I.

General Provisions
This section lays the groundwork for understanding what a corporation is and its fundamental
characteristics.
●​ Definition and Attributes of a Corporation:
○​ Artificial Being: A corporation is a legal fiction, a "person" created by law,
distinct from the individuals who own or operate it. It has rights and obligations
separate from its stockholders/members. This separation is key to corporate
existence.
○​ Created by Operation of Law: Unlike partnerships or sole proprietorships which
can be formed by mere agreement, a corporation comes into existence only upon
the issuance of a Certificate of Incorporation by the Securities and Exchange
Commission (SEC). This means strict compliance with statutory requirements is
essential.
○​ Right of Succession: A corporation has perpetual existence (unless a specific
term is stated in its Articles of Incorporation). Its existence is not affected by the
death, insanity, or insolvency of its stockholders, directors, or officers. This
ensures continuity of business operations.
○​ Limited Powers: A corporation can only exercise powers expressly granted to it
by law, those implied from its express powers, or those incidental to its existence.
It cannot act beyond these defined limits (an "ultra vires" act).
○​ Right to Acquire and Possess Property in Its Own Name: As a distinct legal
entity, a corporation can own assets, incur liabilities, and enter into contracts
independently.
○​ Liability is Limited: Generally, stockholders are liable only to the extent of their
capital contributions (the amount of shares they own). The personal assets of
stockholders are protected from corporate debts and obligations. This is a
primary advantage of the corporate form.
●​ Classes of Corporations:
○​ Stock Corporation: Has capital stock divided into shares and is authorized to
distribute dividends to its stockholders on the basis of shares held. Most
commercial corporations fall under this category.
○​ Non-Stock Corporation: Does not have capital stock and is not authorized to
distribute dividends. Its income is primarily used for the furtherance of its purpose
(e.g., charitable, religious, educational, cultural, social, civic, professional
organizations). Members do not have proprietary interests in its assets.
○​ Public Corporation: Created by the State for governmental purposes (e.g., local
government units, government-owned and controlled corporations).
○​ Private Corporation: Created for private purpose, benefit, or end (most
corporations you encounter).
 ○​ De Jure Corporation: A corporation existing in fact and in law, having complied
with all legal requirements for incorporation. Its existence cannot be collaterally
attacked.
○​ De Facto Corporation: A corporation that exists when there is an honest
attempt to comply with the legal requirements for incorporation, and there is a
bona fide exercise of corporate powers. Its existence can only be challenged by
the State in a direct proceeding (quo warranto).
○​ Corporation by Estoppel: Applies when a group of persons assumes to act as a
corporation but has not complied with the requirements. Those who deal with
them as a corporation may be estopped from denying its corporate existence.
●​ Components of a Corporation:
○​ Corporators: Those who compose the corporation, whether as stockholders (in
a stock corporation) or as members (in a non-stock corporation). They include
incorporators, subscribers, and members.
○​ Incorporators: Those mentioned in the Articles of Incorporation as originally
forming the corporation. They must be natural persons (at least 2, up to 15,
unless OPC), of legal age, and majority must be residents of the Philippines. For
One Person Corporations, only one natural person is required.
○​ Stockholders/Members: The owners of shares in a stock corporation or the
individuals who comprise a non-stock corporation, respectively. They have
specific rights and obligations defined by law and the corporate by-laws.
○​ Board of Directors/Trustees: The governing body of the corporation. For stock
corporations, it's the Board of Directors; for non-stock, it's the Board of Trustees.
They are responsible for corporate policy and management.
○​ Corporate Officers: Appointed by the Board of Directors/Trustees to manage
the day-to-day operations (e.g., President, Corporate Secretary, Treasurer,
Compliance Officer).
●​ Advantages and Disadvantages of the Corporate Form:
○​ Advantages: Limited liability of stockholders, perpetual existence, centralized
management (Board), ease of transfer of ownership (shares), access to capital
(public offerings), standardized operations due to regulations.
○​ Disadvantages: Greater government regulation and compliance burden (SEC),
higher cost of formation and maintenance, double taxation (corporate income and
then dividends, though some mechanisms exist to mitigate this), potential for
abuse of corporate structure.
●​ Doctrine of Piercing the Corporate Veil: This is a legal principle that allows courts to
disregard the separate legal personality of a corporation and hold the individuals
(stockholders, directors) personally liable for corporate debts or obligations. It is applied
sparingly and only under specific circumstances to prevent fraud, injustice, or
circumvention of law.
○​ Grounds for Piercing:
■​ Fraud or Evil Motive: When the corporation is used to commit fraud or
an illegal act.
 ■​ Alter Ego/Instrumentality: When the corporation is merely an adjunct,
business conduit, or alter ego of a person or another corporation (e.g.,
complete domination, commingling of funds, disregard of corporate
formalities).
■​ Evasion of Obligation: When the corporate entity is used to evade
existing obligations or statutory duties.
○​ Effect: The veil is pierced, meaning the separate legal personality is temporarily
ignored for a specific transaction or liability, making the real parties in interest
(e.g., stockholders) directly liable.

II. Incorporation
This section details the birth of a corporation.
●​ Legal Framework: The Revised Corporation Code of the Philippines (Republic Act
No. 11232) is the primary law governing corporate formation and existence. It
superseded the old Corporation Code (Batas Pambansa Blg. 68).
●​ Steps in Incorporation:
○​ Name Verification and Reservation: Submit proposed corporate name to the
SEC for verification of availability and distinguishability.
○​ Drafting of Articles of Incorporation (AOI): The foundational document.
○​ Drafting of By-Laws: Rules for internal governance.
○​ Subscription and Paid-Up Capital:
■​ No minimum capital stock is required unless a special law dictates
otherwise (e.g., for banks, insurance companies).
■​ Previously, 25% of authorized capital stock must be subscribed, and 25%
of the subscribed capital must be paid up. The Revised Corporation Code
removed these minimum subscription and paid-up capital requirements
for most corporations, making it easier to incorporate. However, special
laws for certain industries may still impose specific capital requirements.
○​ Treasurer's Affidavit: A sworn statement by the corporate treasurer attesting to
the paid-up capital.
○​ Filing of Documents with SEC: Submit AOI, By-Laws, Treasurer's Affidavit, and
other supporting documents (e.g., undertaking to change corporate name).
○​ Issuance of Certificate of Incorporation: The SEC reviews the application. If
compliant, it issues the Certificate of Incorporation, at which point the corporation
legally comes into existence.
●​ Articles of Incorporation (AOI): This is the corporation's charter. It must contain:
○​ Corporate name.
○​ Purpose/purposes (primary and secondary).
○​ Principal office address (must be within the Philippines).
○​ Corporate term (perpetual existence unless a specific term is provided).
○​ Names, nationalities, and residences of incorporators.
 ○​ Names, nationalities, and residences of initial directors/trustees.
○​ Authorized Capital Stock (for stock corps), number of shares, par value (if any),
and types of shares.
○​ Amount of subscribed and paid-up capital (though no minimum required for
general corporations now).
○​ Name of the corporate treasurer.
○​ Specific provisions if it's a non-stock or One Person Corporation.
●​ By-Laws: These are internal rules and regulations for the corporation's governance.
They are subordinate to the AOI and the Revised Corporation Code.
○​ Contents: Usually include details on meetings (time, place, notice), election of
directors/officers, duties of officers, fiscal year, dividends, stock transfers, etc.
○​ Adoption: Must be adopted within one (1) month from the issuance of the
Certificate of Incorporation by the affirmative vote of a majority of the outstanding
capital stock or members. Can also be adopted prior to incorporation
(simultaneously with AOI) if signed by all incorporators.
○​ Amendment: Can be amended by a majority vote of the Board and 2/3 vote of
outstanding capital stock/members, or by 2/3 vote of stockholders/members
alone (provided Board is authorized).
●​ Corporate Term:
○​ The Revised Corporation Code now provides for perpetual existence as the
default term for corporations, unless the Articles of Incorporation expressly
provides for a specific term.
○​ Revival of Corporate Existence: A corporation whose term has expired may
apply for revival with the SEC. Upon approval, it shall have perpetual existence
unless otherwise specified.
●​ One Person Corporation (OPC): A significant innovation under the Revised
Corporation Code.
○​ Definition: A corporation with a single stockholder. Only a natural person, trust,
or estate can form an OPC.
○​ Exclusions: Banks, non-bank financial institutions, quasi-banks, pre-need
companies, insurance companies, public and publicly-listed companies, and
non-chartered GOCCs cannot be OPCs. A natural person licensed to exercise a
profession (e.g., CPA, lawyer) may not form an OPC for the purpose of
exercising such profession unless otherwise provided under special laws.
○​ Key Features:
■​ The single stockholder is also the sole director and president.
■​ Must designate a nominee and an alternate nominee in the AOI, who
will take over management and eventually transfer shares upon the single
stockholder's death or incapacity.
■​ No minimum capital stock (unless specified by special law).
■​ Not required to have a Board of Directors (since the single stockholder is
the director).
■​ Not required to have by-laws.
 ■​ Required to appoint a Corporate Secretary and a Treasurer (who must be
distinct from the single stockholder).

III. Board of Directors/Trustees

This body is crucial for the management and oversight of the corporation.
●​ Role and Powers: The Board of Directors (for stock corporations) or Board of Trustees
(for non-stock corporations) is the supreme governing body. It exercises all corporate
powers, conducts all business, and controls all corporate properties. Individual directors
have no power to act for the corporation unless authorized by the Board.
●​ Qualifications and Disqualifications of Directors/Trustees:
○​ Qualifications: Natural persons, of legal age, majority must be residents of the
Philippines. For stock corporations, each director must own at least one share of
the capital stock. For non-stock corporations, members of the board of trustees
must be members of the corporation.
○​ Independent Directors: For corporations vested with public interest (e.g.,
publicly-listed companies, banks, insurance companies), at least 20% of the
board or at least two (2) directors, whichever is lesser, must be independent
directors. An independent director is one who is not related to any director,
officer, or substantial stockholder and does not have any relationship that could
interfere with his independent judgment.
○​ Disqualifications: Conviction by final judgment of an offense punishable by
imprisonment exceeding six (6) years, or violation of the Corporation Code, or
violation of securities laws, or found administratively liable for fraud,
embezzlement, or other dishonest acts.
●​ Election and Term of Office:
○​ Election: Directors/trustees are elected by stockholders/members at annual
meetings by plurality of votes. Each stockholder may cumulate his votes.
○​ Term: Directors serve for one (1) year until their successors are elected and
qualified. Trustees (non-stock) serve for a term not exceeding three (3) years.
●​ Removal of Directors/Trustees: May be removed with or without cause by the vote of
the stockholders holding or representing at least 2/3 of the outstanding capital stock, or
2/3 of the members for non-stock corporations. A director cannot be removed without
cause if it would deprive minority stockholders of their right of representation.
●​ Vacancies in the Board:
○​ By Expiration of Term: Filled by election at the annual meeting.
○​ Other Causes (e.g., death, resignation, removal):
■​ If the remaining directors constitute a quorum, they may fill the vacancy if
the remaining term is not long.
■​ If the remaining directors do not constitute a quorum, the vacancy must
be filled by stockholders/members at a meeting called for that purpose.
 ●​ Compensation of Directors/Trustees: Generally, directors/trustees are not entitled to
compensation as such, unless provided for in the by-laws, or fixed by a resolution of
stockholders representing at least a majority of the outstanding capital stock, or by
special law. They can receive reasonable per diems for attending meetings.
●​ Corporate Officers:
○​ Election/Appointment: Elected by the Board of Directors. Must be natural
persons.
○​ Mandatory Officers: President, Corporate Secretary, Treasurer. (For OPC,
single stockholder is President, and must appoint Corporate Secretary and
Treasurer).
○​ Qualifications: As provided in the by-laws or by the board.
○​ Removal: By the Board of Directors, with or without cause (unlike directors,
officers can generally be removed by the board that appointed them).
●​ Liabilities of Directors, Trustees, and Officers:
○​ Joint and Several Liability: Directors/trustees/officers are solidarily liable for
damages suffered by the corporation, stockholders, or other persons for:
■​ Willful and knowing assent to patently unlawful acts.
■​ Gross negligence or bad faith in directing the affairs of the corporation.
■​ Acquiring any personal or pecuniary interest in conflict with their duty
(conflict of interest).
■​ Voting for or assenting to patently unlawful acts of the corporation.
■​ Fraud or gross negligence.
○​ Self-Dealing Directors: A contract between the corporation and one or more of
its directors/officers is voidable, unless certain conditions are met (e.g., presence
and vote of interested director is not necessary for quorum/approval, contract is
fair and reasonable).
●​ Doctrine of Business Judgment Rule: Courts generally will not interfere with the
business decisions of the Board of Directors, provided they are made in good faith,
within the scope of their authority, and with due diligence. This doctrine protects directors
from liability for honest errors of judgment.

IV. Stockholders/Stocks
This section focuses on the owners of the corporation and their proprietary interests.
●​ Rights of Stockholders/Members:
○​ Right to Vote: Fundamental right to participate in corporate decisions (e.g.,
election of directors, amendment of AOI/By-Laws, sale of substantially all
assets). May be denied to specific classes of shares (e.g., non-voting preferred
shares) if specified in AOI, but some fundamental matters always require voting
rights (e.g., amendment of AOI).
○​ Right to Inspect Corporate Books and Records: To inspect books of accounts,
minutes of meetings, and records of transactions at reasonable hours on
business days, and to demand a copy thereof. This is crucial for transparency.
 ○​ Right to Dividends: For stock corporations, the right to share in the profits of the
corporation when declared by the Board of Directors.
○​ Appraisal Right: The right of a dissenting stockholder to demand payment of
the fair value of his shares in specific instances (e.g., amendment of AOI
extending term, material change in purpose, merger/consolidation, sale of
substantially all corporate assets).
○​ Pre-emptive Right: The right of existing stockholders to subscribe to all issues
or disposition of shares of any class, in proportion to their respective
shareholdings, before such shares are offered to others or the public. This
prevents dilution of ownership. Can be denied (explicitly stated) in the AOI.
○​ Right to Suit:
■​ Derivative Suit: Brought by a stockholder on behalf of the corporation to
enforce a corporate right or to redress a wrong done to the corporation,
when the corporation itself is unable or unwilling to do so.
■​ Individual Suit: Brought by a stockholder in his own name against the
corporation to enforce his direct personal rights (e.g., right to inspect
books, right to receive dividends).
■​ Representative Suit: Brought by a stockholder on behalf of himself and
other similarly situated stockholders.
●​ Classes of Shares:
○​ Common Shares: Entitle the holder to pro rata dividends and voting rights,
residual claim on assets upon liquidation.
○​ Preferred Shares: Given preference in the distribution of dividends and/or
assets upon liquidation. Can be cumulative, non-cumulative, participating,
non-participating. May or may not have voting rights depending on the AOI.
○​ Par Value Shares: Shares with a designated minimum issue price (par value)
stated in the AOI. Cannot be issued below par value.
○​ No-Par Value Shares: Shares without a designated par value. Cannot be issued
for less than P5.00. Entire consideration received is considered capital and
cannot be returned to stockholders. Not allowed for banks, trust companies,
insurance companies, public utilities, and building and loan associations.
○​ Treasury Shares: Shares of stock previously issued and fully paid for by the
corporation but subsequently reacquired by it through purchase, redemption,
donation, or other lawful means. They have no voting rights and no right to
dividends while held by the corporation. They can be reissued or retired.
●​ Subscription Contract: An agreement to take and pay for original unissued shares of a
corporation. It is irrevocable for at least six (6) months from the date of subscription,
unless released by the corporation or all other subscribers consent.
●​ Call on Unpaid Subscriptions: The Board of Directors can make a "call" for the
payment of the unpaid balance of subscribed shares.
○​ Delinquency: If a subscriber fails to pay a call, his shares become delinquent.
○​ Delinquency Sale: Delinquent shares can be sold at a public auction to the
highest bidder (who offers to pay the full amount of the unpaid subscription plus
costs of sale for the least number of shares).
 ○​ Effects of Delinquency: Loss of voting rights and other stockholder rights
(except the right to dividends for those shares already paid for).
●​ Stock Certificates: A written instrument evidencing ownership of shares of stock in a
corporation. It is not the share itself, but merely evidence of it. Requires signature of
president/VP and secretary/assistant secretary, and corporate seal.
●​ Stock and Transfer Book: A corporate record that contains the names of stockholders,
number of shares owned, dates of acquisition and transfer, and other relevant
information. It is crucial for determining who is a stockholder of record and for valid
transfers of shares. Transfers of shares must be recorded in this book to be binding on
the corporation.

V. Powers of the Corporation

This section deals with what a corporation is legally allowed to do.
●​ Express Powers: Those powers specifically granted to the corporation by the Revised
Corporation Code, other special laws, or enumerated in its Articles of Incorporation.
Examples: power to sue and be sued, to have a corporate seal, to acquire and dispose
of property, to amend its AOI/By-Laws.
●​ Implied Powers: Those powers that are reasonably necessary to carry out the express
powers and purposes of the corporation. They are not explicitly stated but are presumed
to exist. Example: a corporation formed for manufacturing has the implied power to buy
raw materials.
●​ Incidental Powers: Powers that are inherent to the existence of a corporation, even if
not expressly granted. They are necessary for its corporate life. Examples: the power to
have a corporate name, perpetual succession, to make contracts, to borrow money.
●​ Ultra Vires Acts: Acts performed by a corporation that are beyond the scope of its
express, implied, or incidental powers as defined by its Articles of Incorporation and the
law.
○​ Consequences: May be unenforceable against the corporation (if purely
executory). If executed, the contract may be ratified by the stockholders if it's not
illegal. Directors/officers who knowingly commit ultra vires acts may be held
liable.
○​ Distinction from Illegal Acts: Ultra vires acts are merely outside the corporate
powers, while illegal acts are prohibited by law. Illegal acts are void from the
beginning.
●​ Donations: A corporation generally has the power to make reasonable donations for the
public welfare, hospital, charitable, scientific, civic, or similar purposes. However, it is
prohibited from making donations in aid of any political party or candidate or for
purposes of partisan political activity.
●​ Merger and Consolidation:
○​ Merger: One or more corporations are absorbed by another existing corporation,
which retains its corporate existence. The absorbed corporations cease to exist.
 ○​ Consolidation: Two or more corporations unite to form a brand new corporation.
All original corporations cease to exist.
○​ Procedures: Requires a plan of merger/consolidation approved by a majority
vote of the Board of each corporation and ratified by 2/3 of the outstanding
capital stock/members of each corporation. The plan must be submitted to the
SEC for approval.
○​ Effects: The surviving/new corporation acquires all assets, liabilities, and
obligations of the absorbed/constituent corporations. Appraisal rights may arise
for dissenting stockholders.

VI. Meetings
Meetings are the formal mechanisms for corporate decision-making.
●​ Kinds of Meetings:
○​ Stockholders'/Members' Meetings:
■​ Regular/Annual Meeting: Held annually on a date fixed in the by-laws,
primarily for electing directors, approving financial statements, and other
regular business.
■​ Special Meeting: Called as needed to address urgent matters (e.g.,
removal of directors, significant corporate changes).
○​ Directors'/Trustees' Meetings:
■​ Regular Meeting: Held monthly, unless the by-laws provide otherwise.
■​ Special Meeting: Called as needed by the president or majority of the
board.
●​ Notice Requirements: Essential for the validity of a meeting.
○​ Stockholders/Members: Written notice must be sent to all
stockholders/members, usually specifying date, time, and place. For special
meetings, the purpose must also be stated. The by-laws or law usually specify
the minimum period for notice (e.g., 21 days for regular meetings, 7 days for
special meetings, but the RCC allows bylaws to set a shorter period, but not less
than 5 days for regular meetings and 1 day for special meetings).
○​ Directors/Trustees: Written notice of meetings is also generally required, unless
the by-laws provide otherwise.
○​ Waiver of Notice: Can be done expressly or impliedly (e.g., attendance at the
meeting without objection).
●​ Place and Time of Meetings:
○​ Stockholders/Members: Meetings must be held in the principal office of the
corporation, or if not practicable, in the city or municipality where the principal
office is located. Meetings can now be conducted virtually or remotely.
○​ Directors/Trustees: Meetings can be held anywhere in or outside the
Philippines, unless the by-laws provide otherwise. Can also be held virtually or
remotely.
 ●​ Quorum: The minimum number of members or shares present required for a meeting to
be valid and for business to be transacted.
○​ Stockholders/Members: Majority of the outstanding capital stock (for stock
corps) or majority of members (for non-stock corps), unless the AOI or By-laws
require a greater majority.
○​ Directors/Trustees: Majority of the number of directors/trustees as fixed in the
AOI, unless the AOI or By-laws require a greater majority.
●​ Voting:
○​ Methods: Usually viva voce, by ballot, or by proxy.
○​ Cumulative Voting: In stock corporations, each stockholder can multiply the
number of his shares by the number of directors to be elected and cast all his
votes for one candidate or distribute them among several. This is designed to
ensure minority representation on the board.
○​ Proxy Voting: A stockholder can appoint another person (proxy) to attend and
vote on his behalf.
○​ Voting Trust Agreements (VTA): An agreement whereby stockholders transfer
their shares to a trustee for a period (not exceeding 5 years, unless coupled with
an interest) in exchange for voting trust certificates. The trustee then votes the
shares. This is often used to ensure voting control.
●​ Presiding Officer: Usually the President, or as provided in the By-Laws.
●​ Minutes of Meetings: A formal record of the proceedings, resolutions, and actions
taken at a meeting. It serves as evidence of corporate acts.

VII. Dissolution
The end of a corporation's legal existence.
●​ Definition: The extinction of the corporate franchise and the termination of the
corporation's legal existence as a separate entity. It precedes liquidation.
●​ Methods of Dissolution:
○​ Voluntary Dissolution:
■​ Where No Creditors are Affected: Requires a majority vote of the Board
and a resolution approved by stockholders representing at least 2/3 of the
outstanding capital stock (or 2/3 of members). A verified request for
dissolution is filed with the SEC.
■​ Where Creditors are Affected: Requires the same Board and
stockholder/member votes, but also requires notice to creditors (personal
notice and publication), and a hearing with the SEC to address any
objections.
■​ By Shortening Corporate Term: An amendment to the Articles of
Incorporation shortening the corporate term. Upon approval by the SEC,
the corporation is deemed dissolved upon the expiration of the shortened
term.
○​ Involuntary Dissolution:
 ■​ By Expiration of Corporate Term: If the corporate term expires and is
not extended or revived, the corporation is automatically dissolved.
■​ By Legislative Act: Congress can pass a law dissolving a specific
corporation (rare, usually for public policy reasons).
■​ By Order of the SEC: The SEC can dissolve a corporation based on
various grounds, such as:
■​ Non-use of corporate franchise for 5 years from incorporation.
■​ Continuous inoperation for 5 years.
■​ Failure to file corporate reports for a continuous period of 5 years.
■​ Fraud in procuring its certificate of incorporation.
■​ Serious misrepresentation of what the corporation can do.
■​ Violation of any law, rule, or regulation.
■​ Through Quo Warranto Proceedings: A legal action initiated by the
Solicitor General against a corporation for misuse of its franchise,
violation of its charter, or for acting without authority.
●​ Effects of Dissolution:
○​ Cessation of its corporate franchise and legal personality.
○​ It can no longer carry on the business for which it was created, except for the
purpose of liquidation.
○​ The corporate assets are held in trust for creditors and stockholders during the
liquidation period.

VIII. Liquidation
The process of winding up the corporation's affairs after dissolution.
●​ Definition: The process of settling the affairs of a dissolved corporation, which includes
collecting all assets, paying off debts and liabilities, and distributing any remaining assets
to the stockholders or members.
●​ Period for Liquidation:
1.​ The Revised Corporation Code provides a three (3) year period for the
corporation to wind up its affairs from the date of dissolution.
2.​ However, the winding-up period can be extended by appointing a trustee or
receiver within the 3-year period to continue the liquidation beyond that period.
●​ Methods of Liquidation:
1.​ By the Corporation Itself: The Board of Directors continues to act as trustees
(or liquidating trustees) for the 3-year period to wind up affairs.
2.​ By a Trustee: If the 3-year period is insufficient, the corporation or its
stockholders can appoint a trustee to continue the liquidation process. The
trustee acts for the benefit of all interested parties.
3.​ By a Receiver Appointed by the Court: In cases of dispute, or when no one is
willing or able to act as liquidator, a court may appoint a receiver to oversee the
liquidation.
 ●​ Order of Preference in Distribution of Assets: During liquidation, assets are
distributed in a specific order:
1.​ Creditors: All corporate debts and liabilities must be paid first.
2.​ Preferred Stockholders: If the Articles of Incorporation grant preference in
liquidation, preferred stockholders receive their preference amount (e.g., par
value) before common stockholders.
3.​ Common Stockholders: Receive any remaining assets pro rata, based on their
shareholdings.

IX. Other Kinds of Corporations

Understanding variations in corporate structure.
●​ Non-Stock Corporation:
○​ Definition: As mentioned, no capital stock, no dividends. Primarily formed for
non-profit purposes.
○​ Purposes: Educational, religious, charitable, civic, professional, cultural, etc.
○​ Membership: Governed by the Articles of Incorporation and By-Laws. Rules for
admission and termination of membership are specified.
○​ Board of Trustees: Trustees are elected for terms not exceeding three (3) years.
There must be at least five (5) and not more than fifteen (15) trustees.
○​ Distribution of assets upon dissolution: Assets are generally not distributed to
members (unless otherwise provided for in the Articles of Incorporation or
by-laws, and only after paying debts). Often, assets are transferred to a similar
non-profit organization or governmental entity.
●​ Close Corporation:
○​ Definition: A corporation whose shares are held by a limited number of persons
(not exceeding 20) and are not offered to the public. There are restrictions on the
transfer of shares.
○​ Characteristics: Often family-owned or closely-held businesses. Stockholders
typically participate directly in management. Can incorporate certain provisions in
the AOI or by-laws that are typically found in partnership agreements.
○​ Prohibited Corporations from being Close Corporations: Banks, non-bank
financial institutions, quasi-banks, pre-need companies, insurance companies,
public and publicly-listed companies, and non-chartered GOCCs.
○​ Flexibility: Can dispense with the necessity of a Board of Directors (stockholders
can manage directly) and may have different quorum and voting requirements.
●​ Special Corporation: These are corporations that are subject to the Corporation Code
but also have specific provisions under special laws.
○​ Educational Corporations: Governed by the RCC and specific laws (e.g.,
Education Act of 1982, Higher Education Act of 1994). Often non-stock, but can
be stock. Trustees of non-stock educational institutions serve for a term of five (5)
years.
 ○​ Religious Corporations: Governed by the RCC and specific provisions for sole
corporations (corporation sole, where only one person constitutes the
corporation, e.g., a bishop) or religious societies.
○​ One Person Corporations (OPC): (Already detailed in Section II).
○​ Foundations: Non-stock corporations established for charitable, religious,
educational, scientific, cultural, or social purposes. Subject to specific rules on
endowments and disbursements.
○​ Cooperatives: Primarily governed by the Cooperative Code of the Philippines
(RA 9520), not the Corporation Code. They are formed for the primary purpose of
providing goods and services to their members. However, general principles of
corporate law may apply suppletorily.

X. Foreign Corporation
Corporations formed under foreign laws operating in the Philippines.
●​ Definition: A corporation formed, organized, or existing under any laws other than those
of the Philippines and whose laws allow Filipino citizens and corporations to do business
in its own country or state.
●​ Necessity of License: A foreign corporation must first obtain a license to do business
from the SEC before it can "transact business" in the Philippines.
○​ What Constitutes "Transacting Business": Implies a continuity of commercial
dealings and arrangements, and contemplates to that extent the performance of
acts or the exercise of functions normally incident to and in progressive
prosecution of the purpose and object of its organization. Isolated transactions do
not constitute "doing business."
●​ Resident Agent: A licensed foreign corporation must appoint a resident agent in the
Philippines upon whom summons and other legal processes may be served. The
resident agent can be an individual resident of the Philippines or a domestic corporation
lawfully authorized to act as such.
●​ Effects of Doing Business Without a License:
○​ Cannot Sue: The foreign corporation cannot maintain or intervene in any action,
suit, or proceeding in any court or administrative agency in the Philippines.
○​ Can Be Sued: It can be sued or proceeded against before Philippine courts or
administrative tribunals. This is based on the principle of estoppel or capacity to
be sued, preventing the foreign corporation from using its lack of license to
escape liability.
○​ Void Contracts: Contracts entered into by an unlicensed foreign corporation
doing business may be void or unenforceable against the other party.
●​ Applicable Laws: Once licensed, a foreign corporation is generally subject to the laws,
rules, and regulations applicable to domestic corporations of the same class, with some
exceptions for internal governance.
●​ Withdrawal of License: A foreign corporation may apply to the SEC for the withdrawal
of its license to do business in the Philippines. This typically involves paying all
outstanding liabilities, surrendering its license, and publishing notice of withdrawal.