repealable; and (5) a
distribution of cash dividends to the shareholders.
TITLE IV — POWERS OF CORPORATIONS
Sec. 36. Corporate powers and capacity. — Every
corporation incorporated under this Code has the power and capacity:
1. To sue and be sued in its corporate name;
2. Of succession by its corporate name for the period
of time stated in the articles of incorporation and the certificate of
incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in
accordance with the provisions of this Code;
5. To adopt by-laws, not contrary to law, morals, or
public policy, and to amend or repeal the same in accordance with this
Code;
6. In case of stock corporations, to issue or sell
stocks to subscribers and to sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this Code; and to
admit members to the corporation if it be a non-stock corporation;
7. To purchase, receive, take or grant, hold, convey,
sell, lease, pledge, mortgage and otherwise deal with such real and
personal property, including securities and bonds of other
corporations, as the transaction of the lawful business of the
corporation may reasonably and necessarily require, subject to the
limitations prescribed by law and the Constitution;
8. To enter into merger or consolidation with other
corporations as provided in this Code;
9. To make reasonable donations, including those for
the public welfare or for hospital, charitable, cultural, scientific,
civic, or similar purposes: Provided, That no corporation, domestic or
foreign, shall give donations in aid of any political party or
candidate or for purposes of partisan political activity;
10. To establish pension, retirement, and other plans
for the benefit of its directors, trustees, officers and employees; and
11. To exercise such other powers as may be essential
or necessary to carry out its purpose or purposes as stated in the
articles of incorporation. (13a)
Sec. 37. Power to extend or shorten corporate
term. — A private corporation may extend or shorten its term as stated
in the articles of incorporation when approved by a majority vote of
the board of directors or trustees and ratified at a meeting by the
stockholders representing at least two-thirds (2/3) of the outstanding
capital stock or by at least two-thirds (2/3) of the members in case of
non-stock corporations. Written notice of the proposed action and of
the time and place of the meeting shall be addressed to each
stockholder or member at his place of residence as shown on the books
of the corporation and deposited to the addressee in the post office
with postage prepaid, or served personally: Provided, That in case of
extension of corporate term, any dissenting stockholder may exercise
his appraisal right under the conditions provided in this code. (n)
Sec. 38. Power to increase or decrease capital
stock; incur, create or increase bonded indebtedness. — No corporation
shall increase or decrease its capital stock or incur, create or
increase any bonded indebtedness unless approved by a majority vote of
the board of directors and, at a stockholder's meeting duly called for
the purpose, two-thirds (2/3) of the outstanding capital stock shall
favor the increase or diminution of the capital stock, or the
incurring, creating or increasing of any bonded indebtedness. Written
notice of the proposed increase or diminution of the capital stock or
of the incurring, creating, or increasing of any bonded indebtedness
and of the time and place of the stockholder's meeting at which the
proposed increase or diminution of the capital stock or the incurring
or increasing of any bonded indebtedness is to be considered, must be
addressed to each stockholder at his place of residence as shown on the
books of the corporation and deposited to the addressee in the post
office with postage prepaid, or served personally.
A certificate in duplicate must be signed by a majority of the
directors of the corporation and countersigned by the chairman and the
secretary of the stockholders' meeting, setting forth:
(1) That the requirements of this section have been
complied with;
(2) The amount of the increase or diminution of the
capital stock;
(3) If an increase of the capital stock, the amount
of capital stock or number of shares of no-par stock thereof actually
subscribed, the names, nationalities and residences of the persons
subscribing, the amount of capital stock or number of no-par stock
subscribed by each, and the amount paid by each on his subscription in
cash or property, or the amount of capital stock or number of shares of
no-par stock allotted to each stock-holder if such increase is for the
purpose of making effective stock dividend therefor authorized;
(4) Any bonded indebtedness to be incurred, created
or increased;
(5) The actual indebtedness of the corporation on the
day of the meeting;
(6) The amount of stock represented at the meeting;
and
(7) The vote authorizing the increase or diminution
of the capital stock, or the incurring, creating or increasing of any
bonded indebtedness.
Any increase or decrease in the capital stock or the incurring,
creating or increasing of any bonded indebtedness shall require prior
approval of the Securities and Exchange Commission.
One of the duplicate certificates shall be kept on file in the office
of the corporation and the other shall be filed with the Securities and
Exchange Commission and attached to the original articles of
incorporation. From and after approval by the Securities and Exchange
Commission and the issuance by the Commission of its certificate of
filing, the capital stock shall stand increased or decreased and the
incurring, creating or increasing of any bonded indebtedness
authorized, as the certificate of filing may declare: Provided, That
the Securities and Exchange Commission shall not accept for filing any
certificate of increase of capital stock unless accompanied by the
sworn statement of the treasurer of the corporation lawfully holding
office at the time of the filing of the certificate, showing that at
least twenty-five (25%) percent of such increased capital stock has
been subscribed and that at least twenty-five (25%) percent of the
amount subscribed has been paid either in actual cash to the
corporation or that there has been transferred to the corporation
property the valuation of which is equal to twenty-five (25%) percent
of the subscription: Provided, further, That no decrease of the capital
stock shall be approved by the Commission if its effect shall prejudice
the rights of corporate creditors.
Non-stock corporations may incur or create bonded indebtedness, or
increase the same, with the approval by a majority vote of the board of
trustees and of at least two-thirds (2/3) of the members in a meeting
duly called for the purpose.
Bonds issued by a corporation shall be registered with the Securities
and Exchange Commission, which shall have the authority to determine
the sufficiency of the terms thereof. (17a)
Sec. 39. Power to deny pre-emptive right. — All
stockholders of a stock corporation shall enjoy pre-emptive right to
subscribe to all issues or disposition of shares of any class, in
proportion to their respective shareholdings, unless such right is
denied by the articles of incorporation or an amendment thereto:
Provided, That such pre-emptive right shall not extend to shares to be
issued in compliance with laws requiring stock offerings or minimum
stock ownership by the public; or to shares to be issued in good faith
with the approval of the stockholders representing two-thirds (2/3) of
the outstanding capital stock, in exchange for property needed for
corporate purposes or in payment of a previously contracted debt.
Sec. 40. Sale or other disposition of assets. —
Subject to the provisions of existing laws on illegal combinations and
monopolies, a corporation may, by a majority vote of its board of
directors or trustees, sell, lease, exchange, mortgage, pledge or
otherwise dispose of all or substantially all of its property and
assets, including its goodwill, upon such terms and conditions and for
such consideration, which may be money, stocks, bonds or other
instruments for the payment of money or other property or
consideration, as its board of directors or trustees may deem
expedient, when authorized by the vote of the stockholders representing
at least two-thirds (2/3) of the outstanding capital stock, or in case
of non-stock corporation, by the vote of at least to two-thirds (2/3)
of the members, in a stockholder's or member's meeting duly called for
the purpose. Written notice of the proposed action and of the time and
place of the meeting shall be addressed to each stockholder or member
at his place of residence as shown on the books of the corporation and
deposited to the addressee in the post office with postage prepaid, or
served personally: Provided, That any dissenting stockholder may
exercise his appraisal right under the conditions provided in this
Code.
A sale or other disposition shall be deemed to cover substantially all
the corporate property and assets if thereby te or otherwise, or whose corporate existence for other
purposes is terminated in any other manner, shall nevertheless be
continued as a body corporate for three (3) years after the time when
it would have been so dissolved, for the purpose of prosecuting and
defending suits by or against it and enabling it to settle and close
its affairs, to dispose of and convey its property and to distribute
its assets, but not for the purpose of continuing the business for
which it was established.
At any time during said three (3) years, the corporation is authorized
and empowered to convey all of its property to trustees for the benefit
of stockholders, members, creditors, and other persons in interest.
From and after any such conveyance by the corporation of its property
in trust for the benefit of its stockholders, members, creditors and
others in interest, all interest which the corporation had in the
property terminates, the legal interest vests in the trustees, and the
beneficial interest in the stockholders, members, creditors or other
persons in interest.
Upon the winding up of the corporate affairs, any asset distributable
to any creditor or stockholder or member who is unknown or cannot be
found shall be escheated to the city or municipality where such assets
are located.
Except by decrease of capital stock and as otherwise allowed by this
Code, no corporation shall distribute any of its assets or property
except upon lawful dissolution and after payment of all its debts and
liabilities. (77a, 89a, 16a)
TITLE XV — FOREIGN CORPORATIONS
Sec. 123. Definition and rights of foreign
corporations. — For the purposes of this Code, a foreign corporation is
one 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. It shall have the right to
transact business in the Philippines after it shall have obtained a
license to transact business in this country in accordance with this
Code and a certificate of authority from the appropriate government
agency. (n)
Sec. 124. Application to existing foreign
corporations. — Every foreign corporation which on the date of the
effectivity of this Code is authorized to do business in the
Philippines under a license therefore issued to it, shall continue to
have such authority under the terms and condition of its license,
subject to the provisions of this Code and other special laws. (n)
Sec. 125. Application for a license. — A foreign
corporation applying for a license to transact business in the
Philippines shall submit to the Securities and Exchange Commission a
copy of its articles of incorporation and by-laws, certified in
accordance with law, and their translation to an official language of
the Philippines, if necessary. The application shall be under oath and,
unless already stated in its articles of incorporation, shall
specifically set forth the following:
1. The date and term of incorporation;
2. The address, including the street number, of the
principal office of the corporation in the country or state of
incorporation;
3. The name and address of its resident agent
authorized to accept summons and process in all legal proceedings and,
pending the establishment of a local office, all notices affecting the
corporation;
4. The place in the Philippines where the corporation
intends to operate;
5. The specific purpose or purposes which the
corporation intends to pursue in the transaction of its business in the
Philippines: Provided, That said purpose or purposes are those
specifically stated in the certificate of authority issued by the
appropriate government agency;
6. The names and addresses of the present directors
and officers of the corporation;
7. A statement of its authorized capital stock and
the aggregate number of shares which the corporation has authority to
issue, itemized by classes, par value of shares, shares without par
value, and series, if any;
8. A statement of its outstanding capital stock and
the aggregate number of shares which the corporation has issued,
itemized by classes, par value of shares, shares without par value, and
series, if any;
9. A statement of the amount actually paid in; and
10. Such additional information as may be necessary
or appropriate in order to enable the Securities and Exchange
Commission to determine whether such corporation is entitled to a
license to transact business in the Philippines, and to determine and
assess the fees payable.
Attached to the application for license shall be a duly executed
certificate under oath by the authorized official or officials of the
jurisdiction of its incorporation, attesting to the fact that the laws
of the country or state of the applicant allow Filipino citizens and
corporations to do business therein, and that the applicant is an
existing corporation in good standing. If such certificate is in a
foreign language, a translation thereof in English under oath of the
translator shall be attached thereto.
The application for a license to transact business in the Philippines
shall likewise be accompanied by a statement under oath of the
president or any other person authorized by the corporation, showing to
the satisfaction of the Securities and Exchange Commission and other
governmental agency in the proper cases that the applicant is solvent
and in sound financial condition, and setting forth the assets and
liabilities of the corporation as of the date not exceeding one (1)
year immediately prior to the filing of the application.
Foreign banking, financial and insurance corporations shall, in
addition to the above requirements, comply with the provisions of
existing laws applicable to them. In the case of all other foreign
corporations, no application for license to transact business in the
Philippines shall be accepted by the Securities and Exchange Commission
without previous authority from the appropriate government agency,
whenever required by law. (68a)
Sec. 126. Issuance of a license. — If the
Securities and Exchange Commission is satisfied that the applicant has
complied with all the requirements of this Code and other special laws,
rules and regulations, the Commission shall issue a license to the
applicant to transact business in the Philippines for the purpose or
purposes specified in such license. Upon issuance of the license, such
foreign corporation may commence to transact business in the
Philippines and continue to dhe corporation would be
rendered incapable of continuing the business or accomplishing the
purpose for which it was incorporated.
After such authorization or approval by the stockholders or members,
the board of directors or trustees may, nevertheless, in its
discretion, abandon such sale, lease, exchange, mortgage, pledge or
other disposition of property and assets, subject to the rights of
third parties under any contract relating thereto, without further
action or approval by the stockholders or members.
Nothing in this section is intended to restrict the power of any
corporation, without the authorization by the stockholders or members,
to sell, lease, exchange, mortgage, pledge or otherwise dispose of any
of its property and assets if the same is necessary in the usual and
regular course of business of said corporation or if the proceeds of
the sale or other disposition of such property and assets be
appropriated for the conduct of its remaining business.
In non-stock corporations where there are no members with voting
rights, the vote of at least a majority of the trustees in office will
be sufficient authorization for the corporation to enter into any
transaction authorized by this section.
Sec. 41. Power to acquire own shares. — A stock
corporation shall have the power to purchase or acquire its own shares
for a legitimate corporate purpose or purposes, including but not
limited to the following cases: Provided, That the corporation has
unrestricted retained earnings in its books to cover the shares to be
purchased or acquired:
1. To eliminate fractional shares arising out of
stock dividends;
2. To collect or compromise an indebtedness to the
corporation, arising out of unpaid subscription, in a delinquency sale,
and to purchase delinquent shares sold during said sale; and
3. To pay dissenting or withdrawing stockholders
entitled to payment for their shares under the provisions of this Code.
(a)
Sec. 42. Power to invest corporate funds in
another corporation or business or for any other purpose. — Subject to
the provisions of this Code, a private corporation may invest its funds
in any other corporation or business or for any purpose other than the
primary purpose for which it was organized when approved by a majority
of the board of directors or trustees and ratified by the stockholders
representing at least two-thirds (2/3) of the outstanding capital
stock, or by at least two thirds (2/3) of the members in the case of
non-stock corporations, at a stockholder's or member's meeting duly
called for the purpose. Written notice of the proposed investment and
the time and place of the meeting shall be addressed to each
stockholder or member at his place of residence as shown on the books
of the corporation and deposited to the addressee in the post office
with postage prepaid, or served personally: Provided, That any
dissenting stockholder shall have appraisal right as provided in this
Code: Provided, however, That where the investment by the corporation
is reasonably necessary to accomplish its primary purpose as stated in
the articles of incorporation, the approval of the stockholders or
members shall not be necessary. (17 1/2a)
Sec. 43. Power to declare dividends. — The board
of directors of a stock corporation may declare dividends out of the
unrestricted retained earnings which shall be payable in cash, in
property, or in stock to all stockholders on the basis of outstanding
stock held by them: Provided, That any cash dividends due on delinquent
stock shall first be applied to the unpaid balance on the subscription
plus costs and expenses, while stock dividends shall be withheld from
the delinquent stockholder until his unpaid subscription is fully paid:
Provided, further, That no stock dividend shall be issued without the
approval of stockholders representing not less than two-thirds (2/3) of
the outstanding capital stock at a regular or special meeting duly
called for the purpose. (16a)
Stock corporations are prohibited from retaining surplus profits in
excess of one hundred (100%) percent of their paid-in capital stock,
except: (1) when justified by definite corporate expansion projects or
programs approved by the board of directors; or (2) when the
corporation is prohibited under any loan agreement with any financial
institution or creditor, whether local or foreign, from declaring
dividends without its/his consent, and such consent has not yet been
secured; or (3) 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. (n)
Sec. 44. Power to enter into management contract.
— No corporation shall conclude a management contract with another
corporation unless such contract shall have been approved by the board
of directors and by stockholders owning at least the majority of the
outstanding capital stock, or by at least a majority of the members in
the case of a non-stock corporation, of both the managing and the
managed corporation, at a meeting duly called for the purpose:
Provided, That (1) where a stockholder or stockholders representing the
same interest of both the managing and the managed corporations own or
control more than one-third (1/3) of the total outstanding capital
stock entitled to vote of the managing corporation; or (2) where a
majority of the members of the board of directors of the managing
corporation also constitute a majority of the members of the board of
directors of the managed corporation, then the management contract must
be approved by the stockholders of the managed corporation owning at
least two-thirds (2/3) of the total outstanding capital stock entitled
to vote, or by at least two-thirds (2/3) of the members in the case of
a non-stock corporation. No management contract shall be entered into
for a period longer than five years for any one term.
The provisions of the next preceding paragraph shall apply to any
contract whereby a corporation undertakes to manage or operate all or
substantially all of the business of another corporation, whether such
contracts are called service contracts, operating agreements or
otherwise: Provided, however, That such service contracts or operating
agreements which relate to the exploration, development, exploitation
or utilization of natural resources may be entered into for such
periods as may be provided by the pertinent laws or regulations. (n)
Sec. 45. Ultra vires acts of corporations. — No
corporation under this Code shall possess or exercise any corporate
powers except those conferred by this Code or by its articles of
incorporation and except such as are necessary or incidental to the
exercise of the powers so conferred. (n)
TITLE V — BY LAWS
Sec. 46. Adoption of by-laws. — Every corporation
formed under this Code must, within one (1) month after receipt of
official notice of the issuance of its certificate of incorporation by
the Securities and Exchange Commission, adopt a code of by-laws for its
government not inconsistent with this Code. For the adoption of by-laws
by the corporation the affirmative vote of the stockholders
representing at least a majority of the outstanding capital stock, or
of at least a majority of the members in case of non-stock
corporations, shall be necessary. The by-laws shall be signed by the
stockholders or members voting for them and shall be kept in the
principal office of the corporation, subject to the inspection of the
stockholders or members during office hours. A copy thereof, duly
certified to by a majority of the directors or trustees countersigned
by the secretary of the corporation, shall be filed with the Securities
and Exchange Commission which shall be attached to the original
articles of incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may
be adopted and filed prior to incorporation; in such case, such by-laws
shall be approved and signed by all the incorporators and submitted to
the Securities and Exchange Commission, together with the articles of
incorporation.
In all cases, by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-laws
are not inconsistent with this Code.
The Securities and Exchange Commission shall not accept for filing the
by-laws or any amendment thereto of any bank, banking institution,
building and loan association, trust company, insurance company, public
utility, educational institution or other special corporations governed
by special laws, unless accompanied by a certificate of the appropriate
government agency to the effect that such by-laws or amendments are in
accordance with law. (20a)
Sec. 47. Contents of by-laws. — Subject to the
provisions of the Constitution, this Code, other special laws, and the
articles of incorporation, a private corporation may provide in its
by-laws for:
1. The time, place and manner of calling and
conducting regular or special meetings of the directors or trustees;
2. The time and manner of calling and conducting
regular or special meetings of the stockholders or members;
3. The required quorum in meetings of stockholders or
members and the manner of voting therein;
4. The form for proxies of stockholders and members
and the manner of voting them;
5. The qualifications, duties and compensation of
directors or trustees, officers and employees;
6. The time for holding the annual election of
directors of trustees and the mode or manner of giving notice thereof;
7. The manner of election or appointment and the term
of office of all officers other than directors or trustees;
8. The penalties for violation of the by-laws;
9. In the case of stock corporations, the manner of
issuing stock certificates; and
10. Such other matters as may be necessary for the
proper or convenient transaction of its corporate business and affairs.
(21a)
Sec. 48. Amendments to by-laws. — The board of
directors or trustees, by a majority vote thereof, and the owners of at
least a majority of the outstanding capital stock, or at least a
majority of the members of a non-stock corporation, at a regular or
special meeting duly called for the purpose, may amend or repeal any
by-laws or adopt new by-laws. The owners of two-thirds (2/3) of the
outstanding capital stock or two-thirds (2/3) of the members in a
non-stock corporation may delegate to the board of directors or
trustees the power to amend or repeal any by-laws or adopt new by-laws:
Provided, That any power delegated to the board of directors or
trustees to amend or repeal any by-laws or adopt new by-laws shall be
considered as revoked whenever stockholders owning or representing a
majority of the outstanding capital stock or a majority of the members
in non-stock corporations, shall so vote at a regular or special
meeting.
Whenever any amendment or new by-laws are adopted, such amendment or
new by-laws shall be attached to the original by-laws in the office of
the corporation, and a copy thereof, duly certified under oath by the
corporate secretary and a majority of the directors or trustees, shall
be filed with the Securities and Exchange Commission the same to be
attached to the original articles of incorporation and original
by-laws.
The amended or new by-laws shall only be effective upon the issuance by
the Securities and Exchange Commission of a certification that the same
are not inconsistent with this Code. (22a and 23a)
TITLE VI — MEETINGS
Sec. 49. Kinds of meetings. — Meetings of
directors, trustees, stockholders, or members may be regular or
special. (n)
Sec. 50. Regular and special meetings of
stockholders or members. — Regular meetings of stockholders or members
shall be held annually on a date fixed in the by-laws, or if not so
fixed, on any date in April of every year as determined by the board of
directors or trustees: Provided, That written notice of regular
meetings shall be sent to all stockholders or members of record at
least two (2) weeks prior to the meeting, unless a different period is
required by the by-laws.
Special meetings of stockholders or members shall be held at any time
deemed necessary or as provided in the by-laws: Provided, however, That
at least one (1) week written notice shall be sent to all stockholders
or members, unless otherwise provided in the by-laws.
Notice of any meeting may be waived, expressly or impliedly, by any
stockholder or member.
Whenever, for any cause, there is no person authorized to call a
meeting, the Securities and Exchange Commission, upon petition of a
stockholder or member on a showing of good cause therefor, may issue an
order to the petitioning stockholder or member directing him to call a
meeting of the corporation by giving proper notice required by this
Code or by the by-laws. The petitioning stockholder or member shall
preside thereat until at least a majority of the stockholders or
members present have chosen one of their number as presiding officer.
(24, 26)
Sec. 51. Place and time of meetings of
stockholders of members. — Stockholder's or member's meetings, whether
regular or special, shall be held in the city or municipality where the
principal office of the corporation is located, and if practicable in
the principal office of the corporation: Provided, That Metro Manila
shall, for purposes of this section, be considered a city or
municipality.
Notice of meetings shall be in writing, and the time and place thereof
stated therein.
All proceedings had and any business transacted at any meeting of the
stockholders or members, if within the powers or authority of the
corporation, shall be valid even if the meeting be improperly held or
called, provided all the stockholders or members of the corporation are
present or duly represented at the meeting. (24 and 25)
Sec. 52. Quorum in meetings. — Unless otherwise
provided for in this Code or in the by-laws, a quorum shall consist of
the stockholders representing a majority of the outstanding capital
stock or a majority of the members in the case of non-stock
corporations. (n)
Sec. 53. Regular and special meetings of directors
or trustees. — Regular meetings of the board of directors or trustees
of every corporation shall be held monthly, unless the by-laws provide
otherwise.
Special meetings of the board of directors or trustees may be held at
any time upon the call of the president or as provided in the by-laws.
Meetings of directors or trustees of corporations may be held anywhere
in or outside of the Philippines, unless the by-laws provide otherwise.
Notice of regular or special meetings stating the date, time and place
of the meeting must be sent to every director or trustee at least one
(1) day prior to the scheduled meeting, unless otherwise provided by
the by-laws. A director or trustee may waive this requirement, either
expressly or impliedly. (n)
Sec. 54. Who shall preside at meetings. — The
president shall preside at all meetings of the directors or trustee as
well as of the stockholders or members, unless the by-laws provide
otherwise. (n)
Sec. 55. Right to vote of pledgors, mortgagors,
and administrators. — In case of pledged or mortgaged shares in stock
corporations, the pledgor or mortgagor shall have the right to attend
and vote at meetings of stockholders, unless the pledgee or mortgagee
is expressly given by the pledgor or mortgagor such right in writing
which is recorded on the appropriate corporate books. (n)
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. (27a)
Sec. 56. Voting in case of joint ownership of
stock. — In case of shares of stock owned jointly by two or more
persons, in order to vote the same, the consent of all the co-owners
shall be necessary, 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: Provided, That when the shares are owned in an
"and/or" capacity by the holders thereof, any one of the joint owners
can vote said shares or appoint a proxy therefor. (n)
Sec. 57. Voting right for treasury shares. —
Treasury shares shall have no voting right as long as such shares
remain in the Treasury. (n)
Sec. 58. Proxies. — Stockholders and members may
vote in person or by proxy in all meetings of stockholders or members.
Proxies shall in writing, signed by the stockholder or member and filed
before the scheduled meeting with the corporate secretary. Unless
otherwise provided in the proxy, it shall be valid only for the meeting
for which it is intended. No proxy shall be valid and effective for a
period longer than five (5) years at any one time. (n)
Sec. 59. Voting trusts. — One or more stockholders
of a stock corporation may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote and other
rights pertaining to the shares for a period not exceeding five (5)
years at any time: Provided, That in the case of a voting trust
specifically required as a condition in a loan agreement, said voting
trust may be for a period exceeding five (5) years but shall
automatically expire upon full payment of the loan. A voting trust
agreement must be in writing and notarized, and shall specify the terms
and conditions thereof. A certified copy of such agreement shall be
filed with the corporation and with the Securities and Exchange
Commission; otherwise, said agreement is ineffective and unenforceable.
The certificate or certificates of stock covered by the voting trust
agreement shall be cancelled and new ones shall be issued in the name
of the trustee or trustees stating that they are issued pursuant to
said agreement. In the books of the corporation, it shall be noted that
the transfer in the name of the trustee or trustees is made pursuant to
said voting trust agreement.
The trustee or trustees shall execute and deliver to the transferors
voting trust certificates, which shall be transferable in the same
manner and with the same effect as certificates of stock.
The voting trust agreement filed with the corporation shall be subject
to examination by any stockholder of the corporation in the same manner
as any other corporate book or record: Provided, That both the
transferor and the trustee or trustees may exercise the right of
inspection of all corporate books and records in accordance with the
provisions of this Code.
Any other stockholder may transfer his shares to the same trustee or
trustees upon the terms and conditions stated in the voting trust
agreement, and thereupon shall be bound by all the provisions of said
agreement.
No voting trust agreement shall be entered into for the purpose of
circumventing the law against monopolies and illegal combinations in
restraint of trade or used for purposes of fraud.
Unless expressly renewed, all rights granted in a voting trust
agreement shall automatically expire at the end of the agreed period,
and the voting trust certificates as well as the certificates of stock
in the name of the trustee or trustees shall thereby be deemed
cancelled and new certificates of stock shall be reissued in the name
of the transferors.
The voting trustee or trustees may vote by proxy unless the agreement
provides otherwise. (36a)
TITLE VII — STOCKS AND
STOCKHOLDERS
Sec. 60. Subscription contract. — Any contract for
the acquisition of unissued stock in an existing corporation or a
corporation still to be formed shall be deemed a subscription within
the meaning of this Title, notwithstanding the fact that the parties
refer to it as a purchase or some other contract. (n)
Sec. 61. Pre-incorporation subscription. — A
subscription for shares of stock of a corporation still to be formed
shall be irrevocable for a period of at least six (6) months from the
date of subscription, unless all of the other subscribers consent to
the revocation, or unless the incorporation of said corporation fails
to materialize within said period or within a longer period as may be
stipulated in the contract of subscription: Provided, That no
pre-incorporation subscription may be revoked after the submission of
the articles of incorporation to the Securities and Exchange
Commission. (n)
Sec. 62. Consideration for stocks. — Stocks shall
not be issued for a consideration less than the par or issued price
thereof. Consideration for the issuance of stock may be any or a
combination of any two or more of the following:
1. Actual cash paid to the corporation;
2. Property, tangible or intangible, actually
received by the corporation and necessary or convenient for its use and
lawful purposes at a fair valuation equal to the par or issued value of
the stock issued;
3. Labor performed for or services actually rendered
to the corporation;
4. Previously incurred indebtedness of the
corporation;
5. Amounts transferred from unrestricted retained
earnings to stated capital; and
6. Outstanding shares exchanged for stocks in the
event of reclassification or conversion.
Where the consideration is other than actual cash, or consists of
intangible property such as patents of copyrights, the valuation
thereof shall initially be determined by the incorporators or the board
of directors, subject to approval by the Securities and Exchange
Commission.
Shares of stock shall not be issued in exchange for promissory notes or
future service.
The same considerations provided for in this section, insofar as they
may be applicable, may be used for the issuance of bonds by the
corporation.
The issued price of no-par value shares may be fixed in the articles of
incorporation or by the board of directors pursuant to authority
conferred upon it by the articles of incorporation or the by-laws, or
in the absence thereof, by the stockholders representing at least a
majority of the outstanding capital stock at a meeting duly called for
the purpose. (5 and 16)
Sec. 63. Certificate of stock and transfer of
shares. — The capital stock of stock corporations shall be divided into
shares for which certificates signed by the president or vice
president, countersigned by the secretary or assistant secretary, and
sealed with the seal of the corporation shall be issued in accordance
with the by-laws. Shares of stock so issued are personal property and
may be transferred by delivery of the certificate or certificates
indorsed by the owner or his attorney-in-fact or other person legally
authorized to make the transfer. No transfer, however, shall be valid,
except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the certificate or
certificates and the number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim
shall be transferable in the books of the corporation. (35)
Sec. 64. Issuance of stock certificates. — No
certificate of stock shall be issued to a subscriber until the full
amount of his subscription together with interest and expenses (in case
of delinquent shares), if any is due, has been paid. (37)
Sec. 65. Liability of directors for watered
stocks. — Any director or officer of a corporation consenting to the
issuance of stocks for a consideration less than its par or issued
value or for a consideration in any form other than cash, valued in
excess of its fair value, or who, having knowledge thereof, does not
forthwith express his objection in writing and file the same with the
corporate secretary, shall be solidarily, liable with the stockholder
concerned to the corporation and its creditors for the difference
between the fair value received at the time of issuance of the stock
and the par or issued value of the same. (n)
Sec. 66. Interest on unpaid subscriptions. —
Subscribers for stock shall pay to the corporation interest on all
unpaid subscriptions from the date of subscription, if so required by,
and at the rate of interest fixed in the by-laws. If no rate of
interest is fixed in the by-laws, such rate shall be deemed to be the
legal rate. (37)
Sec. 67. Payment of balance of subscription. —
Subject to the provisions of the contract of subscription, the board of
directors of any stock corporation may at any time declare due and
payable to the corporation unpaid subscriptions to the capital stock
and may collect the same or such percentage thereof, in either case
with accrued interest, if any, as it may deem necessary.
Payment of any unpaid subscription or any percentage thereof, together
with the interest accrued, if any, shall be made on the date specified
in the contract of subscription or on the date stated in the call made
by the board. Failure to pay on such date shall render the entire
balance due and payable and shall make the stockholder liable for
interest at the legal rate on such balance, unless a different rate of
interest is provided in the by-laws, computed from such date until full
payment. If within thirty (30) days from the said date no payment is
made, all stocks covered by said subscription shall thereupon become
delinquent and shall be subject to sale as hereinafter provided, unless
the board of directors orders otherwise. (38)
Sec. 68. Delinquency sale. — The board of
directors may, by resolution, order the sale of delinquent stock and
shall specifically state the amount due on each subscription plus all
accrued interest, and the date, time and place of the sale which shall
not be less than thirty (30) days nor more than sixty (60) days from
the date the stocks become delinquent.
Notice of said sale, with a copy of the resolution, shall be sent to
every delinquent stockholder either personally or by registered mail.
The same shall furthermore be published once a week for two (2)
consecutive weeks in a newspaper of general circulation in the province
or city where the principal office of the corporation is located.
Unless the delinquent stockholder pays to the corporation, on or before
the date specified for the sale of the delinquent stock, the balance
due on his subscription, plus accrued interest, costs of advertisement
and expenses of sale, or unless the board of directors otherwise
orders, said delinquent stock shall be sold at public auction to such
bidder who shall offer to pay the full amount of the balance on the
subscription together with accrued interest, costs of advertisement and
expenses of sale, for the smallest number of shares or fraction of a
share. The stock so purchased shall be transferred to such purchaser in
the books of the corporation and a certificate for such stock shall be
issued in his favor. The remaining shares, if any, shall be credited in
favor of the delinquent stockholder who shall likewise be entitled to
the issuance of a certificate of stock covering such shares.
Should there be no bidder at the public auction who offers to pay the
full amount of the balance on the subscription together with accrued
interest, costs of advertisement and expenses of sale, for the smallest
number of shares or fraction of a share, the corporation may, subject
to the provisions of this Code, bid for the same, and the total amount
due shall be credited as paid in full in the books of the corporation.
Title to all the shares of stock covered by the subscription shall be
vested in the corporation as treasury shares and may be disposed of by
said corporation in accordance with the provisions of this Code.
(39a-46a)
Sec. 69. When sale may be questioned. — No action
to recover delinquent stock sold can be sustained upon the ground of
irregularity or defect in the notice of sale, or in the sale itself of
the delinquent stock, unless the party seeking to maintain such action
first pays or tenders to the party holding the stock the sum for which
the same was sold, with interest from the date of sale at the legal
rate; and no such action shall be maintained unless it is commenced by
the filing of a complaint within six (6) months from the date of sale.
(47a)
Sec. 70. Court action to recover unpaid
subscription. — Nothing in this Code shall prevent the corporation from
collecting by action in a court of proper jurisdiction the amount due
on any unpaid subscription, with accrued interest, costs and expenses.
(49a)
Sec. 71. Effect of delinquency. — No delinquent
stock shall be voted for or be entitled to vote or to representation at
any stockholder's meeting, nor shall the holder thereof be entitled to
any of the rights of a stockholder except the right to dividends in
accordance with the provisions of this Code, until and unless he pays
the amount due on his subscription with accrued interest, and the costs
and expenses of advertisement, if any. (50a)
Sec. 72. Rights of unpaid shares. — Holders of
subscribed shares not fully paid which are not delinquent shall have
all the rights of a stockholder. (n)
Sec. 73. Lost or destroyed certificates. — The
following procedure shall be followed for the issuance by a corporation
of new certificates of stock in lieu of those which have been lost,
stolen or destroyed:
1. The registered owner of a certificate of stock in
a corporation or his legal representative shall file with the
corporation an affidavit in triplicate setting forth, if possible, the
circumstances as to how the certificate was lost, stolen or destroyed,
the number of shares represented by such certificate, the serial number
of the certificate and the name of the corporation which issued the
same. He shall also submit such other information and evidence which he
may deem necessary;
2. After verifying the affidavit and other
information and evidence with the books of the corporation, said
corporation shall publish a notice in a newspaper of general
circulation published in the place where the corporation has its
principal office, once a week for three (3) consecutive weeks at the
expense of the registered owner of the certificate of stock which has
been lost, stolen or destroyed. The notice shall state the name of said
corporation, the name of the registered owner and the serial number of
said certificate, and the number of shares represented by such
certificate, and that after the expiration of one (1) year from the
date of the last publication, if no contest has been presented to said
corporation regarding said certificate of stock, the right to make such
contest shall be barred and said corporation shall cancel in its books
the certificate of stock which has been lost, stolen or destroyed and
issue in lieu thereof new certificate of stock, unless the registered
owner files a bond or other security in lieu thereof as may be
required, effective for a period of one (1) year, for such amount and
in such form and with such sureties as may be satisfactory to the board
of directors, in which case a new certificate may be issued even before
the expiration of the one (1) year period provided herein: Provided,
That if a contest has been presented to said corporation or if an
action is pending in court regarding the ownership of said certificate
of stock which has been lost, stolen or destroyed, the issuance of the
new certificate of stock in lieu thereof shall be suspended until the
final decision by the court regarding the ownership of said certificate
of stock which has been lost, stolen or destroyed.
Except in case of fraud, bad faith, or negligence on the part of the
corporation and its officers, no action may be brought against any
corporation which shall have issued certificate of stock in lieu of
those lost, stolen or destroyed pursuant to the procedure
above-described. (R.A. 201a)
TITLE VIII — CORPORATE BOOKS AND
RECORDS
Sec. 74. Books to be kept; stock transfer agent. —
Every corporation shall keep and carefully preserve at its principal
office a record of all business transactions and minutes of all
meetings of stockholders or members, or of the board of directors or
trustees, in which shall be set forth in detail the time and place of
holding the meeting, how authorized, the notice given, whether the
meeting was regular or special, if special its object, those present
and absent, and every act done or ordered done at the meeting. Upon the
demand of any director, trustee, stockholder or member, the time when
any director, trustee, stockholder or member entered or left the
meeting must be noted in the minutes; and on a similar demand, the yeas
and nays must be taken on any motion or proposition, and a record
thereof carefully made. The protest of any director, trustee,
stockholder or member on any action or proposed action must be recorded
in full on his demand.
The records of all business transactions of the corporation and the
minutes of any meetings shall be open to inspection by any director,
trustee, stockholder or member of the corporation at reasonable hours
on business days and he may demand, in writing, for a copy of excerpts
from said records or minutes, at his expense.
Any officer or agent of the corporation who shall refuse to allow any
director, trustees, stockholder or member of the corporation to examine
and copy excerpts from its records or minutes, in accordance with the
provisions of this Code, shall be liable to such director, trustee,
stockholder or member for damages, and in addition, shall be guilty of
an offense which shall be punishable under Section 144 of this Code:
Provided, That if such refusal is made pursuant to a resolution or
order of the board of directors or trustees, the liability under this
section for such action shall be imposed upon the directors or trustees
who voted for such refusal: and Provided, further, That it shall be a
defense to any action under this section that the person demanding to
examine and copy excerpts from the corporation's records and minutes
has improperly used any information secured through any prior
examination of the records or minutes of such corporation or of any
other corporation, or was not acting in good faith or for a legitimate
purpose in making his demand.
Stock corporations must also keep a book to be known as the "stock and
transfer book", in which must be kept a record of all stocks in the
names of the stockholders alphabetically arranged; the installments
paid and unpaid on all stock for which subscription has been made, and
the date of payment of any installment; 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 the by-laws may prescribe.
The stock and transfer book shall be kept in the principal office of
the corporation or in the office of its stock transfer agent and shall
be open for inspection by any director or stockholder of the
corporation at reasonable hours on business days.
No stock transfer agent or one engaged principally in the business of
registering transfers of stocks in behalf of a stock corporation shall
be allowed to operate in the Philippines unless he secures a license
from the Securities and Exchange Commission and pays a fee as may be
fixed by the Commission, which shall be renewable annually: Provided,
That a stock corporation is not precluded from performing or making
transfer of its own stocks, in which case all the rules and regulations
imposed on stock transfer agents, except the payment of a license fee
herein provided, shall be applicable. (51a and 32a; P.B. No.
268.)
Sec. 75. Right to financial statements. — Within
ten (10) days from receipt of a written request of any stockholder or
member, the corporation shall furnish to him its most recent financial
statement, which shall include a balance sheet as of the end of the
last taxable year and a profit or loss statement for said taxable year,
showing in reasonable detail its assets and liabilities and the result
of its operations.
At the regular meeting of stockholders or members, the board of
directors or trustees shall present to such stockholders or members a
financial report of the operations of the corporation for the preceding
year, which shall include financial statements, duly signed and
certified by an independent certified public accountant.
However, if the paid-up capital of the corporation is less than
P50,000.00, the financial statements may be certified under oath by the
treasurer or any responsible officer of the corporation. (n)
TITLE IX — MERGER AND
CONSOLIDATION
Sec. 76. Plan or merger of consolidation. — Two or
more corporations may merge into a single corporation which shall be
one of the constituent corporations or may consolidate into a new
single corporation which shall be the consolidated corporation.
The board of directors or trustees of each corporation, party to the
merger or consolidation, shall approve a plan of merger or
consolidation setting forth the following:
1. The names of the corporations proposing to merge
or consolidate, hereinafter referred to as the constituent
corporations;
2. The terms of the merger or consolidation and the
mode of carrying the same into effect;
3. A statement of the changes, if any, in the
articles of incorporation of the surviving corporation in case of
merger; and, with respect to the consolidated corporation in case of
consolidation, all the statements required to be set forth in the
articles of incorporation for corporations organized under this Code;
and
4. Such other provisions with respect to the proposed
merger or consolidation as are deemed necessary or desirable. (n)
Sec. 77. Stockholder's or member's approval. —
Upon approval by majority vote of each of the board of directors or
trustees of the constituent corporations of the plan of merger or
consolidation, the same shall be submitted for approval by the
stockholders or members of each of such corporations at separate
corporate meetings duly called for the purpose. Notice of such meetings
shall be given to all stockholders or members of the respective
corporations, at least two (2) weeks prior to the date of the meeting,
either personally or by registered mail. Said notice shall state the
purpose of the meeting and shall include a copy or a summary of the
plan of merger or consolidation. The affirmative vote of stockholders
representing at least two-thirds (2/3) of the outstanding capital stock
of each corporation in the case of stock corporations or at least
two-thirds (2/3) of the members in the case of non-stock corporations
shall be necessary for the approval of such plan. Any dissenting
stockholder in stock corporations may exercise his appraisal right in
accordance with the Code: Provided, That if after the approval by the
stockholders of such plan, the board of directors decides to abandon
the plan, the appraisal right shall be extinguished.
Any amendment to the plan of merger or consolidation may be made,
provided such amendment is approved by majority vote of the respective
boards of directors or trustees of all the constituent corporations and
ratified by the affirmative vote of stockholders representing at least
two-thirds (2/3) of the outstanding capital stock or of two-thirds
(2/3) of the members of each of the constituent corporations. Such
plan, together with any amendment, shall be considered as the agreement
of merger or consolidation. (n)
Sec. 78. Articles of merger or consolidation. —
After the approval by the stockholders or members as required by the
preceding section, articles of merger or articles of consolidation
shall be executed by each of the constituent corporations, to be signed
by the president or vice-president and certified by the secretary or
assistant secretary of each corporation setting forth:
1. The plan of the merger or the plan of
consolidation;
2. As to stock corporations, the number of shares
outstanding, or in the case of non-stock corporations, the number of
members; and
3. As to each corporation, the number of shares or
members voting for and against such plan, respectively. (n)
Sec. 79. Effectivity of merger or consolidation. —
The articles of merger or of consolidation, signed and certified as
herein above required, shall be submitted to the Securities and
Exchange Commission in quadruplicate for its approval: Provided, That
in the case of merger or consolidation of banks or banking
institutions, building and loan associations, trust companies,
insurance companies, public utilities, educational institutions and
other special corporations governed by special laws, the favorable
recommendation of the appropriate government agency shall first be
obtained. If the Commission is satisfied that the merger or
consolidation of the corporations concerned is not inconsistent with
the provisions of this Code and existing laws, it shall issue a
certificate of merger or of consolidation, at which time the merger or
consolidation shall be effective.
If, upon investigation, the Securities and Exchange Commission has
reason to believe that the proposed merger or consolidation is contrary
to or inconsistent with the provisions of this Code or existing laws,
it shall set a hearing to give the corporations concerned the
opportunity to be heard. Written notice of the date, time and place of
hearing shall be given to each constituent corporation at least two (2)
weeks before said hearing. The Commission shall thereafter proceed as
provided in this Code. (n)
Sec. 80. Effects of merger or consolidation. — The
merger or consolidation shall have the following effects:
1. The constituent corporations shall become a single
corporation which, in case of merger, shall be the surviving
corporation designated in the plan of merger; and, in case of
consolidation, shall be the consolidated corporation designated in the
plan of consolidation;
2. The separate existence of the constituent
corporations shall cease, except that of the surviving or the
consolidated corporation;
3. The surviving or the consolidated corporation
shall possess all the rights, privileges, immunities and powers and
shall be subject to all the duties and liabilities of a corporation
organized under this Code;
4. The surviving or the consolidated corporation
shall thereupon and thereafter possess all the rights, privileges,
immunities and franchises of each of the constituent corporations; and
all property, real or personal, and all receivables due on whatever
account, including subscriptions to shares and other choses in action,
and all and every other interest of, or 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
5. The surviving or consolidated corporation shall be
responsible and liable for all the liabilities and obligations of each
of the constituent corporations in the same manner as if such surviving
or consolidated corporation had itself incurred such liabilities or
obligations; and any pending claim, action or proceeding brought by or
against any of such constituent corporations may be prosecuted by or
against the surviving or consolidated corporation. The rights of
creditors or liens upon the property of any of such constituent
corporations shall not be impaired by such merger or consolidation. (n)
TITLE X — APPRAISAL RIGHT
Sec. 81. Instances of appraisal right. — Any
stockholder of a corporation shall have the right to dissent and demand
payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of
incorporation 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;
2. In case of sale, lease, exchange, transfer,
mortgage, pledge or other disposition of all or substantially all of
the corporate property and assets as provided in the Code; and
3. In case of merger or consolidation. (n)
Sec. 82. How right is exercised. — The appraisal
right may be exercised by any stockholder who shall have voted against
the proposed corporate action, by making a written demand on the
corporation within thirty (30) days after the date on which the vote
was taken for payment of the fair value of his shares: Provided, That
failure to make the demand within such period shall be deemed a waiver
of the appraisal right. If the proposed corporate action is implemented
or affected, the corporation shall pay to such stockholder, upon
surrender of the certificate or certificates of stock representing his
shares, the fair value thereof as of the day prior to the date on which
the vote was taken, excluding any appreciation or depreciation in
anticipation of such corporate action.
If within a period of sixty (60) days from the date the corporate
action was approved by the stockholders, the withdrawing stockholder
and the corporation cannot agree on the fair value of the shares, it
shall be determined and appraised by three (3) disinterested persons,
one of whom shall be named by the stockholder, another by the
corporation, and the third by the two thus chosen. The findings of the
majority of the appraisers shall be final, and their award shall be
paid by the corporation within thirty (30) days after such award is
made: Provided, That no payment shall be made to any dissenting
stockholder unless the corporation has unrestricted retained earnings
in its books to cover such payment: and Provided, further, That upon
payment by the corporation of the agreed or awarded price, the
stockholder shall forthwith transfer his shares to the corporation. (n)
Sec. 83. Effect of demand and termination of
right. — From the time of demand for payment of the fair value of a
stockholder's shares until either the abandonment of the corporate
action involved or the purchase of the said shares by the corporation,
all rights accruing to such shares, including voting and dividend
rights, shall be suspended in accordance with the provisions of this
Code, except the right of such stockholder to receive payment of the
fair value thereof: Provided, That if the dissenting stockholder is not
paid the value of his shares within 30 days after the award, his voting
and dividend rights shall immediately be restored. (n)
Sec. 84. When right to payment ceases. — No demand
for payment under this Title may be withdrawn unless the corporation
consents thereto. If, however, such demand for payment is withdrawn
with the consent of the corporation, or if the proposed corporate
action is abandoned or rescinded by the corporation or disapproved by
the Securities and Exchange Commission where such approval is
necessary, or if the Securities and Exchange Commission determines that
such stockholder is not entitled to the appraisal right, then the right
of said stockholder to be paid the fair value of his shares shall
cease, his status as a stockholder shall thereupon be restored, and all
dividend distributions which would have accrued on his shares shall be
paid to him. (n)
Sec. 85. Who bears costs of appraisal. — The costs
and expenses of appraisal shall be borne by the corporation, unless the
fair value ascertained by the appraisers is approximately the same as
the price which the corporation may have offered to pay the
stockholder, in which case they shall be borne by the latter. In the
case of an action to recover such fair value, all costs and expenses
shall be assessed against the corporation, unless the refusal of the
stockholder to receive payment was unjustified. (n)
Sec. 86. Notation on certificates; rights of
transferee. — Within ten (10) days after demanding payment for his
shares, a dissenting stockholder shall submit the certificates of stock
representing his shares to the corporation for notation thereon that
such shares are dissenting shares. His failure to do so shall, at the
option of the corporation, terminate his rights under this Title. If
shares represented by the certificates bearing such notation are
transferred, and the certificates consequently cancelled, the rights of
the transferor as a dissenting stockholder under this Title shall cease
and the transferee 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. (n)
TITLE XI — NON-STOCK
CORPORATIONS
Sec. 87. Definition. — For the purposes of this
Code, a non-stock corporation is one where no part of its income is
distributable as dividends to its members, trustees, or officers,
subject to the provisions of this Code on dissolution: Provided, That
any profit which a non-stock corporation may obtain as an incident to
its operations shall, whenever necessary or proper, be used for the
furtherance of the purpose or purposes for which the corporation was
organized, subject to the provisions of this Title.
The provisions governing stock corporation, when pertinent, shall be
applicable to non-stock corporations, except as may be covered by
specific provisions of this Title. (n)
Sec. 88. Purposes. — Non-stock corporations may be
formed or organized for charitable, religious, educational,
professional, cultural, fraternal, literary, scientific, social, civic
service, or similar purposes, like trade, industry, agricultural and
like chambers, or any combination thereof, subject to the special
provisions of this Title governing particular classes of non-stock
corporations. (n)
CHAPTER I
Members
Sec. 89. Right to vote. — The right of the members
of any class or classes to vote may be limited, broadened or denied to
the extent specified in the articles of incorporation or the by-laws.
Unless so limited, broadened or denied, each member, regardless of
class, shall be entitled to one vote.
Unless otherwise provided in the articles of incorporation or the
by-laws, a member may vote by proxy in accordance with the provisions
of this Code. (n)
Voting by mail or other similar means by members of non-stock
corporations may be authorized by the by-laws of non-stock corporations
with the approval of, and under such conditions which may be prescribed
by, the Securities and Exchange Commission.
Sec. 90. Non-transferability of membership. —
Membership in a non-stock corporation and all rights arising therefrom
are personal and non-transferable, unless the articles of incorporation
or the by-laws otherwise provide. (n)
Sec. 91. Termination of membership. — Membership
shall be terminated in the manner and for the causes provided in the
articles of incorporation or the by-laws. Termination of membership
shall have the effect of extinguishing all rights of a member in the
corporation or in its property, unless otherwise provided in the
articles of incorporation or the by-laws. (n)
CHAPTER II
Trustees and Offices
Sec. 92. Election and term of trustees. — Unless
otherwise provided in the articles of incorporation or the by-laws, the
board of trustees of non-stock corporations, which may be more than
fifteen (15) in number as may be fixed in their articles of
incorporation or by-laws, shall, as soon as organized, so classify
themselves that the term of office of one-third (1/3) of their number
shall expire every year; and subsequent elections of trustees
comprising one-third (1/3) of the board of trustees shall be held
annually and trustees so elected shall have a term of three (3) years.
Trustees thereafter elected to fill vacancies occurring before the
expiration of a particular term shall hold office only for the
unexpired period.
No person shall be elected as trustee unless he is a member of the
corporation.
Unless otherwise provided in the articles of incorporation or the
by-laws, officers of a non-stock corporation may be directly elected by
the members. (n)
Sec. 93. Place of meetings. — The by-laws may
provide that the members of a non-stock corporation may hold their
regular or special meetings at any place even outside the place where
the principal office of the corporation is located: Provided, That
proper notice is sent to all members indicating the date, time and
place of the meeting: and Provided, further, That the place of meeting
shall be within the Philippines. (n)
CHAPTER III
Distribution of Assets in Non-Stock Corporations
Sec. 94. Rules of distribution. — In case
dissolution of a non-stock corporation in accordance with the
provisions of this Code, its assets shall be applied and distributed as
follows:
1. All liabilities and obligations of the corporation
shall be paid, satisfied and discharged, or adequate provision shall be
made therefore;
2. Assets held by the corporation upon a condition
requiring return, transfer or conveyance, and which condition occurs by
reason of the dissolution, shall be returned, transferred or conveyed
in accordance with such requirements;
3. Assets received and held by the corporation
subject to limitations permitting their use only for charitable,
religious, benevolent, educational or similar purposes, but not held
upon a condition requiring return, transfer or conveyance by reason of
the dissolution, shall be transferred or conveyed to one or more
corporations, societies or organizations engaged in activities in the
Philippines substantially similar to those of the dissolving
corporation according to a plan of distribution adopted pursuant to
this Chapter;
4. Assets other than those mentioned in the preceding
paragraphs, if any, shall be distributed in accordance with the
provisions of the articles of incorporation or the by-laws, to the
extent that the articles of incorporation or the by-laws, determine the
distributive rights of members, or any class or classes of members, or
provide for distribution; and
5. In any other case, 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. (n)
Sec. 95. Plan of distribution of assets. — A plan
providing for the distribution of assets, not inconsistent with the
provisions of this Title, may be adopted by a non-stock corporation in
the process of dissolution in the following manner:
The board of trustees shall, by majority vote, adopt a resolution
recommending a plan of distribution and directing the submission
thereof to a vote at a regular or special meeting of members having
voting rights. Written notice setting forth the proposed plan of
distribution or a summary thereof and the date, time and place of such
meeting shall be given to each member entitled to vote, within the time
and in the manner provided in this Code for the giving of notice of
meetings to members. Such plan of distribution shall be adopted upon
approval of at least two-thirds (2/3) of the members having voting
rights present or represented by proxy at such meeting. (n)
TITLE XII — CLOSE CORPORATIONS
Sec. 96. Definition and applicability of Title. —
A close corporation, within the meaning of this Code, 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 twenty (20); (2) all the issued stock of all classes shall be
subject to one or more specified restrictions on transfer permitted by
this Title; and (3) The corporation shall not list in any stock
exchange or make any public offering of any of its stock of any class.
Notwithstanding the foregoing, a corporation shall not be deemed a
close corporation when at least two-thirds (2/3) of its voting stock or
voting rights is owned or controlled by another corporation which is
not a close corporation within the meaning of this Code.
Any corporation may be incorporated as a close corporation, except
mining or oil companies, stock exchanges, banks, insurance companies,
public utilities, educational institutions and corporations declared to
be vested with public interest in accordance with the provisions of
this Code.
The provisions of this Title shall primarily govern close corporations:
Provided, That the provisions of other Titles of this Code shall apply
suppletorily except insofar as this Title otherwise provides.
Sec. 97. Articles of incorporation. — The articles
of incorporation of a close corporation may provide:
1. For a classification of shares or rights and the
qualifications for owning or holding the same and restrictions on their
transfers as may be stated therein, subject to the provisions of the
following section;
2. For a classification of directors into one or more
classes, each of whom may be voted for and elected solely by a
particular class of stock; and
3. For a greater quorum or voting requirements in
meetings of stockholders or directors than those provided in this Code.
The articles of incorporation of a close corporation may provide that
the business of the corporation shall be managed by the stockholders of
the corporation rather than by a board of directors. So long as this
provision continues in effect:
1. No meeting of stockholders need be called to elect
directors;
2. Unless the context clearly requires otherwise, the
stockholders of the corporation shall be deemed to be directors for the
purpose of applying the provisions of this Code; and
3. The stockholders of the corporation shall be
subject to all liabilities of directors.
The articles of incorporation may likewise provide that all officers or
employees or that specified officers or employees shall be elected or
appointed by the stockholders, instead of by the board of directors.
Sec. 98. Validity of restrictions on transfer of
shares. — Restrictions on the right to transfer shares must appear in
the articles of incorporation and in the by-laws as well as in the
certificate of stock; otherwise, the same shall not be binding on any
purchaser thereof in good faith. Said restrictions shall not be more
onerous than granting the existing stockholders or the corporation the
option to purchase the shares of the transferring stockholder with such
reasonable terms, conditions or period stated therein. If upon the
expiration of said period, the existing stockholders or the corporation
fails to exercise the option to purchase, the transferring stockholder
may sell his shares to any third person.
Sec. 99. Effects of issuance or transfer of stock
in breach of qualifying conditions. —
1. If stock of a close corporation is issued or
transferred to any person who is not entitled under any provision of
the articles of incorporation to be a holder of record of its stock,
and if the certificate for such stock conspicuously shows the
qualifications of the persons entitled to be holders of record thereof,
such person is conclusively presumed to have notice of the fact of his
ineligibility to be a stockholder.
2. If the articles of incorporation of a close
corporation states the number of persons, not exceeding twenty (20),
who are entitled to be holders of record of its stock, and if the
certificate for such stock conspicuously states such number, and if the
issuance or transfer of stock to any person would cause the stock to be
held by more than such number of persons, the person to whom such stock
is issued or transferred is conclusively presumed to have notice of
this fact.
3. If a stock certificate of any close corporation
conspicuously shows a restriction on transfer of stock of the
corporation, the transferee of the stock is conclusively presumed to
have notice of the fact that he has acquired stock in violation of the
restriction, if such acquisition violates the restriction.
4. Whenever any person to whom stock of a close
corporation has been issued or transferred has, or is conclusively
presumed under this section to have, notice either (a) that he is a
person not eligible to be a holder of stock of the corporation, or (b)
that transfer of stock to him would cause the stock of the corporation
to be held by more than the number of persons permitted by its articles
of incorporation to hold stock of the corporation, or (c) that the
transfer of stock is in violation of a restriction on transfer of
stock, the corporation may, at its option, refuse to register the
transfer of stock in the name of the transferee.
5. The provisions of subsection (4) shall not be
applicable if the transfer of stock, though contrary to subsections
(1), (2) or (3), has been consented to by all the stockholders of the
close corporation, or if the close corporation has amended its articles
of incorporation in accordance with this Title.
6. The term "transfer", as used in this section, is
not limited to a transfer for value.
7. The provisions of this section shall not impair
any right which the transferee may have to rescind the transfer or to
recover under any applicable warranty, express or implied.
Sec. 100. Agreements by stockholders. —
1. Agreements by and among stockholders executed
before the formation and organization of a close corporation, signed by
all stockholders, shall survive the incorporation of such corporation
and shall continue to be valid and binding between and among such
stockholders, if such be their intent, to the extent that such
agreements are not inconsistent with the articles of incorporation,
irrespective of where the provisions of such agreements are contained,
except those required by this Title to be embodied in said articles of
incorporation.
2. An agreement between two or more stockholders, if
in writing and signed by the parties thereto, may provide that in
exercising any voting rights, the shares held by them shall be voted as
therein provided, or as they may agree, or as determined in accordance
with a procedure agreed upon by them.
3. No provision in any written agreement signed by
the stockholders, relating to any phase of the corporate affairs, shall
be invalidated as between the parties on the ground that its effect is
to make them partners among themselves.
4. A written agreement among some or all of the
stockholders in a close corporation shall not be invalidated on the
ground that it so relates to the conduct of the business and affairs of
the corporation as to restrict or interfere with the discretion or
powers of the board of directors: Provided, That such agreement shall
impose on the stockholders who are parties thereto the liabilities for
managerial acts imposed by this Code on directors.
5. To the extent that the stockholders are actively
engaged in the management or operation of the business and affairs of a
close corporation, the stockholders shall be held to strict fiduciary
duties to each other and among themselves. Said stockholders shall be
personally liable for corporate torts unless the corporation has
obtained reasonably adequate liability insurance.
Sec. 101. When board meeting is unnecessary or
improperly held. — Unless the by-laws provide otherwise, any action by
the directors of a close corporation without a meeting shall
nevertheless be deemed valid if:
1. Before or after such action is taken, written
consent thereto is signed by all the directors; or
2. All the stockholders have actual or implied
knowledge of the action and make no prompt objection thereto in
writing; or
3. The directors are accustomed to take informal
action with the express or implied acquiescence of all the
stockholders; or
4. All the directors have express or implied
knowledge of the action in question and none of them makes prompt
objection thereto in writing.
If a director's meeting is held without proper call or notice, an
action taken therein within the corporate powers is deemed ratified by
a director who failed to attend, unless he promptly files his written
objection with the secretary of the corporation after having knowledge
thereof.
Sec. 102. Pre-emptive right in close corporations.
— The pre-emptive right of stockholders in close corporations shall
extend to all stock to be issued, including reissuance of treasury
shares, whether for money, property or personal services, or in payment
of corporate debts, unless the articles of incorporation provide
otherwise.
Sec. 103. Amendment of articles of incorporation.
— Any amendment to the articles of incorporation which seeks to delete
or remove any provision required by this Title to be contained in the
articles of incorporation or to reduce a quorum or voting requirement
stated in said articles of incorporation shall not be valid or
effective unless approved by the affirmative vote of at least
two-thirds (2/3) of the outstanding capital stock, whether with or
without voting rights, or of such greater proportion of shares as may
be specifically provided in the articles of incorporation for amending,
deleting or removing any of the aforesaid provisions, at a meeting duly
called for the purpose.
Sec. 104. Deadlocks. — Notwithstanding any
contrary provision in the articles of incorporation or by-laws or
agreement of stockholders of a close corporation, if the directors or
stockholders are so divided respecting the management of the
corporation's business and affairs that the votes required for any
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 generally, the Securities and
Exchange Commission, upon written petition by any stockholder, shall
have the power to arbitrate the dispute. In the exercise of such power,
the Commission shall have authority to make such order as it deems
appropriate, including an order: (1) cancelling or altering any
provision contained in the articles of incorporation, by-laws, or any
stockholder's agreement; (2) cancelling, altering or enjoining any
resolution or act of the corporation or its board of directors,
stockholders, or officers; (3) directing or prohibiting any act of the
corporation or its board of directors, stockholders, officers, or other
persons party to the action; (4) requiring the purchase at their fair
value of shares of any stockholder, either by the corporation
regardless of the availability of unrestricted retained earnings in its
books, or by the other stockholders; (5) appointing a provisional
director; (6) dissolving the corporation; or (7) granting such other
relief as the circumstances may warrant.
A provisional director shall be an impartial person who is neither a
stockholder nor a creditor of the corporation or of any subsidiary or
affiliate of the corporation, and whose further qualifications, if any,
may be determined by the Commission. A provisional director is not a
receiver of the corporation and does not have the title and powers of a
custodian or receiver. A provisional director shall have all the rights
and powers of a duly elected director of the corporation, including the
right to notice of and to vote at meetings of directors, until such
time as he shall be removed by order of the Commission or by all the
stockholders. His compensation shall be determined by agreement between
him and the corporation subject to approval of the Commission, which
may fix his compensation in the absence of agreement or in the event of
disagreement between the provisional director and the corporation.
Sec. 105. Withdrawal of stockholder or dissolution
of corporation. — In addition and without prejudice to other rights and
remedies available to a stockholder under this Title, any stockholder
of a close corporation may, for any reason, compel the said corporation
to purchase his shares at their fair value, which shall not be less
than their par or issued value, when the corporation has sufficient
assets in its books to cover its debts and liabilities exclusive of
capital stock: Provided, That any stockholder of a close corporation
may, by written petition to the Securities and Exchange Commission,
compel the dissolution of such corporation whenever any of acts of the
directors, officers or those in control of the corporation is illegal,
or fraudulent, or dishonest, or oppressive or unfairly prejudicial to
the corporation or any stockholder, or whenever corporate assets are
being misapplied or wasted.
TITLE XIII — SPECIAL
CORPORATIONS
CHAPTER I
Educational Corporations
Sec. 106. Incorporation. — Educational
corporations shall be governed by special laws and by the general
provisions of this Code. (n)
Sec. 107. Pre-requisites to incorporation. —
Except upon favorable recommendation of the Ministry of Education and
Culture, the Securities and Exchange Commission shall not accept or
approve the articles of incorporation and by-laws of any educational
institution. (168a)
Sec. 108. Board of trustees. — Trustees of
educational institutions organized as non-stock corporations shall not
be less than five (5) nor more than fifteen (15): Provided, however,
That the number of trustees shall be in multiples of five (5).
Unless otherwise provided in the articles of incorporation on the
by-laws, the board of trustees of incorporated schools, colleges, or
other institutions of learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of their number
shall expire every year. Trustees thereafter elected to fill vacancies,
occurring before the expiration of a particular term, shall hold office
only for the unexpired period. Trustees elected thereafter to fill
vacancies caused by expiration of term shall hold office for five (5)
years. A majority of the trustees shall constitute a quorum for the
transaction of business. The powers and authority of trustees shall be
defined in the by-laws.
For institutions organized as stock corporations, the number and term
of directors shall be governed by the provisions on stock corporations.
(169a)
CHAPTER II
Religious Corporations
Sec. 109. Classes of religious corporations. —
Religious corporations may be incorporated by one or more persons. Such
corporations may be classified into corporations sole and religious
societies.
Religious corporations shall be governed by this Chapter and by the
general provisions on non-stock corporations insofar as they may be
applicable. (n)
Sec. 110. Corporation sole. — For the purpose of
administering and managing, as trustee, the affairs, property and
temporalities of any religious denomination, sect or church, a
corporation sole may be formed by the chief archbishop, bishop, priest,
minister, rabbi or other presiding elder of such religious
denomination, sect or church. (154a)
Sec. 111. Articles of incorporation. — In order to
become a corporation sole, the chief archbishop, bishop, priest,
minister, rabbi or presiding elder of any religious denomination, sect
or church must file with the Securities and Exchange Commission
articles of incorporation setting forth the following:
1. That he is the chief archbishop, bishop, priest,
minister, rabbi or presiding elder of his religious denomination, sect
or church and that he desires to become a corporation sole;
2. That the rules, regulations and discipline of his
religious denomination, sect or church are not inconsistent with his
becoming a corporation sole and do not forbid it;
3. That as such chief archbishop, bishop, priest,
minister, rabbi or presiding elder, he is charged with the
administration of the temporalities and the management of the affairs,
estate and properties of his religious denomination, sect or church
within his territorial jurisdiction, describing such territorial
jurisdiction;
4. The manner in which any vacancy occurring in the
office of chief archbishop, bishop, priest, minister, rabbi of
presiding elder is required to be filled, according to the rules,
regulations or discipline of the religious denomination, sect or church
to which he belongs; and
5. The place where the principal office of the
corporation sole is to be established and located, which place must be
within the Philippines.
The articles of incorporation may include any other provision not
contrary to law for the regulation of the affairs of the corporation.
(n)
Sec. 112. Submission of the articles of
incorporation. — The articles of incorporation must be verified, before
filing, by affidavit or affirmation of the chief archbishop, bishop,
priest, minister, rabbi or presiding elder, as the case may be, and
accompanied by a copy of the commission, certificate of election or
letter of appointment of such chief archbishop, bishop, priest,
minister, rabbi or presiding elder, duly certified to be correct by any
notary public.
From and after the filing with the Securities and Exchange Commission
of the said articles of incorporation, verified by affidavit or
affirmation, and accompanied by the documents mentioned in the
preceding paragraph, such chief archbishop, bishop, priest, minister,
rabbi or presiding elder shall become a corporation sole and all
temporalities, estate and properties of the religious denomination,
sect or church theretofore administered or managed by him as such chief
archbishop, bishop, priest, minister, rabbi or presiding elder shall be
held in trust by him as a corporation sole, for the use, purpose,
behalf and sole benefit of his religious denomination, sect or church,
including hospitals, schools, colleges, orphan asylums, parsonages and
cemeteries thereof. (n)
Sec. 113. Acquisition and alienation of property.
— Any corporation sole may purchase and hold real estate and personal
property for its church, charitable, benevolent or educational
purposes, and may receive bequests or gifts for such purposes. Such
corporation may sell or mortgage real property held by it by obtaining
an order for that purpose from the Court of First Instance of the
province where the property is situated upon proof made to the
satisfaction of the court that notice of the application for leave to
sell or mortgage has been given by publication or otherwise in such
manner and for such time as said court may have directed, and that it
is to the interest of the corporation that leave to sell or mortgage
should be granted. The application for leave to sell or mortgage must
be made by petition, duly verified, by the chief archbishop, bishop,
priest, minister, rabbi or presiding elder acting as corporation sole,
and may be opposed by any member of the religious denomination, sect or
church represented by the corporation sole: Provided, That in cases
where the rules, regulations and discipline of the religious
denomination, sect or church, religious society or order concerned
represented by such corporation sole regulate the method of acquiring,
holding, selling and mortgaging real estate and personal property, such
rules, regulations and discipline shall control, and the intervention
of the courts shall not be necessary. (159a)
Sec. 114. Filling of vacancies. — The successors
in office of any chief archbishop, bishop, priest, minister, rabbi or
presiding elder in a corporation sole shall become the corporation sole
on their accession to office and shall be permitted to transact
business as such on the filing with the Securities and Exchange
Commission of a copy of their commission, certificate of election, or
letters of appointment, duly certified by any notary public.
During any vacancy in the office of chief archbishop, bishop, priest,
minister, rabbi or presiding elder of any religious denomination, sect
or church incorporated as a corporation sole, the person or persons
authorized and empowered by the rules, regulations or discipline of the
religious denomination, sect or church represented by the corporation
sole to administer the temporalities and manage the affairs, estate and
properties of the corporation sole during the vacancy shall exercise
all the powers and authority of the corporation sole during such
vacancy. (158a)
Sec. 115. Dissolution. — A corporation sole may be
dissolved and its affairs settled voluntarily by submitting to the
Securities and Exchange Commission a verified declaration of
dissolution.
The declaration of dissolution shall set forth:
1. The name of the corporation;
2. The reason for dissolution and winding up;
3. The authorization for the dissolution of the
corporation by the particular religious denomination, sect or church;
4. The names and addresses of the persons who are to
supervise the winding up of the affairs of the corporation.
Upon approval of such declaration of dissolution by the Securities and
Exchange Commission, the corporation shall cease to carry on its
operations except for the purpose of winding up its affairs. (n)
Sec. 116. Religious societies. — Any religious
society or religious order, or any diocese, synod, or district
organization of any religious denomination, sect or church, unless
forbidden by the constitution, rules, regulations, or discipline of the
religious denomination, sect or church of which it is a part, or by
competent authority, may, upon written consent and/or by an affirmative
vote at a meeting called for the purpose of at least two-thirds (2/3)
of its membership, incorporate for the administration of its
temporalities or for the management of its affairs, properties and
estate by filing with the Securities and Exchange Commission, articles
of incorporation verified by the affidavit of the presiding elder,
secretary, or clerk or other member of such religious society or
religious order, or diocese, synod, or district organization of the
religious denomination, sect or church, setting forth the following:
1. That the religious society or religious order, or
diocese, synod, or district organization is a religious organization of
a religious denomination, sect or church;
2. That at least two-thirds (2/3) of its membership
have given their written consent or have voted to incorporate, at a
duly convened meeting of the body;
3. That the incorporation of the religious society or
religious order, or diocese, synod, or district organization desiring
to incorporate is not forbidden by competent authority or by the
constitution, rules, regulations or discipline of the religious
denomination, sect, or church of which it forms a part;
4. That the religious society or religious order, or
diocese, synod, or district organization desires to incorporate for the
administration of its affairs, properties and estate;
5. The place where the principal office of the
corporation is to be established and located, which place must be
within the Philippines; and
6. The names, nationalities, and residences of the
trustees elected by the religious society or religious order, or the
diocese, synod, or district organization to serve for the first year or
such other period as may be prescribed by the laws of the religious
society or religious order, or of the diocese, synod, or district
organization, the board of trustees to be not less than five (5) nor
more than fifteen (15). (160a)
TITLE XIV — DISSOLUTION
Sec. 117. Methods of dissolution. — A corporation
formed or organized under the provisions of this Code may be dissolved
voluntarily or involuntarily. (n)
Sec. 118. Voluntary dissolution where no creditors
are affected. — If dissolution of a corporation does not prejudice the
rights of any creditor having a claim against it, the dissolution may
be effected by majority vote of the board of directors or trustees, and
by a resolution duly adopted by the affirmative vote of the
stockholders owning at least two-thirds (2/3) of the outstanding
capital stock or of at least two-thirds (2/3) of the members of a
meeting to be held upon call of the directors or trustees after
publication of the notice of time, place and object of the meeting for
three (3) consecutive weeks in a newspaper published in the place where
the principal office of said corporation is located; and if no
newspaper is published in such place, then in a newspaper of general
circulation in the Philippines, after sending such notice to each
stockholder or member either by registered mail or by personal delivery
at least thirty (30) days prior to said meeting. A copy of the
resolution authorizing the dissolution shall be certified by a majority
of the board of directors or trustees and countersigned by the
secretary of the corporation. The Securities and Exchange Commission
shall thereupon issue the certificate of dissolution. (62a)
Sec. 119. Voluntary dissolution where creditors
are affected. — Where the dissolution of a corporation may prejudice
the rights of any creditor, the petition for dissolution shall be filed
with the Securities and Exchange Commission. The petition shall be
signed by a majority of its board of directors or trustees or other
officers having the management of its affairs, verified by its
president or secretary or one of its directors or trustees, and shall
set forth all claims and demands against it, and that its dissolution
was resolved upon by the affirmative vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock
or by at least two-thirds (2/3) of the members at a meeting of its
stockholders or members called for that purpose.
If the petition is sufficient in form and substance, the Commission
shall, by an order reciting the purpose of the petition, fix a date on
or before which objections thereto may be filed by any person, which
date shall not be less than thirty (30) days nor more than sixty (60)
days after the entry of the order. Before such date, a copy of the
order shall be published at least once a week for three (3) consecutive
weeks in a newspaper of general circulation published in the
municipality or city where the principal office of the corporation is
situated, or if there be no such newspaper, then in a newspaper of
general circulation in the Philippines, and a similar copy shall be
posted for three (3) consecutive weeks in three (3) public places in
such municipality or city.
Upon five (5) day's notice, given after the date on which the right to
file objections as fixed in the order has expired, the Commission shall
proceed to hear the petition and try any issue made by the objections
filed; and if no such objection is sufficient, and the material
allegations of the petition are true, it shall render judgment
dissolving the corporation and directing such disposition of its assets
as justice requires, and may appoint a receiver to collect such assets
and pay the debts of the corporation. (Rule 104, RCa)
Sec. 120. Dissolution by shortening corporate
term. — A voluntary dissolution may be effected by amending the
articles of incorporation to shorten the corporate term pursuant to the
provisions of this Code. A copy of the amended articles of
incorporation shall be submitted to the Securities and Exchange
Commission in accordance with this Code. Upon approval of the amended
articles of incorporation of the expiration of the shortened term, as
the case may be, the corporation shall be deemed dissolved without any
further proceedings, subject to the provisions of this Code on
liquidation. (n)
Sec. 121. Involuntary dissolution. — A corporation
may be dissolved by the Securities and Exchange Commission upon filing
of a verified complaint and after proper notice and hearing on the
grounds provided by existing laws, rules and regulations. (n)
Sec. 122. Corporate liquidation. — Every
corporation whose charter expires by its own limitation or is annulled
by forfeiture or otherwise, or whose corporate existence for other
purposes is terminated in any other manner, shall nevertheless be
continued as a body corporate for three (3) years after the time when
it would have been so dissolved, for the purpose of prosecuting and
defending suits by or against it and enabling it to settle and close
its affairs, to dispose of and convey its property and to distribute
its assets, but not for the purpose of continuing the business for
which it was established.
At any time during said three (3) years, the corporation is authorized
and empowered to convey all of its property to trustees for the benefit
of stockholders, members, creditors, and other persons in interest.
From and after any such conveyance by the corporation of its property
in trust for the benefit of its stockholders, members, creditors and
others in interest, all interest which the corporation had in the
property terminates, the legal interest vests in the trustees, and the
beneficial interest in the stockholders, members, creditors or other
persons in interest.
Upon the winding up of the corporate affairs, any asset distributable
to any creditor or stockholder or member who is unknown or cannot be
found shall be escheated to the city or municipality where such assets
are located.
Except by decrease of capital stock and as otherwise allowed by this
Code, no corporation shall distribute any of its assets or property
except upon lawful dissolution and after payment of all its debts and
liabilities. (77a, 89a, 16a)
TITLE XV — FOREIGN CORPORATIONS
Sec. 123. Definition and rights of foreign
corporations. — For the purposes of this Code, a foreign corporation is
one 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. It shall have the right to
transact business in the Philippines after it shall have obtained a
license to transact business in this country in accordance with this
Code and a certificate of authority from the appropriate government
agency. (n)
Sec. 124. Application to existing foreign
corporations. — Every foreign corporation which on the date of the
effectivity of this Code is authorized to do business in the
Philippines under a license therefore issued to it, shall continue to
have such authority under the terms and condition of its license,
subject to the provisions of this Code and other special laws. (n)
Sec. 125. Application for a license. — A foreign
corporation applying for a license to transact business in the
Philippines shall submit to the Securities and Exchange Commission a
copy of its articles of incorporation and by-laws, certified in
accordance with law, and their translation to an official language of
the Philippines, if necessary. The application shall be under oath and,
unless already stated in its articles of incorporation, shall
specifically set forth the following:
1. The date and term of incorporation;
2. The address, including the street number, of the
principal office of the corporation in the country or state of
incorporation;
3. The name and address of its resident agent
authorized to accept summons and process in all legal proceedings and,
pending the establishment of a local office, all notices affecting the
corporation;
4. The place in the Philippines where the corporation
intends to operate;
5. The specific purpose or purposes which the
corporation intends to pursue in the transaction of its business in the
Philippines: Provided, That said purpose or purposes are those
specifically stated in the certificate of authority issued by the
appropriate government agency;
6. The names and addresses of the present directors
and officers of the corporation;
7. A statement of its authorized capital stock and
the aggregate number of shares which the corporation has authority to
issue, itemized by classes, par value of shares, shares without par
value, and series, if any;
8. A statement of its outstanding capital stock and
the aggregate number of shares which the corporation has issued,
itemized by classes, par value of shares, shares without par value, and
series, if any;
9. A statement of the amount actually paid in; and
10. Such additional information as may be necessary
or appropriate in order to enable the Securities and Exchange
Commission to determine whether such corporation is entitled to a
license to transact business in the Philippines, and to determine and
assess the fees payable.
Attached to the application for license shall be a duly executed
certificate under oath by the authorized official or officials of the
jurisdiction of its incorporation, attesting to the fact that the laws
of the country or state of the applicant allow Filipino citizens and
corporations to do business therein, and that the applicant is an
existing corporation in good standing. If such certificate is in a
foreign language, a translation thereof in English under oath of the
translator shall be attached thereto.
The application for a license to transact business in the Philippines
shall likewise be accompanied by a statement under oath of the
president or any other person authorized by the corporation, showing to
the satisfaction of the Securities and Exchange Commission and other
governmental agency in the proper cases that the applicant is solvent
and in sound financial condition, and setting forth the assets and
liabilities of the corporation as of the date not exceeding one (1)
year immediately prior to the filing of the application.
Foreign banking, financial and insurance corporations shall, in
addition to the above requirements, comply with the provisions of
existing laws applicable to them. In the case of all other foreign
corporations, no application for license to transact business in the
Philippines shall be accepted by the Securities and Exchange Commission
without previous authority from the appropriate government agency,
whenever required by law. (68a)
Sec. 126. Issuance of a license. — If the
Securities and Exchange Commission is satisfied that the applicant has
complied with all the requirements of this Code and other special laws,
rules and regulations, the Commission shall issue a license to the
applicant to transact business in the Philippines for the purpose or
purposes specified in such license. Upon issuance of the license, such
foreign corporation may commence to transact business in the
Philippines and continue to do so for as long as it retains its
authority to act as a corporation under the laws of the country or
state of its incorporation, unless such license is sooner surrendered,
revoked, suspended or annulled in accordance with this Code or other
special laws.
Within sixty (60) days after the issuance of the license to transact
business in the Philippines, the license, except foreign banking or
insurance corporation, shall deposit with the Securities and Exchange
Commission for the benefit of present and future creditors of the
licensee in the Philippines, securities satisfactory to the Securities
and Exchange Commission, consisting of bonds or other evidence of
indebtedness of the Government of the Philippines, its political
subdivisions and instrumentalities, or of government-owned or
controlled corporations and entities, shares of stock in "registered
enterprises" as this term is defined in Republic Act No. 5186, shares
of stock in domestic corporations registered in the stock exchange, or
shares of stock in domestic insurance companies and banks, or any
combination of these kinds of securities, with an actual market value
of at least one hundred thousand (P100,000.) pesos; Provided, however,
That within six (6) months after each fiscal year of the licensee, the
Securities and Exchange Commission shall require the licensee to
deposit additional securities equivalent in actual market value to two
(2%) percent of the amount by which the licensee's gross income for
that fiscal year exceeds five million (P5,000,000.00) pesos. The
Securities and Exchange Commission shall also require deposit of
additional securities if the actual market value of the securities on
deposit has decreased by at least ten (10%) percent of their actual
market value at the time they were deposited. The Securities and
Exchange Commission may at its discretion release part of the
additional securities deposited with it if the gross income of the
licensee has decreased, or if the actual market value of the total
securities on deposit has increased, by more than ten (10%) percent of
the actual market value of the securities at the time they were
deposited. The Securities and Exchange Commission may, from time to
time, allow the licensee to substitute other securities for those
already on deposit as long as the licensee is solvent. Such licensee
shall be entitled to collect the interest or dividends on the
securities deposited. In the event the licensee ceases to do business
in the Philippines, the securities deposited as aforesaid shall be
returned, upon the licensee's application therefor and upon proof to
the satisfaction of the Securities and Exchange Commission that the
licensee has no liability to Philippine residents, including the
Government of the Republic of the Philippines. (n)
Sec. 127. Who may be a resident agent. — A
resident agent may be either an individual residing in the Philippines
or a domestic corporation lawfully transacting business in the
Philippines: Provided, That in the case of an individual, he must be of
good moral character and of sound financial standing. (n)
Sec. 128. Resident agent; service of process. —
The Securities and Exchange Commission shall require as a condition
precedent to the issuance of the license to transact business in the
Philippines by any foreign corporation that such corporation file with
the Securities and Exchange Commission a written power of attorney
designating some person who must be a resident of the Philippines, on
whom any summons and other legal processes may be served in all actions
or other legal proceedings against such corporation, and consenting
that service upon such resident agent shall be admitted and held as
valid as if served upon the duly authorized officers of the foreign
corporation at its home office. Any such foreign corporation shall
likewise execute and file with the Securities and Exchange Commission
an agreement or stipulation, executed by the proper authorities of said
corporation, in form and substance as follows:
"The (name of foreign corporation) does hereby stipulate and agree, in
consideration of its being granted by the Securities and Exchange
Commission a license to transact business in the Philippines, that if
at any time said corporation shall cease to transact business in the
Philippines, or shall be without any resident agent in the Philippines
on whom any summons or other legal processes may be served, then in any
action or proceeding arising out of any business or transaction which
occurred in the Philippines, service of any summons or other legal
process may be made upon the Securities and Exchange Commission and
that such service shall have the same force and effect as if made upon
the duly-authorized officers of the corporation at its home
office."
Whenever such service of summons or other process shall be made upon
the Securities and Exchange Commission, the Commission shall, within
ten (10) days thereafter, transmit by mail a copy of such summons or
other legal process to the corporation at its home or principal office.
The sending of such copy by the Commission shall be necessary part of
and shall complete such service. All expenses incurred by the
Commission for such service shall be paid in advance by the party at
whose instance the service is made.
In case of a change of address of the resident agent, it shall be his
or its duty to immediately notify in writing the Securities and
Exchange Commission of the new address. (72a; and n)
Sec. 129. Law applicable. — Any foreign
corporation lawfully doing business in the Philippines shall be bound
by all laws, rules and regulations applicable to domestic corporations
of the same class, except such only as provide for the creation,
formation, organization or dissolution of corporations or those which
fix the relations, liabilities, responsibilities, or duties of
stockholders, members, or officers of corporations to each other or to
the corporation. (73a)
Sec. 130. Amendments to articles of incorporation
or by-laws of foreign corporations. — Whenever the articles of
incorporation or by-laws of a foreign corporation authorized to
transact business in the Philippines are amended, such foreign
corporation shall, within sixty (60) days after the amendment becomes
effective, file with the Securities and Exchange Commission, and in the
proper cases with the appropriate government agency, a duly
authenticated copy of the articles of incorporation or by-laws, as
amended, indicating clearly in capital letters or by underscoring the
change or changes made, duly certified by the authorized official or
officials of the country or state of incorporation. The filing thereof
shall not of itself enlarge or alter the purpose or purposes for which
such corporation is authorized to transact business in the Philippines.
(n)
Sec. 131. Amended license. — A foreign corporation
authorized to transact business in the Philippines shall obtain an
amended license in the event it changes its corporate name, or desires
to pursue in the Philippines other or additional purposes, by
submitting an application therefor to the Securities and Exchange
Commission, favorably endorsed by the appropriate government agency in
the proper cases. (n)
Sec. 132. Merger or consolidation involving a
foreign corporation licensed in the Philippines. — One or more foreign
corporations authorized to transact business in the Philippines may
merge or consolidate with any domestic corporation or corporations if
such is permitted under Philippine laws and by the law of its
incorporation: Provided, That the requirements on merger or
consolidation as provided in this Code are followed.
Whenever a foreign corporation authorized to transact business in the
Philippines shall be a party to a merger or consolidation in its home
country or state as permitted by the law of its incorporation, such
foreign corporation shall, within sixty (60) days after such merger or
consolidation becomes effective, file with the Securities and Exchange
Commission, and in proper cases with the appropriate government agency,
a copy of the articles of merger or consolidation duly authenticated by
the proper official or officials of the country or state under the laws
of which merger or consolidation was effected: Provided, however, That
if the absorbed corporation is the foreign corporation doing business
in the Philippines, the latter shall at the same time file a petition
for withdrawal of its license in accordance with this Title. (n)
Sec. 133. Doing business without a license. — No
foreign corporation transacting business in the Philippines without a
license, or its successors or assigns, shall be permitted to maintain
or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be
sued or proceeded against before Philippine courts or administrative
tribunals on any valid cause of action recognized under Philippine
laws. (69a)
Sec. 134. Revocation of license. — Without
prejudice to other grounds provided by special laws, the license of a
foreign corporation to transact business in the Philippines may be
revoked or suspended by the Securities and Exchange Commission upon any
of the following grounds:
1. Failure to file its annual report or pay any fees
as required by this Code;
2. Failure to appoint and maintain a resident agent
in the Philippines as required by this Title;
3. Failure, after change of its resident agent or of
his address, to submit to the Securities and Exchange Commission a
statement of such change as required by this Title;
4. Failure to submit to the Securities and Exchange
Commission an authenticated copy of any amendment to its articles of
incorporation or by-laws or of any articles of merger or consolidation
within the time prescribed by this Title;
5. A misrepresentation of any material matter in any
application, report, affidavit or other document submitted by such
corporation pursuant to this Title;
6. Failure to pay any and all taxes, imposts,
assessments or penalties, if any, lawfully due to the Philippine
Government or any of its agencies or political subdivisions;
7. Transacting business in the Philippines outside of
the purpose or purposes for which such corporation is authorized under
its license;
8. Transacting business in the Philippines as agent
of or acting for and in behalf of any foreign corporation or entity not
duly licensed to do business in the Philippines; or
9. Any other ground as would render it unfit to
transact business in the Philippines. (n)
Sec. 135. Issuance of certificate of revocation. —
Upon the revocation of any such license to transact business in the
Philippines, the Securities and Exchange Commission shall issue a
corresponding certificate of revocation, furnishing a copy thereof to
the appropriate government agency in the proper cases.
The Securities and Exchange Commission shall also mail to the
corporation at its registered office in the Philippines a notice of
such revocation accompanied by a copy of the certificate of revocation.
(n)
Sec. 136. Withdrawal of foreign corporations. —
Subject to existing laws and regulations, a foreign corporation
licensed to transact business in the Philippines may be allowed to
withdraw from the Philippines by filing a petition for withdrawal of
license. No certificate of withdrawal shall be issued by the Securities
and Exchange Commission unless all the following requirements are met;
1. All claims which have accrued in the Philippines
have been paid, compromised or settled;
2. All taxes, imposts, assessments, and penalties, if
any, lawfully due to the Philippine Government or any of its agencies
or political subdivisions have been paid; and
3. The petition for withdrawal of license has been
published once a week for three (3) consecutive weeks in a newspaper of
general circulation in the Philippines.
TITLE XVI — MISCELLANEOUS
PROVISIONS
Sec. 137. Outstanding capital stock defined. — The
term "outstanding capital stock", as used in this Code, means the total
shares of stock issued under binding subscription agreements to
subscribers or stockholders, whether or not fully or partially paid,
except treasury shares. (n)
Sec. 138. Designation of governing boards. — The
provisions of specific provisions of this Code to the contrary
notwithstanding, non-stock or special corporations may, through their
articles of incorporation or their by-laws, designate their governing
boards by any name other than as board of trustees. (n)
Sec. 139. Incorporation and other fees. — The
Securities and Exchange Commission is hereby authorized to collect and
receive fees as authorized by law or by rules and regulations
promulgated by the Commission. (n)
Sec. 140. Stock ownership in certain corporations.
— Pursuant to the duties specified by Article XIV of the Constitution,
the National Economic and Development Authority shall, from time to
time, make a determination of whether the corporate vehicle has been
used by any corporation or by business or industry to frustrate the
provisions thereof or of applicable laws, and shall submit to the
Batasang Pambansa, whenever deemed necessary, a report of its findings,
including recommendations for their prevention or correction.
Maximum limits may be set by the Batasang Pambansa for stockholdings in
corporations declared by it to be vested with a public interest
pursuant to the provisions of this section, belonging to individuals or
groups of individuals related to each other by consanguinity or
affinity or by close business interests, or whenever it is necessary to
achieve national objectives, prevent illegal monopolies or combinations
in restraint or trade, or to implement national economic policies
declared in laws, rules and regulations designed to promote the general
welfare and foster economic development.
In recommending to the Batasang Pambansa corporations, businesses or
industries to be declared vested with a public interest and in
formulating proposals for limitations on stock ownership, the National
Economic and Development Authority shall consider the type and nature
of the industry, the size of the enterprise, the economies of scale,
the geographic location, the extent of Filipino ownership, the labor
intensity of the activity, the export potential, as well as other
factors which are germane to the realization and promotion of business
and industry.
Sec. 141. Annual report or corporations. — Every
corporation, domestic or foreign, lawfully doing business in the
Philippines shall submit to the Securities and Exchange Commission an
annual report of its operations, together with a financial statement of
its assets and liabilities, certified by any independent certified
public accountant in appropriate cases, covering the preceding fiscal
year and such other requirements as the Securities and Exchange
Commission may require. Such report shall be submitted within such
period as may be prescribed by the Securities and Exchange Commission.
(n)
Sec. 142. Confidential nature of examination
results. — All interrogatories propounded by the Securities and
Exchange Commission and the answers thereto, as well as the results of
any examination made by the Commission or by any other official
authorized by law to make an examination of the operations, books and
records of any corporation, shall be kept strictly confidential, except
insofar as the law may require the same to be made public or where such
interrogatories, answers or results are necessary to be presented as
evidence before any court. (n)
Sec. 143. Rule-making power of the Securities and
Exchange Commission. — The Securities and Exchange Commission shall
have the power and authority to implement the provisions of this Code,
and to promulgate rules and regulations reasonably necessary to enable
it to perform its duties hereunder, particularly in the prevention of
fraud and abuses on the part of the controlling stockholders, members,
directors, trustees or officers. (n)
Sec. 144. Violations of the Code. — Violations of
any of the provisions of this Code or its amendments not otherwise
specifically penalized therein shall be punished by a fine of not less
than one thousand (P1,000.00) pesos but not more than ten thousand
(P10,000.00) pesos or by imprisonment for not less than thirty (30)
days but not more than five (5) years, or both, in the discretion of
the court. If the violation is committed by a corporation, the same
may, after notice and hearing, be dissolved in appropriate proceedings
before the Securities and Exchange Commission: Provided, That such
dissolution shall not preclude the institution of appropriate action
against the director, trustee or officer of the corporation responsible
for said violation: Provided, further, That nothing in this section
shall be construed to repeal the other causes for dissolution of a
corporation provided in this Code. (190 1/2 a)
Sec. 145. Amendment or repeal. — No right or
remedy in favor of or against any corporation, its stockholders,
members, directors, trustees, or officers, nor any liability incurred
by any such corporation, stockholders, members, directors, trustees, or
officers, shall be removed or impaired either by the subsequent
dissolution of said corporation or by any subsequent amendment or
repeal of this Code or of any part thereof. (n)
Sec. 146. Repealing clause. — Except as expressly
provided by this Code, all laws or parts thereof inconsistent with any
provision of this Code shall be deemed repealed. (n)
Sec. 147. Separability of provisions. — Should any
provision of this Code or any part thereof be declared invalid or
unconstitutional, the other provisions, so far as they are separable,
shall remain in force. (n)
Sec. 148. Applicability to existing corporations.
— All corporations lawfully existing and doing business in the
Philippines on the date of the effectivity of this Code and heretofore
authorized, licensed or registered by the Securities and Exchange
Commission, shall be deemed to have been authorized, licensed or
registered under the provisions of this Code, subject to the terms and
conditions of its license, and shall be governed by the provisions
hereof: Provided, That if any such corporation is affected by the new
requirements of this Code, said corporation shall, unless otherwise
herein provided, be given a period of not more than two (2) years from
the effectivity of this Code within which to comply with the same. (n)
Sec. 149. Effectivity. — This Code shall take
effect immediately upon its approval.
Approved: May 1, 1980
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