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Section 16 Amendment of

Articles of Incorporation
-Unless otherwise stated, amendment
of the articles may be done
-Voted by the Board or written assent
by stockholders representing 2/3 of
the outstanding Capital Stock
-The dissent of minority will be
disregarded without prejudice
-Vote of 2/3 of members of a non-stock
corporation will not be honored
-Provisions required by the law shall
always be included
-Underscore changes made and
submit a copy certified by the
corporate secretary and the Board
-Amendment will take effect on date of
approval or on the date of filing if not
acted upon within 6 mos.
Power to Amend
-Sections 16, 37 and 38

37: Shortening or extension of


corporate terms
38: Increase or decrease in
Capital Stock
16: others

Necessity of
Stockholders/Members Meeting
-May be affected by written assent of
stockholders representing 2/3 of
outstanding capital stock
*may be affected lang so di required
and written assent
Cases when meeting is necessary and
written assent is insufficient:
1. Extension or shortening of
corporate terms (sec 37)

2. In a close corporation, on
matters mentioned in Section
103
Limitations on Power to Amend
1. Amendments contrary to law
are invalid
2. Amendments must be for
legitimate purposes
3. Must be approved by required
vote
4. Both articles must contain
provisions required by law
5. Indicated changes and submit a
copy certified by the corporate
secretary and the Board
6. Changes will take effect on date
of approval or on date of filing if
not acted upon within 6 mos.
7. Corporations governed by
special laws (banks, banking
corps., building and loan, etc.)
must accompany their articles
with favorable recommendation
by the appropriate government
agency (section 17, par 2)
*Foreign corporations are only
required to file. Amendments
will take effect within 60 days.
Filing shall not of itself, enlarge
or alter the purpose for which it
is authorized. (secs. 130, 125)
Section 17 Grounds When
Articles of Incorporation or
Amendment May Be Rejected or
Disapproved
Corporations will be given time
to correct objectionable portions
Grounds:
1. Not substantially in accordance
with the prescribed form
2. Purpose of corporation is
unconstitutional, illegal,

immoral, or contrary to
government rules & regulations
3. Treasurers Affidavit regarding
the amount of capital stock is
false
4. Percentage of ownership of
capital stock to be owned by PH
citizens has not been complied
with
*grounds are not exclusive
Corporations governed by special laws
(banks, banking corporations, building
and loan, etc.) must accompany their
articles with favorable
recommendation by the appropriate
government agency
1. SEC is required to give
corporations reasonable time to
correct objectionable
portions/portions that did not
comply with the requirements of
the Code (sections 14-16)
2. Corporations governed by
special laws (banks, banking
corps., building and loan, etc.)
must accompany their articles
with favorable recommendation
by the appropriate government
agency
3. The Articles of Incorporation will
not be accepted without a
sworn statement by the
treasurer showing amount of
subscribed and paid
outstanding capital stock (Sec.
14, last par.)
Suspension or Revocation of the
Certificate of Registration of
Corporations
Presidential Decree No. 902-A
Grounds:

1. Fraud in procuring its certificate


of incorporation
2. Serious misrepresentation as to
what the corporation as to what
the corporation can do or is
doing to the great prejudice of,
or damage to, the general
public (so copy-paste siya kasi
di ko masyado gets HAHA
sorry)
3. Refusal to comply with or
defiance of an order by SEC
4. Continuous inoperation 5
years
5. Failure to file by-laws
6. Failure to file required reports in
appropriate forms (Sec. 6[i], PD.
No. 902-A)
Section 18 Corporate
Name
-No corporate name will be allowed if
the proposed name is identical or
deceptively/confusingly similar to any
other name already protected by law
-Bawal contrary to law
-When name has been changed, SEC
shall issue a new certificate with the
corporations new name
Change of Corporate Name
1. Requirements
a. Comply with formalities of
law
b. Amendment of articles of
incorporation and filing of
amendment with SEC
(approval by stockholders is
not sufficient)
2. Effect
a. Does not affect rights of the
corporation
b. Sue and be sued in new
name

Section 19
Commencement of
Corporate Existence
A corporation has corporate existence
and juridical personality when
organized under the Code and when
SEC has issued a certificate of
incorporation under its official seal.
Members shall operate under the
corporate name for the period
mentioned.
Acquisition of Juridical Personality
1. Issuance of certificate of
incorporation
a. COI = final determination of
right to do business and to
enter into contracts
b. COI = charter/corporate
franchise from which
authority flows
c. Corporation must organize
within 2 years from date of
incorporation
2. Filing of articles of incorporation
- In case of religious
corporations, the SEC is not
required to issue a certificate
of incorporation
- Sec. 112: Chief Archbishop,
etc., = corporate sole after
filing the articles
3. Registration of Cooperatives
- Upon registration with
Cooperatives Development
Authority (RA no. 6938, sec.
16)

Section 20 De Facto
Corporations
De jure: according to law
-

Strict/substantial conformity
with requirements

Right to exist cannot be


successfully questioned by
ANY party

De facto: in fact
-

For practical purposes


No legal right to exist
Sufficiently complied with
requirements to be accorded
corporate status against 3rd
parties, not against the State

Requisites (de facto):


1. Valid law under which the
corporation might be
incorporated
2. Bona fide attempt to organize
under such law
3. Actual user or exercise in good
faith of corporate power
Existence of Law
1. Law void, unconstitutional
2. Purpose of corporation is not
contrary to law
3. Presence of law expressly
permitting practice of such
profession
Bona Fide Attempt to Incorporate
Intent to create a de jure
corporation is insufficient
There must be an attempt to
create a de jure corporation and
to comply with the
requirements
1. Creation precluded
- Absence of the articles of
incorporation
- Failure to file articles with
SEC
- Absence of certificate of
incorporation from SEC
2. Creation of de facto corporation
results from:
- Name (see sec. 18)

Incorporators or a certain
number of them are not PH
residents
Acknowledgement of
certificate/articles of
incorporation is insufficient
or done before a person
without authority

User in Good Faith


1. User contemplated
- Acts must be transacted as a
corporation and under
corporate forms
- Business performed can only
be carried on by
corporations
2. Duty to correct defect if
discovered
- Good faith
- If members of the
corporation discover that
they havent complied
substantially, they must act
to correct such defects

1. Uphold State rights


2. Prevent confusion and hardship
3. Public interest and transaction
validity
Section 21 Corporation by
Estoppel
Person/s who did corporate acts
knowing that the corporation
operates without authority shall
be liable
Lack of corporate existence
cannot be used as a defense
against acts entered into as
corporations
Obligations must still be
performed
-

Questioning Validity of Corporate


Existence
-

State must bring direct


proceeding (quo warranto)
against the de facto
corporation

Direct Attack
-

Proceeding brought for this


purpose by the State
Only through Solicitor
General (sec. 20; 121)

Collateral Attack
-

Incidental proceeding

Reason for the rule against collateral


attack

Corporation by estoppel has


no real legal existence
Neither de jure nor de facto
Element of estoppel is
present (duh)
Exists only between people
who misrepresented vs.
people who relied on the
misrepresentation
(Nagpaasa vs. Umasa)
Can be questioned by any 3rd
party except where [arty is
estopped to treat entity
other than as a corporation
(Umasa lang talaga kahit
sinabi nang walang pag-asa)

Section 22 Effect of
Non-Use of Corporate
Charter and Continuous
Inoperation as a
Corporation
Failure to organize within 2
years after incorporation
Failure to operate for at least 5
years after organization
Not applicable if reason for
failure is beyond corporations
control

Mandatory vs. Directory


Provisions
Mandatory designed to protect
public
Directory inconsequential
Conditions Precedent
Non-compliance (or hindi
substantial compliance) = nonexistence; examples:
- articles of incorporation filed
with SEC (sec. 14)
- certificate of incorporation
from SEC (sec. 19)
- Incorporators 5 (sec. 10)
- 25% of capital stock,
subscribed; 25% of which,
paid (sec. 13)
Conditions Subsequent
1. 2 required acts of organization
and commencement
2. Failure may not affect corporate
existence; ground for State to
forfeit charter (ex. Keeping of
books and records, sec. 74)

Organization and Commencement


1. Acts (formal organization)
- Adoption of by-laws
- Election of Board and officers
2. Substantial compliance
sufficient
3. Acts (Commencement)
- Preparatory acts towards
fulfillment of purpose
- Examples:
a. Lease/sale of properties
for business
b. Plans for construction
c. Steps taken to expedite
the construction
4. Effect of subsequent continuous
inoperation
- Grounds for suspension
- Notice and hearing are
required (PD No. 902-A)
- Not applicable for reasons
beyond control of
corporation