Part 4(a): The Old Corporation Code vs The Revised Corporation Code business activities, and the corporation

ness activities, and the corporation is legally bound to fulfill its

Republic Act No. 11232 took effect on 2019 obligations and commitments as outlined in these contracts.
https://www.sec.gov.ph/wp-content/uploads/2019/11/2019Legislation_Revised-Corpor Bringing of Suits: If a dispute or legal issue arises, a corporation
ation-Code-Comparative-Matrix_as-of-March-22-2019.pdf has the legal standing to bring lawsuits or initiate legal actions in its own
name. It can sue other parties or defend itself in legal proceedings to protect
Part 4(b): Preliminaries to Corporations Concepts and Law its rights and interests. Conversely, the corporation can also be sued by
1. Definition of Corporation- others if they believe the corporation has violated its contractual or legal
A corporation is an artificial being created by operation of law, having the obligations.
right of succession and the powers, attributes, and properties expressly authorized by d. Receipt and enjoyment in common privilege and immunities- it
law or incidental to its existence. typically means that a corporation and its shareholders, as a collective entity, share
a. Juridical personality- Juridical personality of a corporation means it's and benefit from certain legal rights, privileges, and immunities. These rights and
recognized as a separate legal entity, enabling it to enter contracts, own property, and protections are generally associated with the corporate structure and include
have legal rights and obligations distinct from its shareholders. A corporation is elements like limited liability, perpetual existence, and the ability to engage in
considered a separate legal entity from its owners. It can enter into contracts, own contracts and legal actions as a separate legal entity. Shareholders enjoy these
assets, sue, and be sued in its own name. privileges collectively, and they are a key advantage of the corporate form.
a1. Corporate Name- A corporate name should include a 2. Juridical Personality- Juridical personality is the legal recognition of an entity as a
distinctive element, a legal identifier (e.g., "Inc." or "Corp."), comply with separate, distinct legal person with rights, responsibilities, and legal capacity, such as
character and uniqueness requirements, and adhere to any specific corporations.
regulations in the jurisdiction. 3. Limited Liability- Shareholders' liability for the corporation's debts and obligations
b. Perpetual succession- Perpetual succession refers to the continuous is generally limited to the amount of their investment in the company. This means that
existence of a legal entity, such as a corporation, regardless of changes in ownership, personal assets of shareholders are protected from the corporation's creditors.
management, or the death of shareholders. This concept ensures that the entity can 4. Piercing the veil of corporate existence- is a legal concept that allows courts to
continue to operate and fulfill its obligations without interruption. It allows a hold shareholders personally liable for a corporation's actions in cases of fraud,
corporation to have a potentially indefinite lifespan and is a key advantage of this abuse, or wrongful conduct. It disregards the limited liability protection of the
business structure. corporate structure.
b1. Corporate Term (New)- The corporate term, also known as the a. Grounds- "Piercing the veil of corporate existence" can occur when
"duration" or "period of existence," refers to the specific length of time for specific grounds or conditions are met. These conditions vary by jurisdiction and case
which a corporation is initially established. In many jurisdictions, corporations specifics, but common grounds include:
can have a perpetual term, meaning they are set up to exist indefinitely 1. First, piercing the corporate veil is used as a tool of statutory interpretation
unless dissolved or terminated. However, some corporations may choose to in the sense that piercing the corporate veil is done in order to bring corporate actors’
specify a finite corporate term, which means they will operate for a defined behavior into conformity with a particular statutory scheme, such as social security or
number of years or until a particular event occurs. The choice of corporate state unemployment compensations schemes. For example, as explained in detail in
term depends on the corporation's bylaws, articles of incorporation, and the the Article, sometimes the corporate form will be ignored in order to accomplish the
legal requirements of the jurisdiction in which it is formed. specific legislative goal of a government benefit program that distinguishes between
c. Acquisition of property, contract obligations and bringing of suits- A owners and employees. And of course, sometimes the corporate form will be
corporation can acquire property, enter into contracts, and bring or defend against respected where doing so is necessary to reach a result that is consistent with a
legal actions. particular state or federal statutory scheme.
Acquisition of Property: A corporation, as a legal entity, has the 2. Second, piercing also is done by courts in order to remedy what appears
capacity to acquire, own, and manage property and assets. This includes the to be fraudulent conduct that does not meet the strict elements of common law fraud.
ability to purchase, lease, or otherwise obtain real estate, equipment, and Specifically, it is used as a remedy for “constructive fraud” in the contractual context.
other assets necessary for its business operations. Simply put, if a court becomes convinced that a shareholder or other equity investor
Contract Obligations: A corporation can enter into contracts and has, by words or actions, led a counter-party to a contract to believe that an obligation
agreements with other parties, such as customers, suppliers, employees, is a personal liability rather than (or in addition to) a corporate debt, then courts
and service providers. These contracts may encompass a wide range of sometimes will use a piercing theory to impose liability on the individual shareholder
rather than a fraud theory.

- MNL A.
 3. The third ground on which courts pierce the corporate veil that we identify c6. Deterrent: The possibility of piercing the corporate veil can
is the promotion of what we term accepted “bankruptcy values.” In particular, serve as a deterrent against abuse of the corporate structure for fraudulent
bankruptcy law strives to achieve an orderly disposition of the debtors’ assets, either or improper purposes.
through corporate reorganization or liquidation. One way that bankruptcy law It's important to note that piercing the corporate veil is an exceptional and rare legal remedy, and
achieves these goals is by preventing shareholders from transferring corporate assets courts typically do not resort to it unless there is clear evidence of misconduct or an abuse of the
to themselves or to particular favored creditors ahead of creditors in times of acute corporate form. The exact consequences can vary depending on the specific facts and legal
principles applied in each case.
economic stress. This result is accomplished in the context of a formal bankruptcy
5. Nationality of a Corporation- A corporation's nationality is the country in which it
proceeding by invoking the doctrine of equitable subordination as well as by the
is legally established, and it determines the legal framework and regulations that
bankruptcy trustee’s power to avoid and set aside preferential transfers and
govern the corporation.
fraudulent conveyances. Outside of bankruptcy (and sometimes in the context of
● Domestic Corporation: A domestic corporation is one that is
bankruptcy proceedings as well), the goal of eliminating opportunism by companies in
incorporated or established in a specific country. It is subject to the
financial distress is accomplished by disregarding the corporate form.
laws and regulations of that country and is considered a legal entity
b. Forms
with rights and responsibilities under its national legal system.
b1. Defeats public convenience- means that a corporation's
● Foreign Corporation: A foreign corporation is a corporation that is
actions or practices harm the interests and well-being of the general public
incorporated in one country but conducts business or operations in
or community, potentially leading to regulatory intervention or legal
another country. It is considered a "foreign" entity in the country
consequences.
where it is operating, and it may be subject to certain legal
b2. Fraud Cases- involve deceptive or dishonest actions within the
requirements and regulations of that host country.
company, such as financial misrepresentation, embezzlement, or bribery.
These actions can lead to legal consequences and harm a corporation's
6. Test in determining Nationality- The test for determining a corporation's
reputation.
nationality typically considers factors such as the place of incorporation, principal
b3. Alter ego cases- involve situations where a court treats a
place of business, control and ownership, applicable laws, operational activities, and
corporation and its shareholders as one entity, disregarding the separation
tax obligations. The specific criteria vary by jurisdiction.
between them. This is typically done when the corporation is misused to
a. Incorporation/Domiciliary- Determined by the principal place of
achieve wrongful objectives, potentially leading to personal liability for the
business of the corporation. Incorporation refers to the process of legally creating a
shareholders.
corporation or business entity. It involves filing the necessary documents and meeting
c. Effects
legal requirements to establish a separate legal entity. "Domiciliary" typically refers to
c1. Personal Liability: Shareholders or owners may become
a corporation's legal residence or primary place of registration. It is the jurisdiction
personally liable for the corporation's debts and legal obligations. Their
where the corporation is incorporated and subject to its primary set of laws and
personal assets could be used to satisfy the corporate liabilities.
regulations. In summary, incorporation is the process of creating a corporation, and
c2. Circumventing Limited Liability: This legal action circumvents
"domiciliary" relates to its legal home or place of incorporation.
the limited liability protection that is a key advantage of the corporate
b. Control- nationality of the controlling stockholders or members of the corp
structure.
c3. Accountability: Shareholders or owners may be held
accountable for the corporation's wrongful actions or misconduct, especially
if the corporate form was used to perpetrate fraud, evade legal
responsibilities, or engage in improper conduct.
c4. Protection of Stakeholders: The legal action can protect
stakeholders, such as creditors, employees, and business partners, by
ensuring they have a source for recourse if the corporation cannot meet its
obligations.
c5. Case-by-Case Determination: The specific effects depend on
the circumstances of each case, as piercing the corporate veil is a
fact-specific legal remedy that is applied on a case-by-case basis.

- MNL A.
 public stock exchange. It is owned by a wide range of shareholders, and its financial
In corporate finance, the percentage of ownership typically indicates information is typically publicly disclosed.
the level of influence: d. Private- A private corporation is owned by a limited number of
Subsidiary: Usually over 50% ownership, allowing for full control. shareholders and is not publicly traded. Ownership is often restricted to a specific
Significant Influence: Generally 20% to 50% ownership, where the investor group of individuals or entities, and its financial information is not typically publicly
can influence decisions but not control. disclosed.
Associate: Typically 20% or less, where the investor holds minor influence e. Government-owned and controlled- A government-owned and
without significant control. controlled corporation (GOCC) is a corporation owned and controlled by a
c. Grandfather- nationality is attributed to the percentage of equity in the government or government agency, typically established to provide public services,
corporation used in nationalized or partly nationalized areas. generate revenue, or fulfill specialized functions on behalf of the government.
Is a term used to describe an exemption or special provision in a law, f. De jure- is a Latin term that means "by law" or "in accordance with the
regulation, or policy that allows certain individuals or entities to continue existing law." In the context of a corporation, "de jure" refers to a corporation that has been
practices or enjoy specific rights, even if new rules or requirements would otherwise properly and legally formed in compliance with all the required legal procedures and
prohibit or restrict those activities. It's often used to ensure that established practices formalities. A "de jure" corporation is recognized as a legitimate legal entity with all
are not disrupted by changes in the law. For example, a "grandfather clause" might the rights and protections that come with its legal status. It has met all the statutory
allow older buildings to remain in compliance with previous building codes even after requirements, such as filing the necessary documents, paying fees, and adhering to
new codes have been introduced. corporate governance laws, to exist as a lawful corporation.
For instance, in a city where new zoning laws limit the number of restaurants g. De facto- is a Latin term that means "in fact" or "in reality." In the context
allowed in a residential area, a restaurant that has been operating there for years can of a corporation, a "de facto" corporation is one that may not have been formed in
remain open without facing the new restrictions. This means it doesn't have to change strict compliance with all the required legal procedures and formalities, yet it is treated
its operations or location, preserving its customer base and staff. Meanwhile, any new as if it were a legitimate corporation due to its practical operation and acceptance by
restaurant wishing to open in that area would need to comply with the new laws, those involved.
potentially leading to fewer dining options for locals. A "de facto" corporation may lack some of the necessary legal formalities,
such as proper registration or adherence to corporate governance laws, but it still
functions as a corporation in practice. This recognition is often based on the principle
of fairness and the assumption that the entity intended to act as a corporation, even if
it did not fully meet the legal requirements. The legal status and acceptance of "de
facto" corporations can vary by jurisdiction, and they may have limited rights and
protections compared to "de jure" corporations.
h. Estoppel- A corporation by estoppel is one which is not really a
corporation but which has represented itself to the public as a real corporation and
which cannot now be permitted to deny such representation.
i. Prescription- If a corporation has existed for such a time longer than the
memory of man can remember, it is presumed that, a long time ago, it was given a
charter and it should be deemed a corporation in our legal system. It is called a
"corporation by prescription."
7. Kinds of Corporations
A corporation by prescription is one where corporate powers have been
a. Domestic- A domestic corporation is one that is incorporated and
exercised by a body of men for such a length of time to raise presumption of the grant
operates within a specific country or state. It is subject to the laws and regulations of
of an ancient charter to their predecessor such as the Roman Catholic Church.
that jurisdiction.
j. Shell- is a registered company with minimal or no active business
b. Foreign- A foreign corporation is one that is incorporated in one country
operations, often used for purposes like holding assets, facilitating mergers, tax
or state but conducts business or operates in another. It is considered a "foreign"
planning, or asset protection. An easy example of a shell corporation is a company
entity in the jurisdiction where it is operating and may be subject to certain legal
that exists only on paper, with no physical office, employees, or business activities. It
requirements and regulations.
may have been created solely to hold a valuable trademark or to serve as a legal
c. Public- A public corporation, often referred to as a publicly traded
entity for potential future use, such as a merger or acquisition. This shell corporation
corporation, is one whose shares of stock are available for purchase and sale on a

- MNL A.
is maintained in compliance with legal requirements but has no ongoing operational ● Alignment with International Standards: The Corporation Code aimed to
activities. align the Philippines' corporate regulations with international standards,
k. Shelf- It is a company that has been legally registered but has little or no making it more competitive and attractive for foreign investors. It promoted
active business operations or significant assets. Shelf corporations are pre-formed transparency, accountability, and improved corporate governance.
entities that are typically "put on the shelf" by their creators for later use. These ● Revisions and Updates: Over the years, there have been amendments and
entities may be sold to individuals or businesses looking for a quick way to establish a updates to the Corporation Code to address changing business needs and
company with an established registration history. align with evolving legal standards. Some of the significant updates include
The term "shelf corporation" implies that the entity is ready to be taken off the introduction of the Revised Corporation Code (Republic Act 11232) in
the shelf and put into use when needed. Like shell corporations, shelf corporations 2019, which further modernized and improved corporate regulations.
must still comply with legal and regulatory requirements, and their use should be in Sec. 2 - 4
accordance with the law. The primary distinction between "shelf" and "shell" lies in the Section 2. Corporation Defined
fact that shelf corporations are specifically created for the purpose of being sold to A corporation is an artificial being created by operation of law, having the
others. right of succession and the powers, attributes, and properties expressly authorized by
law or incident to its existence.
Owners of a Corporation Section 3. Classes of Corporations.
1.The incorporators are stockholders or members mentioned in the Articles of Corporations formed or organized under this Code may be stock or nonstock
Incorporation as originally forming and composing the corporation and who are corporations. Stock corporations are those which have capital stock divided into
signatories thereof. shares and are authorized to distribute to the holders of such shares dividends or
2.Corporators are those who composed the corporation whether stockholders or allotments of the surplus profits on the basis of the shares held. All other corporations
members. are nonstock corporations.
3.Stockholders Or shareholders are owners of shares in a corporation which has Nonstock corporations are organized primarily for public good and welfare,
capital stocks. such as charitable, educational, cultural, or similar purposes. No part of their income
4.Members are corporators of a corporation which has no capital stock. is distributed as dividends to members, trustees, or officers, and any profit generated
5.A subscriber is one who has agreed to take shares of stock from the corporation must be used for the furtherance of the purpose or purposes for which the corporation
under a subscription agreement on the original issue of such stock but not fully paid. was organized. All other corporations are nonstock corporations.
SEC. 4. Corporations Created by Special Laws or Charters.
Corporations created by special laws or charters shall be governed primarily
Relative Provisions under Republic Act No. 11232 or The REVISED Corporation by the provisions of the special law or charter creating them or applicable to them,
Code: supplemented by the provisions of this Code, insofar as they are applicable.
The historical background of the Corporation Code in the Philippines Sec. 11
● Pre-1980: Before the enactment of the Corporation Code of 1980, the legal SEC. 11. Corporate Term.
framework for corporations in the Philippines was governed by the A corporation shall have perpetual existence unless its articles of
Corporation Law of 1906, which was based on American corporate law incorporation provide otherwise.
principles established during the American colonial period. Corporations with certificates of incorporation issued prior to the effectivity of
● Enactment of the Corporation Code (1980): The Corporation Code of the this Code, and which continue to exist, shall have perpetual existence, unless the
Philippines, officially known as Batas Pambansa Blg. 68, was signed into law corporation, upon a vote of its stockholders representing a majority of its outstanding
on May 1, 1980, and took effect on May 1, 1981. It was a comprehensive capital stock, notifies the Commission that it elects to retain its specific corporate term
piece of legislation that replaced the outdated Corporation Law of 1906. pursuant to its articles of incorporation: Provided, That any change in the corporate
● Modernization and Simplification: The primary goal of enacting the term under this section is without prejudice to the appraisal right of dissenting
Corporation Code was to modernize and simplify corporate regulations, stockholders in accordance with the provisions of this Code.
making it easier for businesses to incorporate and operate. The new code A corporate term for a specific period may be extended or shortened by
introduced various innovations, such as allowing one-person corporations amending the articles of incorporation: Provided, That no extension may be made
(OPCs), removing the requirement for a minimum number of incorporators, earlier than three (3) years prior to the original or subsequent expiry date(s) unless
and providing more flexibility in corporate governance. there are justifiable reasons for an earlier extension as may be determined by the

- MNL A.
Commission: Provided, further, That such extension of the corporate term shall take All person who assume to act as a corporation knowing it to be without
effect only on the day following the original or subsequent expiry date(s). authority to do so shall be liable as general partners for all debts, liabilities and
A corporation whose term has expired may apply for a revival of its damages incurred or arising as a result thereof: Provided, however, That when any
corporate existence, together with all the rights and privileges under its certificate of such ostensible corporation is sued on any transaction entered by it as a corporation
incorporation and subject to all of its duties, debts and liabilities existing prior to its or on any tort committed by it as such, it shall not be allowed to use its lack of
revival. Upon approval by the Commission, the corporation shall be deemed revived corporate personality as a defense. Anyone who assumes an obligation to an
and a certificate of revival of corporate existence shall be issued, giving it perpetual ostensible corporation as such cannot resist performance thereof on the ground that
existence, unless its application for revival provides otherwise. No application for there was in fact no corporation.
revival of certificate of incorporation of banks, banking and quasi- banking institutions, Sec. 140 - 153 TITLE XV: FOREIGN CORPORATIONS
preneed, insurance and trust companies, non-stock savings and loan associations SEC. 140. Definition and Rights of Foreign Corporations.
(NSSLAs), pawnshops, corporations engaged in money service business, and other For purposes of this Code, a foreign corporation is one formed, organized or
financial intermediaries shall be approved by the Commission unless accompanied by existing under laws other than those of the Philippines’ and whose laws allow Filipino
a favorable recommendation of the appropriate government agency. citizens and corporations to do business in its own country or State. It shall have the
Sec. 17 right to transact business in the Philippines after obtaining a license for that purpose
SEC. 17. Corporate Name. in accordance with this Code and a certificate of authority from the appropriate
No corporate name shall be allowed by the Commission if it is not government agency.
distinguishable from that already reserved or registered for the use of another SEC. 141. Application to Existing Foreign Corporations.
corporation, or if such name is already protected by law, or when its use is contrary to Every foreign corporation which on the date of the effectivity of this Code, is
existing law, rules and regulations. A name is not distinguishable even if it contains authorized to do business in the Philippines under a license issued to it shall continue
one or more of the following: to have such authority under the terms and conditions of its license, subject to the
(a) The word “corporation”, “company”, “incorporated”, “limited”, “limited provisions of this Code and other special laws.
liability”, or an abbreviation of one of such words; and SEC. 142. Application for a License.
(b) Punctuations, articles, conjunctions, contractions, prepositions, A foreign corporation applying for a license to transact business in the
abbreviations, different tenses, spacing, or number of the same word or phrase. Philippines shall submit to the Commission a copy of its articles of incorporation and
The Commission, upon determination that the corporate name is: (1) not bylaws, certified in accordance with law, and their translation to an official language of
distinguishable from a name already reserved or registered for the use of another the Philippines, if necessary. The application shall be under oath and, unless already
corporation; (2) already protected by law; or (3) contrary to law, rules and regulations, stated in its articles of incorporation, shall specifically set forth the following:
may summarily order the corporation to immediately cease and desist from using (a) The date and term of incorporation;
such name and require the corporation to register a new one. The Commission shall (b) The address, including the street number, of the principal office of the
also cause the removal of all visible signages, marks, advertisements, labels, prints corporation in the country or State of incorporation;
and other effects bearing such corporate name. Upon the approval of the new (c) The name and address of its resident agent authorized to accept
corporate name, the Commission shall issue a certificate of incorporation under the summons and process in all legal proceedings and all notices affecting the
amended name. corporation, pending the establishment of a local office;
If the corporation fails to comply with the Commission’s order, the (d) The place in the Philippines where the corporation intends to operate;
Commission may hold the corporation and its responsible directors or officers in (e) The specific purpose or purposes which the corporation intends to
contempt and/or hold them administratively, civilly and/or criminally liable under this pursue in the transaction of its business in the Philippines: Provided, That said
Code and other applicable laws and/or revoke the registration of the corporation. purpose or purposes are those specifically stated in the certificate of authority issued
Sec. 19 - 20 by the appropriate government agency;
SEC. 19. De facto Corporations. (f) The names and addresses of the present directors and officers of the
The due incorporation of any corporation claiming in good faith to be a corporation;
corporation under this Code, and its right to exercise corporate powers, shall not be (g) A statement of its authorized capital stock and the aggregate number of
inquired into collaterally in any private suit to which such corporation may be a party. shares which the corporation has authority to issue, itemized by class, par value of
Such inquiry may be made by the Solicitor General in a quo warranto proceeding. shares, shares without par value, and series, if any;
SEC. 20. Corporation by Estoppel.

- MNL A.
 (h) A statement of its outstanding capital stock and the aggregate number of Republic Act No. 8799, otherwise known as “The Securities Regulation
shares which the corporation has issued, itemized by class, par value of shares, Code”, shares of stock in domestic corporations listed in the stock exchange, shares
shares without par value, and series, if any; of stock in domestic insurance companies and banks, any financial instrument
(i) A statement of the amount actually paid in; and determined suitable by the Commission, or any combination thereof with an actual
(j) Such additional information as may be necessary or appropriate in order market value of at least Five hundred thousand pesos (P500,000.00) or such other
to enable the Commission to determine whether such corporation is entitled to a amount that may be set by the Commission: Provided however, That within six (6)
license to transact business in the Philippines, and to determine and assess the fees months after each fiscal year of the licensee, the Commission shall require the
payable. licensee to deposit additional securities or financial instruments equivalent in actual
Attached to the application for license shall be a certificate under oath duly market value to two percent (2%) of the amount by which the licensee’s gross income
executed by the authorized official or officials of the jurisdiction of its incorporation, for that fiscal year exceeds Ten million pesos (P10,000,000.00). The Commission
attesting to the fact that the laws of the country or State of the applicant allow Filipino shall also require the deposit of additional securities or financial instruments if the
citizens and corporations to do business therein, and that the applicant is an existing actual market value of the deposited securities or financial instruments has decreased
corporation in good standing. If the certificate is in a foreign language, a translation by at least ten percent (10%) of their actual market value at the time they were
thereof in English under oath of the translator shall be attached to the application. deposited. The Commission may, at its discretion, release part of the additional
The application for a license to transact business in the Philippines shall deposit if the gross income of the licensee has decreased, or if the actual market
likewise be accompanied by a statement under oath of the president or any other value of the total deposit has increased, by more than ten percent (10%) of their
person authorized by the corporation, showing to the satisfaction of the Commission actual market value at the time they were deposited. The Commission may, from time
and when appropriate, other governmental agencies that the applicant is solvent and to time, allow the licensee to make substitute deposits for those already on deposit as
in sound financial condition, setting forth the assets and liabilities of the corporation long as the licensee is solvent. Such licensee shall be entitled to collect the interest or
as of the date not exceeding one (1) year immediately prior to the filing of the dividends on such deposits. In the event the licensee ceases to do business in the
application. Philippines, its deposits shall be returned, upon the licensee’s application and upon
Foreign banking, financial, and insurance corporations shall, in addition to proof to the satisfaction of the Commission that the licensee has no liability to
the above requirements, comply with the provisions of existing laws applicable to Philippine residents, including the Government of the Republic of the Philippines. For
them. In the case of all other foreign corporations, no application for license to purposes of computing the securities deposit, the composition of gross income and
transact business in the Philippines shall be accepted by the Commission without allowable deductions therefrom shall be in accordance with the rules of the
previous authority from the appropriate government agency, whenever required by Commission.
law. SEC. 144. Who May be a Resident Agent.
SEC. 143. Issuance of a License A resident agent may be either an individual residing in the Philippines or a
If the Commission is satisfied that the applicant has complied with all the domestic corporation lawfully transacting business in the Philippines: Provided, That
requirements of this Code and other special laws, rules and regulations, the an individual resident agent must be of good moral character and of sound financial
Commission shall issue a license to transact business in the Philippines to the standing: Provided, further, That in case of a domestic corporation who will act as a
applicant for the purpose or purposes specified in such license. Upon issuance of the resident agent, it must likewise be of sound financial standing and must show proof
license, such foreign corporation may commence to transact business in the that it is in good standing as certified by the Commission.
Philippines and continue to do so for as long as it retains its authority to act as a SEC. 145. Resident Agent; Service of Process.
corporation under the laws of the country or State of its incorporation, unless such As a condition to the issuance of the license for a foreign corporation to
license is sooner surrendered, revoked, suspended, or annulled in accordance with transact business in the Philippines, such corporation shall file with the Commission a
this Code or other special laws. Within sixty (60) days after the issuance of the written power of attorney designating a person who must be a resident of the
license to transact business in the Philippines, the licensee, except foreign banking or Philippines, on whom summons and other legal processes may be served in all
insurance corporations, shall deposit with the Commission for the benefit of present actions or other legal proceedings against such corporation, and consenting that
and future creditors of the licensee in the Philippines, securities satisfactory to the service upon such resident agent shall be admitted and held as valid as if served
Commission, consisting of bonds or other evidence of indebtedness of the upon the duly authorized officers of the foreign corporation at its home office. Such
Government of the Philippines, its political subdivisions and instrumentalities, or of foreign corporation shall likewise execute and file with the Commission an agreement
government-owned or - controlled corporations and entities, shares of stock or debt or stipulation, executed by the proper authorities of said corporation, in form and
securities that are registered under substance as follows:

- MNL A.
 “The (name of foreign corporation) hereby stipulates and agrees, in One or more foreign corporations authorized to transact business in the
consideration of being granted a license to transact business in the Philippines, that if Philippines may merge or consolidate with any domestic corporation or corporations if
the corporation shall cease to transact business in the Philippines, or shall be without permitted under Philippine laws and by the law of its incorporation: Provided, That the
any resident agent in the Philippines on whom any summons or other legal processes requirements on merger or consolidation as provided in this Code are followed.
may be served, then service of any summons or other legal process may be made Whenever a foreign corporation authorized to transact business in the
upon the Commission in any action or proceeding arising out of any business or Philippines shall be a party to a merger or consolidation in its home country or State
transaction which occurred in the Philippines and such service shall have the same as permitted by the law authorizing its incorporation, such foreign corporation shall,
force and effect as if made upon the duly authorized officers of the corporation at its within sixty (60) days after the effectivity of such merger or consolidation, file with the
home office.” Commission, and in proper cases, with the appropriate government agency, a copy of
Whenever such service of summons or other process is made upon the the articles of merger or consolidation duly authenticated by the proper official or
Commission, the Commission shall, within ten (10) days thereafter, transmit by mail a officials of the country or state under whose laws, the merger or consolidation was
copy of such summons or other legal process to the corporation at its home or effected: Provided however, That if the absorbed corporation is the foreign
principal office. The sending of such copy by the Commission shall be a necessary corporation doing business in the Philippines, the latter shall at the same time file a
part of and shall complete such service. All expenses incurred by the Commission for petition for withdrawal of its license in accordance with this Title.
such service shall be paid in advance by the party at whose instance the service is SEC. 150. Doing Business Without a License.
made. No foreign corporation transacting business in the Philippines without a
It shall be the duty of the resident agent to immediately notify the license, or its successors or assigns, shall be permitted to maintain or intervene in
Commission in writing of any change in the resident agent’s address. any action, suit or proceeding in any court or administrative agency of the Philippines;
SEC. 146. Law Applicable. but such corporation may be sued or proceeded against before Philippine courts or
A foreign corporation lawfully doing business in the Philippines shall be administrative tribunals on any valid cause of action recognized under Philippine
bound by all laws, rules and regulations applicable to domestic corporations of the laws.
same class, except those which provide for the creation, formation, organization or SEC. 151. Revocation of License.
dissolution of corporations or those which fix the relations, liabilities, responsibilities, Without prejudice to other grounds provided under special laws, the license
or duties of stockholders, members, or officers of corporations to each other or to the of a foreign corporation to transact business in the Philippines may be revoked or
corporation suspended by the Commission upon any of the following grounds:
SEC. 147. Amendments to Articles of Incorporation or Bylaws of Foreign (a) Failure to file its annual report or pay any fees as required by this Code;
Corporations. (b) Failure to appoint and maintain a resident agent in the Philippines as
Whenever the articles of incorporation or bylaws of a foreign corporation required by this Title;
authorized to transact business in the Philippines are amended, such foreign (c) Failure, after change of its resident agent or address, to submit to the
corporation shall, within sixty (60) days after the amendment becomes effective, file Commission a statement of such change as required by this Title;
with the Commission, and in the proper cases, with the appropriate government (d) Failure to submit to the Commission an authenticated copy of any
agency, a duly authenticated copy of the amended articles of incorporation or bylaws, amendment to its articles of incorporation or bylaws or of any articles of merger or
indicating clearly in capital letters or underscoring the change or changes made, duly consolidation within the time prescribed by this Title;
certified by the authorized official or officials of the country or State of incorporation. (e) A misrepresentation of any material matter in any application, report,
Such filing shall not in itself enlarge or alter the purpose or purposes for which such affidavit or other document submitted by such corporation pursuant to this Title;
corporation is authorized to transact business in the Philippines. (f) Failure to pay any and all taxes, imposts, assessments or penalties, if
SEC. 148. Amended License. any, lawfully due to the Philippine Government or any of its agencies or political
A foreign corporation authorized to transact business in the Philippines shall subdivisions;
obtain an amended license in the event it changes its corporate name, or desires to (g) Transacting business in the Philippines outside of the purpose or
pursue other or additional purposes in the Philippines, by submitting an application purposes for which such corporation is authorized under its license;
with the Commission, favorably endorsed by the appropriate government agency in (h) Transacting business in the Philippines as agent of or acting on behalf of
the proper cases. any foreign corporation or entity not duly licensed to do business in the Philippines; or
SEC. 149. Merger or Consolidation Involving a Foreign Corporation Licensed in the (i) Any other ground as would render it unfit to transact business in the
Philippines. Philippines.
SEC. 152. Issuance of Certificate of Revocation.

- MNL A.
 Upon the revocation of the license to transact business in the Philippines, ONE PERSON CORPORATION may have a single stockholder, as well as sole
the Commission shall issue a corresponding certificate of revocation, furnishing a director. Its registration must comply with the corresponding separate guidelines on
copy thereof to the appropriate government agency in the proper cases. the establishment of an OPC.
The Commission shall also mail the notice and copy of the certificate of b. Powers
revocation to the corporation, at its registered office in the Philippines. ➢ Express- powers are explicitly granted to the corporation through
SEC. 153. Withdrawal of Foreign Corporations. its articles of incorporation or charter and the laws of the jurisdiction
Subject to existing laws and regulations, a foreign corporation licensed to in which it is incorporated. These powers define the corporation's
transact business in the Philippines may be allowed to withdraw from the Philippines primary objectives, activities, and scope of operations. They
by filing a petition for withdrawal of license. No certificate of withdrawal shall be provide the legal authority to engage in specific business activities.
issued by the Commission unless all the following requirements are met: - For example, the articles of incorporation might expressly state that the
(a) All claims which have accrued in the Philippines have been paid, corporation is authorized to manufacture and sell a certain type of product.
compromised or settled; ➢ Implied- powers are not explicitly mentioned in the articles of
(b) All taxes, imposts, assessments, and penalties, if any, lawfully due to the incorporation but are considered necessary to carry out the
Philippine Government or any of its agencies or political subdivisions have been paid; corporation's express powers. These powers are generally
(c) The petition for withdrawal of license has been published once a week for recognized by law as essential for the corporation's functioning.
three (3) consecutive weeks in a newspaper of general circulation in the Philippines. They may include the power to enter into contracts, hire
employees, or lease property.
Part 4(c): Republic Act No. 11232 or The REVISED Corporation Code - For instance, if a corporation is expressly authorized to operate a restaurant,
1. Private Corporations- is a company owned by a small group of individuals or it implies the power to hire staff, purchase ingredients, and rent a location.
organizations and is not publicly traded on stock exchanges. It typically has a limited ➢ Incidental Powers are those actions or abilities that are
number of shareholders, less stringent reporting requirements, and allows for greater reasonably necessary to achieve the corporation's express or
control by shareholders. Private corporations are common among family-owned implied powers. They are actions that are considered natural and
businesses and small to medium-sized enterprises. customary in the course of conducting the corporation's business.
a. Formation or creation Power to acquire properties
● PROMOTION- Activities done by promoter for the founding and - An example of incidental power is the authority to sign routine contracts or
organizing of the business or enterprise of the issuer engage in marketing and advertising activities to promote the business. the
● INCORPORATION- Founding or creating the corporation. right to succession, the right to have a corporate name, right to make
Steps - Execution of the Articles of Incorporation (AOI) by the bylaws, and the right to hold properties for the purposes that are allowed by
incorporators and other documents required for registration of the corporation its charter.
- Filing of the articles of incorporation with the SEC together with the ➢ Ratification is a process by which a corporation formally approves
treasurer’s affidavit an action that was taken without proper authorization. When
- If governed by special laws: a favorable recommendation of the someone, often an employee or agent of the corporation, takes an
appropriate government agency. action on behalf of the corporation that wasn't explicitly authorized,
● FORMAL ORGANIZATION AND COMMENCEMENT OF the corporation's board of directors or shareholders may choose to
BUSINESS TRANSACTIONS ratify the action after the fact.
Examples: - For instance, if an employee entered into a significant contract on behalf of
1. Adoption of by-laws and filing the same with the sec the corporation without prior approval, the board might ratify the contract to
2. Election of board of directors or board of trustees and make it legally binding.
officers 1. BOARD
3. Payment of shares 2. EXECUTIVE OFFICERS
NATURAL PERSONS who are licensed to practice a profession ,and partnerships or 3. STOCKHOLDERS OR MEMBERS, comes in incase of
associations organized for the purpose of practicing a profession, shall not be allowed substantial change
to organize a corporation unless otherwise stated under special laws. ➢ Ultra-vires vs. Void
NUMBER OF INCORPORATORS two or more persons, but not more than 15, may ★ "Ultra vires" refers to actions taken by a corporation that
organize themselves and form a corporation. go beyond its express and implied powers, as well as

- MNL A.
 those that are not reasonably incidental to its intended II. Incorporators - Signatories. People mentioned in the articles of
business activities. incorporation as originally forming and composing the corporation.
- If a corporation engages in ultra vires activities, it can be III. Stockholders- Owners of shares of stock in a stock corporation
challenged, and the actions may be considered void or IV. Members - Corporators of a non-stock corporation
unenforceable. V. Board of directors or board of trustees- Governing body in a
- In some cases, third parties dealing with an entity may still be able stock corporation, while the board of trustees is the governing body in a
to enforce contracts or agreements if they had no knowledge of the non-stock corporation
ultra vires nature of the transaction. VI. Corporate Officers- The president, who shall be a director, a
★ "Void" actions refers to something that is completely treasurer who may or may not be a director, a secretary who shall be a
invalid and without legal effect. When an action, contract, resident and citizen of the Philippines, and such other officers as may be
or decision is declared void, it is treated as if it never provided for in the by-laws. If the corporation is vested with public interest,
existed in the eyes of the law. the board shall also elect a compliance officer.
- Void acts are typically not subject to ratification or validation; they are simply VII. Subscribers- Persons who have agreed to take and pay for
treated as if they never existed in the first place. Courts will not enforce void original, unissued shares of a corporation formed or to be formed.
contracts or actions, and any benefits conferred are typically not VIII. Underwriter- A person who guarantees on a firm commitment
recoverable. and/or declared best effort basis the distribution and sale of securities of any
c. Stock- Corporations which have a capital stock divided into shares and kind by another company. A person or entity, especially an investment
are authorized to distribute to the holders of such shares dividends or allotments of banker, who guarantees the sale of newly issued securities by purchasing all
the surplus profits on the basis of the shares are stock corporations or part of the shares for resale to the public.
Example: LAND BANK OF THE PHILIPPINES, Philippine Crop insurance IX. Promoter- Is a person who brings about or cause to bring about
corporation, Philippine International trading corporation, and Philippine the formation and organization of a corporation by:
national bank 1. Bringing together the incorporators or the persons interested in the
d. Non-stock- Where no part of its income is distributable as dividends to its enterprise;
members, trustees, or officers. Provided that any profit which a non-stock corporation 2. Procuring subscriptions or capital for the corporation; and
may obtain as an incidental to its operations shall, whenever necessary or proper, be 3. Setting in motion the machinery which leads to the incorporation of the
used for the furtherance of the purpose or purposes for which the corporation was corporation itself.
organized. Any profit acquired by the corporation shall be used to advance or for the A founder or organizer of a corporation or business venture;
betterment of a nonprofit organization rather than distributing these to for the benefit business enterprise. One who takes the entrepreneurial initiative in funding
of individuals involved as a corporation. Mostly Tax exempt or organizing a business enterprise.
Example: St. Luke’s medical center inc., Advent Health g. Articles of Incorporation (page 233)
d. Other Special Kinds- Corporations created by special laws or “charters” I. Nature- Three fold-nature of the AOI
Two essential conditions ➔ Contract between state and the corporation
Common Good: The first condition is that the corporation must serve the ➔ Between corporation and its stockholders
common good. In other words, its existence and operations should be in the ➔ Between stockholders inter se.
interest of the public welfare and benefit society as a whole. The corporation II. Adoption- The adoption process in Philippine corporate law
should contribute to the well-being of the people. involves the approval and acceptance of the Articles of
Incorporation. It requires the founders, initial shareholders, or
Economic Viability: The second condition relates to economic viability. This
members of the corporation to meet and formally adopt these
condition applies mainly to government-owned or controlled corporations
articles. In this context, adoption signifies that the corporation
that engage in economic or commercial activities and need to compete in the
acknowledges the Articles as its governing document and agrees to
marketplace. These corporations should be financially sustainable and able
abide by its provisions. For example, if a group of shareholders
to compete effectively.
gathers to approve the Articles of Incorporation for a new retail
f. Composition
corporation in the Philippines, they are adopting the document.
I. Corporators - Those who compose corporation, whether as
stockholders or members

- MNL A.
 III. Amendment- ⅔ vote of the outstanding capital stock, or ⅔ the board of directors or members), and formally documenting the
members if it's a non-stock corporation. Underscoring the changes changes.
made. Certification under oath by: ❖ Ang bylaws kay pwede ma-amend or repealed and new
➔ Corporate secretary bylaws can be adopted pero dapat majority of the board or
➔ Majority of the BOD or BOT stating the fact that said owners kay mu-agree and mu-vote.
amendments have been duly approved by the required ❖ A special meeting must be called for the purpose of
vote of the stockholders or members, shall be submitted to amending the bylaws.
SEC ❖ Delegation of power, pwede nga ang board of directors or
Approved by sec. Accompanied by a favorable recommendation of trustees ang mu decide ani. However, those owners who
the appropriate government agency in cases of: (dili maapprove if represent ⅔ of the capital stock or ⅔ for noncapital stock,
walay recommendation) kay pwede irevoke ang delegated power.
➔ Banks ❖ Amendment shall only be effective upon the issuance by
➔ Banking and quasi-banking institutions the commission of a certification that the same is in
➔ Preneed accordance with this code and other relevant laws.
➔ Insurance and trust companies IV. Binding third persons- Not bound unless have knowledge of the
➔ Nonstock savings and loan associations by-laws. It typically refers to a situation where an agreement or
➔ Pawnshops contract between two parties (the first and second parties) has legal
➔ Other financial intermediaries consequences or obligations for a third person who is not directly
involved in the agreement. This concept can vary by jurisdiction
h. By-laws and legal context.
I. Nature- Rules and regulations or private laws enacted in a - For example, in contract law, a third-party beneficiary may be a person or
corporation to regulate, govern, and control its own actions, affairs entity who is not a party to the contract but is intended to benefit from the
and concerns and its stockholders or members and directors and contract's performance. In such cases, the contract may be binding on the
officers with relation thereto and among themselves in their relation third-party beneficiary, and they may have legal rights to enforce the
to it. contract's terms.
- Relatively continuing rules of action adopted by the - The ability of a contract to bind a third person often depends on the specific
corporation for its government. language and intentions of the contracting parties, as well as applicable laws
- PURPOSE: TO REGULATE THE CONDUCT AND and regulations. Not all contracts are enforceable against third parties, and
DEFINE THE DUTIES OF THE MEMBERS TOWARDS THE whether a third person can be bound by a contract is subject to legal
CORPORATIONS AND AMONG THEMSELVES. principles and contractual provisions.
- They specify the authority granted to each role and detail
their responsibilities. i. Incorporators- Incorporators are the initial individuals or entities
II. Adoption- "Bylaws adaptation" refers to the process of updating or responsible for founding a corporation. They draft and sign the articles of
amending an organization's internal rules and regulations (bylaws) incorporation, initiating the corporation's legal existence. Their role primarily involves
to accommodate changes in its structure, operations, legal the establishment of the corporation, and they may later take on other positions within
requirements, or other needs. This process often involves board or the company if they choose.
member approval and legal documentation. j. Amount of Capital Stock to be prescribed or paid-up (authorized
III. Amendment- refers to the process of making changes or revisions capital stock)-
to an organization's existing bylaws. Bylaws are a set of rules and Amount of its capital stock
regulations that govern the internal operations, structure, and
Division into shares
decision-making processes of the organization. Amending the
bylaws is done to update or modify specific provisions to reflect Par value of shares
changes in the organization's needs, legal requirements, or internal Original subscribers (nationalities, residence, and the amount
procedures. The process typically involves proposing amendments, subscribed and paid)
obtaining approval from the appropriate governing body (such as

- MNL A.
 k. When corporate existence commences- A corporation shall have other general corporate use. Are more liquid and flexible because
perpetual existence unless its articles of incorporation says otherwise. they are not subject to specific restrictions. They can be utilized by
l. Corporate books and records the company as needed for various operational and financial
● Minutes refer to the detailed written records of meetings held by a purposes.
corporation's board of directors, shareholders, or various c. Capital- refers to the financial resources, including money and assets,
committees. These records capture the discussions, decisions, and that a company uses to operate and generate income. It can encompass various
actions taken during these meetings. Minutes are essential for forms of funding, such as equity capital (funds from shareholders) and debt capital
maintaining a clear and accurate history of corporate activities and (borrowed funds).
ensuring compliance with legal and regulatory requirements. d. Capital Stock- represents the ownership interests in a corporation. It is
● Accounts encompass the financial records and accounting books typically divided into shares, and shareholders own these shares in proportion to their
of the corporation. These records include ledgers, journals, investments. Capital stock can be issued in various classes, each with different rights.
financial statements, and other accounting documents that track the Mao ni ang naa sa articles of corporation.
financial transactions and financial health of the corporation. Proper e. Authorized Capital Stock- is the maximum amount of capital stock that a
accounting is essential for financial transparency, tax compliance, corporation is legally allowed to issue. It is defined in the corporation's articles of
and financial reporting incorporation.those shares ready for public
● Stock and Transfer Book- The stock and transfer book is a record f. Share of Stock- is a unit of ownership in a corporation. Shareholders own
that tracks the ownership of shares in a stock corporation. It one or more shares, which represent their ownership stake and may come with
contains details about the shareholders, the number of shares they certain rights, such as voting rights and dividend entitlements.
own, the dates of acquisition or transfer, and any related g. Subscribed Capital- is the portion of the authorized capital stock that
information, such as stock certificates issued. This book is vital for shareholders have committed to purchase. It represents the total value of shares for
maintaining an accurate record of share ownership, facilitating the which shareholders have agreed to subscribe.
transfer of shares, and ensuring compliance with securities h. Paid-up Capital- the portion of the subscribed capital that shareholders
regulations. have already paid for in cash or other assets. It reflects the actual funds that
2. Stock or Share Corporations have been contributed to the corporation.
a. Doctrine of Equality of Shares (default principle) - This doctrine SUBSCRIPTION IS INDIVISIBLE
ensures that all shareholders of the same class of shares have uniform rights and i. Preemptive Right- is the right of existing shareholders to purchase
responsibilities. Each share shall be equal in all respects (rights and liabilities) to additional shares of stock before the corporation offers them to external investors.
every other share except as otherwise provided in the articles of incorporation and This right helps protect the ownership interests of current shareholders.
stated in the certificate of stock. j. Increase or decrease of Capital Stock- A corporation can change the
b. Trust Fund Doctrine- ensures that the capital assets of a corporation are amount of its authorized capital stock through an increase (issuing more shares) or a
preserved to satisfy the claims of creditors before they are distributed to decrease (reducing the number of shares). This process typically requires approval
shareholders. This is a fundamental principle in corporate law that protects the by the shareholders and compliance with legal requirements.
interests of creditors and maintains the financial integrity of the corporation k. Subscription contract- is a legal agreement between a subscriber (an
➢ Restricted Retained Earnings- refer to a portion of a company's individual or entity) and the corporation to purchase a specified number of shares of
accumulated profits that are earmarked or reserved for specific stock. It outlines the terms, conditions, and obligations related to the purchase.
purposes. These purposes are typically defined by the company's l. Consideration for stocks- refers to the value (such as money, assets, or
management or board of directors. The reservation of these services) that a subscriber provides in exchange for the shares they are purchasing. It
earnings is done by allocating them to specific reserves or accounts is a fundamental element of the subscription contract. Stocks shall not be issued for a
within the company's financial statements. consideration less than the par or issued price thereof.
Common reasons for restricting retained earnings include setting Consideration consists of property-
aside funds for future investments, planned expansions, debt ➢ Must be subject to a fair valuation equal to the par or issued value
repayments, legal requirements, or other specific uses. of the stock issued
➢ Unrestricted Retained Earnings- These earnings are free and ➢ Property is actually received by the corporation
available for various uses, including dividend payments to
shareholders, reinvestment in the business, debt reduction, or any

- MNL A.
 ➢ If it consists of intangible property, the valuation thereof shall initially 3. Payment to Avoid Sale- To avoid the sale of their delinquent shares, a delinquent
be determined by the incorporators of the BOD subject to the stockholder must pay the full balance due on the subscription, including any accrued
approval by the SEC. interest, within the specified period. The corporation provides a clear deadline for this
m. Certificate of stocks and transfer of shares- certificate of stock is a payment.
document that certifies a shareholder's ownership of a certain number of shares. The 4. Sale at Public Auction- If the delinquent stockholder does not pay the full amount
transfer of shares involves changing ownership, which requires proper documentation on or before the specified date, the delinquent shares are put up for public auction.
and record-keeping. The highest bidder, willing to pay the full amount due on the subscription, accrued
Signed by the president or vice president, countersigned by the secretary or interest, costs of advertisement, and expenses of the sale, is the purchaser of the
assistant secretary, sealed with the seal of the corporation shall be issued in delinquent shares.
accordance with the bylaws.
NO transfer, shall be valid except as between the parties, until the transfer is 5. Transfer of Purchased Shares- The stock purchased at the public auction is
recorded in the books of the corporation showing the names of the parties to the transferred to the winning bidder's name in the corporation's books, and a certificate
transaction, the date of transfer, the number of the certificate or certificates, and the for these shares is issued to the purchaser.
number of shares transferred. 6. Crediting Remaining Shares- If there are any remaining shares left over from the
n. Liability for watered stocks- Watered stocks are shares that are issued auction, they are credited to the delinquent stockholder's account. The delinquent
with an overvaluation of assets or an inadequate consideration. Shareholders can be stockholder is also entitled to receive a certificate of stock covering these remaining
held liable for watered stocks, meaning they may need to repay any excessive value shares.
they received when they initially subscribed to the shares. 7. No Bidder at Public Auction- If there are no bidders at the public auction who are
o. Balance of subscription and delinquency sale- Payment of balance of willing to pay the full amount due on the subscription, including interest and
subscription - the BOD has the authority to demand payment from unpaid associated costs, the corporation may bid for the delinquent shares. The total amount
subscriptions. They can specify the percentage of the unpaid amount that they want due will be credited as fully paid in the corporation's books. The shares become
to collect, including accrued interest on the unpaid subscription. treasury shares, which the corporation can later sell or dispose of following the
Shareholders are required to make payments on the dates specified in the regulations specified in the applicable corporate laws.
subscription contract indicated in a call made by the board of directors, failure to do
so has consequences. 3. Classification of Stock
- Unpaid balance becomes immediately due and demandable a. Par and Non-par
- Liable for interest on the unpaid balance. - Par value is a nominal or face value assigned to shares. Par stock
- Interest begins accruing from the specified date until the full has a specified par value, and the shares cannot be sold for less
payment of the amount is made. than this value.
Delinquency sale- This term relates to any unpaid balance on the subscribed - Non-par stock does not have a designated par value, and the
shares. If a shareholder fails to pay the full subscription amount, the corporation may shares can be sold at any price determined by the market.
sell the delinquent shares to recover the outstanding balance. b. Voting (grants shareholders the right to participate in corporate decisions
The passage you provided outlines the procedures and consequences related to and vote on matters such as board elections and major company decisions)
delinquent stockholders who have failed to pay their subscription amounts for shares - Founder's- shares that are initially issued to the founders of a
in a corporation. corporation. It often carries specific rights or restrictions.
1. Notice of Sale- When a stockholder becomes delinquent, the corporation takes ★ Exclusive Voting Rights: Founders' shares may grant their holders
steps to collect the unpaid subscription amount. The board of directors passes a the exclusive right to vote and be voted for in the election of
resolution to initiate the sale of the delinquent shares. Notice of this sale, along with a directors of the company. In other words, the founders or early
copy of the resolution, is sent to every delinquent stockholder. The notice can be investors have a significant say in the composition of the company's
delivered personally, by registered mail, or through other means as specified in the board of directors.
corporation's bylaws. ★ Limited Period: This exclusive right to vote and be voted for in
2. Public Advertisement- The corporation is required to publish a notice of the sale in direct elections is not indefinite. It is limited to a specific period,
a newspaper of general circulation in the province or city where the corporation's which should not exceed five (5) years from the date of the
principal office is located. This notice should appear once a week for two consecutive company's incorporation. This limitation ensures that the founders'
weeks.

- MNL A.
 control is not permanent and that other shareholders have a say in from the shareholder at a predetermined price and under specified
the company's governance over time. conditions regardless if the corporation has unrestricted retained
★ Legal Restrictions: The provision also mentions that such exclusive earnings or not. However, you can only repurchase these if after
voting rights should not be allowed if their exercise would violate purchasing it, naa pa gihapon enough money ang corporation to
specific laws, including Commonwealth Act No. 108 (the cover debts and liabilities.
"Anti-Dummy Law") and Republic Act No. 7042 (the "Foreign - Retained earnings: also termed as earned surplus or undistributed
Investments Act of 1991"). These laws are typically designed to profit.
regulate foreign ownership and control in Philippine corporations Types of shares: compulsory: corp is required to redeem shares. Optional:
and prevent circumvention of these regulations. The provision is corporation is not mandated to redeem the shares
indicating that founders' shares cannot be used to violate these III. Treasury - shares of stock which have been issued and fully paid
laws or any other relevant laws. for, but subsequently reacquired by the issuing corporation through
- Common- represents ownership in the company and typically purchase, redemption, donation or some other lawful means.
carries voting rights. Shareholders of common stock may receive d. Promotion - Companies may offer promotional stock to investors or
dividends and have a say in corporate decisions potential shareholders to attract capital. This stock may be offered at a discounted
- Voting Trust Agreement- A voting trust agreement is a legal price or with additional benefits to entice investors to buy shares.
arrangement in which the shareholders of a corporation transfer e. Escrow ( mura siya ug conditional obligation )
their voting rights to a trustee or a group of trustees for a specified - In mergers and acquisitions, part of the purchase price may be held
period of time. The purpose of a voting trust agreement is to in escrow to cover potential liabilities or indemnify the buyer against
consolidate the voting power of a company's shareholders and any undisclosed issues or breaches of the agreement. This
streamline decision-making. Here are some key points about voting ensures that the buyer has some recourse if problems arise after
trust agreements: the transaction.The agreement specifies certain conditions or
Three tests of voting trust agreement events that need to occur before the deposited asset is released
1. That the voting rights of the stock are separated from the from escrow.
other attributes of ownership - The agreement specifies certain conditions or events that need to
2. Voting rights granted are intended to be irrevocable for a occur before the deposited asset is released from escrow.
definite period of time f. Over-issued - refers to a situation where a corporation has issued more
3. The principal purpose of the grant of voting rights is to shares of its stock than it is legally authorized to issue based on its articles of
acquire voting control of the corporation. incorporation or corporate charter. SUCH ISSUANCE IS NULL AND VOID.
c. Non-voting g. Watered - Stocks issued for a consideration less than the par or issued
I. Preferred price thereof or in any other form other than cash valued in excess of its fair value.
- preferred as to assets - means that in the event of the company's EX:
liquidation, preferred shareholders have a priority claim on the ABC Corporation issues 10,000 shares at a par value of $1 per share, which should
company's assets over common shareholders. This means that if generate $10,000 in capital if done legitimately.
the company is being liquidated, preferred shareholders must be - However, they report that the machinery they received as consideration is worth
paid their predetermined liquidation preference before any assets $10,000, even though its fair value is only $5,000.
are distributed to common shareholders. - As a result, the company records the issuance as if they've raised $10,000 in
- preferred as to dividends - means that preferred shareholders have capital, when, in reality, they've only received assets worth $5,000.
a prior claim to receive dividends before common shareholders. If -This inflated value of the machinery and the capital received creates the appearance
the company declares dividends, preferred shareholders will of a healthier financial position on their balance sheet, which can be misleading to
receive their dividend payments first, up to the amount specified in investors.
the dividend terms, before any dividends are distributed to common
shareholders. 4. Rights of Stockholders
II. Redeemable - also known as repurchaseable shares or buyback a. Management
shares, are a type of shares issued by a corporation that includes a - Indirect
provision allowing the issuing company to repurchase the shares

- MNL A.
 To vote directors - Stockholders have the right to vote in the - Directly seeks remedies for harm experienced by the stockholder.
election of the corporation's board of directors. Directors are responsible for - Typically, there is no need for the stockholder to make a demand on
overseeing the company's management and making critical decisions on its the corporation.
behalf. The number of votes each stockholder can cast is typically - The stockholder is the sole plaintiff, representing only their own
proportional to the number of shares they hold. interests.
To remove directors - stockholders have the right to remove II. Representative
directors from their positions before their terms expire. The specific rules and - Brought by a lead plaintiff on behalf of a group of stockholders with
procedures for director removal may be outlined in the company's bylaws or common claims.
corporate charter. - Alleges harm suffered by a group of stockholders with substantially
- Direct similar grievances.
To give approval to certain corporate actions - Efficient mechanism to consolidate multiple similar claims into one
b. Proprietary lawsuit for cost-effectiveness.
I. Appraisal - Allows stockholders to demand payment of the fair value of their - Requires court certification as a class action based on specific legal
shares in certain circumstances, such as mergers or significant corporate criteria.
actions. Stockholders who dissented and voted against the proposed - The lead plaintiff and class members collectively represent the
corporate action may choose to get out of the corporation by demanding group's interests.
payment of the fair market value of his shares. III. Derivative
II. Issuance of Stock Certificate- Entitles stockholders to receive physical or - Brought by an individual stockholder on behalf of the corporation.
electronic certificates as evidence of their ownership of shares. - Alleges harm to the corporation's rights or interests due to actions
III. To proportionately participate in the distribution of assets during by its directors, officers, or employees.
liquidation- Grants stockholders the right to receive their proportionate - Seeks to enforce the corporation's rights when the board fails to do
share of the company's assets in the event of its liquidation. so.
IV. To transfer stocks- Permits stockholders to buy, sell, or transfer their - The stockholder must generally show that they made a demand on
shares to others, subject to certain legal and contractual restrictions. the corporation or that such a demand would have been futile.
V. Pre-emptive or First Refusal- Provides stockholders with the right to - The stockholder is acting as a representative of the corporation, not
purchase additional shares of stock before the company offers them to in their individual capacity.
external parties, allowing existing stockholders to maintain their proportional d. Dividends
ownership. I. Dividends vs. Profits
VI. To inspect books and records- Grants stockholders the right to review the Dividends refer to payments made by a corporation to its
corporation's financial records, documents, and minutes, subject to certain shareholders out of its profits or earnings. These payments are typically
conditions and legal requirements. distributed in the form of cash, additional shares, or other assets. Dividends
VII. To financial statements- Ensures stockholders have access to the are a way for shareholders to receive a return on their investment in the
company's financial statements, reports, and disclosures, allowing them to company. The decision to declare dividends is made by the corporation's
assess the company's financial health. board of directors and is based on factors like the company's financial
VIII. To recover stocks unlawfully sold to delinquent payment of performance, available profits, and its dividend policy.
subscription- Allows stockholders to reclaim their shares if they were sold Profits represent the positive financial results of a corporation after
due to the delinquency of payment of subscription, provided they meet deducting all expenses, costs, and taxes from its total revenue. Profits can
certain conditions and timeframes. be retained by the company to reinvest in its operations, pay down debt, or
IX. To commence suits- Permits stockholders to bring legal actions, such as fund future growth. Alternatively, they can be distributed to shareholders in
derivative suits or individual suits, to protect their rights and interests in the the form of dividends. The portion of profits not paid out as dividends is
corporation. known as retained earnings, which is an important source of capital for a
c. Remedial corporation's ongoing activities and expansion.
I. Individual - In summary, dividends are payments made to shareholders out of a corporation's
- Brought by an individual stockholder. profits, while profits represent the financial gains of the company after accounting for
- Alleges harm to the stockholder's own personal rights or interests.

- MNL A.
all expenses and taxes. The decision to pay dividends is influenced by the availability ➢ The person or persons designated in the by-laws have authority to call
of profits and the corporation's financial strategy. stockholders or member's meeting;
II. When and how issued ➢ In the absence of such provision in the by-laws, it may be called by a
- Dividends are typically issued periodically, such as quarterly, director or trustee or by an officer entrusted with the management of the
semi-annually, or annually, as decided by the corporation's board of corporation;
directors. The decision to issue dividends is made based on the ➢ A petitioning stockholder or member may make the call on order of theSEC
company's financial performance, cash flow, and capital needs. whenever for any cause, there is no person authorized to call a meeting or
- Dividends are usually distributed to shareholders in the form of the person authorized unjustly refuses to call a meeting;
cash, but they can also be paid in the form of stock or property. The ➢ There must be a previous notice; and
specific method of distribution is determined by the corporation's ➢ There must be a quorum.
BOD and may depend on various factors, including the company's Remote communication: kailangan inotify niya in advance ang presiding officer and
financial position and objectives. the corporate secretary nga mag attend siya through remote communication or other
III. Kinds alternative mode of communication.
1. Cash - These are the most common forms of dividends. Shareholders Sa principal place of the corporation dapat i-preside ang meetings.
receive their dividend payments in cash. The amount paid per share is b. Board- The term "board" often refers to a "board of directors" or "board of
typically expressed as a fixed dollar amount per share. trustees," which is a group of individuals responsible for overseeing the
2. Stock - shareholders receive additional shares of the company's stock. management and strategic direction of an organization, such as a
These are often distributed on a per-share basis, with each shareholder corporation, nonprofit, or educational institution. Here's a brief explanation:
receiving a certain number of new shares for each share they already own. - Board of Directors: In a corporation, the board of directors is
Stock dividends are usually expressed as a percentage. typically elected by the shareholders to make decisions on behalf of
3. Property - In some cases, corporations may issue dividends in the form of the company. They have fiduciary duties to act in the best interests
property, such as assets or securities other than the company's own stock. of the corporation and its shareholders. The board sets corporate
These can be physical assets like real estate or intellectual property. The policies, makes strategic decisions, hires executives, and monitors
value of the property dividend is typically determined by the company's the company's performance.
board of directors. - Board of Trustees: In nonprofit organizations and educational
institutions, the governing body is often referred to as the board of
5. Board of Directors, Trustees and Officers trustees. They are responsible for ensuring the organization's
a. Meetings- Regular and Special meetings of stockholders or members mission is carried out, managing its finances, and overseeing its
- Regular meetings - held annually on a date fixed in the bylaws. Or if overall operations.
not so fixed, on any date after april 15 of every year as determined The composition and responsibilities of the board can vary by organization
by the board of directors or trustees. PROVIDED that written notice and are outlined in its bylaws or governing documents. The board plays a
of regular meetings shall be sent to all stockholders or members of critical role in governance, accountability, and setting the strategic direction
record at least (21) days prior to the meeting. uNLESS, a different for the organization they oversee.
period is required in the bylaws, law, or regulation. May be in the c. Corporate officers- Corporate officers are individuals appointed by a
form of electronic mail or such other manner as the commission corporation's board of directors to manage the day-to-day operations and
shall allow under its guidelines. execute the strategic decisions of the company. These officers hold key
- SPECIAL MEETINGS - SHALL BE HELD AT ANY TIME DEEMED leadership positions and are responsible for various aspects of the
NECESSARY or as provided by the bylaws. Provided, however, corporation's activities. Here's a brief overview:
that at least one week written notice shall be sent to all - Chief Executive Officer (CEO): The CEO is the highest-ranking
stockholders officer in a corporation. They are responsible for setting the
Requirements for stockholders' or members' meetings company's overall strategic direction, making major decisions, and
➢ It must be held at the proper place; ensuring that the organization's objectives are met. The CEO is
➢ It must be held at the stated date and at the appointed time; often the public face of the company and interacts with
➢ It must be called by the proper person; shareholders, employees, and external stakeholders.

- MNL A.
 - Chief Financial Officer (CFO): The CFO oversees the financial wrongful conduct that harms the corporation or its stakeholders. Limited
aspects of the corporation, including financial planning, budgeting, liability corporations (LLCs) and corporations (Inc.) are business structures
reporting, and risk management. They ensure the company's that provide a degree of liability protection to their owners, shielding their
financial stability and compliance with financial regulations. personal assets from business-related liabilities.
- Chief Operating Officer (COO): The COO is responsible for the - Dealings: "Dealings" typically refers to the transactions, agreements, and
day-to-day operations of the corporation. They oversee the interactions that a corporation engages in with other entities. These can
company's internal processes, production, and service delivery, encompass a wide range of activities, including business contracts, financial
working to optimize efficiency and effectiveness. transactions, mergers and acquisitions, partnerships, collaborations, and
- Chief Marketing Officer (CMO): The CMO is in charge of the various other business arrangements. Corporate dealings involve
corporation's marketing and promotional activities. They develop negotiations, legal agreements, and the execution of business strategies to
marketing strategies, manage advertising and branding efforts, and achieve the company's objectives.
work to attract and retain customers.
- Chief Information Officer (CIO): The CIO is responsible for the
corporation's information technology (IT) systems and
infrastructure. They manage the company's technology resources,
data security, and digital strategies.
- General Counsel or Chief Legal Officer (CLO): The General
Counsel, also known as the Chief Legal Officer, oversees the
corporation's legal affairs. They provide legal advice, handle
contracts, manage litigation, and ensure the company complies
with all relevant laws and regulations.
- Chief Human Resources Officer (CHRO): The CHRO is in charge of
the corporation's human resources function. They manage
workforce planning, employee recruitment, development,
compensation, and workplace policies.
- Chief Sustainability Officer (CSO): In some corporations, a Chief
Sustainability Officer is responsible for environmental and
sustainability initiatives, ensuring the company operates in an
environmentally responsible manner.
The specific titles and roles of corporate officers can vary by organization
and industry. These officers work closely with the board of directors and are
accountable for their respective areas of expertise to help the corporation
achieve its goals and fulfill its mission.
d. Compensation, liability and dealings
- Compensation: Compensation refers to the payment or benefits that
individuals receive for their services or work within a corporation. In a
corporate context, this often includes the salaries, bonuses, stock options,
and other forms of remuneration provided to corporate officers, executives,
and employees. Compensation packages can vary widely and are typically
determined by factors such as an individual's role, experience, and
performance.
- Liability: Liability, in a corporate context, refers to the legal responsibility or
obligation of a corporation or its officers for certain actions, debts, or legal
obligations. For example, in a corporation, there can be personal liability for
officers and directors if they breach their fiduciary duties or engage in

- MNL A.