You are on page 1of 4

Section 2 Artificial being a separate entity (it can incur its own debts and liabilities), not tied

ed to any person or group of people; several rights that we would consider to be individual rights have been given to corporations Can require properties Created by operation of law With a right to succession can virtually live forever; virtually unlimited profit Has the powers, attributes, and properties as expressly authorized by law or incidence to its existence Section 3 Stock a. Have capital stock divided into shares and are authorized to distribute to the holders of shares dividends or allotments of the surplus profits on the basis of the shares b. Composition: stockholders Non-Stock a. All other private corporations Section 6 (Classification of Shares) Corporation may divide shares of stock or series of shares Common share with right to vote Preferred share has preference over dividends and distribution of assets upon liquidation; right to vote may be restricted Redeemable share is purchased or taken up by the corporation upon the expiration of a fixed period (Sec. 8); right to vote may be restricted Can also be both preferred and redeemable Approval of the following by the stockholders is necessary (In all of these cases, even non-voting stocks, or non-voting members, as the case may be, will be entitled to vote): (1) Amendment of articles of incorporation; (2) Increase and decrease of capital stock; (3) Incurring, creating or increasing bonded indebtedness; (4) Sale, lease, mortgage or other disposition of substantially all corporate assets; (5) Investment of funds in another business or corporation or for a purpose other than the primary purpose for which the corporation was organized; (6) Adoption, amendment and repeal of by-laws; (7) Merger and consolidation; (8) Dissolution of corporation Sec. 10 (Number and Qualifications of incorporators) Any number of natural persons not less than 5; not more than 15 Of legal age Majority should be residents of the Philippines Each of the incorporators must own or a be subscriber to at least one capital stock May form a corporation for any lawful purpose or purposes Sec 11. (Corporate Term) Shall exist for a period not exceeding 50 years May be extended for periods not extending 50 years Sec. 13 (Amount of capital stock to be subscribed and paid for the purposes of incorporation) 25% of the authorized capital stock as stated in the articles of incorporation must be subscribed at the end of incorporation 25% of the total subscription must be paid upon subscription 25% of 25% Sec. 14 (Contents of Articles of incorporation) constitution, foundation, groundwork of the corporation Corporate name Primary purpose Principal office

Term of existence Incorporators Number of directors or trustees Names, nationalities & residences of the directors or trustees who will act as such until the first regular directors or trustees are elected If a stock corporation, amount of authorized capital stock must be stated 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 Other matters Treasurer who has been chosen by the pre-incorporation subscribers/members to receive on behalf of the corporation, all subscriptions /contributions paid by them 25% of 25% rule to be certified by Treasurer; paid up capital should not be less than P5,000

Sec. 15 (Form of Articles of Incorporation) See PDF Public utilities corporations need to be completely owned by Filipino citizens Sec. 16 (Amendment of Articles of Incorporation) 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. Amendments take effect only from the approval by the SEC. However, such approval or rejection must be made within six months of filing of amendment; otherwise it shall take effect even w/o such approval (as of the date of filing), unless cause of delay is attributable to the corporation. Sec. 18 (Corporate name) No corporate name may be allowed by the SEC if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected 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) It is only upon such issuance that the corporation acquires juridical personality Certificate of incorporation issued by the SEC corporations existence as a legal entity commences Sec. 23 (Board of Directors or Trustees) As long as the qualifications imposed are reasonable and not meant to unjustly or unfairly deprive the minority of their rightful representation in the BOD, such provisions are within the power of the majority to provide in the by-laws. 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. In non-stock corporations, trustees must be members of the corporation Sec. 24 (Election of directors and trustees) The BOD is responsible for corporate policies and the general management of the business affairs of the corporation. 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 Must by ballot if requested by any voting stockholder The formula for determining the number of shares needed to elect a given number of directors is as follows:

X = Y x N1 N+1

+1

X = being the number of shares needed to elect a given number of directors Y = being the total number of shares present or represented at the meeting N1 = being the number of directors desired to be elected N = being the total number of directors to be elected Sec. 25 (Corporate officers, quorum) The minimum set of officers are: (1) president (who shall be a director); (2) secretary (who shall be a resident and Filipino citizen); an (3) treasurer (who may or may not be a director) The by-laws, however, may provide for other officers. Any 2 or more positions may be held concurrently by the same person, except that no one shall act as (a) president and secretary, or (b) president and treasurer at the same time. Sec. 27 (Disqualification of Directors, Trustees or officers) Conviction by final judgment of an offense punishable by imprisonment > 6 yrs. Violation of Corporation Code committed within 6 yrs. prior to the date of election or appointment Sec. 28 (Removal of directors or trustees) By a vote of the SHs holding or representing at least 2/3 of the outstanding capital stock, or by a vote of at least 2/3 of the members entitled to vote, provided that such removal takes place at either a regular meeting of the corporation or at a special meeting called for the purpose. In both cases, there must be previous notice to the SHs / members of the intention to propose such removal at the meeting. Removal may be with or without cause. However, removal without cause may not be used to deprive minority SHs or members of the right of representation to which they may be entitled under Sec. 24 of the Code. Sec. 30 (Compensation of directors) If provided in by-laws: That compensation stated in the by-laws. If not provided in by-laws: Directors shall not receive any compensation other than reasonable per diems, as directors. However, compensation other than per diems may be granted to directors by a majority vote of the SHs at a regular or special stockholders' meeting. Note: In no case shall the total yearly compensation of directors, as such directors, exceed 10% of the net income before income tax of the corporation during the preceding year. Sec. 31 (Liability of directors, trustees, or officers) Arises when they either (1) willfully and knowingly vote for or assent to patently unlawful acts of the corporation; or (2) are guilty of gross negligence of bad faith in directing the affairs of the corporation; or (3) acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees. In such cases, the 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 would otherwise have accrued to the corporation. Sec. 36 (Corporate powers and capacity) To sue and be sued in its corporate name

Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of incorporation; To adopt and use a corporate seal; To amend its articles of incorporation in accordance with the provisions of this Code; To adopt by-laws not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this Code In case of stock corporations, to issue of 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 nonstock corporation; To purchase, receive, take, 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; (NOTE: There are two (2) general restrictions on the power of the corp. to acquire and hold properties: (1) that the property must be reasonable and necessarily required by the transaction of its lawful business, and (2) that the power shall be subject to the limitations prescribed by other special laws and the Constitution.) To adopt any plan of merger or consolidation as provided in this Code; To make reasonable donations, including those for the public welfare of 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; To establish pension, retirement and other plans for the benefit of its directors, trustees, officers and employees; and To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in its articles of incorporation.

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.