Section 2 Corporation, definition
Section 3 Stock Corporation
Section 87 Non-stock Corporation
Section 6 Classification of Share
Section 12. Minimum capital stock required of
stock corporations.
Section 13. Amount of capital stock to be subscribed
and paid for the purposes of incorporation
The Trust Fund Doctrine
Powers of Corporations
Appraisal Right
Definition
Instances
Derivative Suits
Definition
Requisites
Section 2. Corporation defined
A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its
existence. (2)
Section 3. 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.
Section 87. non-stock corporation
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.
Section 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:
Insolvent
Rehabilitation
Liquidation
FRIA Section 64
Section 12
Section 13
Claim, definition
Section 76
Section 84 percentage of approval only
Exceptions to suspension order
Patent
Copyright
Trademark
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 assets and property unless the stringent requirements therefor
matters: are complied with.
1. Amendment of the articles of incorporation;
POWERS OF CORPORATIONS
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other
Sec. 36. Corporate powers and capacity.
disposition of all or substantially all of the corporate
Sec. 37. Power to extend or shorten corporate term.
property;
(Appraisal Right, in case of extension; 2/3(
4. Incurring, creating or increasing bonded indebtedness;
Sec. 38. Power to increase or decrease capital stock;
5. Increase or decrease of capital stock;
incur, create or increase bonded indebtedness. (2/3
6. Merger or consolidation of the corporation with another
vote)
corporation or other corporations;
Sec. 39. Power to deny pre-emptive right. (2/3 vote)
7. Investment of corporate funds in another corporation or
Sec. 40. Sale or other disposition of assets. (Appraisal right;
business in accordance with this Code; and
2/3 vote)
8. Dissolution of the corporation.
Sec. 41. Power to acquire own shares.
Sec. 42. Power to invest corporate funds in another
Except as provided in the immediately preceding paragraph, the
corporation or business or for any
vote necessary to approve a particular corporate act as provided
other purpose. (Appraisal Right;(2/3 vote)
in this Code shall be deemed to refer only to stocks with voting
Sec. 43. Power to declare dividends. (In case of stock
rights. (5a)
dividends, 2/3 vote)
Sec. 44. Power to enter into management contract.
Section 12. Minimum capital stock required of stock
corporations. – Stock corporations incorporated under this Code (majority, 2/3 vote)
shall not be required to have any minimum authorized capital
EXPRESS - Section 36, Section 45
stock except as otherwise specifically provided for by special
POWER TO SUE
law, and subject to the provisions of the following section.
• directors if not derivative suit
Section 13. Amount of capital stock to be subscribed and paid for • failure to attach Secretary’s
the purposes of incorporation. – At least twenty-five percent Certificate of Board Resolution
(25%) of the authorized capital stock as stated in the articles of authorizing the filing of Petition
incorporation must be subscribed at the time of incorporation, is fatal
POWER TO SELL, LEASE, DISPOSE or ENCUMBER - Section
and at least twenty-five (25%) per cent of the total subscription
23, Section 36
must be paid upon subscription, the balance to be payable on a
POWER OF SUCCESSION
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 POWER TO EXTEND CORPORATE TERM
payment by the board of directors: Provided, however, That in POWER TO INCREASE DECREASE CAPITAL STOCK
no case shall the paid-up capital be less than five Thousand (Section 38) APPRAISAL RIGHT
POWER TO INCUR, CREATE OR INCREASE BONDED
(P5,000.00) pesos. (n)
INDEBTEDNESS (Section 38)

The Trust Fund Doctrine, first enunciated by this Court in the IMPLIED - flow from the nature of the underlying
1923 case of Philippine Trust Co. vs. Rivera, provides that business enterprise; discretionary authority to
subscriptions to the capital stock of a corporation constitute a enter into contracts necessary for business.
fund to which the creditors have a right to look for the
satisfaction of their claims. i.e., non-realty corporation has the implied
This doctrine is the underlying principle in the procedure for the power to lease out idle property’ invest money
distribution of capital assets, embodied in the Corporation Code, at the best possible returns
which allows the distribution of corporate capital only in three
POWER TO BORROW MONEY except Section
instances:
38
(1) amendment of the Articles of Incorporation to reduce
the authorized capital stock, INCIDENTAL - flow from the nature of the
(2) purchase of redeemable shares by the corporation, corporation as a juridical person
regardless of the existence of unrestricted retained
earnings, and Sec. 36. Corporate powers and capacity. - Every
(3) dissolution and eventual liquidation of the corporation incorporated under this Code has the
corporation. power and capacity:

Furthermore, the doctrine is articulated in Section 41 on the 1. To sue and be sued in its corporate name;
power of a corporation to acquire its own shares and in Section
122 on the prohibition against the distribution of corporate
 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.
APPRAISAL RIGHT Section 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
Section 1. Derivative action. — A stockholder or member may
bring an action in the name of a corporation or association, as
the case may be, provided, that:
(1) He was a stockholder or member at the time the acts or
transactions subject of the action occurred and the time
the action was filed;
(2) He exerted all reasonable efforts, and alleges the same with
particularity in the complaint, to exhaust all remedies
available under the articles of incorporation, by-laws, laws
or rules governing the corporation or partnership to
obtain the relief he desires;
(3) No appraisal rights are available for the acts or acts
complained of; and
(4) The suit is not a nuisance or harassment suit.
In case of nuisance of harassment suit, the court shall forthwith
dismiss the case.
An individual stockholder is permitted to institute a derivative
suit on behalf of the corporation wherein he holds stocks in
order to protect or vindicate corporate rights, whenever the
officials of the corporation refuse to sue, or are the ones to be
sued, or hold the control of the corporation.
In such actions, the suing stockholder is regarded as a nominal
party, with the corporation as the real party in interest.
A derivative action is a suit by a shareholder to enforce a
corporate cause of action.
The corporation is a necessary party to the suit. And the relief
which is granted is a judgment against a third person in favor of
the corporation.
Cram down
Section 64.Creditor Approval of Rehabilitation Plan. – The
rehabilitation receiver shall notify the creditors and
stakeholders that the Plan is ready for their examination. Within
twenty (2Q) days from the said notification, the rehabilitation
receiver shall convene the creditors, either as a whole or per
class, for purposes of voting on the approval of the Plan. The
Plan shall be deemed rejected unless approved by all classes of
creditors w hose rights are adversely modified or affected by the
Plan. For purposes of this section, the Plan is deemed to have
been approved by a class of creditors if members of the said
class holding more than fifty percent (50%) of the total claims
of the said class vote in favor of the Plan. The votes of the
creditors shall be based solely on the amount of their respective
claims based on the registry of claims submitted by the
rehabilitation receiver pursuant to Section 44 hereof.
Notwithstanding the rejection of the Rehabilitation Plan, the
court may confirm the Rehabilitation Plan if all of the following
circumstances are present:
(a)The Rehabilitation Plan complies with the
requirements specified in this Act.
(b) The rehabilitation receiver recommends the
confirmation of the Rehabilitation Plan;
(c) The shareholders, owners or partners of the
juridical debtor lose at least their controlling interest
as a result of the Rehabilitation Plan; and
(d) The Rehabilitation Plan would likely provide the objecting
class of creditors with compensation which has a net present
value greater than that which they would have received if the
debtor were under liquidation.
Section 86. Cram Down Effect. - A restructuring/workout
agreement or Rehabilitation Plan that is approved pursuant to
an informal workout framework referred to in this chapter shall
have the same legal effect as confirmation of a Plan under
Section 69 hereof. The notice of the Rehabilitation Plan or
restructuring agreement or Plan shall be published once a week
for at least three (3) consecutive weeks in a newspaper of
general circulation in the Philippines. The Rehabilitation Plan or
restructuring agreement shall take effect upon the lapse of
fifteen (15) days from the date of the last publication of the
notice thereof.
Section 12. Petition to Initiate Voluntary Proceedings by Debtor.
- When approved by the owner in case of a sole proprietorship,
or by a majority of the partners in case of a partnership, or in
case of a corporation, by a majority vote of the board of directors
or trustees and authorized by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital
stock, or in case of nonstock corporation, by the vote of at least
two-thirds (2/3) of the members, in a stockholder's or
member's meeting duly called for the purpose, an insolvent
debtor may initiate voluntary proceedings under this Act by
filing a petition for rehabilitation with the court and on the
grounds hereinafter specifically provided. The petition shall be
verified to establish the insolvency of the debtor and the
viability of its rehabilitation, and include, whether as an
attachment or as part of the body of the petition, as a minimum
the following:
(a) Identification of the debtor, its principal activities
and its addresses;
(b) Statement of the fact of and the cause of the
debtor's insolvency or inability to pay its obligations
as they become due;
(c) The specific relief sought pursuant to this Act;
(d) The grounds upon which the petition is based;
(e) Other information that may be required under
this Act depending on the form of relief requested;
(f) Schedule of the debtor's debts and liabilities
including a list of creditors with their addresses,
amounts of claims and collaterals, or securities, if
any;
(g) An inventory of all its assets including receivables
and claims against third parties;
(h) A Rehabilitation Plan;
(i) The names of at least three (3) nominees to the
position of rehabilitation receiver; and
(j) Other documents required to be filed with the
petition pursuant to this Act and the rules of
procedure as may be promulgated by the Supreme
Court.
A group of debtors may jointly file a petition for rehabilitation
under this Act when one or more of its members foresee the
impossibility of meeting debts when they respectively fall due,
and the financial distress would likely adversely affect the
financial condition and/or operations of the other members of
the group and/or the participation of the other members of the
group is essential under the terms and conditions of the
proposed Rehabilitation Plan.
(2) Involuntary Proceedings.
Section 13. Circumstances Necessary to Initiate Involuntary
Proceedings. - Any creditor or group of creditors with a claim of,
or the aggregate of whose claims is, at least One Million Pesos
(Php1,000,000.00) or at least twenty-five percent (25%) of the
subscribed capital stock or partners' contributions, whichever
is higher, may initiate involuntary proceedings against the
debtor by filing a petition for rehabilitation with the court if:
(a) there is no genuine issue of fact on law on the
claim/s of the petitioner/s, and that the due and
demandable payments thereon have not been made
for at least sixty (60) days or that the debtor has
failed generally to meet its liabilities as they fall due;
or
(b) a creditor, other than the petitioner/s, has
initiated foreclosure proceedings against the debtor
that will prevent the debtor from paying its debts as
they become due or will render it insolvent.
Section 76. Petition by Debtor. - An insolvent debtor, by itself or
jointly with any of its creditors, may file a verified petition with
the court for the approval of a pre-negotiated Rehabilitation
Plan which has been endorsed or approved by creditors holding
at least two-thirds (2/3) of the total liabilities of the debtor,
including secured creditors holding more than fifty percent
(50%) of the total secured claims of the debtor and unsecured
creditors holding more than fifty percent (50%) of the total
unsecured claims of the debtor. The petition shall include as a
minimum:
(a) a schedule of the debtor's debts and liabilities;
(b) an inventory of the debtor's assets;
(c) the pre-negotiated Rehabilitation Plan, including
the names of at least three (3) qualified nominees for
rehabilitation receiver; and
(d) a summary of disputed claims against the debtor
and a report on the provisioning of funds to account
for appropriate payments should any such claims be
ruled valid or their amounts adjusted.
Section 84. Minimum Requirements of Out-of-Court or Informal
Restructuring Agreements and Rehabilitation Plans.- For an out-
of-court or informal restructuring/workout agreement or
Rehabilitation Plan to qualify under this chapter, it must meet
the following minimum requirements:
(a) The debtor must agree to the out-of-court or
informal restructuring/workout agreement or
Rehabilitation Plan;
(b) It must be approved by creditors representing at
least sixty-seven (67%) of the secured obligations of
the debtor;
(c) It must be approved by creditors representing at
least seventy-five percent (75%) of the unsecured
obligations of the debtor; and
(d) It must be approved by creditors holding at least
eighty-five percent (85%) of the total liabilities,
secured and unsecured, of the debtor.
Insolvent
Rehabilitation
Liquidation
PATENT (Sec. 21)
Any technical solution of a problem in any field of human
activity which is new, involves an inventive step and is
industrially applicable shall be patentable. It may be, or
may relate to, a product, or process, or an improvement of
any of the foregoing.
COPYRIGHT (Sec. 171.1)
A right over literary and artistic works which are original
intellectual creations in the literary and artistic domain
protected from the moment of creation.
TRADEMARK (Sec. 121.1)
Any visible sign capable of distinguishing the goods
(trademark) or services (service mark) of an enterprise
and shall include a stamped or marked container of
goods.