THE

CORPORATION CODE
OF THE
PHILIPPINES
[Batas Pambansa Blg. 68]
 
 
TITLE I
GENERAL PROVISIONS
Definitions and Classifications

Section 1. Title of the Code. - This Code shall be known as "The

Corporation Code of the Philippines".

Sec. 2. Corporation defined. - A corporation is an artificial being

created by operation of law, having the right of succession and the
powers, attributes and properties expressly authorized by law or incident
to its existence.

Sec. 3. Classes of corporations. - Corporations formed or organized

under this Code may be stock or non-stock corporations. Corporations
which have capital stock divided into shares and are authorized to
distribute to the holders of such shares dividends or allotments of the
surplus profits on the basis of the shares held are stock corporations. All
other corporations are non-stock corporations.

Sec. 4. Corporations created by special laws or charters. -

Corporations created by special laws or charters shall be governed
primarily by the provisions of the special law or charter creating them or
applicable to them, supplemented by the provisions of this Code, insofar
as they are applicable.

Sec. 5. Corporators and incorporators, stockholders and

members. - Corporators are those who compose a corporation,
whether as stockholders or as members. Incorporators are those
stockholders or members mentioned in the articles of incorporation as
originally forming and composing the corporation and who are
signatories thereof.

Corporators in a stock corporation are called stockholders or

shareholders. Corporators in a non-stock corporation are called
members.

Sec. 6. Classification of shares. - The shares of stock of stock

corporations may be divided into classes or series of shares, or both, any
of which classes or series of shares may have such rights, privileges or
restrictions as may be stated in the articles of incorporation: Provided,
That no share may be deprived of voting rights except those classified
and issued as "preferred" or "redeemable" shares, unless otherwise
provided in this Code: Provided, further, That there shall always be a
class or series of shares which have complete voting rights. Any or all of
the shares or series of shares may have a par value or have no par value
as may be provided for in the articles of incorporation: Provided,
however, That banks, trust companies, insurance companies, public
utilities, and building and loan associations shall not be permitted to
issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given

preference in the distribution of the assets of the corporation in case of
liquidation and in the distribution of dividends, or such other
preferences as may be stated in the articles of incorporation which are
not violative of the provisions of this Code: Provided, That preferred
shares of stock may be issued only with a stated par value. The board of
directors, where authorized in the articles of incorporation, may fix the
terms and conditions of preferred shares of stock or any series thereof:
Provided, That such terms and conditions shall be effective upon the
filing of a certificate thereof with the Securities and Exchange
Commission.

Shares of capital stock issued without par value shall be deemed fully
paid and non-assessable and the holder of such shares shall not be liable
to the corporation or to its creditors in respect thereto: Provided; That
shares without par value may not be issued for a consideration less than
the value of five (P5.00) pesos per share: Provided, further, That the
entire consideration received by the corporation for its no-par value
shares shall be treated as capital and shall not be available for
distribution as dividends.

A corporation may, furthermore, classify its shares for the purpose of

insuring compliance with constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated

in the certificate of stock, each share shall be equal in all respects to
every other share.

Where the articles of incorporation provide for non-voting shares in the

cases allowed by this Code, the holders of such shares shall nevertheless
be entitled to vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

3. Sale, lease, exchange, mortgage, pledge or other

disposition of all or substantially all of the corporate
property;

4. Incurring, creating or increasing bonded indebtedness;

5. Increase or decrease of capital stock;

6. Merger or consolidation of the corporation with another

corporation or other corporations;

7. Investment of corporate funds in another corporation or

business in accordance with this Code; and

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote

necessary to approve a particular corporate act as provided in this Code
shall be deemed to refer only to stocks with voting rights.

Sec. 7. Founders' shares. - Founders' shares classified as such in the

articles of incorporation may be given certain rights and privileges not
enjoyed by the owners of other stocks, provided that where the exclusive
right to vote and be voted for in the election of directors is granted, it
must be for a limited period not to exceed five (5) years subject to the
approval of the Securities and Exchange Commission. The five-year
period shall commence from the date of the aforesaid approval by the
Securities and Exchange Commission.

Sec. 8. Redeemable shares. - Redeemable shares may be issued by

the corporation when expressly so provided in the articles of
incorporation. They may be purchased or taken up by the corporation
upon the expiration of a fixed period, regardless of the existence of
unrestricted retained earnings in the books of the corporation, and upon
such other terms and conditions as may be stated in the articles of
incorporation, which terms and conditions must also be stated in the
certificate of stock representing said shares.

Sec. 9. Treasury shares. - Treasury shares are shares of stock which

have been issued and fully paid for, but subsequently reacquired by the
issuing corporation by purchase, redemption, donation or through some
other lawful means. Such shares may again be disposed of for a
reasonable price fixed by the board of directors.

TITLE II
INCORPORATION AND ORGANIZATION
OF PRIVATE CORPORATIONS

Sec. 10. Number and qualifications of incorporators. - Any

number of natural persons not less than five (5) but not more than
fifteen (15), all of legal age and a majority of whom are residents of the
Philippines, may form a private corporation for any lawful purpose or
purposes. Each of the incorporators of s stock corporation must own or
be a subscriber to at least one (1) share of the capital stock of the
corporation.

Sec. 11. Corporate term. - A corporation shall exist for a period not
exceeding fifty (50) years from the date of incorporation unless sooner
dissolved or unless said period is extended. The corporate term as
originally stated in the articles of incorporation may be extended for
periods not exceeding fifty (50) years in any single instance by an
amendment of the articles of incorporation, in accordance with this
Code; Provided, That no extension can be made earlier than five (5)
years prior to the original or subsequent expiry date(s) unless there are
justifiable reasons for an earlier extension as may be determined by the
Securities and Exchange Commission.

Sec. 12. Minimum capital stock required of stock

corporations. - Stock corporations incorporated under this Code shall
not be required to have any minimum authorized capital stock except as
otherwise specifically provided for by special law, and subject to the
provisions of the following section.

Sec. 13. Amount of capital stock to be subscribed and paid for

the purposes of incorporation. - At least twenty-five percent (25%)
of the authorized capital stock as stated in the articles of incorporation
must be subscribed at the time of incorporation, and at least twenty-five
(25%) per cent of the total subscription must be paid upon subscription,
the balance to be payable on a date or dates fixed in the contract of
subscription without need of call, or in the absence of a fixed date or
dates, upon call for payment by the board of directors: Provided,
however, That in no case shall the paid-up capital be less than five
Thousand (P5,000.00) pesos.

Sec. 14. Contents of the articles of incorporation. - All

corporations organized under this code shall file with the Securities and
Exchange Commission articles of incorporation in any of the official
languages duly signed and acknowledged by all of the incorporators,
containing substantially the following matters, except as otherwise
prescribed by this Code or by special law:

1. The name of the corporation;

2. The specific purpose or purposes for which the

corporation is being incorporated. Where a corporation
has more than one stated purpose, the articles of
incorporation shall state which is the primary purpose and
which is/are he secondary purpose or purposes: Provided,
That a non-stock corporation may not include a purpose
which would change or contradict its nature as such;

3. The place where the principal office of the corporation is

to be located, which must be within the Philippines;

4. The term for which the corporation is to exist;

5. The names, nationalities and residences of the

incorporators;

6. The number of directors or trustees, which shall not be

less than five (5) nor more than fifteen (15);

7. The names, nationalities and residences of persons who

shall act as directors or trustees until the first regular
directors or trustees are duly elected and qualified in
accordance with this Code;

8. If it be a stock corporation, the amount of its authorized

capital stock in lawful money of the Philippines, the
number of shares into which it is divided, and in case the
share are par value shares, the par value of each, the
names, nationalities and residences of the original
subscribers, and the amount subscribed and paid by each
on his subscription, and if some or all of the shares are
without par value, such fact must be stated;

9. If it be a non-stock corporation, the amount of its

capital, the names, nationalities and residences of the
contributors and the amount contributed by each; and

10. Such other matters as are not inconsistent with law and
 which the incorporators may deem necessary and
convenient.

The Securities and Exchange Commission shall not accept the articles of
incorporation of any stock corporation unless accompanied by a sworn
statement of the Treasurer elected by the subscribers showing that at
least twenty-five (25%) percent of the authorized capital stock of the
corporation has been subscribed, and at least twenty-five (25%) of the
total subscription has been fully paid to him in actual cash and/or in
property the fair valuation of which is equal to at least twenty-five (25%)
percent of the said subscription, such paid-up capital being not less than
five thousand (P5,000.00) pesos.

Sec. 15. Forms of Articles of Incorporation. - Unless otherwise

prescribed by special law, articles of incorporation of all domestic
corporations shall comply substantially with the following form:
 

ARTICLES OF INCORPORATION
OF
__________________________
(Name of Corporation)

KNOW ALL MEN BY THESE PRESENTS:

The undersigned incorporators, all of legal age and a

majority of whom are residents of the Philippines, have
this day voluntarily agreed to form a (stock) (non-stock)
corporation under the laws of the Republic of the
Philippines;

AND WE HEREBY CERTIFY:

FIRST: That the name of said corporation shall be

".............................................., INC. or CORPORATION";

SECOND: That the purpose or purposes for which such

corporation is incorporated are: (If there is more than one
purpose, indicate primary and secondary purposes);

THIRD: That the principal office of the corporation is

located in the City/Municipality
of ............................................., Province
of .................................................., Philippines;

FOURTH: That the term for which said corporation is to

exist is ................ years from and after the date of issuance
of the certificate of incorporation;

FIFTH: That the names, nationalities and residences of the

incorporators of the corporation are as follows:

NAME             NATIONALITY             RESIDENCE

..................................... ..................................... .................

....................

..................................... ..................................... .................

....................

..................................... ..................................... .................

....................

..................................... ..................................... .................

....................

..................................... ..................................... .................

....................

SIXTH: That the number of directors or trustees of the

corporation shall be .............; and the names, nationalities
and residences of the first directors or trustees of the
corporation are as follows:

NAME             NATIONALITY             RESIDENCE

..................................... ..................................... .................

....................

..................................... ..................................... .................

....................

..................................... ..................................... .................

....................

..................................... ..................................... .................

....................
..................................... ..................................... .................
....................

SEVENTH: That the authorized capital stock of the

corporation is .................................................
(P......................) PESOS in lawful money of the
Philippines, divided into ............... shares with the par
value of ................................... (P.......................) Pesos per
share.

(In case all the share are without par value):

That the capital stock of the corporation

is ........................... shares without par value. (In case
some shares have par value and some are without par
value): That the capital stock of said corporation consists
of ........................ shares of which ....................... shares
are of the par value of .............................. (P.....................)
PESOS each, and of which ................................ shares are
without par value.

EIGHTH: That at least twenty five (25%) per cent of the

authorized capital stock above stated has been subscribed
as follows:

Name of Subscriber Nationality No of Shares Amount

Subscribed Subscribed

.................................. .................... ........................ ............

...........

.................................. .................... ........................ ............

...........

.................................. .................... ........................ ............

...........

.................................. .................... ........................ ............

...........

.................................. .................... ........................ ............

...........

NINTH: That the above-named subscribers have paid at

least twenty-five (25%) percent of the total subscription as
follows:

Name of Subscriber Amount Subscribed Total Paid-In

................................... ...................................... ..................

.............

................................... ...................................... ..................

.............

................................... ...................................... ..................

.............

................................... ...................................... ..................

.............

................................... ...................................... ..................

.............

(Modify Nos. 8 and 9 if shares are with no par value. In

case the corporation is non-stock, Nos. 7, 8 and 9 of the
above articles may be modified accordingly, and it is
sufficient if the articles state the amount of capital or
money contributed or donated by specified persons, stating
the names, nationalities and residences of the contributors
or donors and the respective amount given by each.)

TENTH: That ....................................... has been elected by

the subscribers as Treasurer of the Corporation to act as
such until his successor is duly elected and qualified in
accordance with the by-laws, and that as such Treasurer,
he has been authorized to receive for and in the name and
for the benefit of the corporation, all subscription (or fees)
or contributions or donations paid or given by the
subscribers or members.

ELEVENTH: (Corporations which will engage in any

business or activity reserved for Filipino citizens shall
provide the following):

"No transfer of stock or interest which shall reduce the

ownership of Filipino citizens to less than the required
percentage of the capital stock as provided by existing laws
shall be allowed or permitted to recorded in the proper
books of the corporation and this restriction shall be
indicated in all stock certificates issued by the
corporation."

IN WITNESS WHEREOF, we have hereunto signed these

Articles of Incorporation, this ................... day
of .............................., 19 ........... in the City/Municipality
of ........................................, Province
of ................................................., Republic of the
Philippines.

............................................ .............................................

............................................ .............................................

................................................

(Names and signatures of the incorporators)

SIGNED IN THE PRESENCE OF:

............................................ .............................................

(Notarial Acknowledgment)
 

TREASURER'S AFFIDAVIT

REPUBLIC OF THE PHILIPPINES )

CITY/MUNICIPALITY OF ) S.S.

PROVINCE OF )

I, ...................................., being duly sworn, depose and

say:

That I have been elected by the subscribers of the

corporation as Treasurer thereof, to act as such until my
successor has been duly elected and qualified in
accordance with the by-laws of the corporation, and that as
such Treasurer, I hereby certify under oath that at least
25% of the authorized capital stock of the corporation has
been subscribed and at least 25% of the total subscription
has been paid, and received by me, in cash or property, in
the amount of not less than P5,000.00, in accordance with
 the Corporation Code.

.......................................

(Signature of Treasurer)

SUBSCRIBED AND SWORN to before me, a Notary Public,

for and in the City/Municipality of ..................................
Province of .........................................., this ............. day of
........................., 19 ........; by ............................................
with Res. Cert. No. ..................... issued at .................
on ......................, 19 ..........
 

NOTARY PUBLIC

    My commission expires on ..........................., 19 ........

Doc. No. ...............;

Page No. ...............;

Book No. ..............;

Series of 19..... (7a)

Sec. 16. Amendment of Articles of Incorporation. - Unless

otherwise prescribed by this Code or by special law, and for legitimate
purposes, any provision or matter stated in the articles of incorporation
may be amended by a majority vote of the board of directors or trustees
and the vote or written assent of the stockholders representing at least
two-thirds (2/3) of the outstanding capital stock, without prejudice to
the appraisal right of dissenting stockholders in accordance with the
provisions of this Code, or the vote or written assent of at least two-
thirds (2/3) of the members if it be a non-stock corporation.

The original and amended articles together shall contain all provisions
required by law to be set out in the articles of incorporation. Such
articles, as amended shall be indicated by underscoring the change or
changes made, and a copy thereof duly certified under oath by the
corporate secretary and a majority of the directors or trustees stating the
fact that said amendment or amendments have been duly approved by
the required vote of the stockholders or members, shall be submitted to
the Securities and Exchange Commission.
The amendments shall take effect upon their approval by the Securities
and Exchange Commission or from the date of filing with the said
Commission if not acted upon within six (6) months from the date of
filing for a cause not attributable to the corporation.

Sec. 17. Grounds when articles of incorporation or

amendment may be rejected or disapproved. - The Securities
and Exchange Commission may reject the articles of incorporation or
disapprove any amendment thereto if the same is not in compliance with
the requirements of this Code: Provided, That the Commission shall give
the incorporators a reasonable time within which to correct or modify
the objectionable portions of the articles or amendment. The following
are grounds for such rejection or disapproval:

1. That the articles of incorporation or any amendment

thereto is not substantially in accordance with the form
prescribed herein;

2. That the purpose or purposes of the corporation are

patently unconstitutional, illegal, immoral, or contrary to
government rules and regulations;

3. That the Treasurer's Affidavit concerning the amount of

capital stock subscribed and/or paid if false;

4. That the percentage of ownership of the capital stock to

be owned by citizens of the Philippines has not been
complied with as required by existing laws or the
Constitution.

No articles of incorporation or amendment to articles of incorporation of

banks, banking and quasi-banking institutions, building and loan
associations, trust companies and other financial intermediaries,
insurance companies, public utilities, educational institutions, and other
corporations governed by special laws shall be accepted or approved by
the Commission unless accompanied by a favorable recommendation of
the appropriate government agency to the effect that such articles or
amendment is in accordance with law.

Sec. 18. Corporate name. - No corporate name may be allowed by

the Securities and Exchange Commission if the proposed name is
identical or deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws. When a change in the
corporate name is approved, the Commission shall issue an amended
certificate of incorporation under the amended name.

Sec. 19. Commencement of corporate existence. - A private

corporation formed or organized under this Code commences to have
corporate existence and juridical personality and is deemed incorporated
from the date the Securities and Exchange Commission issues a
certificate of incorporation under its official seal; and thereupon the
incorporators, stockholders/members and their successors shall
constitute a body politic and corporate under the name stated in the
articles of incorporation for the period of time mentioned therein, unless
said period is extended or the corporation is sooner dissolved in
accordance with law.

Sec. 20. De facto corporations. - The due incorporation of any

corporation claiming in good faith to be a corporation under this Code,
and its right to exercise corporate powers, shall not be inquired into
collaterally in any private suit to which such corporation may be a party.
Such inquiry may be made by the Solicitor General in a quo warranto
proceeding.

Sec. 21. Corporation by estoppel. - All persons who assume to act

as a corporation knowing it to be without authority to do so shall be
liable as general partners for all debts, liabilities and damages incurred
or arising as a result thereof: Provided, however, That when any such
ostensible corporation is sued on any transaction entered by it as a
corporation or on any tort committed by it as such, it shall not be
allowed to use as a defense its lack of corporate personality.

On who assumes an obligation to an ostensible corporation as such,

cannot resist performance thereof on the ground that there was in fact
no corporation.

Sec. 22. Effects on non-use of corporate charter and

continuous inoperation of a corporation. - If a corporation does
not formally organize and commence the transaction of its business or
the construction of its works within two (2) years from the date of its
incorporation, its corporate powers cease and the corporation shall be
deemed dissolved. However, if a corporation has commenced the
transaction of its business but subsequently becomes continuously
inoperative for a period of at least five (5) years, the same shall be a
ground for the suspension or revocation of its corporate franchise or
certificate of incorporation.

This provision shall not apply if the failure to organize, commence the
transaction of its businesses or the construction of its works, or to
continuously operate is due to causes beyond the control of the
corporation as may be determined by the Securities and Exchange
Commission.

TITLE III
BOARD OF DIRECTORS/TRUSTEES/OFFICERS

Sec. 23. The board of directors or trustees. - Unless otherwise

provided in this Code, the corporate powers of all corporations formed
under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of
directors or trustees to be elected from among the holders of stocks, or
where there is no stock, from among the members of the corporation,
who shall hold office for one (1) year until their successors are elected
and qualified.

Every director must own at least one (1) share of the capital stock of the
corporation of which he is a director, which share shall stand in his
name on the books of the corporation. Any director who ceases to be the
owner of at least one (1) share of the capital stock of the corporation of
which he is a director shall thereby cease to be a director. Trustees of
non-stock corporations must be members thereof. a majority of the
directors or trustees of all corporations organized under this Code must
be residents of the Philippines.

Sec. 24. Election of directors or trustees. - At all elections of

directors or trustees, there must be present, either in person or by
representative authorized to act by written proxy, the owners of a
majority of the outstanding capital stock, or if there be no capital stock, a
majority of the members entitled to vote. The election must be by ballot
if requested by any voting stockholder or member. In stock corporations,
every stockholder entitled to vote shall have the right to vote in person or
by proxy the number of shares of stock standing, at the time fixed in the
by-laws, in his own name on the stock books of the corporation, or where
the by-laws are silent, at the time of the election; and said stockholder
may vote such number of shares for as many persons as there are
directors to be elected or he may cumulate said shares and give one
candidate as many votes as the number of directors to be elected
multiplied by the number of his shares shall equal, or he may distribute
them on the same principle among as many candidates as he shall see
fit: Provided, That the total number of votes cast by him shall not exceed
the number of shares owned by him as shown in the books of the
corporation multiplied by the whole number of directors to be elected:
Provided, however, That no delinquent stock shall be voted. Unless
otherwise provided in the articles of incorporation or in the by-laws,
members of corporations which have no capital stock may cast as many
votes as there are trustees to be elected but may not cast more than one
vote for one candidate. Candidates receiving the highest number of votes
shall be declared elected. Any meeting of the stockholders or members
called for an election may adjourn from day to day or from time to time
but not sine die or indefinitely if, for any reason, no election is held, or if
there not present or represented by proxy, at the meeting, the owners of
a majority of the outstanding capital stock, or if there be no capital stock,
a majority of the member entitled to vote.

Sec. 25. Corporate officers, quorum. - Immediately after their

election, the directors of a corporation must formally organize by the
election of a president, who shall be a director, a treasurer who may or
may not be a director, a secretary who shall be a resident and citizen of
the Philippines, and such other officers as may be provided for in the by-
laws. Any two (2) or more positions may be held concurrently by the
same person, except that no one shall act as president and secretary or
as president and treasurer at the same time.

The directors or trustees and officers to be elected shall perform the

duties enjoined on them by law and the by-laws of the corporation.
Unless the articles of incorporation or the by-laws provide for a greater
majority, a majority of the number of directors or trustees as fixed in the
articles of incorporation shall constitute a quorum for the transaction of
corporate business, and every decision of at least a majority of the
directors or trustees present at a meeting at which there is a quorum
shall be valid as a corporate act, except for the election of officers which
shall require the vote of a majority of all the members of the board.

Directors or trustees cannot attend or vote by proxy at board meetings.

Sec. 26. Report of election of directors, trustees and officers. -

Within thirty (30) days after the election of the directors, trustees and
officers of the corporation, the secretary, or any other officer of the
corporation, shall submit to the Securities and Exchange Commission,
the names, nationalities and residences of the directors, trustees, and
officers elected. Should a director, trustee or officer die, resign or in any
manner cease to hold office, his heirs in case of his death, the secretary,
or any other officer of the corporation, or the director, trustee or officer
himself, shall immediately report such fact to the Securities and
Exchange Commission.

Sec. 27. Disqualification of directors, trustees or officers. - No

person convicted by final judgment of an offense punishable by
imprisonment for a period exceeding six (6) years, or a violation of this
Code committed within five (5) years prior to the date of his election or
appointment, shall qualify as a director, trustee or officer of any
corporation.
Sec. 28. Removal of directors or trustees. - Any director or
trustee of a corporation may be removed from office by a vote of the
stockholders holding or representing at least two-thirds (2/3) of the
outstanding capital stock, or if the corporation be a non-stock
corporation, by a vote of at least two-thirds (2/3) of the members
entitled to vote: Provided, That such removal shall take place either at a
regular meeting of the corporation or at a special meeting called for the
purpose, and in either case, after previous notice to stockholders or
members of the corporation of the intention to propose such removal at
the meeting. A special meeting of the stockholders or members of a
corporation for the purpose of removal of directors or trustees, or any of
them, must be called by the secretary on order of the president or on the
written demand of the stockholders representing or holding at least a
majority of the outstanding capital stock, or, if it be a non-stock
corporation, on the written demand of a majority of the members
entitled to vote. Should the secretary fail or refuse to call the special
meeting upon such demand or fail or refuse to give the notice, or if there
is no secretary, the call for the meeting may be addressed directly to the
stockholders or members by any stockholder or member of the
corporation signing the demand. Notice of the time and place of such
meeting, as well as of the intention to propose such removal, must be
given by publication or by written notice prescribed in this Code.
Removal may be with or without cause: Provided, That removal without
cause may not be used to deprive minority stockholders or members of
the right of representation to which they may be entitled under Section
24 of this Code.

Sec. 29. Vacancies in the office of director or trustee. - Any

vacancy occurring in the board of directors or trustees other than by
removal by the stockholders or members or by expiration of term, may
be filled by the vote of at least a majority of the remaining directors or
trustees, if still constituting a quorum; otherwise, said vacancies must be
filled by the stockholders in a regular or special meeting called for that
purpose. A director or trustee so elected to fill a vacancy shall be elected
only or the unexpired term of his predecessor in office.

A directorship or trusteeship to be filled by reason of an increase in the

number of directors or trustees shall be filled only by an election at a
regular or at a special meeting of stockholders or members duly called
for the purpose, or in the same meeting authorizing the increase of
directors or trustees if so stated in the notice of the meeting.

Sec. 30. Compensation of directors. - In the absence of any

provision in the by-laws fixing their compensation, the directors shall
not receive any compensation, as such directors, except for reasonable
pre diems: Provided, however, That any such compensation other than
per diems may be granted to directors by the vote of the stockholders
representing at least a majority of the outstanding capital stock at a
regular or special stockholders' meeting. In no case shall the total yearly
compensation of directors, as such directors, exceed ten (10%) percent of
the net income before income tax of the corporation during the
preceding year.

Sec. 31. Liability of directors, trustees or officers. - Directors or

trustees who willfully and knowingly vote for or assent to patently
unlawful acts of the corporation or who are guilty of gross negligence or
bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such
directors or trustees shall be liable jointly and severally for all damages
resulting therefrom suffered by the corporation, its stockholders or
members and other persons.

When a director, trustee or officer attempts to acquire or acquires, in

violation of his duty, any interest adverse to the corporation in respect of
any matter which has been reposed in him in confidence, as to which
equity imposes a disability upon him to deal in his own behalf, he shall
be liable as a trustee for the corporation and must account for the profits
which otherwise would have accrued to the corporation.

Sec. 32. Dealings of directors, trustees or officers with the

corporation. - A contract of the corporation with one or more of its
directors or trustees or officers is voidable, at the option of such
corporation, unless all the following conditions are present:

1. That the presence of such director or trustee in the board

meeting in which the contract was approved was not
necessary to constitute a quorum for such meeting;

2. That the vote of such director or trustee was nor

necessary for the approval of the contract;

3. That the contract is fair and reasonable under the

circumstances; and

4. That in case of an officer, the contract has been

previously authorized by the board of directors.

Where any of the first two conditions set forth in the preceding
paragraph is absent, in the case of a contract with a director or trustee,
such contract may be ratified by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock or
of at least two-thirds (2/3) of the members in a meeting called for the
purpose: Provided, That full disclosure of the adverse interest of the
directors or trustees involved is made at such meeting: Provided,
however, That the contract is fair and reasonable under the
circumstances.

Sec. 33. Contracts between corporations with interlocking

directors. - Except in cases of fraud, and provided the contract is fair
and reasonable under the circumstances, a contract between two or
more corporations having interlocking directors shall not be invalidated
on that ground alone: Provided, That if the interest of the interlocking
director in one corporation is substantial and his interest in the other
corporation or corporations is merely nominal, he shall be subject to the
provisions of the preceding section insofar as the latter corporation or
corporations are concerned.

Stockholdings exceeding twenty (20%) percent of the outstanding capital

stock shall be considered substantial for purposes of interlocking
directors.

Sec. 34. Disloyalty of a director. - Where a director, by virtue of his

office, acquires for himself a business opportunity which should belong
to the corporation, thereby obtaining profits to the prejudice of such
corporation, he must account to the latter for all such profits by
refunding the same, unless his act has been ratified by a vote of the
stockholders owning or representing at least two-thirds (2/3) of the
outstanding capital stock. This provision shall be applicable,
notwithstanding the fact that the director risked his own funds in the
venture.

Sec. 35. Executive committee. - The by-laws of a corporation may

create an executive committee, composed of not less than three
members of the board, to be appointed by the board. Said committee
may act, by majority vote of all its members, on such specific matters
within the competence of the board, as may be delegated to it in the by-
laws or on a majority vote of the board, except with respect to: (1)
approval of any action for which shareholders' approval is also required;
(2) the filing of vacancies in the board; (3) the amendment or repeal of
by-laws or the adoption of new by-laws; (4) the amendment or repeal of
any resolution of the board which by its express terms is not so
amendable or repealable; and (5) a distribution of cash dividends to the
shareholders.

TITLE IV
POWERS OF CORPORATIONS

Sec. 36. Corporate powers and capacity. - Every corporation

incorporated under this Code has the power and capacity:

1. To sue and be sued in its corporate name;

2. Of succession by its corporate name for the period of

time stated in the articles of incorporation and the
certificate of incorporation;

3. To adopt and use a corporate seal;

4. To amend its articles of incorporation in accordance

with the provisions of this Code;

5. To adopt by-laws, not contrary to law, morals, or public

policy, and to amend or repeal the same in accordance with
this Code;

6. In case of stock corporations, to issue or sell stocks to

subscribers and to sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this
Code; and to admit members to the corporation if it be a
non-stock corporation;

7. To purchase, receive, take or grant, hold, convey, sell,

lease, pledge, mortgage and otherwise deal with such real
and personal property, including securities and bonds of
other corporations, as the transaction of the lawful
business of the corporation may reasonably and
necessarily require, subject to the limitations prescribed by
law and the Constitution;

8. To enter into merger or consolidation with other

corporations as provided in this Code;

9. To make reasonable donations, including those for the

public welfare or for hospital, charitable, cultural,
scientific, civic, or similar purposes: Provided, That no
corporation, domestic or foreign, shall give donations in
aid of any political party or candidate or for purposes of
partisan political activity;

10. To establish pension, retirement, and other plans for

the benefit of its directors, trustees, officers and
employees; and
 11. To exercise such other powers as may be essential or
necessary to carry out its purpose or purposes as stated in
the articles of incorporation.

Sec. 37. Power to extend or shorten corporate term. - A private

corporation may extend or shorten its term as stated in the articles of
incorporation when approved by a majority vote of the board of directors
or trustees and ratified at a meeting by the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock or by at least two-
thirds (2/3) of the members in case of non-stock corporations. Written
notice of the proposed action and of the time and place of the meeting
shall be addressed to each stockholder or member at his place of
residence as shown on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or served personally:
Provided, That in case of extension of corporate term, any dissenting
stockholder may exercise his appraisal right under the conditions
provided in this code. (n)

Sec. 38. Power to increase or decrease capital stock; incur,

create or increase bonded indebtedness. - No corporation shall
increase or decrease its capital stock or incur, create or increase any
bonded indebtedness unless approved by a majority vote of the board of
directors and, at a stockholder's meeting duly called for the purpose,
two-thirds (2/3) of the outstanding capital stock shall favor the increase
or diminution of the capital stock, or the incurring, creating or
increasing of any bonded indebtedness. Written notice of the proposed
increase or diminution of the capital stock or of the incurring, creating,
or increasing of any bonded indebtedness and of the time and place of
the stockholder's meeting at which the proposed increase or diminution
of the capital stock or the incurring or increasing of any bonded
indebtedness is to be considered, must be addressed to each stockholder
at his place of residence as shown on the books of the corporation and
deposited to the addressee in the post office with postage prepaid, or
served personally.

A certificate in duplicate must be signed by a majority of the directors of

the corporation and countersigned by the chairman and the secretary of
the stockholders' meeting, setting forth:

(1) That the requirements of this section have been

complied with;

(2) The amount of the increase or diminution of the capital

stock;

(3) If an increase of the capital stock, the amount of capital

 stock or number of shares of no-par stock thereof actually
subscribed, the names, nationalities and residences of the
persons subscribing, the amount of capital stock or
number of no-par stock subscribed by each, and the
amount paid by each on his subscription in cash or
property, or the amount of capital stock or number of
shares of no-par stock allotted to each stock-holder if such
increase is for the purpose of making effective stock
dividend therefor authorized;

(4) Any bonded indebtedness to be incurred, created or

increased;

(5) The actual indebtedness of the corporation on the day

of the meeting;

(6) The amount of stock represented at the meeting; and

(7) The vote authorizing the increase or diminution of the

capital stock, or the incurring, creating or increasing of any
bonded indebtedness.

Any increase or decrease in the capital stock or the incurring, creating or

increasing of any bonded indebtedness shall require prior approval of
the Securities and Exchange Commission.

One of the duplicate certificates shall be kept on file in the office of the
corporation and the other shall be filed with the Securities and Exchange
Commission and attached to the original articles of incorporation. From
and after approval by the Securities and Exchange Commission and the
issuance by the Commission of its certificate of filing, the capital stock
shall stand increased or decreased and the incurring, creating or
increasing of any bonded indebtedness authorized, as the certificate of
filing may declare: Provided, That the Securities and Exchange
Commission shall not accept for filing any certificate of increase of
capital stock unless accompanied by the sworn statement of the
treasurer of the corporation lawfully holding office at the time of the
filing of the certificate, showing that at least twenty-five (25%) percent of
such increased capital stock has been subscribed and that at least
twenty-five (25%) percent of the amount subscribed has been paid either
in actual cash to the corporation or that there has been transferred to the
corporation property the valuation of which is equal to twenty-five (25%)
percent of the subscription: Provided, further, That no decrease of the
capital stock shall be approved by the Commission if its effect shall
prejudice the rights of corporate creditors.
Non-stock corporations may incur or create bonded indebtedness, or
increase the same, with the approval by a majority vote of the board of
trustees and of at least two-thirds (2/3) of the members in a meeting
duly called for the purpose.

Bonds issued by a corporation shall be registered with the Securities and

Exchange Commission, which shall have the authority to determine the
sufficiency of the terms thereof. (17a)

Sec. 39. Power to deny pre-emptive right. - All stockholders of a

stock corporation shall enjoy pre-emptive right to subscribe to all issues
or disposition of shares of any class, in proportion to their respective
shareholdings, unless such right is denied by the articles of
incorporation or an amendment thereto: Provided, That such pre-
emptive right shall not extend to shares to be issued in compliance with
laws requiring stock offerings or minimum stock ownership by the
public; or to shares to be issued in good faith with the approval of the
stockholders representing two-thirds (2/3) of the outstanding capital
stock, in exchange for property needed for corporate purposes or in
payment of a previously contracted debt.

Sec. 40. Sale or other disposition of assets. - Subject to the

provisions of existing laws on illegal combinations and monopolies, a
corporation may, by a majority vote of its board of directors or trustees,
sell, lease, exchange, mortgage, pledge or otherwise dispose of all or
substantially all of its property and assets, including its goodwill, upon
such terms and conditions and for such consideration, which may be
money, stocks, bonds or other instruments for the payment of money or
other property or consideration, as its board of directors or trustees may
deem expedient, when authorized by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, or
in case of non-stock corporation, by the vote of at least to two-thirds
(2/3) of the members, in a stockholder's or member's meeting duly
called for the purpose. Written notice of the proposed action and of the
time and place of the meeting shall be addressed to each stockholder or
member at his place of residence as shown on the books of the
corporation and deposited to the addressee in the post office with
postage prepaid, or served personally: Provided, That any dissenting
stockholder may exercise his appraisal right under the conditions
provided in this Code.

A sale or other disposition shall be deemed to cover substantially all the

corporate property and assets if thereby the corporation would be
rendered incapable of continuing the business or accomplishing the
purpose for which it was incorporated.
After such authorization or approval by the stockholders or members,
the board of directors or trustees may, nevertheless, in its discretion,
abandon such sale, lease, exchange, mortgage, pledge or other
disposition of property and assets, subject to the rights of third parties
under any contract relating thereto, without further action or approval
by the stockholders or members.

Nothing in this section is intended to restrict the power of any

corporation, without the authorization by the stockholders or members,
to sell, lease, exchange, mortgage, pledge or otherwise dispose of any of
its property and assets if the same is necessary in the usual and regular
course of business of said corporation or if the proceeds of the sale or
other disposition of such property and assets be appropriated for the
conduct of its remaining business.

In non-stock corporations where there are no members with voting

rights, the vote of at least a majority of the trustees in office will be
sufficient authorization for the corporation to enter into any transaction
authorized by this section. (28 1/2a)

Sec. 41. Power to acquire own shares. - A stock corporation shall

have the power to purchase or acquire its own shares for a legitimate
corporate purpose or purposes, including but not limited to the
following cases: Provided, That the corporation has unrestricted
retained earnings in its books to cover the shares to be purchased or
acquired:

1. To eliminate fractional shares arising out of stock

dividends;

2. To collect or compromise an indebtedness to the

corporation, arising out of unpaid subscription, in a
delinquency sale, and to purchase delinquent shares sold
during said sale; and

3. To pay dissenting or withdrawing stockholders entitled

to payment for their shares under the provisions of this
Code. (n)

Sec. 42. Power to invest corporate funds in another

corporation or business or for any other purpose. - Subject to
the provisions of this Code, a private corporation may invest its funds in
any other corporation or business or for any purpose other than the
primary purpose for which it was organized when approved by a
majority of the board of directors or trustees and ratified by the
stockholders representing at least two-thirds (2/3) of the outstanding
capital stock, or by at least two thirds (2/3) of the members in the case of
non-stock corporations, at a stockholder's or member's meeting duly
called for the purpose. Written notice of the proposed investment and
the time and place of the meeting shall be addressed to each stockholder
or member at his place of residence as shown on the books of the
corporation and deposited to the addressee in the post office with
postage prepaid, or served personally: Provided, That any dissenting
stockholder shall have appraisal right as provided in this Code:
Provided, however, That where the investment by the corporation is
reasonably necessary to accomplish its primary purpose as stated in the
articles of incorporation, the approval of the stockholders or members
shall not be necessary. (17 1/2a)

Sec. 43. Power to declare dividends. - The board of directors of a

stock corporation may declare dividends out of the unrestricted retained
earnings which shall be payable in cash, in property, or in stock to all
stockholders on the basis of outstanding stock held by them: Provided,
That any cash dividends due on delinquent stock shall first be applied to
the unpaid balance on the subscription plus costs and expenses, while
stock dividends shall be withheld from the delinquent stockholder until
his unpaid subscription is fully paid: Provided, further, That no stock
dividend shall be issued without the approval of stockholders
representing not less than two-thirds (2/3) of the outstanding capital
stock at a regular or special meeting duly called for the purpose. (16a)

Stock corporations are prohibited from retaining surplus profits in

excess of one hundred (100%) percent of their paid-in capital stock,
except: (1) when justified by definite corporate expansion projects or
programs approved by the board of directors; or (2) when the
corporation is prohibited under any loan agreement with any financial
institution or creditor, whether local or foreign, from declaring
dividends without its/his consent, and such consent has not yet been
secured; or (3) when it can be clearly shown that such retention is
necessary under special circumstances obtaining in the corporation,
such as when there is need for special reserve for probable
contingencies. (n)

Sec. 44. Power to enter into management contract. - No

corporation shall conclude a management contract with another
corporation unless such contract shall have been approved by the board
of directors and by stockholders owning at least the majority of the
outstanding capital stock, or by at least a majority of the members in the
case of a non-stock corporation, of both the managing and the managed
corporation, at a meeting duly called for the purpose: Provided, That (1)
where a stockholder or stockholders representing the same interest of
both the managing and the managed corporations own or control more
than one-third (1/3) of the total outstanding capital stock entitled to vote
of the managing corporation; or (2) where a majority of the members of
the board of directors of the managing corporation also constitute a
majority of the members of the board of directors of the managed
corporation, then the management contract must be approved by the
stockholders of the managed corporation owning at least two-thirds
(2/3) of the total outstanding capital stock entitled to vote, or by at least
two-thirds (2/3) of the members in the case of a non-stock corporation.
No management contract shall be entered into for a period longer than
five years for any one term.

The provisions of the next preceding paragraph shall apply to any

contract whereby a corporation undertakes to manage or operate all or
substantially all of the business of another corporation, whether such
contracts are called service contracts, operating agreements or
otherwise: Provided, however, That such service contracts or operating
agreements which relate to the exploration, development, exploitation or
utilization of natural resources may be entered into for such periods as
may be provided by the pertinent laws or regulations. (n)

Sec. 45. Ultra vires acts of corporations. - No corporation under

this Code shall possess or exercise any corporate powers except those
conferred by this Code or by its articles of incorporation and except such
as are necessary or incidental to the exercise of the powers so conferred.
(n)

TITLE V
BY LAWS

Sec. 46. Adoption of by-laws. - Every corporation formed under this

Code must, within one (1) month after receipt of official notice of the
issuance of its certificate of incorporation by the Securities and
Exchange Commission, adopt a code of by-laws for its government not
inconsistent with this Code. For the adoption of by-laws by the
corporation the affirmative vote of the stockholders representing at least
a majority of the outstanding capital stock, or of at least a majority of the
members in case of non-stock corporations, shall be necessary. The by-
laws shall be signed by the stockholders or members voting for them and
shall be kept in the principal office of the corporation, subject to the
inspection of the stockholders or members during office hours. A copy
thereof, duly certified to by a majority of the directors or trustees
countersigned by the secretary of the corporation, shall be filed with the
Securities and Exchange Commission which shall be attached to the
original articles of incorporation.

Notwithstanding the provisions of the preceding paragraph, by-laws may

be adopted and filed prior to incorporation; in such case, such by-laws
shall be approved and signed by all the incorporators and submitted to
the Securities and Exchange Commission, together with the articles of
incorporation.

In all cases, by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-laws
are not inconsistent with this Code.

The Securities and Exchange Commission shall not accept for filing the
by-laws or any amendment thereto of any bank, banking institution,
building and loan association, trust company, insurance company,
public utility, educational institution or other special corporations
governed by special laws, unless accompanied by a certificate of the
appropriate government agency to the effect that such by-laws or
amendments are in accordance with law. (20a)

Sec. 47. Contents of by-laws. - Subject to the provisions of the

Constitution, this Code, other special laws, and the articles of
incorporation, a private corporation may provide in its by-laws for:

1. The time, place and manner of calling and conducting

regular or special meetings of the directors or trustees;

2. The time and manner of calling and conducting regular

or special meetings of the stockholders or members;

3. The required quorum in meetings of stockholders or

members and the manner of voting therein;

4. The form for proxies of stockholders and members and

the manner of voting them;

5. The qualifications, duties and compensation of directors

or trustees, officers and employees;

6. The time for holding the annual election of directors of

trustees and the mode or manner of giving notice thereof;

7. The manner of election or appointment and the term of

office of all officers other than directors or trustees;

8. The penalties for violation of the by-laws;

9. In the case of stock corporations, the manner of issuing

 stock certificates; and

10. Such other matters as may be necessary for the proper

or convenient transaction of its corporate business and
affairs. (21a)

Sec. 48. Amendments to by-laws. - The board of directors or

trustees, by a majority vote thereof, and the owners of at least a majority
of the outstanding capital stock, or at least a majority of the members of
a non-stock corporation, at a regular or special meeting duly called for
the purpose, may amend or repeal any by-laws or adopt new by-laws.
The owners of two-thirds (2/3) of the outstanding capital stock or two-
thirds (2/3) of the members in a non-stock corporation may delegate to
the board of directors or trustees the power to amend or repeal any by-
laws or adopt new by-laws: Provided, That any power delegated to the
board of directors or trustees to amend or repeal any by-laws or adopt
new by-laws shall be considered as revoked whenever stockholders
owning or representing a majority of the outstanding capital stock or a
majority of the members in non-stock corporations, shall so vote at a
regular or special meeting.

Whenever any amendment or new by-laws are adopted, such

amendment or new by-laws shall be attached to the original by-laws in
the office of the corporation, and a copy thereof, duly certified under
oath by the corporate secretary and a majority of the directors or
trustees, shall be filed with the Securities and Exchange Commission the
same to be attached to the original articles of incorporation and original
by-laws.

The amended or new by-laws shall only be effective upon the issuance by
the Securities and Exchange Commission of a certification that the same
are not inconsistent with this Code. (22a and 23a)

TITLE VI
MEETINGS

Sec. 49. Kinds of meetings. - Meetings of directors, trustees,

stockholders, or members may be regular or special. (n)

Sec. 50. Regular and special meetings of stockholders or

members. - Regular meetings of stockholders or members shall be held
annually on a date fixed in the by-laws, or if not so fixed, on any date in
April of every year as determined by the board of directors or trustees:
Provided, That written notice of regular meetings shall be sent to all
stockholders or members of record at least two (2) weeks prior to the
meeting, unless a different period is required by the by-laws.

Special meetings of stockholders or members shall be held at any time

deemed necessary or as provided in the by-laws: Provided, however,
That at least one (1) week written notice shall be sent to all stockholders
or members, unless otherwise provided in the by-laws.

Notice of any meeting may be waived, expressly or impliedly, by any

stockholder or member.

Whenever, for any cause, there is no person authorized to call a meeting,

the Secretaries and Exchange Commission, upon petition of a
stockholder or member on a showing of good cause therefor, may issue
an order to the petitioning stockholder or member directing him to call a
meeting of the corporation by giving proper notice required by this Code
or by the by-laws. The petitioning stockholder or member shall preside
thereat until at least a majority of the stockholders or members present
have been chosen one of their number as presiding officer. (24, 26)

Sec. 51. Place and time of meetings of stockholders or

members. - Stockholders' or members' meetings, whether regular or
special, shall be held in the city or municipality where the principal
office of the corporation is located, and if practicable in the principal
office of the corporation: Provided, That Metro Manila shall, for
purposes of this section, be considered a city or municipality.

Notice of meetings shall be in writing, and the time and place thereof
stated therein.

All proceedings had and any business transacted at any meeting of the
stockholders or members, if within the powers or authority of the
corporation, shall be valid even if the meeting be improperly held or
called, provided all the stockholders or members of the corporation are
present or duly represented at the meeting. (24 and 25)

Sec. 52. Quorum in meetings. - Unless otherwise provided for in

this Code or in the by-laws, a quorum shall consist of the stockholders
representing a majority of the outstanding capital stock or a majority of
the members in the case of non-stock corporations. (n)

Sec. 53. Regular and special meetings of directors or trustees.

- Regular meetings of the board of directors or trustees of every
corporation shall be held monthly, unless the by-laws provide otherwise.

Special meetings of the board of directors or trustees may be held at any

time upon the call of the president or as provided in the by-laws.

Meetings of directors or trustees of corporations may be held anywhere

in or outside of the Philippines, unless the by-laws provide otherwise.
Notice of regular or special meetings stating the date, time and place of
the meeting must be sent to every director or trustee at least one (1) day
prior to the scheduled meeting, unless otherwise provided by the by-
laws. A director or trustee may waive this requirement, either expressly
or impliedly. (n)

Sec. 54. Who shall preside at meetings. - The president shall

preside at all meetings of the directors or trustee as well as of the
stockholders or members, unless the by-laws provide otherwise. (n)

Sec. 55. Right to vote of pledgors, mortgagors, and

administrators. - In case of pledged or mortgaged shares in stock
corporations, the pledgor or mortgagor shall have the right to attend and
vote at meetings of stockholders, unless the pledgee or mortgagee is
expressly given by the pledgor or mortgagor such right in writing which
is recorded on the appropriate corporate books. (n)

Executors, administrators, receivers, and other legal representatives

duly appointed by the court may attend and vote in behalf of the
stockholders or members without need of any written proxy. (27a)

Sec. 56. Voting in case of joint ownership of stock. - In case of

shares of stock owned jointly by two or more persons, in order to vote
the same, the consent of all the co-owners shall be necessary, unless
there is a written proxy, signed by all the co-owners, authorizing one or
some of them or any other person to vote such share or shares: Provided,
That when the shares are owned in an "and/or" capacity by the holders
thereof, any one of the joint owners can vote said shares or appoint a
proxy therefor. (n)

Sec. 57. Voting right for treasury shares. - Treasury shares shall
have no voting right as long as such shares remain in the Treasury. (n)

Sec. 58. Proxies. - Stockholders and members may vote in person or

by proxy in all meetings of stockholders or members. Proxies shall in
writing, signed by the stockholder or member and filed before the
scheduled meeting with the corporate secretary. Unless otherwise
provided in the proxy, it shall be valid only for the meeting for which it is
intended. No proxy shall be valid and effective for a period longer than
five (5) years at any one time. (n)

Sec. 59. Voting trusts. - One or more stockholders of a stock

corporation may create a voting trust for the purpose of conferring upon
a trustee or trustees the right to vote and other rights pertaining to the
shares for a period not exceeding five (5) years at any time: Provided,
That in the case of a voting trust specifically required as a condition in a
loan agreement, said voting trust may be for a period exceeding five (5)
years but shall automatically expire upon full payment of the loan. A
voting trust agreement must be in writing and notarized, and shall
specify the terms and conditions thereof. A certified copy of such
agreement shall be filed with the corporation and with the Securities and
Exchange Commission; otherwise, said agreement is ineffective and
unenforceable. The certificate or certificates of stock covered by the
voting trust agreement shall be canceled and new ones shall be issued in
the name of the trustee or trustees stating that they are issued pursuant
to said agreement. In the books of the corporation, it shall be noted that
the transfer in the name of the trustee or trustees is made pursuant to
said voting trust agreement.

The trustee or trustees shall execute and deliver to the transferors voting
trust certificates, which shall be transferable in the same manner and
with the same effect as certificates of stock.

The voting trust agreement filed with the corporation shall be subject to
examination by any stockholder of the corporation in the same manner
as any other corporate book or record: Provided, That both the
transferor and the trustee or trustees may exercise the right of inspection
of all corporate books and records in accordance with the provisions of
this Code.

Any other stockholder may transfer his shares to the same trustee or
trustees upon the terms and conditions stated in the voting trust
agreement, and thereupon shall be bound by all the provisions of said
agreement.

No voting trust agreement shall be entered into for the purpose of

circumventing the law against monopolies and illegal combinations in
restraint of trade or used for purposes of fraud.

Unless expressly renewed, all rights granted in a voting trust agreement

shall automatically expire at the end of the agreed period, and the voting
trust certificates as well as the certificates of stock in the name of the
trustee or trustees shall thereby be deemed canceled and new certificates
of stock shall be reissued in the name of the transferors.

The voting trustee or trustees may vote by proxy unless the agreement
provides otherwise. (36a)
 TITLE VII
STOCKS AND STOCKHOLDERS

Sec. 60. Subscription contract. - Any contract for the acquisition of

unissued stock in an existing corporation or a corporation still to be
formed shall be deemed a subscription within the meaning of this Title,
notwithstanding the fact that the parties refer to it as a purchase or some
other contract. (n)

Sec. 61. Pre-incorporation subscription. - A subscription for

shares of stock of a corporation still to be formed shall be irrevocable for
a period of at least six (6) months from the date of subscription, unless
all of the other subscribers consent to the revocation, or unless the
incorporation of said corporation fails to materialize within said period
or within a longer period as may be stipulated in the contract of
subscription: Provided, That no pre-incorporation subscription may be
revoked after the submission of the articles of incorporation to the
Securities and Exchange Commission. (n)

Sec. 62. Considering for stocks. - Stocks shall not be issued for a
consideration less than the par or issued price thereof. Consideration for
the issuance of stock may be any or a combination of any two or more of
the following:

1. Actual cash paid to the corporation;

2. Property, tangible or intangible, actually received by the

corporation and necessary or convenient for its use and
lawful purposes at a fair valuation equal to the par or
issued value of the stock issued;

3. Labor performed for or services actually rendered to the

corporation;

4. Previously incurred indebtedness of the corporation;

5. Amounts transferred from unrestricted retained

earnings to stated capital; and

6. Outstanding shares exchanged for stocks in the event of

reclassification or conversion.

Where the consideration is other than actual cash, or consists of

intangible property such as patents of copyrights, the valuation thereof
shall initially be determined by the incorporators or the board of
directors, subject to approval by the Securities and Exchange
Commission.

Shares of stock shall not be issued in exchange for promissory notes or

future service.

The same considerations provided for in this section, insofar as they may
be applicable, may be used for the issuance of bonds by the corporation.

The issued price of no-par value shares may be fixed in the articles of
incorporation or by the board of directors pursuant to authority
conferred upon it by the articles of incorporation or the by-laws, or in
the absence thereof, by the stockholders representing at least a majority
of the outstanding capital stock at a meeting duly called for the purpose.
(5 and 16)

Sec. 63. Certificate of stock and transfer of shares. - The capital

stock of stock corporations shall be divided into shares for which
certificates signed by the president or vice president, countersigned by
the secretary or assistant secretary, and sealed with the seal of the
corporation shall be issued in accordance with the by-laws. Shares of
stock so issued are personal property and may be transferred by delivery
of the certificate or certificates endorsed by the owner or his attorney-in-
fact or other person legally authorized to make the transfer. No transfer,
however, shall be valid, except as between the parties, until the transfer
is recorded in the books of the corporation showing the names of the
parties to the transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares transferred.

No shares of stock against which the corporation holds any unpaid claim
shall be transferable in the books of the corporation. (35)

Sec. 64. Issuance of stock certificates. - No certificate of stock

shall be issued to a subscriber until the full amount of his subscription
together with interest and expenses (in case of delinquent shares), if any
is due, has been paid. (37)

Sec. 65. Liability of directors for watered stocks. - Any director

or officer of a corporation consenting to the issuance of stocks for a
consideration less than its par or issued value or for a consideration in
any form other than cash, valued in excess of its fair value, or who,
having knowledge thereof, does not forthwith express his objection in
writing and file the same with the corporate secretary, shall be solidarily,
liable with the stockholder concerned to the corporation and its creditors
for the difference between the fair value received at the time of issuance
of the stock and the par or issued value of the same. (n)

Sec. 66. Interest on unpaid subscriptions. - Subscribers for stock

shall pay to the corporation interest on all unpaid subscriptions from the
date of subscription, if so required by, and at the rate of interest fixed in
the by-laws. If no rate of interest is fixed in the by-laws, such rate shall
be deemed to be the legal rate. (37)

Sec. 67. Payment of balance of subscription. - Subject to the

provisions of the contract of subscription, the board of directors of any
stock corporation may at any time declare due and payable to the
corporation unpaid subscriptions to the capital stock and may collect the
same or such percentage thereof, in either case with accrued interest, if
any, as it may deem necessary.

Payment of any unpaid subscription or any percentage thereof, together

with the interest accrued, if any, shall be made on the date specified in
the contract of subscription or on the date stated in the call made by the
board. Failure to pay on such date shall render the entire balance due
and payable and shall make the stockholder liable for interest at the legal
rate on such balance, unless a different rate of interest is provided in the
by-laws, computed from such date until full payment. If within thirty
(30) days from the said date no payment is made, all stocks covered by
said subscription shall thereupon become delinquent and shall be
subject to sale as hereinafter provided, unless the board of directors
orders otherwise. (38)

Sec. 68. Delinquency sale. - The board of directors may, by

resolution, order the sale of delinquent stock and shall specifically state
the amount due on each subscription plus all accrued interest, and the
date, time and place of the sale which shall not be less than thirty (30)
days nor more than sixty (60) days from the date the stocks become
delinquent.

Notice of said sale, with a copy of the resolution, shall be sent to every
delinquent stockholder either personally or by registered mail. The same
shall furthermore be published once a week for two (2) consecutive
weeks in a newspaper of general circulation in the province or city where
the principal office of the corporation is located.

Unless the delinquent stockholder pays to the corporation, on or before

the date specified for the sale of the delinquent stock, the balance due on
his subscription, plus accrued interest, costs of advertisement and
expenses of sale, or unless the board of directors otherwise orders, said
delinquent stock shall be sold at public auction to such bidder who shall
offer to pay the full amount of the balance on the subscription together
with accrued interest, costs of advertisement and expenses of sale, for
the smallest number of shares or fraction of a share. The stock so
purchased shall be transferred to such purchaser in the books of the
corporation and a certificate for such stock shall be issued in his favor.
The remaining shares, if any, shall be credited in favor of the delinquent
stockholder who shall likewise be entitled to the issuance of a certificate
of stock covering such shares.

Should there be no bidder at the public auction who offers to pay the full
amount of the balance on the subscription together with accrued
interest, costs of advertisement and expenses of sale, for the smallest
number of shares or fraction of a share, the corporation may, subject to
the provisions of this Code, bid for the same, and the total amount due
shall be credited as paid in full in the books of the corporation. Title to
all the shares of stock covered by the subscription shall be vested in the
corporation as treasury shares and may be disposed of by said
corporation in accordance with the provisions of this Code.

Sec. 69. When sale may be questioned. - No action to recover

delinquent stock sold can be sustained upon the ground of irregularity or
defect in the notice of sale, or in the sale itself of the delinquent stock,
unless the party seeking to maintain such action first pays or tenders to
the party holding the stock the sum for which the same was sold, with
interest from the date of sale at the legal rate; and no such action shall be
maintained unless it is commenced by the filing of a complaint within six
(6) months from the date of sale. (47a)

Sec. 70. Court action to recover unpaid subscription. - Nothing

in this Code shall prevent the corporation from collecting by action in a
court of proper jurisdiction the amount due on any unpaid subscription,
with accrued interest, costs and expenses. (49a)

Sec. 71. Effect of delinquency. - No delinquent stock shall be voted

for be entitled to vote or to representation at any stockholder's meeting,
nor shall the holder thereof be entitled to any of the rights of a
stockholder except the right to dividends in accordance with the
provisions of this Code, until and unless he pays the amount due on his
subscription with accrued interest, and the costs and expenses of
advertisement, if any. (50a)

Sec. 72. Rights of unpaid shares. - Holders of subscribed shares not

fully paid which are not delinquent shall have all the rights of a
stockholder. (n)

Sec. 73. Lost or destroyed certificates. - The following procedure

shall be followed for the issuance by a corporation of new certificates of
stock in lieu of those which have been lost, stolen or destroyed:

1. The registered owner of a certificate of stock in a corporation or

 his legal representative shall file with the corporation an affidavit
in triplicate setting forth, if possible, the circumstances as to how
the certificate was lost, stolen or destroyed, the number of shares
represented by such certificate, the serial number of the
certificate and the name of the corporation which issued the
same. He shall also submit such other information and evidence
which he may deem necessary;

2. After verifying the affidavit and other information and evidence

with the books of the corporation, said corporation shall publish a
notice in a newspaper of general circulation published in the place
where the corporation has its principal office, once a week for
three (3) consecutive weeks at the expense of the registered owner
of the certificate of stock which has been lost, stolen or destroyed.
The notice shall state the name of said corporation, the name of
the registered owner and the serial number of said certificate, and
the number of shares represented by such certificate, and that
after the expiration of one (1) year from the date of the last
publication, if no contest has been presented to said corporation
regarding said certificate of stock, the right to make such contest
shall be barred and said corporation shall cancel in its books the
certificate of stock which has been lost, stolen or destroyed and
issue in lieu thereof new certificate of stock, unless the registered
owner files a bond or other security in lieu thereof as may be
required, effective for a period of one (1) year, for such amount
and in such form and with such sureties as may be satisfactory to
the board of directors, in which case a new certificate may be
issued even before the expiration of the one (1) year period
provided herein: Provided, That if a contest has been presented to
said corporation or if an action is pending in court regarding the
ownership of said certificate of stock which has been lost, stolen
or destroyed, the issuance of the new certificate of stock in lieu
thereof shall be suspended until the final decision by the court
regarding the ownership of said certificate of stock which has
been lost, stolen or destroyed.

Except in case of fraud, bad faith, or negligence on the part of the

corporation and its officers, no action may be brought against any
corporation which shall have issued certificate of stock in lieu of those
lost, stolen or destroyed pursuant to the procedure above-described. (R.
A. 201a)

TITLE VIII
CORPORATE BOOKS AND RECORDS

Sec. 74. Books to be kept; stock transfer agent. - Every

corporation shall keep and carefully preserve at its principal office a
record of all business transactions and minutes of all meetings of
stockholders or members, or of the board of directors or trustees, in
which shall be set forth in detail the time and place of holding the
meeting, how authorized, the notice given, whether the meeting was
regular or special, if special its object, those present and absent, and
every act done or ordered done at the meeting. Upon the demand of any
director, trustee, stockholder or member, the time when any director,
trustee, stockholder or member entered or left the meeting must be
noted in the minutes; and on a similar demand, the yeas and nays must
be taken on any motion or proposition, and a record thereof carefully
made. The protest of any director, trustee, stockholder or member on
any action or proposed action must be recorded in full on his demand.

The records of all business transactions of the corporation and the

minutes of any meetings shall be open to inspection by any director,
trustee, stockholder or member of the corporation at reasonable hours
on business days and he may demand, writing, for a copy of excerpts
from said records or minutes, at his expense.

Any officer or agent of the corporation who shall refuse to allow any
director, trustees, stockholder or member of the corporation to examine
and copy excerpts from its records or minutes, in accordance with the
provisions of this Code, shall be liable to such director, trustee,
stockholder or member for damages, and in addition, shall be guilty of
an offense which shall be punishable under Section 144 of this Code:
Provided, That if such refusal is made pursuant to a resolution or order
of the board of directors or trustees, the liability under this section for
such action shall be imposed upon the directors or trustees who voted
for such refusal: and Provided, further, That it shall be a defense to any
action under this section that the person demanding to examine and
copy excerpts from the corporation's records and minutes has
improperly used any information secured through any prior examination
of the records or minutes of such corporation or of any other
corporation, or was not acting in good faith or for a legitimate purpose in
making his demand.

Stock corporations must also keep a book to be known as the "stock and
transfer book", in which must be kept a record of all stocks in the names
of the stockholders alphabetically arranged; the installments paid and
unpaid on all stock for which subscription has been made, and the date
of payment of any installment; a statement of every alienation, sale or
transfer of stock made, the date thereof, and by and to whom made; and
such other entries as the by-laws may prescribe. The stock and transfer
book shall be kept in the principal office of the corporation or in the
office of its stock transfer agent and shall be open for inspection by any
director or stockholder of the corporation at reasonable hours on
business days.

No stock transfer agent or one engaged principally in the business of

registering transfers of stocks in behalf of a stock corporation shall be
allowed to operate in the Philippines unless he secures a license from the
Securities and Exchange Commission and pays a fee as may be fixed by
the Commission, which shall be renewable annually: Provided, That a
stock corporation is not precluded from performing or making transfer
of its own stocks, in which case all the rules and regulations imposed on
stock transfer agents, except the payment of a license fee herein
provided, shall be applicable. (51a and 32a; B. P. No. 268.)

Sec. 75. Right to financial statements. - Within ten (10) days from
receipt of a written request of any stockholder or member, the
corporation shall furnish to him its most recent financial statement,
which shall include a balance sheet as of the end of the last taxable year
and a profit or loss statement for said taxable year, showing in
reasonable detail its assets and liabilities and the result of its operations.

At the regular meeting of stockholders or members, the board of

directors or trustees shall present to such stockholders or members a
financial report of the operations of the corporation for the preceding
year, which shall include financial statements, duly signed and certified
by an independent certified public accountant.

However, if the paid-up capital of the corporation is less than

P50,000.00, the financial statements may be certified under oath by the
treasurer or any responsible officer of the corporation. (n)

TITLE IX
MERGER AND CONSOLIDATION

Sec. 76. Plan or merger of consolidation. - Two or more

corporations may merge into a single corporation which shall be one of
the constituent corporations or may consolidate into a new single
corporation which shall be the consolidated corporation.

The board of directors or trustees of each corporation, party to the

merger or consolidation, shall approve a plan of merger or consolidation
setting forth the following:

1. The names of the corporations proposing to merge or consolidate,

hereinafter referred to as the constituent corporations;

2. The terms of the merger or consolidation and the mode of carrying

 the same into effect;

3. A statement of the changes, if any, in the articles of incorporation

of the surviving corporation in case of merger; and, with respect to
the consolidated corporation in case of consolidation, all the
statements required to be set forth in the articles of incorporation for
corporations organized under this Code; and

4. Such other provisions with respect to the proposed merger or

consolidation as are deemed necessary or desirable. (n)

Sec. 77. Stockholder's or member's approval. - Upon approval by

majority vote of each of the board of directors or trustees of the
constituent corporations of the plan of merger or consolidation, the
same shall be submitted for approval by the stockholders or members of
each of such corporations at separate corporate meetings duly called for
the purpose. Notice of such meetings shall be given to all stockholders or
members of the respective corporations, at least two (2) weeks prior to
the date of the meeting, either personally or by registered mail. Said
notice shall state the purpose of the meeting and shall include a copy or
a summary of the plan of merger or consolidation. The affirmative vote
of stockholders representing at least two-thirds (2/3) of the outstanding
capital stock of each corporation in the case of stock corporations or at
least two-thirds (2/3) of the members in the case of non-stock
corporations shall be necessary for the approval of such plan. Any
dissenting stockholder in stock corporations may exercise his appraisal
right in accordance with the Code: Provided, That if after the approval by
the stockholders of such plan, the board of directors decides to abandon
the plan, the appraisal right shall be extinguished.

Any amendment to the plan of merger or consolidation may be made,

provided such amendment is approved by majority vote of the respective
boards of directors or trustees of all the constituent corporations and
ratified by the affirmative vote of stockholders representing at least two-
thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the
members of each of the constituent corporations. Such plan, together
with any amendment, shall be considered as the agreement of merger or
consolidation. (n)

Sec. 78. Articles of merger or consolidation. - After the approval

by the stockholders or members as required by the preceding section,
articles of merger or articles of consolidation shall be executed by each of
the constituent corporations, to be signed by the president or vice-
president and certified by the secretary or assistant secretary of each
corporation setting forth:
 1. The plan of the merger or the plan of consolidation;

2. As to stock corporations, the number of shares outstanding, or in

the case of non-stock corporations, the number of members; and

3. As to each corporation, the number of shares or members voting

for and against such plan, respectively. (n)

Sec. 79. Effectivity of merger or consolidation. - The articles of

merger or of consolidation, signed and certified as herein above
required, shall be submitted to the Securities and Exchange Commission
in quadruplicate for its approval: Provided, That in the case of merger or
consolidation of banks or banking institutions, building and loan
associations, trust companies, insurance companies, public utilities,
educational institutions and other special corporations governed by
special laws, the favorable recommendation of the appropriate
government agency shall first be obtained. If the Commission is satisfied
that the merger or consolidation of the corporations concerned is not
inconsistent with the provisions of this Code and existing laws, it shall
issue a certificate of merger or of consolidation, at which time the
merger or consolidation shall be effective.

If, upon investigation, the Securities and Exchange Commission has

reason to believe that the proposed merger or consolidation is contrary
to or inconsistent with the provisions of this Code or existing laws, it
shall set a hearing to give the corporations concerned the opportunity to
be heard. Written notice of the date, time and place of hearing shall be
given to each constituent corporation at least two (2) weeks before said
hearing. The Commission shall thereafter proceed as provided in this
Code. (n)

Sec. 80. Effects or merger or consolidation. - The merger or

consolidation shall have the following effects:

1. The constituent corporations shall become a single corporation which,

in case of merger, shall be the surviving corporation designated in the
plan of merger; and, in case of consolidation, shall be the consolidated
corporation designated in the plan of consolidation;

2. The separate existence of the constituent corporations shall cease,

except that of the surviving or the consolidated corporation;

3. The surviving or the consolidated corporation shall possess all the

rights, privileges, immunities and powers and shall be subject to all
the duties and liabilities of a corporation organized under this Code;

4. The surviving or the consolidated corporation shall thereupon and

 thereafter possess all the rights, privileges, immunities and
franchises of each of the constituent corporations; and all property,
real or personal, and all receivables due on whatever account,
including subscriptions to shares and other choses in action, and all
and every other interest of, or belonging to, or due to each
constituent corporation, shall be deemed transferred to and vested in
such surviving or consolidated corporation without further act or
deed; and

5. The surviving or consolidated corporation shall be responsible and

liable for all the liabilities and obligations of each of the constituent
corporations in the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obligations; and any
pending claim, action or proceeding brought by or against any of such
constituent corporations may be prosecuted by or against the surviving
or consolidated corporation. The rights of creditors or liens upon the
property of any of such constituent corporations shall not be impaired by
such merger or consolidation. (n)

TITLE X
APPRAISAL RIGHT

Sec. 81. Instances of appraisal right. - Any stockholder of a

corporation shall have the right to dissent and demand payment of the
fair value of his shares in the following instances:

1. In case any amendment to the articles of incorporation

has the effect of changing or restricting the rights of any
stockholder or class of shares, or of authorizing
preferences in any respect superior to those of outstanding
shares of any class, or of extending or shortening the term
of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage,

pledge or other disposition of all or substantially all of the
corporate property and assets as provided in the Code; and

3. In case of merger or consolidation. (n)

Sec. 82. How right is exercised. - The appraisal right may be

exercised by any stockholder who shall have voted against the proposed
corporate action, by making a written demand on the corporation within
thirty (30) days after the date on which the vote was taken for payment
of the fair value of his shares: Provided, That failure to make the demand
within such period shall be deemed a waiver of the appraisal right. If the
proposed corporate action is implemented or affected, the corporation
shall pay to such stockholder, upon surrender of the certificate or
certificates of stock representing his shares, the fair value thereof as of
the day prior to the date on which the vote was taken, excluding any
appreciation or depreciation in anticipation of such corporate action.

If within a period of sixty (60) days from the date the corporate action
was approved by the stockholders, the withdrawing stockholder and the
corporation cannot agree on the fair value of the shares, it shall be
determined and appraised by three (3) disinterested persons, one of
whom shall be named by the stockholder, another by the corporation,
and the third by the two thus chosen. The findings of the majority of the
appraisers shall be final, and their award shall be paid by the
corporation within thirty (30) days after such award is made: Provided,
That no payment shall be made to any dissenting stockholder unless the
corporation has unrestricted retained earnings in its books to cover such
payment: and Provided, further, That upon payment by the corporation
of the agreed or awarded price, the stockholder shall forthwith transfer
his shares to the corporation. (n)

Sec. 83. Effect of demand and termination of right. - From the

time of demand for payment of the fair value of a stockholder's shares
until either the abandonment of the corporate action involved or the
purchase of the said shares by the corporation, all rights accruing to such
shares, including voting and dividend rights, shall be suspended in
accordance with the provisions of this Code, except the right of such
stockholder to receive payment of the fair value thereof: Provided, That
if the dissenting stockholder is not paid the value of his shares within 30
days after the award, his voting and dividend rights shall immediately be
restored. (n)

Sec. 84. When right to payment ceases. - No demand for payment

under this Title may be withdrawn unless the corporation consents
thereto. If, however, such demand for payment is withdrawn with the
consent of the corporation, or if the proposed corporate action is
abandoned or rescinded by the corporation or disapproved by the
Securities and Exchange Commission where such approval is necessary,
or if the Securities and Exchange Commission determines that such
stockholder is not entitled to the appraisal right, then the right of said
stockholder to be paid the fair value of his shares shall cease, his status
as a stockholder shall thereupon be restored, and all dividend
distributions which would have accrued on his shares shall be paid to
him. (n)

Sec. 85. Who bears costs of appraisal. - The costs and expenses of
appraisal shall be borne by the corporation, unless the fair value
ascertained by the appraisers is approximately the same as the price
which the corporation may have offered to pay the stockholder, in which
case they shall be borne by the latter. In the case of an action to recover
such fair value, all costs and expenses shall be assessed against the
corporation, unless the refusal of the stockholder to receive payment was
unjustified. (n)

Sec. 86. Notation on certificates; rights of transferee. - Within

ten (10) days after demanding payment for his shares, a dissenting
stockholder shall submit the certificates of stock representing his shares
to the corporation for notation thereon that such shares are dissenting
shares. His failure to do so shall, at the option of the corporation,
terminate his rights under this Title. If shares represented by the
certificates bearing such notation are transferred, and the certificates
consequently canceled, the rights of the transferor as a dissenting
stockholder under this Title shall cease and the transferee shall have all
the rights of a regular stockholder; and all dividend distributions which
would have accrued on such shares shall be paid to the transferee. (n)

TITLE XI
NON-STOCK CORPORATIONS

Sec. 87. Definition. - For the purposes of this Code, a non-stock

corporation is one where no part of its income is distributable as
dividends to its members, trustees, or officers, subject to the provisions
of this Code on dissolution: Provided, That any profit which a non-stock
corporation may obtain as an incident to its operations shall, whenever
necessary or proper, be used for the furtherance of the purpose or
purposes for which the corporation was organized, subject to the
provisions of this Title.

The provisions governing stock corporation, when pertinent, shall be

applicable to non-stock corporations, except as may be covered by
specific provisions of this Title. (n)

 Sec. 88. Purposes. - Non-stock corporations may be formed or

organized for charitable, religious, educational, professional, cultural,
fraternal, literary, scientific, social, civic service, or similar purposes, like
trade, industry, agricultural and like chambers, or any combination
thereof, subject to the special provisions of this Title governing
particular classes of non-stock corporations. (n)

Chapter I - MEMBERS

Sec. 89. Right to vote. - The right of the members of any class or
classes to vote may be limited, broadened or denied to the extent
specified in the articles of incorporation or the by-laws. Unless so
limited, broadened or denied, each member, regardless of class, shall be
entitled to one vote.

Unless otherwise provided in the articles of incorporation or the by-laws,

a member may vote by proxy in accordance with the provisions of this
Code. (n)

Voting by mail or other similar means by members of non-stock

corporations may be authorized by the by-laws of non-stock
corporations with the approval of, and under such conditions which may
be prescribed by, the Securities and Exchange Commission.

Sec. 90. Non-transferability of membership. - Membership in a

non-stock corporation and all rights arising therefrom are personal and
non-transferable, unless the articles of incorporation or the by-laws
otherwise provide. (n)

Sec. 91. Termination of membership. - Membership shall be

terminated in the manner and for the causes provided in the articles of
incorporation or the by-laws. Termination of membership shall have the
effect of extinguishing all rights of a member in the corporation or in its
property, unless otherwise provided in the articles of incorporation or
the by-laws. (n) 

Chapter II - TRUSTEES AND OFFICERS

Sec. 92. Election and term of trustees. - Unless otherwise provided

in the articles of incorporation or the by-laws, the board of trustees of
non-stock corporations, which may be more than fifteen (15) in number
as may be fixed in their articles of incorporation or by-laws, shall, as
soon as organized, so classify themselves that the term of office of one-
third (1/3) of their number shall expire every year; and subsequent
elections of trustees comprising one-third (1/3) of the board of trustees
shall be held annually and trustees so elected shall have a term of three
(3) years. Trustees thereafter elected to fill vacancies occurring before
the expiration of a particular term shall hold office only for the
unexpired period.

No person shall be elected as trustee unless he is a member of the

corporation.

Unless otherwise provided in the articles of incorporation or the by-laws,

officers of a non-stock corporation may be directly elected by the
members. (n)

Sec. 93. Place of meetings. - The by-laws may provide that the
members of a non-stock corporation may hold their regular or special
meetings at any place even outside the place where the principal office of
the corporation is located: Provided, That proper notice is sent to all
members indicating the date, time and place of the meeting: and
Provided, further, That the place of meeting shall be within the
Philippines. (n)
 

Chapter III - DISTRIBUTION OF ASSETS IN

NON-STOCK CORPORATIONS

Sec. 94. Rules of distribution. - In case dissolution of a non-stock

corporation in accordance with the provisions of this Code, its assets
shall be applied and distributed as follows:

1. All liabilities and obligations of the corporation shall be

paid, satisfied and discharged, or adequate provision shall
be made therefore;

2. Assets held by the corporation upon a condition

requiring return, transfer or conveyance, and which
condition occurs by reason of the dissolution, shall be
returned, transferred or conveyed in accordance with such
requirements;

3. Assets received and held by the corporation subject to

limitations permitting their use only for charitable,
religious, benevolent, educational or similar purposes, but
not held upon a condition requiring return, transfer or
conveyance by reason of the dissolution, shall be
transferred or conveyed to one or more corporations,
societies or organizations engaged in activities in the
Philippines substantially similar to those of the dissolving
corporation according to a plan of distribution adopted
pursuant to this Chapter;

4. Assets other than those mentioned in the preceding

paragraphs, if any, shall be distributed in accordance with
the provisions of the articles of incorporation or the by-
laws, to the extent that the articles of incorporation or the
by-laws, determine the distributive rights of members, or
any class or classes of members, or provide for
distribution; and

5. In any other case, assets may be distributed to such

persons, societies, organizations or corporations, whether
 or not organized for profit, as may be specified in a plan of
distribution adopted pursuant to this Chapter. (n)

Sec. 95. Plan of distribution of assets. - A plan providing for the

distribution of assets, not inconsistent with the provisions of this Title,
may be adopted by a non-stock corporation in the process of dissolution
in the following manner:
The board of trustees shall, by majority vote, adopt a resolution
recommending a plan of distribution and directing the submission
thereof to a vote at a regular or special meeting of members having
voting rights. Written notice setting forth the proposed plan of
distribution or a summary thereof and the date, time and place of such
meeting shall be given to each member entitled to vote, within the time
and in the manner provided in this Code for the giving of notice of
meetings to members. Such plan of distribution shall be adopted upon
approval of at least two-thirds (2/3) of the members having voting rights
present or represented by proxy at such meeting. (n)

TITLE XII
CLOSE CORPORATIONS

Sec. 96. Definition and applicability of Title. - A close

corporation, within the meaning of this Code, is one whose articles of
incorporation provide that: (1) All the corporation's issued stock of all
classes, exclusive of treasury shares, shall be held of record by not more
than a specified number of persons, not exceeding twenty (20); (2) all
the issued stock of all classes shall be subject to one or more specified
restrictions on transfer permitted by this Title; and (3) The corporation
shall not list in any stock exchange or make any public offering of any of
its stock of any class. Notwithstanding the foregoing, a corporation shall
not be deemed a close corporation when at least two-thirds (2/3) of its
voting stock or voting rights is owned or controlled by another
corporation which is not a close corporation within the meaning of this
Code.

Any corporation may be incorporated as a close corporation, except

mining or oil companies, stock exchanges, banks, insurance companies,
public utilities, educational institutions and corporations declared to be
vested with public interest in accordance with the provisions of this
Code.

The provisions of this Title shall primarily govern close corporations:

Provided, That the provisions of other Titles of this Code shall apply
suppletorily except insofar as this Title otherwise provides.

Sec. 97. Articles of incorporation. - The articles of incorporation of

a close corporation may provide:

1. For a classification of shares or rights and the

qualifications for owning or holding the same and
restrictions on their transfers as may be stated therein,
subject to the provisions of the following section;

2. For a classification of directors into one or more classes,

each of whom may be voted for and elected solely by a
particular class of stock; and

3. For a greater quorum or voting requirements in

meetings of stockholders or directors than those provided
in this Code.

The articles of incorporation of a close corporation may provide that the

business of the corporation shall be managed by the stockholders of the
corporation rather than by a board of directors. So long as this provision
continues in effect:
1. No meeting of stockholders need be called to elect
directors;

2. Unless the context clearly requires otherwise, the

stockholders of the corporation shall be deemed to be
directors for the purpose of applying the provisions of this
Code; and

3. The stockholders of the corporation shall be subject to

all liabilities of directors.

The articles of incorporation may likewise provide that all officers or

employees or that specified officers or employees shall be elected or
appointed by the stockholders, instead of by the board of directors.

Sec. 98. Validity of restrictions on transfer of shares. -

Restrictions on the right to transfer shares must appear in the articles of
incorporation and in the by-laws as well as in the certificate of stock;
otherwise, the same shall not be binding on any purchaser thereof in
good faith. Said restrictions shall not be more onerous than granting the
existing stockholders or the corporation the option to purchase the
shares of the transferring stockholder with such reasonable terms,
conditions or period stated therein. If upon the expiration of said period,
the existing stockholders or the corporation fails to exercise the option to
purchase, the transferring stockholder may sell his shares to any third
person.

Sec. 99. Effects of issuance or transfer of stock in breach of

qualifying conditions. -

1. If stock of a close corporation is issued or transferred to

any person who is not entitled under any provision of the
articles of incorporation to be a holder of record of its
stock, and if the certificate for such stock conspicuously
shows the qualifications of the persons entitled to be
holders of record thereof, such person is conclusively
presumed to have notice of the fact of his ineligibility to be
a stockholder.

2. If the articles of incorporation of a close corporation

states the number of persons, not exceeding twenty (20),
who are entitled to be holders of record of its stock, and if
the certificate for such stock conspicuously states such
number, and if the issuance or transfer of stock to any
person would cause the stock to be held by more than such
number of persons, the person to whom such stock is
issued or transferred is conclusively presumed to have
notice of this fact.

3. If a stock certificate of any close corporation

conspicuously shows a restriction on transfer of stock of
the corporation, the transferee of the stock is conclusively
presumed to have notice of the fact that he has acquired
stock in violation of the restriction, if such acquisition
violates the restriction.

4. Whenever any person to whom stock of a close

corporation has been issued or transferred has, or is
conclusively presumed under this section to have, notice
either (a) that he is a person not eligible to be a holder of
stock of the corporation, or (b) that transfer of stock to him
would cause the stock of the corporation to be held by
more than the number of persons permitted by its articles
of incorporation to hold stock of the corporation, or (c)
that the transfer of stock is in violation of a restriction on
transfer of stock, the corporation may, at its option, refuse
to register the transfer of stock in the name of the
transferee.

5. The provisions of subsection (4) shall not applicable if

the transfer of stock, though contrary to subsections (1),
 (2) of (3), has been consented to by all the stockholders of
the close corporation, or if the close corporation has
amended its articles of incorporation in accordance with
this Title.

6. The term "transfer", as used in this section, is not

limited to a transfer for value.

7. The provisions of this section shall not impair any right

which the transferee may have to rescind the transfer or to
recover under any applicable warranty, express or implied.

Sec. 100. Agreements by stockholders. -

1. Agreements by and among stockholders executed before
the formation and organization of a close corporation,
signed by all stockholders, shall survive the incorporation
of such corporation and shall continue to be valid and
binding between and among such stockholders, if such be
their intent, to the extent that such agreements are not
inconsistent with the articles of incorporation, irrespective
of where the provisions of such agreements are contained,
except those required by this Title to be embodied in said
articles of incorporation.

2. An agreement between two or more stockholders, if in

writing and signed by the parties thereto, may provide that
in exercising any voting rights, the shares held by them
shall be voted as therein provided, or as they may agree, or
as determined in accordance with a procedure agreed upon
by them.

3. No provision in any written agreement signed by the

stockholders, relating to any phase of the corporate affairs,
shall be invalidated as between the parties on the ground
that its effect is to make them partners among themselves.

4. A written agreement among some or all of the

stockholders in a close corporation shall not be invalidated
on the ground that it so relates to the conduct of the
business and affairs of the corporation as to restrict or
interfere with the discretion or powers of the board of
directors: Provided, That such agreement shall impose on
the stockholders who are parties thereto the liabilities for
managerial acts imposed by this Code on directors.

5. To the extent that the stockholders are actively engaged

 in the management or operation of the business and affairs
of a close corporation, the stockholders shall be held to
strict fiduciary duties to each other and among themselves.
Said stockholders shall be personally liable for corporate
torts unless the corporation has obtained reasonably
adequate liability insurance.

Sec. 101. When board meeting is unnecessary or improperly

held. - Unless the by-laws provide otherwise, any action by the directors
of a close corporation without a meeting shall nevertheless be deemed
valid if:
1. Before or after such action is taken, written consent
thereto is signed by all the directors; or

2. All the stockholders have actual or implied knowledge of

the action and make no prompt objection thereto in
writing; or

3. The directors are accustomed to take informal action

with the express or implied acquiescence of all the
stockholders; or

4. All the directors have express or implied knowledge of

the action in question and none of them makes prompt
objection thereto in writing.

If a director's meeting is held without proper call or notice, an action

taken therein within the corporate powers is deemed ratified by a
director who failed to attend, unless he promptly files his written
objection with the secretary of the corporation after having knowledge
thereof.

Sec. 102. Pre-emptive right in close corporations. - The pre-

emptive right of stockholders in close corporations shall extend to all
stock to be issued, including reissuance of treasury shares, whether for
money, property or personal services, or in payment of corporate debts,
unless the articles of incorporation provide otherwise.

Sec. 103. Amendment of articles of incorporation. - Any

amendment to the articles of incorporation which seeks to delete or
remove any provision required by this Title to be contained in the
articles of incorporation or to reduce a quorum or voting requirement
stated in said articles of incorporation shall not be valid or effective
unless approved by the affirmative vote of at least two-thirds (2/3) of the
outstanding capital stock, whether with or without voting rights, or of
such greater proportion of shares as may be specifically provided in the
articles of incorporation for amending, deleting or removing any of the
aforesaid provisions, at a meeting duly called for the purpose.

Sec. 104. Deadlocks. - Notwithstanding any contrary provision in the

articles of incorporation or by-laws or agreement of stockholders of a
close corporation, if the directors or stockholders are so divided
respecting the management of the corporation's business and affairs that
the votes required for any corporate action cannot be obtained, with the
consequence that the business and affairs of the corporation can no
longer be conducted to the advantage of the stockholders generally, the
Securities and Exchange Commission, upon written petition by any
stockholder, shall have the power to arbitrate the dispute. In the exercise
of such power, the Commission shall have authority to make such order
as it deems appropriate, including an order: (1) canceling or altering any
provision contained in the articles of incorporation, by-laws, or any
stockholder's agreement; (2) canceling, altering or enjoining any
resolution or act of the corporation or its board of directors,
stockholders, or officers; (3) directing or prohibiting any act of the
corporation or its board of directors, stockholders, officers, or other
persons party to the action; (4) requiring the purchase at their fair value
of shares of any stockholder, either by the corporation regardless of the
availability of unrestricted retained earnings in its books, or by the other
stockholders; (5) appointing a provisional director; (6) dissolving the
corporation; or (7) granting such other relief as the circumstances may
warrant.

A provisional director shall be an impartial person who is neither a

stockholder nor a creditor of the corporation or of any subsidiary or
affiliate of the corporation, and whose further qualifications, if any, may
be determined by the Commission. A provisional director is not a
receiver of the corporation and does not have the title and powers of a
custodian or receiver. A provisional director shall have all the rights and
powers of a duly elected director of the corporation, including the right
to notice of and to vote at meetings of directors, until such time as he
shall be removed by order of the Commission or by all the stockholders.
His compensation shall be determined by agreement between him and
the corporation subject to approval of the Commission, which may fix
his compensation in the absence of agreement or in the event of
disagreement between the provisional director and the corporation.

Sec. 105. Withdrawal of stockholder or dissolution of

corporation. - In addition and without prejudice to other rights and
remedies available to a stockholder under this Title, any stockholder of a
close corporation may, for any reason, compel the said corporation to
purchase his shares at their fair value, which shall not be less than their
par or issued value, when the corporation has sufficient assets in its
books to cover its debts and liabilities exclusive of capital stock:
Provided, That any stockholder of a close corporation may, by written
petition to the Securities and Exchange Commission, compel the
dissolution of such corporation whenever any of acts of the directors,
officers or those in control of the corporation is illegal, or fraudulent, or
dishonest, or oppressive or unfairly prejudicial to the corporation or any
stockholder, or whenever corporate assets are being misapplied or
wasted.

TITLE XIII
SPECIAL CORPORATIONS
Chapter I - Educational Corporations

Sec. 106. Incorporation. - Educational corporations shall be

governed by special laws and by the general provisions of this Code. (n)

Sec. 107. Pre-requisites to incorporation. - Except upon favorable

recommendation of the Ministry of Education and Culture, the
Securities and Exchange Commission shall not accept or approve the
articles of incorporation and by-laws of any educational institution.
(168a)

Sec. 108. Board of trustees. - Trustees of educational institutions

organized as non-stock corporations shall not be less than five (5) nor
more than fifteen (15): Provided, however, That the number of trustees
shall be in multiples of five (5).

Unless otherwise provided in the articles of incorporation on the by-

laws, the board of trustees of incorporated schools, colleges, or other
institutions of learning shall, as soon as organized, so classify themselves
that the term of office of one-fifth (1/5) of their number shall expire
every year. Trustees thereafter elected to fill vacancies, occurring before
the expiration of a particular term, shall hold office only for the
unexpired period. Trustees elected thereafter to fill vacancies caused by
expiration of term shall hold office for five (5) years. A majority of the
trustees shall constitute a quorum for the transaction of business. The
powers and authority of trustees shall be defined in the by-laws.

For institutions organized as stock corporations, the number and term of

directors shall be governed by the provisions on stock corporations.
(169a)
 

Chapter II - RELIGIOUS CORPORATIONS

Sec. 109. Classes of religious corporations. - Religious

corporations may be incorporated by one or more persons. Such
corporations may be classified into corporations sole and religious
societies.

Religious corporations shall be governed by this Chapter and by the

general provisions on non-stock corporations insofar as they may be
applicable. (n)

Sec. 110. Corporation sole. - For the purpose of administering and

managing, as trustee, the affairs, property and temporalities of any
religious denomination, sect or church, a corporation sole may be
formed by the chief archbishop, bishop, priest, minister, rabbi or other
presiding elder of such religious denomination, sect or church. (154a)

Sec. 111. Articles of incorporation. - In order to become a

corporation sole, the chief archbishop, bishop, priest, minister, rabbi or
presiding elder of any religious denomination, sect or church must file
with the Securities and Exchange Commission articles of incorporation
setting forth the following:

1. That he is the chief archbishop, bishop, priest, minister,

rabbi or presiding elder of his religious denomination, sect
or church and that he desires to become a corporation sole;

2. That the rules, regulations and discipline of his religious

denomination, sect or church are not inconsistent with his
becoming a corporation sole and do not forbid it;

3. That as such chief archbishop, bishop, priest, minister,

rabbi or presiding elder, he is charged with the
administration of the temporalities and the management of
the affairs, estate and properties of his religious
denomination, sect or church within his territorial
jurisdiction, describing such territorial jurisdiction;

4. The manner in which any vacancy occurring in the office

of chief archbishop, bishop, priest, minister, rabbi of
presiding elder is required to be filled, according to the
rules, regulations or discipline of the religious
denomination, sect or church to which he belongs; and

5. The place where the principal office of the corporation

sole is to be established and located, which place must be
within the Philippines.

The articles of incorporation may include any other provision not

contrary to law for the regulation of the affairs of the corporation. (n)

Sec. 112. Submission of the articles of incorporation. - The

articles of incorporation must be verified, before filing, by affidavit or
affirmation of the chief archbishop, bishop, priest, minister, rabbi or
presiding elder, as the case may be, and accompanied by a copy of the
commission, certificate of election or letter of appointment of such chief
archbishop, bishop, priest, minister, rabbi or presiding elder, duly
certified to be correct by any notary public.

From and after the filing with the Securities and Exchange Commission
of the said articles of incorporation, verified by affidavit or affirmation,
and accompanied by the documents mentioned in the preceding
paragraph, such chief archbishop, bishop, priest, minister, rabbi or
presiding elder shall become a corporation sole and all temporalities,
estate and properties of the religious denomination, sect or church
theretofore administered or managed by him as such chief archbishop,
bishop, priest, minister, rabbi or presiding elder shall be held in trust by
him as a corporation sole, for the use, purpose, behalf and sole benefit of
his religious denomination, sect or church, including hospitals, schools,
colleges, orphan asylums, parsonages and cemeteries thereof. (n)

Sec. 113. Acquisition and alienation of property. - Any

corporation sole may purchase and hold real estate and personal
property for its church, charitable, benevolent or educational purposes,
and may receive bequests or gifts for such purposes. Such corporation
may sell or mortgage real property held by it by obtaining an order for
that purpose from the Court of First Instance of the province where the
property is situated upon proof made to the satisfaction of the court that
notice of the application for leave to sell or mortgage has been given by
publication or otherwise in such manner and for such time as said court
may have directed, and that it is to the interest of the corporation that
leave to sell or mortgage should be granted. The application for leave to
sell or mortgage must be made by petition, duly verified, by the chief
archbishop, bishop, priest, minister, rabbi or presiding elder acting as
corporation sole, and may be opposed by any member of the religious
denomination, sect or church represented by the corporation sole:
Provided, That in cases where the rules, regulations and discipline of the
religious denomination, sect or church, religious society or order
concerned represented by such corporation sole regulate the method of
acquiring, holding, selling and mortgaging real estate and personal
property, such rules, regulations and discipline shall control, and the
intervention of the courts shall not be necessary. (159a)

Sec. 114. Filling of vacancies. - The successors in office of any chief

archbishop, bishop, priest, minister, rabbi or presiding elder in a
corporation sole shall become the corporation sole on their accession to
office and shall be permitted to transact business as such on the filing
with the Securities and Exchange Commission of a copy of their
commission, certificate of election, or letters of appointment, duly
certified by any notary public.

During any vacancy in the office of chief archbishop, bishop, priest,

minister, rabbi or presiding elder of any religious denomination, sect or
church incorporated as a corporation sole, the person or persons
authorized and empowered by the rules, regulations or discipline of the
religious denomination, sect or church represented by the corporation
sole to administer the temporalities and manage the affairs, estate and
properties of the corporation sole during the vacancy shall exercise all
the powers and authority of the corporation sole during such vacancy.
(158a)

Sec. 115. Dissolution. - A corporation sole may be dissolved and its

affairs settled voluntarily by submitting to the Securities and Exchange
Commission a verified declaration of dissolution.

The declaration of dissolution shall set forth:

1. The name of the corporation;

2. The reason for dissolution and winding up;

3. The authorization for the dissolution of the corporation

by the particular religious denomination, sect or church;

4. The names and addresses of the persons who are to

supervise the winding up of the affairs of the corporation.

Upon approval of such declaration of dissolution by the Securities and

Exchange Commission, the corporation shall cease to carry on its
operations except for the purpose of winding up its affairs. (n)

Sec. 116. Religious societies. - Any religious society or religious

order, or any diocese, synod, or district organization of any religious
denomination, sect or church, unless forbidden by the constitution,
rules, regulations, or discipline of the religious denomination, sect or
church of which it is a part, or by competent authority, may, upon
written consent and/or by an affirmative vote at a meeting called for the
purpose of at least two-thirds (2/3) of its membership, incorporate for
the administration of its temporalities or for the management of its
affairs, properties and estate by filing with the Securities and Exchange
Commission, articles of incorporation verified by the affidavit of the
presiding elder, secretary, or clerk or other member of such religious
society or religious order, or diocese, synod, or district organization of
the religious denomination, sect or church, setting forth the following:

1. That the religious society or religious order, or diocese, synod, or

district organization is a religious organization of a religious
denomination, sect or church;

2. That at least two-thirds (2/3) of its membership have given their

written consent or have voted to incorporate, at a duly convened
meeting of the body;

3. That the incorporation of the religious society or religious order,

or diocese, synod, or district organization desiring to incorporate is
not forbidden by competent authority or by the constitution, rules,
regulations or discipline of the religious denomination, sect, or
church of which it forms a part;

4. That the religious society or religious order, or diocese, synod, or

district organization desires to incorporate for the administration of
its affairs, properties and estate;

5. The place where the principal office of the corporation is to be

established and located, which place must be within the Philippines;
and

6. The names, nationalities, and residences of the trustees elected by the

religious society or religious order, or the diocese, synod, or district
organization to serve for the first year or such other period as may be
prescribed by the laws of the religious society or religious order, or of the
diocese, synod, or district organization, the board of trustees to be not
less than five (5) nor more than fifteen (15). (160a)

TITLE XIV
DISSOLUTION

Sec. 117. Methods of dissolution. - A corporation formed or

organized under the provisions of this Code may be dissolved voluntarily
or involuntarily. (n)

Sec. 118. Voluntary dissolution where no creditors are

affected. - If dissolution of a corporation does not prejudice the rights
of any creditor having a claim against it, the dissolution may be effected
by majority vote of the board of directors or trustees, and by a resolution
duly adopted by the affirmative vote of the stockholders owning at least
two-thirds (2/3) of the outstanding capital stock or of at least two-thirds
(2/3) of the members of a meeting to be held upon call of the directors or
trustees after publication of the notice of time, place and object of the
meeting for three (3) consecutive weeks in a newspaper published in the
place where the principal office of said corporation is located; and if no
newspaper is published in such place, then in a newspaper of general
circulation in the Philippines, after sending such notice to each
stockholder or member either by registered mail or by personal delivery
at least thirty (30) days prior to said meeting. A copy of the resolution
authorizing the dissolution shall be certified by a majority of the board of
directors or trustees and countersigned by the secretary of the
corporation. The Securities and Exchange Commission shall thereupon
issue the certificate of dissolution. (62a)

Sec. 119. Voluntary dissolution where creditors are affected. -

Where the dissolution of a corporation may prejudice the rights of any
creditor, the petition for dissolution shall be filed with the Securities and
Exchange Commission. The petition shall be signed by a majority of its
board of directors or trustees or other officers having the management of
its affairs, verified by its president or secretary or one of its directors or
trustees, and shall set forth all claims and demands against it, and that
its dissolution was resolved upon by the affirmative vote of the
stockholders representing at least two-thirds (2/3) of the outstanding
capital stock or by at least two-thirds (2/3) of the members at a meeting
of its stockholders or members called for that purpose.

If the petition is sufficient in form and substance, the Commission shall,

by an order reciting the purpose of the petition, fix a date on or before
which objections thereto may be filed by any person, which date shall
not be less than thirty (30) days nor more than sixty (60) days after the
entry of the order. Before such date, a copy of the order shall be
published at least once a week for three (3) consecutive weeks in a
newspaper of general circulation published in the municipality or city
where the principal office of the corporation is situated, or if there be no
such newspaper, then in a newspaper of general circulation in the
Philippines, and a similar copy shall be posted for three (3) consecutive
weeks in three (3) public places in such municipality or city.

Upon five (5) day's notice, given after the date on which the right to file
objections as fixed in the order has expired, the Commission shall
proceed to hear the petition and try any issue made by the objections
filed; and if no such objection is sufficient, and the material allegations
of the petition are true, it shall render judgment dissolving the
corporation and directing such disposition of its assets as justice
requires, and may appoint a receiver to collect such assets and pay the
debts of the corporation. (Rule 104, RCa)
Sec. 120. Dissolution by shortening corporate term. - A
voluntary dissolution may be effected by amending the articles of
incorporation to shorten the corporate term pursuant to the provisions
of this Code. A copy of the amended articles of incorporation shall be
submitted to the Securities and Exchange Commission in accordance
with this Code. Upon approval of the amended articles of incorporation
of the expiration of the shortened term, as the case may be, the
corporation shall be deemed dissolved without any further proceedings,
subject to the provisions of this Code on liquidation. (n)

Sec. 121. Involuntary dissolution. - A corporation may be dissolved

by the Securities and Exchange Commission upon filing of a verified
complaint and after proper notice and hearing on the grounds provided
by existing laws, rules and regulations. (n)

Sec. 122. Corporate liquidation. - Every corporation whose charter

expires by its own limitation or is annulled by forfeiture or otherwise, or
whose corporate existence for other purposes is terminated in any other
manner, shall nevertheless be continued as a body corporate for three
(3) years after the time when it would have been so dissolved, for the
purpose of prosecuting and defending suits by or against it and enabling
it to settle and close its affairs, to dispose of and convey its property and
to distribute its assets, but not for the purpose of continuing the business
for which it was established.

At any time during said three (3) years, the corporation is authorized
and empowered to convey all of its property to trustees for the benefit of
stockholders, members, creditors, and other persons in interest. From
and after any such conveyance by the corporation of its property in trust
for the benefit of its stockholders, members, creditors and others in
interest, all interest which the corporation had in the property
terminates, the legal interest vests in the trustees, and the beneficial
interest in the stockholders, members, creditors or other persons in
interest.

Upon the winding up of the corporate affairs, any asset distributable to

any creditor or stockholder or member who is unknown or cannot be
found shall be escheated to the city or municipality where such assets are
located.

Except by decrease of capital stock and as otherwise allowed by this

Code, no corporation shall distribute any of its assets or property except
upon lawful dissolution and after payment of all its debts and liabilities.
(77a, 89a, 16a)

TITLE XV
 FOREIGN CORPORATIONS

Sec. 123. Definition and rights of foreign corporations. - For

the purposes of this Code, a foreign corporation is one formed, organized
or existing under any laws other than those of the Philippines and whose
laws allow Filipino citizens and corporations to do business in its own
country or state. It shall have the right to transact business in the
Philippines after it shall have obtained a license to transact business in
this country in accordance with this Code and a certificate of authority
from the appropriate government agency. (n)

Sec. 124. Application to existing foreign corporations. - Every

foreign corporation which on the date of the effectivity of this Code is
authorized to do business in the Philippines under a license therefore
issued to it, shall continue to have such authority under the terms and
condition of its license, subject to the provisions of this Code and other
special laws. (n)

Sec. 125. Application for a license. - A foreign corporation applying

for a license to transact business in the Philippines shall submit to the
Securities and Exchange Commission a copy of its articles of
incorporation and by-laws, certified in accordance with law, and their
translation to an official language of the Philippines, if necessary. The
application shall be under oath and, unless already stated in its articles
of incorporation, shall specifically set forth the following:

1. The date and term of incorporation;

2. The address, including the street number, of the

principal office of the corporation in the country or state of
incorporation;

3. The name and address of its resident agent authorized to

accept summons and process in all legal proceedings and,
pending the establishment of a local office, all notices
affecting the corporation;

4. The place in the Philippines where the corporation

intends to operate;

5. The specific purpose or purposes which the corporation

intends to pursue in the transaction of its business in the
Philippines: Provided, That said purpose or purposes are
those specifically stated in the certificate of authority
issued by the appropriate government agency;

6. The names and addresses of the present directors and

 officers of the corporation;

7. A statement of its authorized capital stock and the

aggregate number of shares which the corporation has
authority to issue, itemized by classes, par value of shares,
shares without par value, and series, if any;

8. A statement of its outstanding capital stock and the

aggregate number of shares which the corporation has
issued, itemized by classes, par value of shares, shares
without par value, and series, if any;

9. A statement of the amount actually paid in; and

10. Such additional information as may be necessary or

appropriate in order to enable the Securities and Exchange
Commission to determine whether such corporation is
entitled to a license to transact business in the Philippines,
and to determine and assess the fees payable.

Attached to the application for license shall be a duly executed certificate

under oath by the authorized official or officials of the jurisdiction of its
incorporation, attesting to the fact that the laws of the country or state of
the applicant allow Filipino citizens and corporations to do business
therein, and that the applicant is an existing corporation in good
standing. If such certificate is in a foreign language, a translation thereof
in English under oath of the translator shall be attached thereto.

The application for a license to transact business in the Philippines shall

likewise be accompanied by a statement under oath of the president or
any other person authorized by the corporation, showing to the
satisfaction of the Securities and Exchange Commission and other
governmental agency in the proper cases that the applicant is solvent
and in sound financial condition, and setting forth the assets and
liabilities of the corporation as of the date not exceeding one (1) year
immediately prior to the filing of the application.

Foreign banking, financial and insurance corporations shall, in addition

to the above requirements, comply with the provisions of existing laws
applicable to them. In the case of all other foreign corporations, no
application for license to transact business in the Philippines shall be
accepted by the Securities and Exchange Commission without previous
authority from the appropriate government agency, whenever required
by law. (68a)

Sec. 126. Issuance of a license. - If the Securities and Exchange

Commission is satisfied that the applicant has complied with all the
requirements of this Code and other special laws, rules and regulations,
the Commission shall issue a license to the applicant to transact business
in the Philippines for the purpose or purposes specified in such license.
Upon issuance of the license, such foreign corporation may commence to
transact business in the Philippines and continue to do so for as long as
it retains its authority to act as a corporation under the laws of the
country or state of its incorporation, unless such license is sooner
surrendered, revoked, suspended or annulled in accordance with this
Code or other special laws.

Within sixty (60) days after the issuance of the license to transact
business in the Philippines, the license, except foreign banking or
insurance corporation, shall deposit with the Securities and Exchange
Commission for the benefit of present and future creditors of the
licensee in the Philippines, securities satisfactory to the Securities and
Exchange Commission, consisting of bonds or other evidence of
indebtedness of the Government of the Philippines, its political
subdivisions and instrumentalities, or of government-owned or
controlled corporations and entities, shares of stock in "registered
enterprises" as this term is defined in Republic Act No. 5186, shares of
stock in domestic corporations registered in the stock exchange, or
shares of stock in domestic insurance companies and banks, or any
combination of these kinds of securities, with an actual market value of
at least one hundred thousand (P100,000.) pesos; Provided, however,
That within six (6) months after each fiscal year of the licensee, the
Securities and Exchange Commission shall require the licensee to
deposit additional securities equivalent in actual market value to two
(2%) percent of the amount by which the licensee's gross income for that
fiscal year exceeds five million (P5,000,000.00) pesos. The Securities
and Exchange Commission shall also require deposit of additional
securities if the actual market value of the securities on deposit has
decreased by at least ten (10%) percent of their actual market value at
the time they were deposited. The Securities and Exchange Commission
may at its discretion release part of the additional securities deposited
with it if the gross income of the licensee has decreased, or if the actual
market value of the total securities on deposit has increased, by more
than ten (10%) percent of the actual market value of the securities at the
time they were deposited. The Securities and Exchange Commission
may, from time to time, allow the licensee to substitute other securities
for those already on deposit as long as the licensee is solvent. Such
licensee shall be entitled to collect the interest or dividends on the
securities deposited. In the event the licensee ceases to do business in
the Philippines, the securities deposited as aforesaid shall be returned,
upon the licensee's application therefor and upon proof to the
satisfaction of the Securities and Exchange Commission that the licensee
has no liability to Philippine residents, including the Government of the
Republic of the Philippines. (n)

Sec. 127. Who may be a resident agent. - A resident agent may be

either an individual residing in the Philippines or a domestic corporation
lawfully transacting business in the Philippines: Provided, That in the
case of an individual, he must be of good moral character and of sound
financial standing. (n)

Sec. 128. Resident agent; service of process. - The Securities and

Exchange Commission shall require as a condition precedent to the
issuance of the license to transact business in the Philippines by any
foreign corporation that such corporation file with the Securities and
Exchange Commission a written power of attorney designating some
person who must be a resident of the Philippines, on whom any
summons and other legal processes may be served in all actions or other
legal proceedings against such corporation, and consenting that service
upon such resident agent shall be admitted and held as valid as if served
upon the duly authorized officers of the foreign corporation at its home
office. Any such foreign corporation shall likewise execute and file with
the Securities and Exchange Commission an agreement or stipulation,
executed by the proper authorities of said corporation, in form and
substance as follows:

"The (name of foreign corporation) does hereby stipulate and agree, in

consideration of its being granted by the Securities and Exchange
Commission a license to transact business in the Philippines, that if at
any time said corporation shall cease to transact business in the
Philippines, or shall be without any resident agent in the Philippines on
whom any summons or other legal processes may be served, then in any
action or proceeding arising out of any business or transaction which
occurred in the Philippines, service of any summons or other legal
process may be made upon the Securities and Exchange Commission
and that such service shall have the same force and effect as if made
upon the duly-authorized officers of the corporation at its home office."

Whenever such service of summons or other process shall be made upon

the Securities and Exchange Commission, the Commission shall, within
ten (10) days thereafter, transmit by mail a copy of such summons or
other legal process to the corporation at its home or principal office. The
sending of such copy by the Commission shall be necessary part of and
shall complete such service. All expenses incurred by the Commission
for such service shall be paid in advance by the party at whose instance
the service is made.

In case of a change of address of the resident agent, it shall be his or its

duty to immediately notify in writing the Securities and Exchange
Commission of the new address. (72a; and n)

Sec. 129. Law applicable. - Any foreign corporation lawfully doing

business in the Philippines shall be bound by all laws, rules and
regulations applicable to domestic corporations of the same class, except
such only as provide for the creation, formation, organization or
dissolution of corporations or those which fix the relations, liabilities,
responsibilities, or duties of stockholders, members, or officers of
corporations to each other or to the corporation. (73a)

Sec. 130. Amendments to articles of incorporation or by-laws

of foreign corporations. - Whenever the articles of incorporation or
by-laws of a foreign corporation authorized to transact business in the
Philippines are amended, such foreign corporation shall, within sixty
(60) days after the amendment becomes effective, file with the Securities
and Exchange Commission, and in the proper cases with the appropriate
government agency, a duly authenticated copy of the articles of
incorporation or by-laws, as amended, indicating clearly in capital letters
or by underscoring the change or changes made, duly certified by the
authorized official or officials of the country or state of incorporation.
The filing thereof shall not of itself enlarge or alter the purpose or
purposes for which such corporation is authorized to transact business
in the Philippines. (n)

Sec. 131. Amended license. - A foreign corporation authorized to

transact business in the Philippines shall obtain an amended license in
the event it changes its corporate name, or desires to pursue in the
Philippines other or additional purposes, by submitting an application
therefor to the Securities and Exchange Commission, favorably endorsed
by the appropriate government agency in the proper cases. (n)

Sec. 132. Merger or consolidation involving a foreign

corporation licensed in the Philippines. - One or more foreign
corporations authorized to transact business in the Philippines may
merge or consolidate with any domestic corporation or corporations if
such is permitted under Philippine laws and by the law of its
incorporation: Provided, That the requirements on merger or
consolidation as provided in this Code are followed.

Whenever a foreign corporation authorized to transact business in the

Philippines shall be a party to a merger or consolidation in its home
country or state as permitted by the law of its incorporation, such foreign
corporation shall, within sixty (60) days after such merger or
consolidation becomes effective, file with the Securities and Exchange
Commission, and in proper cases with the appropriate government
agency, a copy of the articles of merger or consolidation duly
authenticated by the proper official or officials of the country or state
under the laws of which merger or consolidation was effected: Provided,
however, That if the absorbed corporation is the foreign corporation
doing business in the Philippines, the latter shall at the same time file a
petition for withdrawal of it license in accordance with this Title. (n)

Sec. 133. Doing business without a license. - No foreign

corporation transacting business in the Philippines without a license, or
its successors or assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or administrative agency of
the Philippines; but such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on any valid cause of
action recognized under Philippine laws. (69a)

Sec. 134. Revocation of license. - Without prejudice to other

grounds provided by special laws, the license of a foreign corporation to
transact business in the Philippines may be revoked or suspended by the
Securities and Exchange Commission upon any of the following
grounds:

1. Failure to file its annual report or pay any fees as

required by this Code;

2. Failure to appoint and maintain a resident agent in the

Philippines as required by this Title;

3. Failure, after change of its resident agent or of his

address, to submit to the Securities and Exchange
Commission a statement of such change as required by this
Title;

4. Failure to submit to the Securities and Exchange

Commission an authenticated copy of any amendment to
its articles of incorporation or by-laws or of any articles of
merger or consolidation within the time prescribed by this
Title;

5. A misrepresentation of any material matter in any

application, report, affidavit or other document submitted
by such corporation pursuant to this Title;

6. Failure to pay any and all taxes, imposts, assessments or

penalties, if any, lawfully due to the Philippine
 Government or any of its agencies or political subdivisions;

7. Transacting business in the Philippines outside of the

purpose or purposes for which such corporation is
authorized under its license;

8. Transacting business in the Philippines as agent of or

acting for and in behalf of any foreign corporation or entity
not duly licensed to do business in the Philippines; or

9. Any other ground as would render it unfit to transact

business in the Philippines. (n)

Sec. 135. Issuance of certificate of revocation. - Upon the

revocation of any such license to transact business in the Philippines, the
Securities and Exchange Commission shall issue a corresponding
certificate of revocation, furnishing a copy thereof to the appropriate
government agency in the proper cases.

The Securities and Exchange Commission shall also mail to the

corporation at its registered office in the Philippines a notice of such
revocation accompanied by a copy of the certificate of revocation. (n)

Sec. 136. Withdrawal of foreign corporations. - Subject to

existing laws and regulations, a foreign corporation licensed to transact
business in the Philippines may be allowed to withdraw from the
Philippines by filing a petition for withdrawal of license. No certificate of
withdrawal shall be issued by the Securities and Exchange Commission
unless all the following requirements are met;

1. All claims which have accrued in the Philippines have been paid,
compromised or settled;

2. All taxes, imposts, assessments, and penalties, if any, lawfully due

to the Philippine Government or any of its agencies or political
subdivisions have been paid; and

3. The petition for withdrawal of license has been published once a week
for three (3) consecutive weeks in a newspaper of general circulation in
the Philippines.

TITLE XVI
MISCELLANEOUS PROVISIONS

Sec. 137. Outstanding capital stock defined. - The term

"outstanding capital stock", as used in this Code, means the total shares
of stock issued under binding subscription agreements to subscribers or
stockholders, whether or not fully or partially paid, except treasury
shares. (n)

Sec. 138. Designation of governing boards. - The provisions of

specific provisions of this Code to the contrary notwithstanding, non-
stock or special corporations may, through their articles of incorporation
or their by-laws, designate their governing boards by any name other
than as board of trustees. (n)

Sec. 139. Incorporation and other fees. - The Securities and

Exchange Commission is hereby authorized to collect and receive fees as
authorized by law or by rules and regulations promulgated by the
Commission. (n)

Sec. 140. Stock ownership in certain corporations. - Pursuant

to the duties specified by Article XIV of the Constitution, the National
Economic and Development Authority shall, from time to time, make a
determination of whether the corporate vehicle has been used by any
corporation or by business or industry to frustrate the provisions thereof
or of applicable laws, and shall submit to the Batasang Pambansa,
whenever deemed necessary, a report of its findings, including
recommendations for their prevention or correction.

Maximum limits may be set by the Batasang Pambansa for

stockholdings in corporations declared by it to be vested with a public
interest pursuant to the provisions of this section, belonging to
individuals or groups of individuals related to each other by
consanguinity or affinity or by close business interests, or whenever it is
necessary to achieve national objectives, prevent illegal monopolies or
combinations in restraint or trade, or to implement national economic
policies declared in laws, rules and regulations designed to promote the
general welfare and foster economic development.

In recommending to the Batasang Pambansa corporations, business or

industries to be declared vested with a public interest and in formulating
proposals for limitations on stock ownership, the National Economic
and Development Authority shall consider the type and nature of the
industry, the size of the enterprise, the economies of scale, the
geographic location, the extent of Filipino ownership, the labor intensity
of the activity, the export potential, as well as other factors which are
germane to the realization and promotion of business and industry.

Sec. 141. Annual report or corporations. - Every corporation,

domestic or foreign, lawfully doing business in the Philippines shall
submit to the Securities and Exchange Commission an annual report of
its operations, together with a financial statement of its assets and
liabilities, certified by any independent certified public accountant in
appropriate cases, covering the preceding fiscal year and such other
requirements as the Securities and Exchange Commission may require.
Such report shall be submitted within such period as may be prescribed
by the Securities and Exchange Commission. (n)

Sec. 142. Confidential nature of examination results. - All

interrogatories propounded by the Securities and Exchange Commission
and the answers thereto, as well as the results of any examination made
by the Commission or by any other official authorized by law to make an
examination of the operations, books and records of any corporation,
shall be kept strictly confidential, except insofar as the law may require
the same to be made public or where such interrogatories, answers or
results are necessary to be presented as evidence before any court. (n)

Sec. 143. Rule-making power of the Securities and Exchange

Commission. - The Securities and Exchange Commission shall have
the power and authority to implement the provisions of this Code, and to
promulgate rules and regulations reasonably necessary to enable it to
perform its duties hereunder, particularly in the prevention of fraud and
abuses on the part of the controlling stockholders, members, directors,
trustees or officers. (n)

Sec. 144. Violations of the Code. - Violations of any of the

provisions of this Code or its amendments not otherwise specifically
penalized therein shall be punished by a fine of not less than one
thousand (P1,000.00) pesos but not more than ten thousand
(P10,000.00) pesos or by imprisonment for not less than thirty (30)
days but not more than five (5) years, or both, in the discretion of the
court. If the violation is committed by a corporation, the same may, after
notice and hearing, be dissolved in appropriate proceedings before the
Securities and Exchange Commission: Provided, That such dissolution
shall not preclude the institution of appropriate action against the
director, trustee or officer of the corporation responsible for said
violation: Provided, further, That nothing in this section shall be
construed to repeal the other causes for dissolution of a corporation
provided in this Code. (190 1/2 a)

Sec. 145. Amendment or repeal. - No right or remedy in favor of or

against any corporation, its stockholders, members, directors, trustees,
or officers, nor any liability incurred by any such corporation,
stockholders, members, directors, trustees, or officers, shall be removed
or impaired either by the subsequent dissolution of said corporation or
by any subsequent amendment or repeal of this Code or of any part
thereof. (n)

Sec. 146. Repealing clause. - Except as expressly provided by this

Code, all laws or parts thereof inconsistent with any provision of this
Code shall be deemed repealed. (n)

Sec. 147. Separability of provisions. - Should any provision of this

Code or any part thereof be declared invalid or unconstitutional, the
other provisions, so far as they are separable, shall remain in force. (n)

Sec. 148. Applicability to existing corporations. - All

corporations lawfully existing and doing business in the Philippines on
the date of the effectivity of this Code and heretofore authorized,
licensed or registered by the Securities and Exchange Commission, shall
be deemed to have been authorized, licensed or registered under the
provisions of this Code, subject to the terms and conditions of its license,
and shall be governed by the provisions hereof: Provided, That if any
such corporation is affected by the new requirements of this Code, said
corporation shall, unless otherwise herein provided, be given a period of
not more than two (2) years from the effectivity of this Code within
which to comply with the same. (n)

Sec. 149. Effectivity. - This Code shall take effect immediately upon
its approval.

Approved: May 1, 1980