Batas Pambansa Bilang 68

Corporation Code of the Philippines

TITLE I
GENERAL PROVISIONS
DEFINITIONS AND CLASSIFICATIONS
Section 1. Title of the Code. – This Code shall be known as "The
Corporation Code of the Philippines." (n)
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. Classes of corporations. – Corporations formed or organized
under this Code may be stock or non-stock corporations. Corporations
which have capital stock divided into shares and are authorized to distribute
to the holders of such shares dividends or allotments of the surplus profits
on the basis of the shares held are stock corporations. All other corporations
are non-stock corporations. (3a)
Section 4. Corporations created by special laws or charters. – Corporations
created by special laws or charters shall be governed primarily by the
provisions of the special law or charter creating them or applicable to them,
supplemented by the provisions of this Code, insofar as they are applicable.
(n)
Section 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.

Page 1 of 78
Corporators in a stock corporation are called stockholders or shareholders.
Corporators in a non-stock corporation are called members. (4a)
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: 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.

Page 2 of 78
A corporation may, furthermore, classify its shares for the purpose of
insuring compliance with constitutional or legal requirements.
Except as otherwise provided in the articles of incorporation and stated in
the certificate of stock, each share shall be equal in all respects to every
other share.
Where the articles of incorporation provide for non-voting shares in the
cases allowed by this Code, the holders of such shares shall nevertheless be
entitled to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation
or other corporations;
7. Investment of corporate funds in another corporation or business in
accordance with this Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote
necessary to approve a particular corporate act as provided in this Code
shall be deemed to refer only to stocks with voting rights. (5a)
Section 7. Founders’ shares. – Founders’ shares classified as such in the
articles of incorporation may be given certain rights and privileges not
enjoyed by the owners of other stocks, provided that where the exclusive
right to vote and be voted for in the election of directors is granted, it must
be for a limited period not to exceed five (5) years subject to the approval of
the Securities and Exchange Commission. The five-year period shall
commence from the date of the aforesaid approval by the Securities and
Exchange Commission. (n)
Page 3 of 78
Section 8. Redeemable shares. – Redeemable shares may be issued by the
corporation when expressly so provided in the articles of incorporation.
They may be purchased or taken up by the corporation upon the expiration
of a fixed period, regardless of the existence of unrestricted retained
earnings in the books of the corporation, and upon such other terms and
conditions as may be stated in the articles of incorporation, which terms and
conditions must also be stated in the certificate of stock representing said
shares. (n)
Section 9. Treasury shares. – Treasury shares are shares of stock which
have been issued and fully paid for, but subsequently reacquired by the
issuing corporation by purchase, redemption, donation or through some
other lawful means. Such shares may again be disposed of for a reasonable
price fixed by the board of directors. (n)
TITLE II
INCORPORATION AND ORGANIZATION OF PRIVATE
CORPORATIONS
Section 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. (6a)
Section 11. Corporate term. – A corporation shall exist for a period not
exceeding fifty (50) years from the date of incorporation unless sooner
dissolved or unless said period is extended. The corporate term as originally
stated in the articles of incorporation may be extended for periods not
exceeding fifty (50) years in any single instance by an amendment of the
articles of incorporation, in accordance with this Code; Provided, That no
extension can be made earlier than five (5) years prior to the original or
subsequent expiry date(s) unless there are justifiable reasons for an earlier
extension as may be determined by the Securities and Exchange
Commission. (6)
Page 4 of 78
Section 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.
Section 13. Amount of capital stock to be subscribed and paid for the
purposes of incorporation. – At least twenty-five percent (25%) of the
authorized capital stock as stated in the articles of incorporation must be
subscribed at the time of incorporation, and at least twenty-five (25%) per
cent of the total subscription must be paid upon subscription, the balance to
be payable on a date or dates fixed in the contract of subscription without
need of call, or in the absence of a fixed date or dates, upon call for payment
by the board of directors: Provided, however, That in no case shall the paid-
up capital be less than five Thousand (P5,000.00) pesos. (n)
Section 14. Contents of the articles of incorporation. – All corporations
organized under this code shall file with the Securities and Exchange
Commission articles of incorporation in any of the official languages duly
signed and acknowledged by all of the incorporators, containing
substantially the following matters, except as otherwise prescribed by this
Code or by special law:
1. The name of the corporation;
2. The specific purpose or purposes for which the corporation is being
incorporated. Where a corporation has more than one stated purpose,
the articles of incorporation shall state which is the primary purpose
and which is/are the secondary purpose or purposes: Provided, That a
non-stock corporation may not include a purpose which would change
or contradict its nature as such;
3. The place where the principal office of the corporation is to be
located, which must be within the Philippines; Domicile
4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the incorporators;

Page 5 of 78
 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.
Section 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

Page 6 of 78
 __________________________
(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
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
Page 7 of 78
 ____ ____ ____
_______________ _______________ _______________
____ ____ ____
SIXTH: That the number of directors or trustees of the corporation shall be
_______; and the names, nationalities and residences of the first directors or
trustees of the corporation are as follows:
NAME NATIONALITY RESIDENCE
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
SEVENTH: That the authorized capital stock of the corporation is
______________________ (P___________) PESOS in lawful money of the
Philippines, divided into __________ shares with the par value of
____________________ (P_____________) Pesos per share.
(In case all the share are without par value):
That the capital stock of the corporation is ______________ shares without
par value. (In case some shares have par value and some are without par
value): That the capital stock of said corporation consists of _____________
shares of which ______________ shares are of the par value of
_________________ (P____________) PESOS each, and of which
_________________ shares are without par value.
Page 8 of 78
EIGHTH: That at least twenty five (25%) per cent of the authorized capital
stock above stated has been subscribed as follows:
Name of Nationality No. of Shares Amount
Subscriber Subscribed Subscribed
___________ ___________ ___________ ___________
________ ________ ________ ________
___________ ___________ ___________ ___________
________ ________ ________ ________
___________ ___________ ___________ ___________
________ ________ ________ ________
___________ ___________ ___________ ___________
________ ________ ________ ________
___________ ___________ ___________ ___________
________ ________ ________ ________
___________ ___________ ___________ ___________
________ ________ ________ ________
NINTH: That the above-named subscribers have paid at least twenty-five
(25%) percent of the total subscription as follows:
Name of Amount Total
Subscriber Subscribed Paid-In
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
_______________ _______________ _______________
____ ____ ____
Page 9 of 78
 _______________ _______________ _______________
____ ____ ____
(Modify Nos. 8 and 9 if shares are with no par value. In case the corporation
is non-stock, Nos. 7, 8 and 9 of the above articles may be modified
accordingly, and it is sufficient if the articles state the amount of capital or
money contributed or donated by specified persons, stating the names,
nationalities and residences of the contributors or donors and the respective
amount given by each.)
TENTH: That _____________________ has been elected by the subscribers
as Treasurer of the Corporation to act as such until his successor is duly
elected and qualified in accordance with the by-laws, and that as such
Treasurer, he has been authorized to receive for and in the name and for the
benefit of the corporation, all subscription (or fees) or contributions or
donations paid or given by the subscribers or members.
ELEVENTH: (Corporations which will engage in any business or activity
reserved for Filipino citizens shall provide the following):
"No transfer of stock or interest which 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 be recorded in the
proper books of the corporation and this restriction shall be indicated in all
stock certificates issued by the corporation."
IN WITNESS WHEREOF, we have hereunto signed these Articles of
Incorporation, this __________ day of ________________, 19 ______ in
the City/Municipality of ____________________, Province of
________________________, Republic of the Philippines.
___________________ ___________________
___________________ ___________________
________________________________
(Names and signatures of the incorporators)
Page 10 of 78
 SIGNED IN THE PRESENCE OF:
___________________ ___________________
(Notarial Acknowledgment)
TREASURER’S AFFIDAVIT
REPUBLIC OF THE PHILIPPINES)
CITY/MUNICIPALITY OF ) S.S.
PROVINCE OF )
I, ____________________, being duly sworn, depose and say:
That I have been elected by the subscribers of the corporation as Treasurer
thereof, to act as such until my successor has been duly elected and
qualified in accordance with the by-laws of the corporation, and that as such
Treasurer, I hereby certify under oath that at least 25% of the authorized
capital stock of the corporation has been subscribed and at least 25% of the
total subscription has been paid, and received by me, in cash or property, in
the amount of not less than P5,000.00, in accordance with the Corporation
Code.
____________________
(Signature of Treasurer)
SUBSCRIBED AND SWORN to before me, a Notary Public, for and in the
City/Municipality of___________________Province of
_____________________, this _______ day of ___________, 19 _____; by
__________________ with Res. Cert. No. ___________ issued at
_______________________ on ____________, 19 ______
NOTARY PUBLIC
My commission expires on _________, 19 _____
Doc. No. _________;
Page No. _________;
Book No. ________;
Page 11 of 78
Series of 19____ (7a)
Section 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.
Section 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;
Page 12 of 78
 2. That the purpose or purposes of the corporation are patently
unconstitutional, illegal, immoral, or contrary to government rules and
regulations;
3. That the Treasurer’s Affidavit concerning the amount of capital stock
subscribed and/or paid is false;
4. That the percentage of ownership of the capital stock to be owned by
citizens of the Philippines has not been complied with as required by
existing laws or the Constitution.
No articles of incorporation or amendment to articles of incorporation of
banks, banking and quasi-banking institutions, building and loan
associations, trust companies and other financial intermediaries, insurance
companies, public utilities, educational institutions, and other corporations
governed by special laws shall be accepted or approved by the Commission
unless accompanied by a favorable recommendation of the appropriate
government agency to the effect that such articles or amendment is in
accordance with law. (n)
Section 18. Corporate name. – No corporate name may be allowed by the
Securities and Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing corporation or to
any other name already protected by law or is patently deceptive, confusing
or contrary to existing laws. When a change in the corporate name is
approved, the Commission shall issue an amended certificate of
incorporation under the amended name. (n)
Section 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

Page 13 of 78
period of time mentioned therein, unless said period is extended or the
corporation is sooner dissolved in accordance with law. (n)
Section 20. De facto corporations. – The due incorporation of any
corporation claiming in good faith to be a corporation under this Code, and
its right to exercise corporate powers, shall not be inquired into
collaterally in any private suit to which such corporation may be a party.
Such inquiry may be made by the Solicitor General in a quo warranto
proceeding. (n)

Section 21. Corporation by estoppel. – All persons who assume to act as a

corporation knowing it to be without authority to do so shall be liable as
general partners for all debts, liabilities and damages incurred or arising as a
result thereof: Provided, however, That when any such ostensible
corporation is sued on any transaction entered by it as a corporation or on
any tort committed by it as such, it shall not be allowed to use as a defense
its lack of corporate personality.
On who assumes an obligation to an ostensible corporation as such, cannot
resist performance thereof on the ground that there was in fact no
corporation. (n)

Section 22. Effects on non-use of corporate charter and continuous

inoperation of a corporation. – If a corporation does not formally organize
and commence the transaction of its business or the construction of its
works within two (2) years from the date of its incorporation, its corporate
powers cease and the corporation shall be deemed dissolved. However, if a
corporation has commenced the transaction of its business but subsequently
becomes continuously inoperative for a period of at least five (5) years, the
same shall be a ground for the suspension or revocation of its corporate
franchise or certificate of incorporation. (19a)
This provision shall not apply if the failure to organize, commence the
transaction of its businesses or the construction of its works, or to
Page 14 of 78
continuously operate is due to causes beyond the control of the corporation
as may be determined by the Securities and Exchange Commission.
TITLE III
BOARD OF DIRECTORS/TRUSTEES AND OFFICERS
Section 23. The board of directors or trustees. – Unless otherwise provided
in this Code, the corporate powers of all corporations formed under this
Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be
elected from among the holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold office for one (1)
year until their successors are elected and qualified. (28a)
Every director must own at least one (1) share of the capital stock of the
corporation of which he is a director, which share shall stand in his name on
the books of the corporation. Any director who ceases to be the owner of at
least one (1) share of the capital stock of the corporation of which he is a
director shall thereby cease to be a director. Trustees of non-stock
corporations must be members thereof. A majority of the directors or
trustees of all corporations organized under this Code must be residents of
the Philippines.
Section 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
Page 15 of 78
distribute them on the same principle among as many candidates as he shall
see fit: Provided, That the total number of votes cast by him shall not exceed
the number of shares owned by him as shown in the books of the
corporation multiplied by the whole number of directors to be elected:
Provided, however, That no delinquent stock shall be voted. Unless
otherwise provided in the articles of incorporation or in the by-laws,
members of corporations which have no capital stock may cast as many
votes as there are trustees to be elected but may not cast more than one vote
for one candidate. Candidates receiving the highest number of votes shall be
declared elected. Any meeting of the stockholders or members called for an
election may adjourn from day to day or from time to time but not sine die
or indefinitely if, for any reason, no election is held, or if there are not
present or represented by proxy, at the meeting, the owners of a majority of
the outstanding capital stock, or if there be no capital stock, a majority of
the members entitled to vote. (31a)
Section 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.
Page 16 of 78
Directors or trustees cannot attend or vote by proxy at board meetings. (33a)
Section 26. Report of election of directors, trustees and officers. – Within
thirty (30) days after the election of the directors, trustees and officers of the
corporation, the secretary, or any other officer of the corporation, shall
submit to the Securities and Exchange Commission, the names, nationalities
and residences of the directors, trustees, and officers elected. Should a
director, trustee or officer die, resign or in any manner cease to hold office,
his heirs in case of his death, the secretary, or any other officer of the
corporation, or the director, trustee or officer himself, shall immediately
report such fact to the Securities and Exchange Commission. (n)
Section 27. Disqualification of directors, trustees or officers. – No person
convicted by final judgment of an offense punishable by imprisonment for a
period exceeding six (6) years, or a violation of this Code committed within
five (5) years prior to the date of his election or appointment, shall qualify
as a director, trustee or officer of any corporation. (n)
Section 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
Page 17 of 78
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. (n)
Section 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.
Any directorship or trusteeship to be filled by reason of an increase in the
number of directors or trustees shall be filled only by an election at a regular
or at a special meeting of stockholders or members duly called for the
purpose, or in the same meeting authorizing the increase of directors or
trustees if so stated in the notice of the meeting. (n)
Section 30. Compensation of directors. – In the absence of any provision in
the by-laws fixing their compensation, the directors shall not receive any
compensation, as such directors, except for reasonable per diems: Provided,
however, That any such compensation other than per diems may be granted
to directors by the vote of the stockholders representing at least a majority
of the outstanding capital stock at a regular or special stockholders’
meeting. In no case shall the total yearly compensation of directors, as such
directors, exceed ten (10%) percent of the net income before income tax of
the corporation during the preceding year. (n)
Section 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
Page 18 of 78
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 acquire, in
violation of his duty, any interest adverse to the corporation in respect of
any matter which has been reposed in him in confidence, as to which equity
imposes a disability upon him to deal in his own behalf, he shall be liable as
a trustee for the corporation and must account for the profits which
otherwise would have accrued to the corporation. (n)
Section 32. Dealings of directors, trustees or officers with the
corporation. – A contract of the corporation with one or more of its
directors or trustees or officers is voidable, at the option of such corporation,
unless all the following conditions are present:
1. That the presence of such director or trustee in the board meeting in
which the contract was approved was not necessary to constitute a
quorum for such meeting;
2. That the vote of such director or trustee was not necessary for the
approval of the contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in case of an officer, the contract has been previously
authorized by the board of directors.
Where any of the first two conditions set forth in the preceding
paragraph is absent, in the case of a contract with a director or trustee,
such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or
of at least two-thirds (2/3) of the members in a meeting called for the
purpose: Provided, That full disclosure of the adverse interest of the
directors or trustees involved is made at such meeting: Provided,
however, That the contract is fair and reasonable under the
circumstances. (n)
Page 19 of 78
Section 33. Contracts between corporations with interlocking directors. –
Except in cases of fraud, and provided the contract is fair and reasonable
under the circumstances, a contract between two or more corporations
having interlocking directors shall not be invalidated on that ground alone:
Provided, That if the interest of the interlocking director in one corporation
is substantial and his interest in the other corporation or corporations is
merely nominal, he shall be subject to the provisions of the preceding
section insofar as the latter corporation or corporations are concerned.
Stockholdings exceeding twenty (20%) percent of the outstanding capital
stock shall be considered substantial for purposes of interlocking directors.
(n)
Section 34. Disloyalty of a director. – Where a director, by virtue of his
office, acquires for himself a business opportunity which should belong to
the corporation, thereby obtaining profits to the prejudice of such
corporation, he must account to the latter for all such profits by refunding
the same, unless his act has been ratified by a vote of the stockholders
owning or representing at least two-thirds (2/3) of the outstanding capital
stock. This provision shall be applicable, notwithstanding the fact that the
director risked his own funds in the venture. (n)
Section 35. Executive committee. – The by-laws of a corporation may create
an executive committee, composed of not less than three members of the
board, to be appointed by the board. Said committee may act, by majority
vote of all its members, on such specific matters within the competence of
the board, as may be delegated to it in the by-laws or on a majority vote of
the board, except with respect to: (1) approval of any action for which
shareholders’ approval is also required; (2) the filing of vacancies in the
board; (3) the amendment or repeal of by-laws or the adoption of new by-
laws; (4) the amendment or repeal of any resolution of the board which by
its express terms is not so amendable or repealable; and (5) a distribution of
cash dividends to the shareholders.
TITLE IV
POWERS OF CORPORATIONS
Page 20 of 78
Section 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

Page 21 of 78
 11. To exercise such other powers as may be essential or necessary to
carry out its purpose or purposes as stated in the articles of
incorporation. (13a)
Section 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)
Section 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.

Page 22 of 78
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
Page 23 of 78
 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)
Section 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.
Section 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,
Page 24 of 78
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.

Page 25 of 78
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.
Section 41. Power to acquire own shares. – A stock corporation shall have
the power to purchase or acquire its own shares for a legitimate corporate
purpose or purposes, including but not limited to the following cases:
Provided, That the corporation has unrestricted retained earnings in its
books to cover the shares to be purchased or acquired:
1. To eliminate fractional shares arising out of stock dividends;
2. To collect or compromise an indebtedness to the corporation, arising
out of unpaid subscription, in a delinquency sale, and to purchase
delinquent shares sold during said sale; and
3. To pay dissenting or withdrawing stockholders entitled to payment
for their shares under the provisions of this Code. (a)
Section 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

Page 26 of 78
primary purpose as stated in the articles of incorporation, the approval of the
stockholders or members shall not be necessary. (17 1/2a)
Section 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)
Section 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
Page 27 of 78
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)
Section 45. Ultra vires acts of corporations. – No corporation under this
Code shall possess or exercise any corporate powers except those conferred
by this Code or by its articles of incorporation and except such as are
necessary or incidental to the exercise of the powers so conferred. (n)
TITLE V
BY LAWS
Section 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
Page 28 of 78
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)
Section 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;
Page 29 of 78
 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)
Section 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.

Page 30 of 78
The amended or new by-laws shall only be effective upon the issuance by
the Securities and Exchange Commission of a certification that the same are
not inconsistent with this Code. (22a and 23a)
TITLE VI
MEETINGS
Section 49. Kinds of meetings. – Meetings of directors, trustees,
stockholders, or members may be regular or special. (n)
Section 50. Regular and special meetings of stockholders or members. -
Regular meetings of stockholders or members shall be held annually on a
date fixed in the by-laws, or if not so fixed, on any date in April of every
year as determined by the board of directors or trustees: Provided, That
written notice of regular meetings shall be sent to all stockholders or
members of record at least two (2) weeks prior to the meeting, unless a
different period is required by the by-laws.
Special meetings of stockholders or members shall be held at any time
deemed necessary or as provided in the by-laws: Provided, however, That at
least one (1) week written notice shall be sent to all stockholders or
members, unless otherwise provided in the by-laws.
Notice of any meeting may be waived, expressly or impliedly, by any
stockholder or member.
Whenever, for any cause, there is no person authorized to call a meeting, the
Securities and Exchange Commission, upon petition of a stockholder or
member on a showing of good cause therefor, may issue an order to the
petitioning stockholder or member directing him to call a meeting of the
corporation by giving proper notice required by this Code or by the by-laws.
The petitioning stockholder or member shall preside thereat until at least a
majority of the stockholders or members present have chosen one of their
number as presiding officer. (24, 26)
Section 51. Place and time of meetings of stockholders of members. –
Stockholder’s or member’s meetings, whether regular or special, shall be
held in the city or municipality where the principal office of the corporation
Page 31 of 78
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)
Section 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)
Section 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)
Section 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)
Section 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
Page 32 of 78
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)
Section 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)
Section 57. Voting right for treasury shares. – Treasury shares shall have no
voting right as long as such shares remain in the Treasury. (n)
Section 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)
Section 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
Page 33 of 78
the corporation and with the Securities and Exchange Commission;
otherwise, said agreement is ineffective and unenforceable. The certificate
or certificates of stock covered by the voting trust agreement shall be
cancelled and new ones shall be issued in the name of the trustee or trustees
stating that they are issued pursuant to said agreement. In the books of the
corporation, it shall be noted that the transfer in the name of the trustee or
trustees is made pursuant to said voting trust agreement.
The trustee or trustees shall execute and deliver to the transferors voting
trust certificates, which shall be transferable in the same manner and with
the same effect as certificates of stock.
The voting trust agreement filed with the corporation shall be subject to
examination by any stockholder of the corporation in the same manner as
any other corporate book or record: Provided, That both the transferor and
the trustee or trustees may exercise the right of inspection of all corporate
books and records in accordance with the provisions of this Code.
Any other stockholder may transfer his shares to the same trustee or trustees
upon the terms and conditions stated in the voting trust agreement, and
thereupon shall be bound by all the provisions of said agreement.
No voting trust agreement shall be entered into for the purpose of
circumventing the law against monopolies and illegal combinations in
restraint of trade or used for purposes of fraud.
Unless expressly renewed, all rights granted in a voting trust agreement
shall automatically expire at the end of the agreed period, and the voting
trust certificates as well as the certificates of stock in the name of the trustee
or trustees shall thereby be deemed cancelled and new certificates of stock
shall be reissued in the name of the transferors.
The voting trustee or trustees may vote by proxy unless the agreement
provides otherwise. (36a)
TITLE VII
STOCKS AND STOCKHOLDERS

Page 34 of 78
Section 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)
Section 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)
Section 62. Consideration for stocks. – Stocks shall not be issued for a
consideration less than the par or issued price thereof. Consideration for the
issuance of stock may be any or a combination of any two or more of the
following:
1. Actual cash paid to the corporation;
2. Property, tangible or intangible, actually received by the corporation
and necessary or convenient for its use and lawful purposes at a fair
valuation equal to the par or issued value of the stock issued;
3. Labor performed for or services actually rendered to the corporation;
4. Previously incurred indebtedness of the corporation;
5. Amounts transferred from unrestricted retained earnings to stated
capital; and
6. Outstanding shares exchanged for stocks in the event of
reclassification or conversion.
Where the consideration is other than actual cash, or consists of
intangible property such as patents of copyrights, the valuation thereof
shall initially be determined by the incorporators or the board of
Page 35 of 78
 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)
Section 63. Certificate of stock and transfer of shares. – The capital stock of
stock corporations shall be divided into shares for which certificates signed
by the president or vice president, countersigned by the secretary or
assistant secretary, and sealed with the seal of the corporation shall be
issued in accordance with the by-laws. Shares of stock so issued are
personal property and may be transferred by delivery of the certificate or
certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer, however, shall be
valid, except as between the parties, until the transfer is recorded in the
books of the corporation showing the names of the parties to the transaction,
the date of the transfer, the number of the certificate or certificates and the
number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim
shall be transferable in the books of the corporation. (35)

Note: This only applies to sale or disposition od shares and HAS NO

APPLICATION fo mortgages and other forms of encumbrances

Page 36 of 78
Section 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)
Section 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)
Section 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)
Section 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
Page 37 of 78
shall thereupon become delinquent and shall be subject to sale as hereinafter
provided, unless the board of directors orders otherwise. (38)
Section 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
Page 38 of 78
shares and may be disposed of by said corporation in accordance with the
provisions of this Code. (39a-46a)
Section 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)
Section 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)
Section 71. Effect of delinquency. – No delinquent stock shall be voted for
or be entitled to vote or to representation at any stockholder’s meeting, nor
shall the holder thereof be entitled to any of the rights of a stockholder
except the right to dividends in accordance with the provisions of this Code,
until and unless he pays the amount due on his subscription with accrued
interest, and the costs and expenses of advertisement, if any. (50a)
Section 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)
Section 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
Page 39 of 78
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

Page 40 of 78
 lost, stolen or destroyed pursuant to the procedure above-described.
(R.A. 201a)
TITLE VIII
CORPORATE BOOKS AND RECORDS
Section 74. Books to be kept; stock transfer agent. – Every corporation shall
keep and carefully preserve at its principal office a record of all business
transactions and minutes of all meetings of stockholders or members, or of
the board of directors or trustees, in which shall be set forth in detail the
time and place of holding the meeting, how authorized, the notice given,
whether the meeting was regular or special, if special its object, those
present and absent, and every act done or ordered done at the meeting. Upon
the demand of any director, trustee, stockholder or member, the time when
any director, trustee, stockholder or member entered or left the meeting
must be noted in the minutes; and on a similar demand, the yeas and nays
must be taken on any motion or proposition, and a record thereof carefully
made. The protest of any director, trustee, stockholder or member on any
action or proposed action must be recorded in full on his demand.
The records of all business transactions of the corporation and the minutes
of any meetings shall be open to inspection by any director, trustee,
stockholder or member of the corporation at reasonable hours on business
days and he may demand, in writing, for a copy of excerpts from said
records or minutes, at his expense.
Any officer or agent of the corporation who shall refuse to allow any
director, trustees, stockholder or member of the corporation to examine and
copy excerpts from its records or minutes, in accordance with the provisions
of this Code, shall be liable to such director, trustee, stockholder or member
for damages, and in addition, shall be guilty of an offense which shall be
punishable under Section 144 of this Code: Provided, That if such refusal is
made pursuant to a resolution or order of the board of directors or trustees,
the liability under this section for such action shall be imposed upon the
directors or trustees who voted for such refusal: and Provided, further, That
it shall be a defense to any action under this section that the person
Page 41 of 78
demanding to examine and copy excerpts from the corporation’s records
and minutes has improperly used any information secured through any prior
examination of the records or minutes of such corporation or of any other
corporation, or was not acting in good faith or for a legitimate purpose in
making his demand.
Stock corporations must also keep a book to be known as the "stock and
transfer book", in which must be kept a record of all stocks in the names of
the stockholders alphabetically arranged; the installments paid and unpaid
on all stock for which subscription has been made, and the date of payment
of any installment; a statement of every alienation, sale or transfer of stock
made, the date thereof, and by and to whom made; and such other entries as
the by-laws may prescribe. The stock and transfer book shall be kept in the
principal office of the corporation or in the office of its stock transfer agent
and shall be open for inspection by any director or stockholder of the
corporation at reasonable hours on business days.
No stock transfer agent or one engaged principally in the business of
registering transfers of stocks in behalf of a stock corporation shall be
allowed to operate in the Philippines unless he secures a license from the
Securities and Exchange Commission and pays a fee as may be fixed by the
Commission, which shall be renewable annually: Provided, That a stock
corporation is not precluded from performing or making transfer of its own
stocks, in which case all the rules and regulations imposed on stock transfer
agents, except the payment of a license fee herein provided, shall be
applicable. (51a and 32a; P.B. No. 268.)
Section 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
Page 42 of 78
the operations of the corporation for the preceding year, which shall include
financial statements, duly signed and certified by an independent certified
public accountant.
However, if the paid-up capital of the corporation is less than P50,000.00,
the financial statements may be certified under oath by the treasurer or any
responsible officer of the corporation. (n)
TITLE IX
MERGER AND CONSOLIDATION
Section 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)
Section 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
Page 43 of 78
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)
Section 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

Page 44 of 78
 3. As to each corporation, the number of shares or members voting for
and against such plan, respectively. (n)
Section 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)
Section 80. Effects of merger or consolidation. – The merger or
consolidation shall have the following effects:
1. The constituent corporations shall become a single corporation
which, in case of merger, shall be the surviving corporation designated
in the plan of merger; and, in case of consolidation, shall be the
consolidated corporation designated in the plan of consolidation;
2. The separate existence of the constituent corporations shall cease,
except that of the surviving or the consolidated corporation;

Page 45 of 78
 3. The surviving or the consolidated corporation shall possess all the
rights, privileges, immunities and powers and shall be subject to all the
duties and liabilities of a corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises
of each of the constituent corporations; and all property, real or
personal, and all receivables due on whatever account, including
subscriptions to shares and other choses in action, and all and every
other interest of, or belonging to, or due to each constituent
corporation, shall be deemed transferred to and vested in such surviving
or consolidated corporation without further act or deed; and
5. The surviving or consolidated corporation shall be responsible and
liable for all the liabilities and obligations of each of the constituent
corporations in the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obligations; and any
pending claim, action or proceeding brought by or against any of such
constituent corporations may be prosecuted by or against the surviving
or consolidated corporation. The rights of creditors or liens upon the
property of any of such constituent corporations shall not be impaired
by such merger or consolidation. (n)
TITLE X
APPRAISAL RIGHT
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;

Page 46 of 78
 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)
Section 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)
Section 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
Page 47 of 78
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)
Section 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)
Section 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)
Section 86. Notation on certificates; rights of transferee. – Within ten (10)
days after demanding payment for his shares, a dissenting stockholder shall
submit the certificates of stock representing his shares to the corporation for
notation thereon that such shares are dissenting shares. His failure to do so
shall, at the option of the corporation, terminate his rights under this Title. If
shares represented by the certificates bearing such notation are transferred,
and the certificates consequently cancelled, the rights of the transferor as a
dissenting stockholder under this Title shall cease and the transferee shall
have all the rights of a regular stockholder; and all dividend distributions
which would have accrued on such shares shall be paid to the transferee. (n)
Page 48 of 78
 TITLE XI
NON-STOCK CORPORATIONS
Section 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)
Section 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
Section 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.
Page 49 of 78
Section 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)
Section 91. Termination of membership. – Membership shall be terminated
in the manner and for the causes provided in the articles of incorporation or
the by-laws. Termination of membership shall have the effect of
extinguishing all rights of a member in the corporation or in its property,
unless otherwise provided in the articles of incorporation or the by-laws. (n)
CHAPTER II
TRUSTEES AND OFFICES
Section 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)
Section 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

Page 50 of 78
date, time and place of the meeting: and Provided, further, That the place of
meeting shall be within the Philippines. (n)
CHAPTER III
DISTRIBUTION OF ASSETS IN NON-STOCK CORPORATIONS
Section 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)
Page 51 of 78
Section 95. Plan of distribution of assets. – A plan providing for the
distribution of assets, not inconsistent with the provisions of this Title, may
be adopted by a non-stock corporation in the process of dissolution in the
following manner:
The board of trustees shall, by majority vote, adopt a resolution
recommending a plan of distribution and directing the submission thereof to
a vote at a regular or special meeting of members having voting rights.
Written notice setting forth the proposed plan of distribution or a summary
thereof and the date, time and place of such meeting shall be given to each
member entitled to vote, within the time and in the manner provided in this
Code for the giving of notice of meetings to members. Such plan of
distribution shall be adopted upon approval of at least two-thirds (2/3) of the
members having voting rights present or represented by proxy at such
meeting. (n)
TITLE XII
CLOSE CORPORATIONS
Section 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.
Page 52 of 78
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.
Section 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.
Section 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
Page 53 of 78
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.
Section 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
Page 54 of 78
 of persons permitted by its articles of incorporation to hold stock of the
corporation, or (c) that the transfer of stock is in violation of a
restriction on transfer of stock, the corporation may, at its option, refuse
to register the transfer of stock in the name of the transferee.
5. The provisions of subsection (4) shall not be applicable if the transfer
of stock, though contrary to subsections (1), (2) or (3), has been
consented to by all the stockholders of the close corporation, or if the
close corporation has amended its articles of incorporation in
accordance with this Title.
6. The term "transfer", as used in this section, is not limited to a transfer
for value.
7. The provisions of this section shall not impair any right which the
transferee may have to rescind the transfer or to recover under any
applicable warranty, express or implied.
Section 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

Page 55 of 78
 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.
Section 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.
Page 56 of 78
Section 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.
Section 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.
Section 104. Deadlocks. – Notwithstanding any contrary provision in the
articles of incorporation or by-laws or agreement of stockholders of a close
corporation, if the directors or stockholders are so divided respecting the
management of the corporation’s business and affairs that the votes required
for any corporate action cannot be obtained, with the consequence that the
business and affairs of the corporation can no longer be conducted to the
advantage of the stockholders generally, the Securities and Exchange
Commission, upon written petition by any stockholder, shall have the power
to arbitrate the dispute. In the exercise of such power, the Commission shall
have authority to make such order as it deems appropriate, including an
order: (1) cancelling or altering any provision contained in the articles of
incorporation, by-laws, or any stockholder’s agreement; (2) cancelling,
altering or enjoining any resolution or act of the corporation or its board of
directors, stockholders, or officers; (3) directing or prohibiting any act of the
corporation or its board of directors, stockholders, officers, or other persons
party to the action; (4) requiring the purchase at their fair value of shares of
any stockholder, either by the corporation regardless of the availability of
Page 57 of 78
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.
Section 105. Withdrawal of stockholder or dissolution of corporation. – In
addition and without prejudice to other rights and remedies available to a
stockholder under this Title, any stockholder of a close corporation may, for
any reason, compel the said corporation to purchase his shares at their fair
value, which shall not be less than their par or issued value, when the
corporation has sufficient assets in its books to cover its debts and liabilities
exclusive of capital stock: Provided, That any stockholder of a close
corporation may, by written petition to the Securities and Exchange
Commission, compel the dissolution of such corporation whenever any of
acts of the directors, officers or those in control of the corporation is illegal,
or fraudulent, or dishonest, or oppressive or unfairly prejudicial to the
corporation or any stockholder, or whenever corporate assets are being
misapplied or wasted.
TITLE XIII
SPECIAL CORPORATIONS
CHAPTER I - EDUCATIONAL CORPORATIONS
Page 58 of 78
Section 106. Incorporation. – Educational corporations shall be governed
by special laws and by the general provisions of this Code. (n)
Section 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)
Section 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
Section 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)
Section 110. Corporation sole. – For the purpose of administering and
managing, as trustee, the affairs, property and temporalities of any religious
Page 59 of 78
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)
Section 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)
Section 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
Page 60 of 78
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)
Section 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
Page 61 of 78
rules, regulations and discipline shall control, and the intervention of the
courts shall not be necessary. (159a)
Section 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)
Section 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)

Page 62 of 78
Section 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

Page 63 of 78
 6. The names, nationalities, and residences of the trustees elected by the
religious society or religious order, or the diocese, synod, or district
organization to serve for the first year or such other period as may be
prescribed by the laws of the religious society or religious order, or of
the diocese, synod, or district organization, the board of trustees to be
not less than five (5) nor more than fifteen (15). (160a)
TITLE XIV
DISSOLUTION
Section 117. Methods of dissolution. – A corporation formed or organized
under the provisions of this Code may be dissolved voluntarily or
involuntarily. (n)
Section 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)
Section 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
Page 64 of 78
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)
Section 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
Page 65 of 78
any further proceedings, subject to the provisions of this Code on
liquidation. (n)
Section 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)
Section 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)

Page 66 of 78
 TITLE XV
FOREIGN CORPORATIONS
Section 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)
Section 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)
Section 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;

Page 67 of 78
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
Page 68 of 78
 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)
Section 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
Page 69 of 78
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)
Section 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)
Section 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
Page 70 of 78
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)
Section 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
Page 71 of 78
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)
Section 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)
Section 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)
Section 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
Page 72 of 78
becomes effective, file with the Securities and Exchange Commission, and
in proper cases with the appropriate government agency, a copy of the
articles of merger or consolidation duly authenticated by the proper official
or officials of the country or state under the laws of which merger or
consolidation was effected: Provided, however, That if the absorbed
corporation is the foreign corporation doing business in the Philippines, the
latter shall at the same time file a petition for withdrawal of its license in
accordance with this Title. (n)
Section 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)
Section 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;

Page 73 of 78
 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)
Section 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)
Section 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;

Page 74 of 78
 2. All taxes, imposts, assessments, and penalties, if any, lawfully due to
the Philippine Government or any of its agencies or political
subdivisions have been paid; and
3. The petition for withdrawal of license has been published once a
week for three (3) consecutive weeks in a newspaper of general
circulation in the Philippines.
TITLE XVI
MISCELLANEOUS PROVISIONS
Section 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)
Section 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)
Section 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.1âwphi1 (n)
Section 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
Page 75 of 78
provisions of this section, belonging to individuals or groups of individuals
related to each other by consanguinity or affinity or by close business
interests, or whenever it is necessary to achieve national objectives, prevent
illegal monopolies or combinations in restraint or trade, or to implement
national economic policies declared in laws, rules and regulations designed
to promote the general welfare and foster economic development.
In recommending to the Batasang Pambansa corporations, businesses or
industries to be declared vested with a public interest and in formulating
proposals for limitations on stock ownership, the National Economic and
Development Authority shall consider the type and nature of the industry,
the size of the enterprise, the economies of scale, the geographic location,
the extent of Filipino ownership, the labor intensity of the activity, the
export potential, as well as other factors which are germane to the
realization and promotion of business and industry.
Section 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)
Section 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)

Page 76 of 78
Section 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)
Section 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)
Section 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)
Section 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)
Section 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)
Page 77 of 78
Section 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)
Section 149. Effectivity. – This Code shall take effect immediately upon its
approval.
Approved, May 1, 1980

Page 78 of 78