The Corporation Code of The Philippines BP BLG 68

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"
[THE CORPORATION CODE OF THE PHILIPPINES] Batas Pambansa Blg. 68
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;
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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
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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
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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
__________________________
5
(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
..................................... .....................................
.....................................
..................................... .....................................
.....................................
..................................... .....................................
.....................................
..................................... .....................................
.....................................
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..................................... .....................................
.....................................
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:
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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
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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
9
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
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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,
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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
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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-
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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
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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
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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.
16
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;
17
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
18
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
19
(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
20
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:
21
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
22
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
23
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;
24
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
25
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
26
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
27
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
28
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
29
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
30
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
31
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
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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
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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
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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
35
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
36
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
37
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
38
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
39
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,
40
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
41
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
42
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
43
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
44
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
45
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
46
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
47
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
48
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
49
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
50
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
51
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
52
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
53
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,
54
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,
55
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
56
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
57
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
58
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
59
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
60
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
61
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
RALC 2011
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THE

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

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

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

Sec. 5. Corporators and incorporators, stockholders and members.

Corporators in a stock corporation are called stockholders or shareholders.

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

Preferred shares of stock issued by any corporation may be given preference in

Except as otherwise provided in the articles of incorporation and stated in the

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

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

4. Incurring, creating or increasing bonded indebtedness;

5. Increase or decrease of capital stock;

6. Merger or consolidation of the corporation with another

7. Investment of corporate funds in another corporation or

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary

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

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

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

capital stock of the corporation.

Sec. 12. Minimum capital stock required of stock corporations. -

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

1. The name of the corporation;

2. The specific purpose or purposes for which the corporation is

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

7. The names, nationalities and residences of persons who shall

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

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

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

KNOW ALL MEN BY THESE PRESENTS:

The undersigned incorporators, all of legal age and a

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

THIRD: That the principal office of the corporation is

FOURTH: That the term for which said corporation is to

FIFTH: That the names, nationalities and residences of the

NAME NATIONALITY RESIDENCE

SIXTH: That the number of directors or trustees of the

NAME NATIONALITY RESIDENCE

SEVENTH: That the authorized capital stock of the

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

That the capital stock of the corporation is ...........................

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

Name of Subscriber Nationality No of Shares Amount

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

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

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

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

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

NINTH: That the above-named subscribers have paid at