Incorporation

Is the performance of acts, deeds, conditions and writings by incorporators and the official acts,
certificates or records which give the corporation its corporate existence.

NATURE OF CHARTER

Commencement of Corporate Existence – In the Manner prescribed by law.

Acquisition of Juridical Personality: Only thru Incorporation and registration with the SEC.

SEC. 18. Life commences upon issuance of the COI.

AMENDMENTS OT AOI

1. BY-LAWS

SEC. 45 ADOPTION OF BYLAWS

1. Adopted – upon affirmative vote by stockholders/members

2. Signed and kept in the Principal Office
3. COPY:
(a) Certified by the majority D T
(b) Countersigned by secretary
(c) Filed with the Commission with AOI attached.
• WHEN: Bylaws may be adopted and filed prior to incorporation
• EFFECTIVITY: Upon issuance of the Commission of a Certification

* Sec. 46 Contents of Bylaws.

(a) The time, place and manner of calling and conducting regular or special meetings of the directors
or trustees;
(b) The time and manner of calling and conducting regular or special meetings and mode of notifying
the stockholders or members thereof;
(c) The required quorum in meetings of stockholders or members and the manner of voting therein;
(d) The modes by which a stockholder, member, director, or trustee may attend meetings and cast
their votes;
(e) The form for proxies of stockholders and members and the manner of voting them;
(f) The directors’ or trustees’ qualifications, duties and responsibilities, the guidelines for setting the
compensation of directors or trustees and officers, and the maximum number of other board
representations that an independent director or trustee may have which shall, in no case, be
more than the number prescribed by the Commission;
(g) The time for holding the annual election of directors or trustees and the mode or manner of
giving notice thereof;

2. INCORPORATORS
- Stockholders or members mentioned in the AOI as forming and signatories

SEC. 10 NUMBER AND QUALIFICATIONS OF INCORPORATORS

1. Natural or juridical Entity

- Person/Partnership, Association or Corporation
- Not ‘entities’ organized/licensed for the “practice of profession” (unless auth SL)
2. Number of Incorporators < 15
- Singly (As ONE – OPC)
- Jointly (At least 2 – NOT OPC)
3. LEGAL AGE – Capacity to do acts with legal effects
- No incapacitated minors, insane, deaf-mutes, prodigality & civil interdiction
4. Number of shares < 1 SHARE OF CAPITAL STOCK.

*NO RESIDENCY REQUIREMENT – Non-residents may be incorporators

*NO CITIZENSHIP REQUIREMENT but subject to nationalization laws.

> One does not lose his position by transferring all his shares to another. BEING AN INCORPORATOR IS
AN ACCOMPLISHED FACT.

SEC. 11 CORPORATE TERM

1. PERPETUAL
2. NEW CORPORATIONS AOI may specify a FIXED TERM
3. Those incorporated and existing PRIOR to the RCCP shall have Perpetual Term
4. OLD CORPORATION: O/W Must notify SEC about a fixed term.
5. Corporation w/ FIXED TERM deemed dissolved upon expiration
6. Corporation w/ FIXED TERM may EXTEND or SHORTEN by amending AOI
- Extension must be effected during the LIFE OF THE CORPORATION
- Takes effect on the day following the original expiry date.
7. No extension may be made earlier than 3 years prior expiry date
- Unless for justified reasons.

COMMENCEMENT OF CORPORATE EXISTENCE & JURIDICAL PERSONALITY

- Date of issuance of COI by SEC

FIRST DAY is the date of Incorporation (Day of Existence)

If FIXED TERM: “LAST DAY” is the day before the purported day of the same month in the last year of
existence.

SEC. 12 MINIMUM CAPITAL STOCK NOT REQUIRED OF STOCK CORPORATIONS.

- Except as otherwise provided by SPECIAL LAWS.

AOI as its Charter and Contract

- It defines the contractual relationships b/w STATE & CORP, SH & STATE, CORP & SH

SEC. 13 CONTENTS OF ARTICLES OF INCORPORATION

1. Name
2. Purpose
3. Place
4. Term
5. Name/Nat’l/Residence Incorp
6. Number of Directors
7. NNR who shall act as D/T
8. Stock – amt ACS, number shares, par value of each, NNR original subscribers & amt ausbsrubed
and paid on each subscription, statement that all/some shares are without par value
9. Non-Stock – amt Capital, NNR contributors and amt contributed each
10. Deem Necessary

*Requires substantial compliance only. CORPORATE NAME AND PURPOSE CLAUSE INDISPENSIBLE

SEC. 17 CORPORATE NAME

- Necessary for Identification Purposes; HENCE, must be

i. distinguishable from that reserved or registered for use of another
ii. Not protected by law
iii. Not Contrary to law.
▪ NOT: corp/comp/incorp/ltd/ltd liability
▪ Puncs, articles, conjunctions, contractions, prepositions, abbreviations, diff.
tenses, spacing, number
- Essential to Existence & Identity

*SEC may issue cease and desist for failure of ff reqs. Failure to comply may hold the corporation and
responsible directors in contempt-administratively, civilly, criminally liable.

SEC. 13(b) PURPOSE CLAUSE

- For awareness of the business of the corporation

- Specific Purpose/s
- If More than one
i. Primary – ONLY ONE
ii. Secondary – MAY BE SEVERAL (but not incidental to primary purpose)
▪ Where it engages.

*Need not write all powers; as there are IMPLIED/INCIDENTAL POWERS

RATIONALE:

1. Where & in what kind of business “money” is invested

2. Directors are informed of their scope of authority
3. Third persons are aware if a transaction is w/n authority
*The best proof is its AOI; as the SEC has no authority to inquire further

No Collateral attack on the legality of the purpose of the corporation

SEC. 50 PRINCIPAL PLACE OF BUSINESS

- In the Ph
- Must be specifically identified (Not “Metro Manila”
i. Principal Office
ii. Specific address of I D T
- Not required if only moved within the same municipality.

*Not necessary that all businesses be conducted in PPOB;

- Meetings must be conducted in PPOB unless provided otherwise.

NO MINIMUM CAPITAL STOCK

- The Authorized capital stock

- Is divided into shares with par value per share

Shares that may be deprived of voting rights: PREFERRED/REDEEMABLE SHARES

*No par value (shares of stock) may be issued for a consideration LESS THAN P5 per share

PAID-UP CAPITAL

- Portion of the ACS which is subscribed and paid

- However, it is subject to different minimum requirements under Special Laws
- May consist of property; SEC verifies ownership, physical existence, and reasonableness of
the valuation

SEC. 15 AMENDMENTS OF THE AOI

- By majority vote BOD/T

- Vote or written assent of SH – 2/3 OCS (NSC – of trustees and 2/3 members)
- Both original and amended articles together shall contain all provisions required by law to
be set out in the articles of incorporation - underscoring changes made
- a copy duly certified under oath by the corporate secretary and a majority D T,
- with a statement have been duly approved by the required vote of the stockholders or
members, shall be submitted to the Commission.

*APPROVAL need not be express; takes effect if not acted upon WITHIN 6 MOS from date of filing for a
cause not attributable to the corporation.
DOCUMENTARY REQUIREMENTS

1. AMENDED AOI
2. D/T’S CERTIFICATE
3. Monitoring Clearance
4. Secretary’s Certificate

*Indorsements/clearance from other gov’t agencies may be necessary.

BJR

Ong Yong v. Tiu

The Tius’ case for rescission cannot validly be deemed a petition to decrease capital stock because such
action never complied with the formal requirements for decrease of capital stock under Section 33 of the
Corporation Code. No majority vote of the board of directors was ever taken. Neither was there any
stockholders meeting at which the approval of stockholders owning at least two-thirds of the outstanding
capital stock was secured. There was no revised treasurer’s affidavit and no proof that said decrease will
not prejudice the creditors’ rights. On the contrary, all their pleadings contained were alleged acts of
violations by the Ongs to justify an order of rescission.

Furthermore, it is an improper judicial intrusion into the internal affairs of the corporation to compel
FLADC to file at the SEC a petition for the issuance of a certificate of decrease of stock. Decreasing a
corporation’s authorized capital stock is an amendment of the Articles of Incorporation. It is a decision
that only the stockholders and the directors can make, considering that they are the contracting parties
thereto.

In this case, the Tius are actually not just asking for a review of the legality and fairness of a corporate
decision. They want this Court to make a corporate decision for FLADC.

We decline to intervene and order corporate structural changes not voluntarily agreed upon by its
stockholders and directors.

The reason behind the rule is aptly explained by Dean Cesar L. Villanueva, an esteemed author in
corporate law, thus:

Courts and other tribunals are wont to override the business judgment of the board mainly because,
courts are not in the business of business, and the laissez faire rule or the free enterprise system
prevailing in our social and economic set-up dictates that it is better for the State and its organs to leave
business to the businessmen; especially so, when courts are ill-equipped to make business decisions.
More importantly, the social contract in the corporate family to decide the course of the corporate
business has been vested in the board and not with courts.

Where Corporate Power Lodged: Board of Directors/Trustees

Shipside Inc. v. CA
The power of a corporation to sue and be sued in any court is lodged with the board of directors that
exercises its corporate powers.—A corporation, such as petitioner, has no power except those expressly
conferred on it by the Corporation Code and those that are implied or incidental to its existence. In turn,
a corporation exercises said powers through its board of directors and/or its duly authorized officers and
agents. Thus, it has been observed that the power of a corporation to sue and be sued in any court is
lodged with the board of directors that exercises its corporate powers (Premium Marble Resources, Inc.
v. CA, 264 SCRA 11 [1996]). In turn, physical acts of the corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific
act of the board of directors.

DISSOLUTION

CREDITORS

VDVR – No Creditors affected 134

VDFP – With Existing Creditors 135

VDST by Amedning its AO I– Regardless 136

MODES

1. VDVR
Filing with Company Registration and Monitoring Dep’t (R, N, N, M, D)
- Reason
- Form, manner, time Notices given – 20 days prior meeting
- Names SH D approved Dissolution
- Date, Place, Time Meeting of Vote
- Details Publication.

SUBMIT FF:

1. Publication of Notice – Once in newspaper PPOC Located/General Circulation

2. A COPY Resolution – Majority Vote BOD, countersigned Secretary

APPROVAL & ISSUANCE OF CERTIFICATE OF DISSOLUTION– within 15 days from submission of VR

*SEC-administrative only.

2. VDFP
Filed with the OGC of SEC.

*SEC-Quasi-Judicial in nature and not grant if it is detrimental to interests of creditors.

APPROVAL – Assets must be sufficient to cover money claims of creditors.

PROCEEDINGS - Liquidation Proceedings. Requires Publication & Hearing

 1. Approved – affirmative vote of SH = 2/3 OCS FACT STATED.
2. Signed – Majority BOD and Verified by P S D
3. Set out ff: A, R, N, M, Da
a. All claims
b. Reason
c. Form Manner Time Notices Given
d. Date Place Time Meeting Vote
e. Decision was approved by required 2/3 SH
4. SUBMIT FF:
1. Copy of Resolution authorizing, certified majority BOD T, countersigned Secretary
2. List of All creditors
5. Once sufficient, DEADLINE IS FIXED FOR FILING OBJECTIONS – 30-60 days after entry.
6. PUBLICATION
- Once a week for 3 CS wks NGS in city where POC located/NGS
- Copy posted for 3 CS wks in THREE PUBLIC PLACES published in city where POB located.
7. HEARING – 5 days after lapse of expiration
8. Judgment finding objections insufficient and material allegations in petition true (Appointment
of receiver)

*May take 6 mos from time of filing complete documentary reqs.

**Tax Clearance.

3. VDST
Deemed dissolved upon expiration without ANY FURTHER PROCEEDINGS.

HOW SEC. 15

1. APPROVED by majority vote BOD, ratified by vote/written assent 2/3 OCS, w/o prejudice
appraisal right.
2. SUBMITTED – Containing all required provisions set out in AOI (underscoring changes)
3. EFFECTIVE – Upon approval. On the day following the last day of its corporate term.
- Approval ONLY – if it expires before approval
- Expiration ONLY – if approval is given before expiration.

*No amendments that will shorten it to 1 year.

Creditors Proceedings Effective TAX PH REQ

CLEARANCE
VDVR NONE Ad COD YES PUBLICATION
VDFP WITH Q-D (protect) COD YES BOTH P H
VDSC R/O Ad Expiration on Maybe; not if None
the day ST will last
following the for one year
last day of more at time
corporate of
term in AOI application.
without COD
- Note:
Expiration >
Approval –
Approval
Approval >
Expiration –
Expiration of
shortened
term.