TITLE IGENERAL
PROVISIONSDefinitions
and Classifications
Section 1.
Title
of the Code. - This Code shall be known as "The
Corporation Code of the Philippines".cralaw:red
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.
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.
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.
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.
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 no-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.
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.
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.
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.
TITLE IIINCORPORATION
AND ORGANIZATIONOF 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 s stock corporation must own or be a subscriber to at least one (1)
share of the capital stock of the corporation.
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.
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.
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 he 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
intoshares 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
isshares 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
whichshares 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: Thathas 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 shall
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 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, thisday of.,
19in the City/Municipality of.,
Province of, Republic
of the Philippines.
(Names and
signatures of the incorporators)
SIGNED IN THE
PRESENCE OF:
(Notarial
Acknowledgment)
chanroblesvirtualawlibrary
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., thisday 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 if 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.
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.
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.
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.
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.
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.
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 IIIBOARD OF
DIRECTORS/TRUSTEES/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.
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 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.
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.
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.
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.
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 without cause may not
be used to deprive minority stockholders or members of the right of
representation
to which they may be entitled under Section 24 of this Code.
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 still
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.
A
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.
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 pre 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.
Sec. 31. Liability
of directors, trustees or officers. - Directors or
trustees
who willfully 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.
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 nor 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.
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.
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.
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 IVPOWERS 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.
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
the 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. (28 1/2a)
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.
(n)
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 VBY 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 VIMEETINGS
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 Secretaries 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 been chosen one of their number as presiding officer. (24,
26)
Sec. 51. Place
and time of meetings of stockholders or
members.
- Stockholders' or members' 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
canceled 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
canceled 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 VIISTOCKS 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. Considering
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 endorsed 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.
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
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 VIIICORPORATE
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, 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; B. P. 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 IXMERGER 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
or merger or consolidation. - The merger or
consolidation
shall have the following effects:cralaw:red
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 XAPPRAISAL
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 canceled,
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 XINON-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 OFFICERS
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 INNON-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 XIICLOSE
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 applicable if the transfer of stock, though contrary to subsections
(1), (2) of (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) canceling or
altering
any provision contained in the articles of incorporation, by-laws, or
any
stockholder's agreement; (2) canceling, 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 XIIISPECIAL
CORPORATIONSChapter 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 XIVDISSOLUTION
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 XVFOREIGN
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 it 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 XVIMISCELLANEOUS
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,
business 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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