Batas Pambansa Bilang 68 the articles of incorporation which are not violative of the

THE CORPORATION CODE OF THE PHILIPPINES provisions of this Code: Provided, That preferred shares of
Be it enacted by the Batasang Pambansa in session stock may be issued only with a stated par value. The board
assembled: of directors, where authorized in the articles of
TITLE IGENERAL PROVISIONSDEFINITIONS AND incorporation, may fix the terms and conditions of
CLASSIFICATIONS preferred shares of stock or any series thereof: Provided,
That such terms and conditions shall be effective upon the
Section 1. Title of the Code. – This Code shall be known as filing of a certificate thereof with the Securities and
"The Corporation Code of the Philippines." (n) Exchange Commission.

Section 2. Corporation defined. – A corporation is an Shares of capital stock issued without par value shall be
artificial being created by operation of law, having the right deemed fully paid and non-assessable and the holder of
of succession and the powers, attributes and properties such shares shall not be liable to the corporation or to its
expressly authorized by law or incident to its existence. (2) creditors in respect thereto: Provided; That shares without
par value may not be issued for a consideration less than
Section 3. Classes of corporations. – Corporations formed the value of five (P5.00) pesos per share: Provided, further,
or organized under this Code may be stock or non-stock That the entire consideration received by the corporation
corporations. Corporations which have capital stock divided for its no-par value shares shall be treated as capital and
into shares and are authorized to distribute to the holders shall not be available for distribution as dividends.
of such shares dividends or allotments of the surplus profits
on the basis of the shares held are stock corporations. All A corporation may, furthermore, classify its shares for the
other corporations are non-stock corporations. (3a) purpose of insuring compliance with constitutional or legal
requirements.
Section 4. Corporations created by special laws or charters.
– Corporations created by special laws or charters shall be Except as otherwise provided in the articles of
governed primarily by the provisions of the special law or incorporation and stated in the certificate of stock, each
charter creating them or applicable to them, supplemented share shall be equal in all respects to every other share.
by the provisions of this Code, insofar as they are
applicable. (n) Where the articles of incorporation provide for non-voting
shares in the cases allowed by this Code, the holders of
Section 5. Corporators and incorporators, stockholders and such shares shall nevertheless be entitled to vote on the
members. – Corporators are those who compose a following matters:
corporation, whether as stockholders or as members. 1. Amendment of the articles of incorporation;
Incorporators are those stockholders or members 2. Adoption and amendment of by-laws;
mentioned in the articles of incorporation as originally 3. Sale, lease, exchange, mortgage, pledge or other
forming and composing the corporation and who are disposition of all or substantially all of the
signatories thereof. corporate property;
4. Incurring, creating or increasing bonded
Corporators in a stock corporation are called stockholders indebtedness;
or shareholders. Corporators in a non-stock corporation are 5. Increase or decrease of capital stock;
called members. (4a) 6. Merger or consolidation of the corporation with
another corporation or other corporations;
Section 6. Classification of shares. – The shares of stock of 7. Investment of corporate funds in another
stock corporations may be divided into classes or series of corporation or business in accordance with this
shares, or both, any of which classes or series of shares may Code; and
have such rights, privileges or restrictions as may be stated 8. Dissolution of the corporation.
in the articles of incorporation: Provided, That no share
may be deprived of voting rights except those classified and Except as provided in the immediately preceding
issued as "preferred" or "redeemable" shares, unless paragraph, the vote necessary to approve a particular
otherwise provided in this Code: Provided, further, That corporate act as provided in this Code shall be deemed to
there shall always be a class or series of shares which have refer only to stocks with voting rights. (5a)
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 Section 7. Founders’ shares. – Founders’ shares classified as
provided for in the articles of incorporation: Provided, such in the articles of incorporation may be given certain
however, That banks, trust companies, insurance rights and privileges not enjoyed by the owners of other
companies, public utilities, and building and loan stocks, provided that where the exclusive right to vote and
associations shall not be permitted to issue no-par value be voted for in the election of directors is granted, it must
shares of stock. be for a limited period not to exceed five (5) years subject
to the approval of the Securities and Exchange Commission.
Preferred shares of stock issued by any corporation may be The five-year period shall commence from the date of the
given preference in the distribution of the assets of the aforesaid approval by the Securities and Exchange
corporation in case of liquidation and in the distribution of Commission. (n)
dividends, or such other preferences as may be stated in
Section 8. Redeemable shares. – Redeemable shares may Section 14. Contents of the articles of incorporation. – All
be issued by the corporation when expressly so provided in corporations organized under this code shall file with the
the articles of incorporation. They may be purchased or Securities and Exchange Commission articles of
taken up by the corporation upon the expiration of a fixed incorporation in any of the official languages duly signed
period, regardless of the existence of unrestricted retained and acknowledged by all of the incorporators, containing
earnings in the books of the corporation, and upon such substantially the following matters, except as otherwise
other terms and conditions as may be stated in the articles prescribed by this Code or by special law:
of incorporation, which terms and conditions must also be 1. The name of the corporation;
stated in the certificate of stock representing said shares. 2. The specific purpose or purposes for which the
(n) corporation is being incorporated. Where a
corporation has more than one stated purpose,
Section 9. Treasury shares. – Treasury shares are shares of the articles of incorporation shall state which is the
stock which have been issued and fully paid for, but primary purpose and which is/are the secondary
subsequently reacquired by the issuing corporation by purpose or purposes: Provided, That a non-stock
purchase, redemption, donation or through some other corporation may not include a purpose which
lawful means. Such shares may again be disposed of for a would change or contradict its nature as such;
reasonable price fixed by the board of directors. (n) 3. The place where the principal office of the
corporation is to be located, which must be within
TITLE IIINCORPORATION AND ORGANIZATION OF PRIVATE the Philippines;
CORPORATIONS 4. The term for which the corporation is to exist;
5. The names, nationalities and residences of the
Section 10. Number and qualifications of incorporators. – incorporators;
Any number of natural persons not less than five (5) but not 6. The number of directors or trustees, which shall
more than fifteen (15), all of legal age and a majority of not be less than five (5) nor more than fifteen (15);
whom are residents of the Philippines, may form a private 7. The names, nationalities and residences of persons
corporation for any lawful purpose or purposes. Each of the who shall act as directors or trustees until the first
incorporators of s stock corporation must own or be a regular directors or trustees are duly elected and
subscriber to at least one (1) share of the capital stock of qualified in accordance with this Code;
the corporation. (6a) 8. If it be a stock corporation, the amount of its
authorized capital stock in lawful money of the
Section 11. Corporate term. – A corporation shall exist for a Philippines, the number of shares into which it is
period not exceeding fifty (50) years from the date of divided, and in case the share are par value shares,
incorporation unless sooner dissolved or unless said period the par value of each, the names, nationalities and
is extended. The corporate term as originally stated in the residences of the original subscribers, and the
articles of incorporation may be extended for periods not amount subscribed and paid by each on his
exceeding fifty (50) years in any single instance by an subscription, and if some or all of the shares are
amendment of the articles of incorporation, in accordance without par value, such fact must be stated;
with this Code; Provided, That no extension can be made 9. If it be a non-stock corporation, the amount of its
earlier than five (5) years prior to the original or subsequent capital, the names, nationalities and residences of
expiry date(s) unless there are justifiable reasons for an the contributors and the amount contributed by
earlier extension as may be determined by the Securities each; and
and Exchange Commission. (6) 10. Such other matters as are not inconsistent with
law and which the incorporators may deem
Section 12. Minimum capital stock required of stock necessary and convenient.
corporations. – Stock corporations incorporated under this
Code shall not be required to have any minimum The Securities and Exchange Commission shall not accept
authorized capital stock except as otherwise specifically the articles of incorporation of any stock corporation unless
provided for by special law, and subject to the provisions of accompanied by a sworn statement of the Treasurer
the following section. elected by the subscribers showing that at least twenty-five
(25%) percent of the authorized capital stock of the
Section 13. Amount of capital stock to be subscribed and corporation has been subscribed, and at least twenty-five
paid for the purposes of incorporation. – At least twenty- (25%) of the total subscription has been fully paid to him in
five percent (25%) of the authorized capital stock as stated actual cash and/or in property the fair valuation of which is
in the articles of incorporation must be subscribed at the equal to at least twenty-five (25%) percent of the said
time of incorporation, and at least twenty-five (25%) per subscription, such paid-up capital being not less than five
cent of the total subscription must be paid upon thousand (P5,000.00) pesos.
subscription, the balance to be payable on a date or dates
fixed in the contract of subscription without need of call, or Section 15. Forms of Articles of Incorporation. – Unless
in the absence of a fixed date or dates, upon call for otherwise prescribed by special law, articles of
payment by the board of directors: Provided, however, That incorporation of all domestic corporations shall comply
in no case shall the paid-up capital be less than five substantially with the following form:
Thousand (P5,000.00) pesos. (n)
 ARTICLES OF INCORPORATION _____________ shares of which ______________ shares
OF are of the par value of _________________
__________________________ (P____________) PESOS each, and of which
(Name of Corporation) _________________ shares are without par value.

KNOW ALL MEN BY THESE PRESENTS: EIGHTH: That at least twenty five (25%) per cent of the
The undersigned incorporators, all of legal age and a authorized capital stock above stated has been subscribed
majority of whom are residents of the Philippines, have this as follows:
day voluntarily agreed to form a (stock) (non-stock)
corporation under the laws of the Republic of the Name of Nationality No. of Amount
Philippines; Subscriber Shares Subscribed
Subscribed
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 NINTH: That the above-named subscribers have paid at
corporation is incorporated are: (If there is more than one least twenty-five (25%) percent of the total subscription as
purpose, indicate primary and secondary purposes); follows:

THIRD: That the principal office of the corporation is located Name of Amount Total Paid-in
in the City/Municipality of ________________________, Subscriber Subscribed
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;
(Modify Nos. 8 and 9 if shares are with no par value. In case
FIFTH: That the names, nationalities and residences of the
the corporation is non-stock, Nos. 7, 8 and 9 of the above
incorporators of the corporation are as follows:
articles may be modified accordingly, and it is sufficient if
the articles state the amount of capital or money
NAME NATIONALITY RESIDENCE
contributed or donated by specified persons, stating the
names, nationalities and residences of the contributors or
donors and the respective amount given by each.)

TENTH: That _____________________ has been elected by

the subscribers as Treasurer of the Corporation to act as
SIXTH: That the number of directors or trustees of the such until his successor is duly elected and qualified in
corporation shall be _______; and the names, nationalities accordance with the by-laws, and that as such Treasurer, he
and residences of the first directors or trustees of the has been authorized to receive for and in the name and for
corporation are as follows: the benefit of the corporation, all subscription (or fees) or
contributions or donations paid or given by the subscribers
NAME NATIONALITY RESIDENCE or members.

ELEVENTH: (Corporations which will engage in any business

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

SEVENTH: That the authorized capital stock of the "No transfer of stock or interest which shall reduce the
corporation is ______________________ (P___________) ownership of Filipino citizens to less than the required
PESOS in lawful money of the Philippines, divided into percentage of the capital stock as provided by existing laws
__________ shares with the par value of shall be allowed or permitted to be recorded in the proper
____________________ (P_____________) Pesos per books of the corporation and this restriction shall be
share. indicated in all stock certificates issued by the corporation."

(In case all the share are without par value): IN WITNESS WHEREOF, we have hereunto signed these
Articles of Incorporation, this __________ day of
That the capital stock of the corporation is ________________, 19 ______ in the City/Municipality of
______________ shares without par value. (In case some ____________________, Province of
shares have par value and some are without par value): ________________________, Republic of the Philippines.
That the capital stock of said corporation consists of ________________________________
(Names and signatures of the incorporators) of filing with the said Commission if not acted upon within
SIGNED IN THE PRESENCE OF: six (6) months from the date of filing for a cause not
attributable to the corporation.
___________________
(Notarial Acknowledgment) Section 17. Grounds when articles of incorporation or
amendment may be rejected or disapproved. – The
TREASURER’S AFFIDAVIT Securities and Exchange Commission may reject the articles
REPUBLIC OF THE PHILIPPINES) of incorporation or disapprove any amendment thereto if
CITY/MUNICIPALITY OF ) S.S. the same is not in compliance with the requirements of this
PROVINCE OF ) Code: Provided, That the Commission shall give the
I, ____________________, being duly sworn, depose and incorporators a reasonable time within which to correct or
say: modify the objectionable portions of the articles or
That I have been elected by the subscribers of the amendment. The following are grounds for such rejection
corporation as Treasurer thereof, to act as such until my or disapproval:
successor has been duly elected and qualified in accordance 1. That the articles of incorporation or any
with the by-laws of the corporation, and that as such amendment thereto is not substantially in
Treasurer, I hereby certify under oath that at least 25% of accordance with the form prescribed herein;
the authorized capital stock of the corporation has been 2. That the purpose or purposes of the corporation
subscribed and at least 25% of the total subscription has are patently unconstitutional, illegal, immoral, or
been paid, and received by me, in cash or property, in the contrary to government rules and regulations;
amount of not less than P5,000.00, in accordance with the 3. That the Treasurer’s Affidavit concerning the
Corporation Code. amount of capital stock subscribed and/or paid is
____________________ false;
(Signature of Treasurer) 4. That the percentage of ownership of the capital
SUBSCRIBED AND SWORN to before me, a Notary Public, stock to be owned by citizens of the Philippines
for and in the City/Municipality has not been complied with as required by existing
of___________________Province of laws or the Constitution.
_____________________, this _______ day of
___________, 19 _____; by __________________ with Res. No articles of incorporation or amendment to articles of
Cert. No. ___________ issued at incorporation of banks, banking and quasi-banking
_______________________ on ____________, 19 ______ institutions, building and loan associations, trust companies
NOTARY PUBLIC and other financial intermediaries, insurance companies,
My commission expires on _________, 19 _____ public utilities, educational institutions, and other
Doc. No. _________; corporations governed by special laws shall be accepted or
Page No. _________; approved by the Commission unless accompanied by a
Book No. ________; favorable recommendation of the appropriate government
Series of 19____ (7a) agency to the effect that such articles or amendment is in
accordance with law. (n)
Section 16. Amendment of Articles of Incorporation. –
Unless otherwise prescribed by this Code or by special law, Section 18. Corporate name. – No corporate name may be
and for legitimate purposes, any provision or matter stated allowed by the Securities and Exchange Commission if the
in the articles of incorporation may be amended by a proposed name is identical or deceptively or confusingly
majority vote of the board of directors or trustees and the similar to that of any existing corporation or to any other
vote or written assent of the stockholders representing at name already protected by law or is patently deceptive,
least two-thirds (2/3) of the outstanding capital stock, confusing or contrary to existing laws. When a change in
without prejudice to the appraisal right of dissenting the corporate name is approved, the Commission shall
stockholders in accordance with the provisions of this Code, issue an amended certificate of incorporation under the
or the vote or written assent of at least two-thirds (2/3) of amended name. (n)
the members if it be a non-stock corporation.
Section 19. Commencement of corporate existence. – A
The original and amended articles together shall contain all private corporation formed or organized under this Code
provisions required by law to be set out in the articles of commences to have corporate existence and juridical
incorporation. Such articles, as amended shall be indicated personality and is deemed incorporated from the date the
by underscoring the change or changes made, and a copy Securities and Exchange Commission issues a certificate of
thereof duly certified under oath by the corporate secretary incorporation under its official seal; and thereupon the
and a majority of the directors or trustees stating the fact incorporators, stockholders/members and their successors
that said amendment or amendments have been duly shall constitute a body politic and corporate under the
approved by the required vote of the stockholders or name stated in the articles of incorporation for the period
members, shall be submitted to the Securities and of time mentioned therein, unless said period is extended
Exchange Commission. or the corporation is sooner dissolved in accordance with
law. (n)
The amendments shall take effect upon their approval by
the Securities and Exchange Commission or from the date Section 20. De facto corporations. – The due incorporation
of any corporation claiming in good faith to be a Section 24. Election of directors or trustees. – At all
corporation under this Code, and its right to exercise elections of directors or trustees, there must be present,
corporate powers, shall not be inquired into collaterally in either in person or by representative authorized to act by
any private suit to which such corporation may be a party. written proxy, the owners of a majority of the outstanding
Such inquiry may be made by the Solicitor General in a quo capital stock, or if there be no capital stock, a majority of
warranto proceeding. (n) the members entitled to vote. The election must be by
ballot if requested by any voting stockholder or member. In
Section 21. Corporation by estoppel. – All persons who stock corporations, every stockholder entitled to vote shall
assume to act as a corporation knowing it to be without have the right to vote in person or by proxy the number of
authority to do so shall be liable as general partners for all shares of stock standing, at the time fixed in the by-laws, in
debts, liabilities and damages incurred or arising as a result his own name on the stock books of the corporation, or
thereof: Provided, however, That when any such ostensible where the by-laws are silent, at the time of the election;
corporation is sued on any transaction entered by it as a and said stockholder may vote such number of shares for as
corporation or on any tort committed by it as such, it shall many persons as there are directors to be elected or he
not be allowed to use as a defense its lack of corporate may cumulate said shares and give one candidate as many
personality. votes as the number of directors to be elected multiplied by
the number of his shares shall equal, or he may distribute
On who assumes an obligation to an ostensible corporation them on the same principle among as many candidates as
as such, cannot resist performance thereof on the ground he shall see fit: Provided, That the total number of votes
that there was in fact no corporation. (n) cast by him shall not exceed the number of shares owned
by him as shown in the books of the corporation multiplied
Section 22. Effects on non-use of corporate charter and by the whole number of directors to be elected: Provided,
continuous inoperation of a corporation. – If a corporation however, That no delinquent stock shall be voted. Unless
does not formally organize and commence the transaction otherwise provided in the articles of incorporation or in the
of its business or the construction of its works within two by-laws, members of corporations which have no capital
(2) years from the date of its incorporation, its corporate stock may cast as many votes as there are trustees to be
powers cease and the corporation shall be deemed elected but may not cast more than one vote for one
dissolved. However, if a corporation has commenced the candidate. Candidates receiving the highest number of
transaction of its business but subsequently becomes votes shall be declared elected. Any meeting of the
continuously inoperative for a period of at least five (5) stockholders or members called for an election may
years, the same shall be a ground for the suspension or adjourn from day to day or from time to time but not sine
revocation of its corporate franchise or certificate of die or indefinitely if, for any reason, no election is held, or if
incorporation. (19a) there are not present or represented by proxy, at the
meeting, the owners of a majority of the outstanding
This provision shall not apply if the failure to organize, capital stock, or if there be no capital stock, a majority of
commence the transaction of its businesses or the the members entitled to vote. (31a)
construction of its works, or to continuously operate is due
to causes beyond the control of the corporation as may be Section 25. Corporate officers, quorum. – Immediately after
determined by the Securities and Exchange Commission. their election, the directors of a corporation must formally
organize by the election of a president, who shall be a
TITLE IIIBOARD OF DIRECTORS/TRUSTEES AND OFFICERS director, a treasurer who may or may not be a director, a
secretary who shall be a resident and citizen of the
Section 23. The board of directors or trustees. – Unless Philippines, and such other officers as may be provided for
otherwise provided in this Code, the corporate powers of in the by-laws. Any two (2) or more positions may be held
all corporations formed under this Code shall be exercised, concurrently by the same person, except that no one shall
all business conducted and all property of such act as president and secretary or as president and treasurer
corporations controlled and held by the board of directors at the same time.
or trustees to be elected from among the holders of stocks,
or where there is no stock, from among the members of the The directors or trustees and officers to be elected shall
corporation, who shall hold office for one (1) year until their perform the duties enjoined on them by law and the by-
successors are elected and qualified. (28a) laws of the corporation. Unless the articles of incorporation
or the by-laws provide for a greater majority, a majority of
Every director must own at least one (1) share of the capital the number of directors or trustees as fixed in the articles
stock of the corporation of which he is a director, which of incorporation shall constitute a quorum for the
share shall stand in his name on the books of the transaction of corporate business, and every decision of at
corporation. Any director who ceases to be the owner of at least a majority of the directors or trustees present at a
least one (1) share of the capital stock of the corporation of meeting at which there is a quorum shall be valid as a
which he is a director shall thereby cease to be a director. corporate act, except for the election of officers which shall
Trustees of non-stock corporations must be members require the vote of a majority of all the members of the
thereof. A majority of the directors or trustees of all board.
corporations organized under this Code must be residents
of the Philippines. Directors or trustees cannot attend or vote by proxy at
board meetings. (33a)
 his predecessor in office.
Section 26. Report of election of directors, trustees and
officers. – Within thirty (30) days after the election of the Any directorship or trusteeship to be filled by reason of an
directors, trustees and officers of the corporation, the increase in the number of directors or trustees shall be
secretary, or any other officer of the corporation, shall filled only by an election at a regular or at a special meeting
submit to the Securities and Exchange Commission, the of stockholders or members duly called for the purpose, or
names, nationalities and residences of the directors, in the same meeting authorizing the increase of directors or
trustees, and officers elected. Should a director, trustee or trustees if so stated in the notice of the meeting. (n)
officer die, resign or in any manner cease to hold office, his
heirs in case of his death, the secretary, or any other officer Section 30. Compensation of directors. – In the absence of
of the corporation, or the director, trustee or officer any provision in the by-laws fixing their compensation, the
himself, shall immediately report such fact to the Securities directors shall not receive any compensation, as such
and Exchange Commission. (n) directors, except for reasonable per diems: Provided,
however, That any such compensation other than per
Section 27. Disqualification of directors, trustees or officers. diems may be granted to directors by the vote of the
– No person convicted by final judgment of an offense stockholders representing at least a majority of the
punishable by imprisonment for a period exceeding six (6) outstanding capital stock at a regular or special
years, or a violation of this Code committed within five (5) stockholders’ meeting. In no case shall the total yearly
years prior to the date of his election or appointment, shall compensation of directors, as such directors, exceed ten
qualify as a director, trustee or officer of any corporation. (10%) percent of the net income before income tax of the
(n) corporation during the preceding year. (n)

Section 28. Removal of directors or trustees. – Any director Section 31. Liability of directors, trustees or officers. -
or trustee of a corporation may be removed from office by Directors or trustees who willfully and knowingly vote for or
a vote of the stockholders holding or representing at least assent to patently unlawful acts of the corporation or who
two-thirds (2/3) of the outstanding capital stock, or if the are guilty of gross negligence or bad faith in directing the
corporation be a non-stock corporation, by a vote of at affairs of the corporation or acquire any personal or
least two-thirds (2/3) of the members entitled to vote: pecuniary interest in conflict with their duty as such
Provided, That such removal shall take place either at a directors or trustees shall be liable jointly and severally for
regular meeting of the corporation or at a special meeting all damages resulting therefrom suffered by the
called for the purpose, and in either case, after previous corporation, its stockholders or members and other
notice to stockholders or members of the corporation of persons.
the intention to propose such removal at the meeting. A
special meeting of the stockholders or members of a When a director, trustee or officer attempts to acquire or
corporation for the purpose of removal of directors or acquire, in violation of his duty, any interest adverse to the
trustees, or any of them, must be called by the secretary on corporation in respect of any matter which has been
order of the president or on the written demand of the reposed in him in confidence, as to which equity imposes a
stockholders representing or holding at least a majority of disability upon him to deal in his own behalf, he shall be
the outstanding capital stock, or, if it be a non-stock liable as a trustee for the corporation and must account for
corporation, on the written demand of a majority of the the profits which otherwise would have accrued to the
members entitled to vote. Should the secretary fail or corporation. (n)
refuse to call the special meeting upon such demand or fail
or refuse to give the notice, or if there is no secretary, the Section 32. Dealings of directors, trustees or officers with
call for the meeting may be addressed directly to the the corporation. – A contract of the corporation with one or
stockholders or members by any stockholder or member of more of its directors or trustees or officers is voidable, at
the corporation signing the demand. Notice of the time and the option of such corporation, unless all the following
place of such meeting, as well as of the intention to conditions are present:
propose such removal, must be given by publication or by 1. That the presence of such director or trustee in the
written notice prescribed in this Code. Removal may be board meeting in which the contract was approved
with or without cause: Provided, That removal without was not necessary to constitute a quorum for such
cause may not be used to deprive minority stockholders or meeting;
members of the right of representation to which they may 2. That the vote of such director or trustee was not
be entitled under Section 24 of this Code. (n) necessary for the approval of the contract;
3. That the contract is fair and reasonable under the
Section 29. Vacancies in the office of director or trustee. – circumstances; and
Any vacancy occurring in the board of directors or trustees 4. That in case of an officer, the contract has been
other than by removal by the stockholders or members or previously authorized by the board of directors.
by expiration of term, may be filled by the vote of at least a
majority of the remaining directors or trustees, if still Where any of the first two conditions set forth in the
constituting a quorum; otherwise, said vacancies must be preceding paragraph is absent, in the case of a contract
filled by the stockholders in a regular or special meeting with a director or trustee, such contract may be ratified by
called for that purpose. A director or trustee so elected to the vote of the stockholders representing at least two-
fill a vacancy shall be elected only or the unexpired term of 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 accordance with this Code;
purpose: Provided, That full disclosure of the adverse 6. In case of stock corporations, to issue or sell stocks
interest of the directors or trustees involved is made at to subscribers and to sell stocks to subscribers and
such meeting: Provided, however, That the contract is fair to sell treasury stocks in accordance with the
and reasonable under the circumstances. (n) provisions of this Code; and to admit members to
the corporation if it be a non-stock corporation;
Section 33. Contracts between corporations with 7. To purchase, receive, take or grant, hold, convey,
interlocking directors. – Except in cases of fraud, and sell, lease, pledge, mortgage and otherwise deal
provided the contract is fair and reasonable under the with such real and personal property, including
circumstances, a contract between two or more securities and bonds of other corporations, as the
corporations having interlocking directors shall not be transaction of the lawful business of the
invalidated on that ground alone: Provided, That if the corporation may reasonably and necessarily
interest of the interlocking director in one corporation is require, subject to the limitations prescribed by
substantial and his interest in the other corporation or law and the Constitution;
corporations is merely nominal, he shall be subject to the 8. To enter into merger or consolidation with other
provisions of the preceding section insofar as the latter corporations as provided in this Code;
corporation or corporations are concerned. 9. To make reasonable donations, including those for
the public welfare or for hospital, charitable,
Stockholdings exceeding twenty (20%) percent of the cultural, scientific, civic, or similar purposes:
outstanding capital stock shall be considered substantial for Provided, That no corporation, domestic or
purposes of interlocking directors. (n) foreign, shall give donations in aid of any political
party or candidate or for purposes of partisan
Section 34. Disloyalty of a director. – Where a director, by political activity;
virtue of his office, acquires for himself a business 10. To establish pension, retirement, and other plans
opportunity which should belong to the corporation, for the benefit of its directors, trustees, officers
thereby obtaining profits to the prejudice of such and employees; and
corporation, he must account to the latter for all such 11. To exercise such other powers as may be essential
profits by refunding the same, unless his act has been or necessary to carry out its purpose or purposes
ratified by a vote of the stockholders owning or as stated in the articles of incorporation. (13a)
representing at least two-thirds (2/3) of the outstanding
capital stock. This provision shall be applicable, Section 37. Power to extend or shorten corporate term. – A
notwithstanding the fact that the director risked his own private corporation may extend or shorten its term as
funds in the venture. (n) stated in the articles of incorporation when approved by a
majority vote of the board of directors or trustees and
Section 35. Executive committee. – The by-laws of a ratified at a meeting by the stockholders representing at
corporation may create an executive committee, composed least two-thirds (2/3) of the outstanding capital stock or by
of not less than three members of the board, to be at least two-thirds (2/3) of the members in case of non-
appointed by the board. Said committee may act, by stock corporations. Written notice of the proposed action
majority vote of all its members, on such specific matters and of the time and place of the meeting shall be addressed
within the competence of the board, as may be delegated to each stockholder or member at his place of residence as
to it in the by-laws or on a majority vote of the board, shown on the books of the corporation and deposited to
except with respect to: (1) approval of any action for which the addressee in the post office with postage prepaid, or
shareholders’ approval is also required; (2) the filing of served personally: Provided, That in case of extension of
vacancies in the board; (3) the amendment or repeal of by- corporate term, any dissenting stockholder may exercise his
laws or the adoption of new by-laws; (4) the amendment or appraisal right under the conditions provided in this code.
repeal of any resolution of the board which by its express (n)
terms is not so amendable or repealable; and (5) a
distribution of cash dividends to the shareholders. Section 38. Power to increase or decrease capital stock;
incur, create or increase bonded indebtedness. – No
TITLE IVPOWERS OF CORPORATIONS corporation shall increase or decrease its capital stock or
incur, create or increase any bonded indebtedness unless
Section 36. Corporate powers and capacity. – Every approved by a majority vote of the board of directors and,
corporation incorporated under this Code has the power at a stockholder’s meeting duly called for the purpose, two-
and capacity: thirds (2/3) of the outstanding capital stock shall favor the
1. To sue and be sued in its corporate name; increase or diminution of the capital stock, or the incurring,
2. Of succession by its corporate name for the period creating or increasing of any bonded indebtedness. Written
of time stated in the articles of incorporation and notice of the proposed increase or diminution of the capital
the certificate of incorporation; stock or of the incurring, creating, or increasing of any
3. To adopt and use a corporate seal; bonded indebtedness and of the time and place of the
4. To amend its articles of incorporation in stockholder’s meeting at which the proposed increase or
accordance with the provisions of this Code; diminution of the capital stock or the incurring or increasing
5. To adopt by-laws, not contrary to law, morals, or of any bonded indebtedness is to be considered, must be
public policy, and to amend or repeal the same in addressed to each stockholder at his place of residence as
shown on the books of the corporation and deposited to Non-stock corporations may incur or create bonded
the addressee in the post office with postage prepaid, or indebtedness, or increase the same, with the approval by a
served personally. 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
A certificate in duplicate must be signed by a majority of purpose.
the directors of the corporation and countersigned by the
chairman and the secretary of the stockholders’ meeting, Bonds issued by a corporation shall be registered with the
setting forth: Securities and Exchange Commission, which shall have the
(1) That the requirements of this section have been authority to determine the sufficiency of the terms thereof.
complied with; (17a)
(2) The amount of the increase or diminution of the
capital stock; Section 39. Power to deny pre-emptive right. – All
(3) If an increase of the capital stock, the amount of stockholders of a stock corporation shall enjoy pre-emptive
capital stock or number of shares of no-par stock right to subscribe to all issues or disposition of shares of any
thereof actually subscribed, the names, class, in proportion to their respective shareholdings, unless
nationalities and residences of the persons such right is denied by the articles of incorporation or an
subscribing, the amount of capital stock or amendment thereto: Provided, That such pre-emptive right
number of no-par stock subscribed by each, and shall not extend to shares to be issued in compliance with
the amount paid by each on his subscription in laws requiring stock offerings or minimum stock ownership
cash or property, or the amount of capital stock or by the public; or to shares to be issued in good faith with
number of shares of no-par stock allotted to each the approval of the stockholders representing two-thirds
stock-holder if such increase is for the purpose of (2/3) of the outstanding capital stock, in exchange for
making effective stock dividend therefor property needed for corporate purposes or in payment of a
authorized; previously contracted debt.
(4) Any bonded indebtedness to be incurred, created
or increased; Section 40. Sale or other disposition of assets. – Subject to
(5) The actual indebtedness of the corporation on the the provisions of existing laws on illegal combinations and
day of the meeting; monopolies, a corporation may, by a majority vote of its
(6) The amount of stock represented at the meeting; board of directors or trustees, sell, lease, exchange,
and mortgage, pledge or otherwise dispose of all or
(7) The vote authorizing the increase or diminution of substantially all of its property and assets, including its
the capital stock, or the incurring, creating or goodwill, upon such terms and conditions and for such
increasing of any bonded indebtedness. consideration, which may be money, stocks, bonds or other
instruments for the payment of money or other property or
Any increase or decrease in the capital stock or the consideration, as its board of directors or trustees may
incurring, creating or increasing of any bonded deem expedient, when authorized by the vote of the
indebtedness shall require prior approval of the Securities stockholders representing at least two-thirds (2/3) of the
and Exchange Commission. outstanding capital stock, or in case of non-stock
corporation, by the vote of at least to two-thirds (2/3) of
One of the duplicate certificates shall be kept on file in the the members, in a stockholder’s or member’s meeting duly
office of the corporation and the other shall be filed with called for the purpose. Written notice of the proposed
the Securities and Exchange Commission and attached to action and of the time and place of the meeting shall be
the original articles of incorporation. From and after addressed to each stockholder or member at his place of
approval by the Securities and Exchange Commission and residence as shown on the books of the corporation and
the issuance by the Commission of its certificate of filing, deposited to the addressee in the post office with postage
the capital stock shall stand increased or decreased and the prepaid, or served personally: Provided, That any dissenting
incurring, creating or increasing of any bonded stockholder may exercise his appraisal right under the
indebtedness authorized, as the certificate of filing may conditions provided in this Code.
declare: Provided, That the Securities and Exchange
Commission shall not accept for filing any certificate of A sale or other disposition shall be deemed to cover
increase of capital stock unless accompanied by the sworn substantially all the corporate property and assets if
statement of the treasurer of the corporation lawfully thereby the corporation would be rendered incapable of
holding office at the time of the filing of the certificate, continuing the business or accomplishing the purpose for
showing that at least twenty-five (25%) percent of such which it was incorporated.
increased capital stock has been subscribed and that at
least twenty-five (25%) percent of the amount subscribed After such authorization or approval by the stockholders or
has been paid either in actual cash to the corporation or members, the board of directors or trustees may,
that there has been transferred to the corporation property nevertheless, in its discretion, abandon such sale, lease,
the valuation of which is equal to twenty-five (25%) percent exchange, mortgage, pledge or other disposition of
of the subscription: Provided, further, That no decrease of property and assets, subject to the rights of third parties
the capital stock shall be approved by the Commission if its under any contract relating thereto, without further action
effect shall prejudice the rights of corporate creditors. or approval by the stockholders or members.
Nothing in this section is intended to restrict the power of delinquent stockholder until his unpaid subscription is fully
any corporation, without the authorization by the paid: Provided, further, That no stock dividend shall be
stockholders or members, to sell, lease, exchange, issued without the approval of stockholders representing
mortgage, pledge or otherwise dispose of any of its not less than two-thirds (2/3) of the outstanding capital
property and assets if the same is necessary in the usual stock at a regular or special meeting duly called for the
and regular course of business of said corporation or if the purpose. (16a)
proceeds of the sale or other disposition of such property
and assets be appropriated for the conduct of its remaining Stock corporations are prohibited from retaining surplus
business. profits in excess of one hundred (100%) percent of their
paid-in capital stock, except: (1) when justified by definite
In non-stock corporations where there are no members corporate expansion projects or programs approved by the
with voting rights, the vote of at least a majority of the board of directors; or (2) when the corporation is
trustees in office will be sufficient authorization for the prohibited under any loan agreement with any financial
corporation to enter into any transaction authorized by this institution or creditor, whether local or foreign, from
section. declaring dividends without its/his consent, and such
consent has not yet been secured; or (3) when it can be
Section 41. Power to acquire own shares. – A stock clearly shown that such retention is necessary under special
corporation shall have the power to purchase or acquire its circumstances obtaining in the corporation, such as when
own shares for a legitimate corporate purpose or purposes, there is need for special reserve for probable contingencies.
including but not limited to the following cases: Provided, (n)
That the corporation has unrestricted retained earnings in
its books to cover the shares to be purchased or acquired: Section 44. Power to enter into management contract. – No
1. To eliminate fractional shares arising out of stock corporation shall conclude a management contract with
dividends; another corporation unless such contract shall have been
2. To collect or compromise an indebtedness to the approved by the board of directors and by stockholders
corporation, arising out of unpaid subscription, in a owning at least the majority of the outstanding capital
delinquency sale, and to purchase delinquent stock, or by at least a majority of the members in the case
shares sold during said sale; and of a non-stock corporation, of both the managing and the
3. To pay dissenting or withdrawing stockholders managed corporation, at a meeting duly called for the
entitled to payment for their shares under the purpose: Provided, That (1) where a stockholder or
provisions of this Code. (a) stockholders representing the same interest of both the
managing and the managed corporations own or control
Section 42. Power to invest corporate funds in another more than one-third (1/3) of the total outstanding capital
corporation or business or for any other purpose. – Subject stock entitled to vote of the managing corporation; or (2)
to the provisions of this Code, a private corporation may where a majority of the members of the board of directors
invest its funds in any other corporation or business or for of the managing corporation also constitute a majority of
any purpose other than the primary purpose for which it the members of the board of directors of the managed
was organized when approved by a majority of the board of corporation, then the management contract must be
directors or trustees and ratified by the stockholders approved by the stockholders of the managed corporation
representing at least two-thirds (2/3) of the outstanding owning at least two-thirds (2/3) of the total outstanding
capital stock, or by at least two thirds (2/3) of the members capital stock entitled to vote, or by at least two-thirds (2/3)
in the case of non-stock corporations, at a stockholder’s or of the members in the case of a non-stock corporation. No
member’s meeting duly called for the purpose. Written management contract shall be entered into for a period
notice of the proposed investment and the time and place longer than five years for any one term.
of the meeting shall be addressed to each stockholder or
member at his place of residence as shown on the books of The provisions of the next preceding paragraph shall apply
the corporation and deposited to the addressee in the post to any contract whereby a corporation undertakes to
office with postage prepaid, or served personally: Provided, manage or operate all or substantially all of the business of
That any dissenting stockholder shall have appraisal right as another corporation, whether such contracts are called
provided in this Code: Provided, however, That where the service contracts, operating agreements or otherwise:
investment by the corporation is reasonably necessary to Provided, however, That such service contracts or operating
accomplish its primary purpose as stated in the articles of agreements which relate to the exploration, development,
incorporation, the approval of the stockholders or members exploitation or utilization of natural resources may be
shall not be necessary. (17 1/2a) entered into for such periods as may be provided by the
pertinent laws or regulations. (n)
Section 43. Power to declare dividends. - The board of
directors of a stock corporation may declare dividends out Section 45. Ultra vires acts of corporations. – No
of the unrestricted retained earnings which shall be payable corporation under this Code shall possess or exercise any
in cash, in property, or in stock to all stockholders on the corporate powers except those conferred by this Code or
basis of outstanding stock held by them: Provided, That any by its articles of incorporation and except such as are
cash dividends due on delinquent stock shall first be applied necessary or incidental to the exercise of the powers so
to the unpaid balance on the subscription plus costs and conferred. (n)
expenses, while stock dividends shall be withheld from the
 TITLE VBY LAWS term of office of all officers other than directors or
trustees;
Section 46. Adoption of by-laws. – Every corporation 8. The penalties for violation of the by-laws;
formed under this Code must, within one (1) month after 9. In the case of stock corporations, the manner of
receipt of official notice of the issuance of its certificate of issuing stock certificates; and
incorporation by the Securities and Exchange Commission, 10. Such other matters as may be necessary for the
adopt a code of by-laws for its government not inconsistent proper or convenient transaction of its corporate
with this Code. For the adoption of by-laws by the business and affairs. (21a)
corporation the affirmative vote of the stockholders
representing at least a majority of the outstanding capital Section 48. Amendments to by-laws. – The board of
stock, or of at least a majority of the members in case of directors or trustees, by a majority vote thereof, and the
non-stock corporations, shall be necessary. The by-laws owners of at least a majority of the outstanding capital
shall be signed by the stockholders or members voting for stock, or at least a majority of the members of a non-stock
them and shall be kept in the principal office of the corporation, at a regular or special meeting duly called for
corporation, subject to the inspection of the stockholders the purpose, may amend or repeal any by-laws or adopt
or members during office hours. A copy thereof, duly new by-laws. The owners of two-thirds (2/3) of the
certified to by a majority of the directors or trustees outstanding capital stock or two-thirds (2/3) of the
countersigned by the secretary of the corporation, shall be members in a non-stock corporation may delegate to the
filed with the Securities and Exchange Commission which board of directors or trustees the power to amend or
shall be attached to the original articles of incorporation. repeal any by-laws or adopt new by-laws: Provided, That
any power delegated to the board of directors or trustees
Notwithstanding the provisions of the preceding paragraph, to amend or repeal any by-laws or adopt new by-laws shall
by-laws may be adopted and filed prior to incorporation; in be considered as revoked whenever stockholders owning or
such case, such by-laws shall be approved and signed by all representing a majority of the outstanding capital stock or a
the incorporators and submitted to the Securities and majority of the members in non-stock corporations, shall so
Exchange Commission, together with the articles of vote at a regular or special meeting.
incorporation.
Whenever any amendment or new by-laws are adopted,
In all cases, by-laws shall be effective only upon the such amendment or new by-laws shall be attached to the
issuance by the Securities and Exchange Commission of a original by-laws in the office of the corporation, and a copy
certification that the by-laws are not inconsistent with this thereof, duly certified under oath by the corporate
Code. secretary and a majority of the directors or trustees, shall
be filed with the Securities and Exchange Commission the
The Securities and Exchange Commission shall not accept same to be attached to the original articles of incorporation
for filing the by-laws or any amendment thereto of any and original by-laws.
bank, banking institution, building and loan association,
trust company, insurance company, public utility, The amended or new by-laws shall only be effective upon
educational institution or other special corporations the issuance by the Securities and Exchange Commission of
governed by special laws, unless accompanied by a a certification that the same are not inconsistent with this
certificate of the appropriate government agency to the Code. (22a and 23a)
effect that such by-laws or amendments are in accordance
with law. (20a) TITLE VIMEETINGS

Section 47. Contents of by-laws. – Subject to the provisions Section 49. Kinds of meetings. – Meetings of directors,
of the Constitution, this Code, other special laws, and the trustees, stockholders, or members may be regular or
articles of incorporation, a private corporation may provide special. (n)
in its by-laws for:
1. The time, place and manner of calling and Section 50. Regular and special meetings of stockholders or
conducting regular or special meetings of the members. - Regular meetings of stockholders or members
directors or trustees; shall be held annually on a date fixed in the by-laws, or if
2. The time and manner of calling and conducting not so fixed, on any date in April of every year as
regular or special meetings of the stockholders or determined by the board of directors or trustees: Provided,
members; That written notice of regular meetings shall be sent to all
3. The required quorum in meetings of stockholders stockholders or members of record at least two (2) weeks
or members and the manner of voting therein; prior to the meeting, unless a different period is required by
4. The form for proxies of stockholders and members the by-laws.
and the manner of voting them;
5. The qualifications, duties and compensation of Special meetings of stockholders or members shall be held
directors or trustees, officers and employees; at any time deemed necessary or as provided in the by-
6. The time for holding the annual election of laws: Provided, however, That at least one (1) week written
directors of trustees and the mode or manner of notice shall be sent to all stockholders or members, unless
giving notice thereof; otherwise provided in the by-laws.
7. The manner of election or appointment and the
Notice of any meeting may be waived, expressly or right to attend and vote at meetings of stockholders, unless
impliedly, by any stockholder or member. the pledgee or mortgagee is expressly given by the pledgor
or mortgagor such right in writing which is recorded on the
Whenever, for any cause, there is no person authorized to appropriate corporate books. (n)
call a meeting, the Securities and Exchange Commission,
upon petition of a stockholder or member on a showing of Executors, administrators, receivers, and other legal
good cause therefor, may issue an order to the petitioning representatives duly appointed by the court may attend
stockholder or member directing him to call a meeting of and vote in behalf of the stockholders or members without
the corporation by giving proper notice required by this need of any written proxy. (27a)
Code or by the by-laws. The petitioning stockholder or
member shall preside thereat until at least a majority of the Section 56. Voting in case of joint ownership of stock. – In
stockholders or members present have chosen one of their case of shares of stock owned jointly by two or more
number as presiding officer. (24, 26) persons, in order to vote the same, the consent of all the
co-owners shall be necessary, unless there is a written
Section 51. Place and time of meetings of stockholders of proxy, signed by all the co-owners, authorizing one or some
members. – Stockholder’s or member’s meetings, whether of them or any other person to vote such share or shares:
regular or special, shall be held in the city or municipality Provided, That when the shares are owned in an "and/or"
where the principal office of the corporation is located, and capacity by the holders thereof, any one of the joint owners
if practicable in the principal office of the corporation: can vote said shares or appoint a proxy therefor. (n)
Provided, That Metro Manila shall, for purposes of this Section 57. Voting right for treasury shares. – Treasury
section, be considered a city or municipality. shares shall have no voting right as long as such shares
Notice of meetings shall be in writing, and the time and remain in the Treasury. (n)
place thereof stated therein.
Section 58. Proxies. – Stockholders and members may vote
All proceedings had and any business transacted at any in person or by proxy in all meetings of stockholders or
meeting of the stockholders or members, if within the members. Proxies shall in writing, signed by the stockholder
powers or authority of the corporation, shall be valid even or member and filed before the scheduled meeting with the
if the meeting be improperly held or called, provided all the corporate secretary. Unless otherwise provided in the
stockholders or members of the corporation are present or proxy, it shall be valid only for the meeting for which it is
duly represented at the meeting. (24 and 25) intended. No proxy shall be valid and effective for a period
longer than five (5) years at any one time. (n)
Section 52. Quorum in meetings. – Unless otherwise
provided for in this Code or in the by-laws, a quorum shall Section 59. Voting trusts. – One or more stockholders of a
consist of the stockholders representing a majority of the stock corporation may create a voting trust for the purpose
outstanding capital stock or a majority of the members in of conferring upon a trustee or trustees the right to vote
the case of non-stock corporations. (n) and other rights pertaining to the shares for a period not
exceeding five (5) years at any time: Provided, That in the
Section 53. Regular and special meetings of directors or case of a voting trust specifically required as a condition in a
trustees. – Regular meetings of the board of directors or loan agreement, said voting trust may be for a period
trustees of every corporation shall be held monthly, unless exceeding five (5) years but shall automatically expire upon
the by-laws provide otherwise. full payment of the loan. A voting trust agreement must be
in writing and notarized, and shall specify the terms and
Special meetings of the board of directors or trustees may conditions thereof. A certified copy of such agreement shall
be held at any time upon the call of the president or as be filed with the corporation and with the Securities and
provided in the by-laws. Exchange Commission; otherwise, said agreement is
ineffective and unenforceable. The certificate or certificates
Meetings of directors or trustees of corporations may be of stock covered by the voting trust agreement shall be
held anywhere in or outside of the Philippines, unless the cancelled and new ones shall be issued in the name of the
by-laws provide otherwise. Notice of regular or special trustee or trustees stating that they are issued pursuant to
meetings stating the date, time and place of the meeting said agreement. In the books of the corporation, it shall be
must be sent to every director or trustee at least one (1) noted that the transfer in the name of the trustee or
day prior to the scheduled meeting, unless otherwise trustees is made pursuant to said voting trust agreement.
provided by the by-laws. A director or trustee may waive
this requirement, either expressly or impliedly. (n) The trustee or trustees shall execute and deliver to the
transferors voting trust certificates, which shall be
Section 54. Who shall preside at meetings. – The president transferable in the same manner and with the same effect
shall preside at all meetings of the directors or trustee as as certificates of stock.
well as of the stockholders or members, unless the by-laws
provide otherwise. (n) The voting trust agreement filed with the corporation shall
be subject to examination by any stockholder of the
Section 55. Right to vote of pledgors, mortgagors, and corporation in the same manner as any other corporate
administrators. – In case of pledged or mortgaged shares in book or record: Provided, That both the transferor and the
stock corporations, the pledgor or mortgagor shall have the trustee or trustees may exercise the right of inspection of
all corporate books and records in accordance with the
provisions of this Code. Where the consideration is other than actual cash, or
consists of intangible property such as patents of
Any other stockholder may transfer his shares to the same copyrights, the valuation thereof shall initially be
trustee or trustees upon the terms and conditions stated in determined by the incorporators or the board of directors,
the voting trust agreement, and thereupon shall be bound subject to approval by the Securities and Exchange
by all the provisions of said agreement. Commission.

No voting trust agreement shall be entered into for the Shares of stock shall not be issued in exchange for
purpose of circumventing the law against monopolies and promissory notes or future service.
illegal combinations in restraint of trade or used for
purposes of fraud. The same considerations provided for in this section,
insofar as they may be applicable, may be used for the
Unless expressly renewed, all rights granted in a voting issuance of bonds by the corporation.
trust agreement shall automatically expire at the end of the
agreed period, and the voting trust certificates as well as The issued price of no-par value shares may be fixed in the
the certificates of stock in the name of the trustee or articles of incorporation or by the board of directors
trustees shall thereby be deemed cancelled and new pursuant to authority conferred upon it by the articles of
certificates of stock shall be reissued in the name of the incorporation or the by-laws, or in the absence thereof, by
transferors. the stockholders representing at least a majority of the
outstanding capital stock at a meeting duly called for the
The voting trustee or trustees may vote by proxy unless the purpose. (5 and 16)
agreement provides otherwise. (36a)
Section 63. Certificate of stock and transfer of shares. – The
TITLE VIISTOCKS AND STOCKHOLDERS capital stock of stock corporations shall be divided into
shares for which certificates signed by the president or vice
Section 60. Subscription contract. – Any contract for the president, countersigned by the secretary or assistant
acquisition of unissued stock in an existing corporation or a secretary, and sealed with the seal of the corporation shall
corporation still to be formed shall be deemed a be issued in accordance with the by-laws. Shares of stock so
subscription within the meaning of this Title, issued are personal property and may be transferred by
notwithstanding the fact that the parties refer to it as a delivery of the certificate or certificates indorsed by the
purchase or some other contract. (n) owner or his attorney-in-fact or other person legally
authorized to make the transfer. No transfer, however,
Section 61. Pre-incorporation subscription. – A subscription shall be valid, except as between the parties, until the
for shares of stock of a corporation still to be formed shall transfer is recorded in the books of the corporation
be irrevocable for a period of at least six (6) months from showing the names of the parties to the transaction, the
the date of subscription, unless all of the other subscribers date of the transfer, the number of the certificate or
consent to the revocation, or unless the incorporation of certificates and the number of shares transferred.
said corporation fails to materialize within said period or
within a longer period as may be stipulated in the contract No shares of stock against which the corporation holds any
of subscription: Provided, That no pre-incorporation unpaid claim shall be transferable in the books of the
subscription may be revoked after the submission of the corporation. (35)
articles of incorporation to the Securities and Exchange
Commission. (n) Section 64. Issuance of stock certificates. – No certificate of
stock shall be issued to a subscriber until the full amount of
Section 62. Consideration for stocks. – Stocks shall not be his subscription together with interest and expenses (in
issued for a consideration less than the par or issued price case of delinquent shares), if any is due, has been paid. (37)
thereof. Consideration for the issuance of stock may be any
or a combination of any two or more of the following: Section 65. Liability of directors for watered stocks. – Any
1. Actual cash paid to the corporation; director or officer of a corporation consenting to the
2. Property, tangible or intangible, actually received issuance of stocks for a consideration less than its par or
by the corporation and necessary or convenient issued value or for a consideration in any form other than
for its use and lawful purposes at a fair valuation cash, valued in excess of its fair value, or who, having
equal to the par or issued value of the stock knowledge thereof, does not forthwith express his
issued; objection in writing and file the same with the corporate
3. Labor performed for or services actually rendered secretary, shall be solidarily, liable with the stockholder
to the corporation; concerned to the corporation and its creditors for the
4. Previously incurred indebtedness of the difference between the fair value received at the time of
corporation; issuance of the stock and the par or issued value of the
5. Amounts transferred from unrestricted retained same. (n)
earnings to stated capital; and
6. Outstanding shares exchanged for stocks in the Section 66. Interest on unpaid subscriptions. – Subscribers
event of reclassification or conversion. for stock shall pay to the corporation interest on all unpaid
subscriptions from the date of subscription, if so required provisions of this Code, bid for the same, and the total
by, and at the rate of interest fixed in the by-laws. If no rate amount due shall be credited as paid in full in the books of
of interest is fixed in the by-laws, such rate shall be deemed the corporation. Title to all the shares of stock covered by
to be the legal rate. (37) the subscription shall be vested in the corporation as
treasury shares and may be disposed of by said corporation
Section 67. Payment of balance of subscription. – Subject to in accordance with the provisions of this Code. (39a-46a)
the provisions of the contract of subscription, the board of
directors of any stock corporation may at any time declare Section 69. When sale may be questioned. – No action to
due and payable to the corporation unpaid subscriptions to recover delinquent stock sold can be sustained upon the
the capital stock and may collect the same or such ground of irregularity or defect in the notice of sale, or in
percentage thereof, in either case with accrued interest, if the sale itself of the delinquent stock, unless the party
any, as it may deem necessary. seeking to maintain such action first pays or tenders to the
party holding the stock the sum for which the same was
Payment of any unpaid subscription or any percentage sold, with interest from the date of sale at the legal rate;
thereof, together with the interest accrued, if any, shall be and no such action shall be maintained unless it is
made on the date specified in the contract of subscription commenced by the filing of a complaint within six (6)
or on the date stated in the call made by the board. Failure months from the date of sale. (47a)
to pay on such date shall render the entire balance due and
payable and shall make the stockholder liable for interest at Section 70. Court action to recover unpaid subscription. –
the legal rate on such balance, unless a different rate of Nothing in this Code shall prevent the corporation from
interest is provided in the by-laws, computed from such collecting by action in a court of proper jurisdiction the
date until full payment. If within thirty (30) days from the amount due on any unpaid subscription, with accrued
said date no payment is made, all stocks covered by said interest, costs and expenses. (49a)
subscription shall thereupon become delinquent and shall
be subject to sale as hereinafter provided, unless the board Section 71. Effect of delinquency. – No delinquent stock
of directors orders otherwise. (38) shall be voted for or be entitled to vote or to
representation at any stockholder’s meeting, nor shall the
Section 68. Delinquency sale. – The board of directors may, holder thereof be entitled to any of the rights of a
by resolution, order the sale of delinquent stock and shall stockholder except the right to dividends in accordance
specifically state the amount due on each subscription plus with the provisions of this Code, until and unless he pays
all accrued interest, and the date, time and place of the sale the amount due on his subscription with accrued interest,
which shall not be less than thirty (30) days nor more than and the costs and expenses of advertisement, if any. (50a)
sixty (60) days from the date the stocks become delinquent.
Section 72. Rights of unpaid shares. – Holders of subscribed
Notice of said sale, with a copy of the resolution, shall be shares not fully paid which are not delinquent shall have all
sent to every delinquent stockholder either personally or by the rights of a stockholder. (n)
registered mail. The same shall furthermore be published
once a week for two (2) consecutive weeks in a newspaper Section 73. Lost or destroyed certificates. – The following
of general circulation in the province or city where the procedure shall be followed for the issuance by a
principal office of the corporation is located. corporation of new certificates of stock in lieu of those
which have been lost, stolen or destroyed:
Unless the delinquent stockholder pays to the corporation, 1. The registered owner of a certificate of stock in a
on or before the date specified for the sale of the corporation or his legal representative shall file
delinquent stock, the balance due on his subscription, plus with the corporation an affidavit in triplicate
accrued interest, costs of advertisement and expenses of setting forth, if possible, the circumstances as to
sale, or unless the board of directors otherwise orders, said how the certificate was lost, stolen or destroyed,
delinquent stock shall be sold at public auction to such the number of shares represented by such
bidder who shall offer to pay the full amount of the balance certificate, the serial number of the certificate and
on the subscription together with accrued interest, costs of the name of the corporation which issued the
advertisement and expenses of sale, for the smallest same. He shall also submit such other information
number of shares or fraction of a share. The stock so and evidence which he may deem necessary;
purchased shall be transferred to such purchaser in the 2. After verifying the affidavit and other information
books of the corporation and a certificate for such stock and evidence with the books of the corporation,
shall be issued in his favor. The remaining shares, if any, said corporation shall publish a notice in a
shall be credited in favor of the delinquent stockholder who newspaper of general circulation published in the
shall likewise be entitled to the issuance of a certificate of place where the corporation has its principal
stock covering such shares. office, once a week for three (3) consecutive
weeks at the expense of the registered owner of
Should there be no bidder at the public auction who offers the certificate of stock which has been lost, stolen
to pay the full amount of the balance on the subscription or destroyed. The notice shall state the name of
together with accrued interest, costs of advertisement and said corporation, the name of the registered
expenses of sale, for the smallest number of shares or owner and the serial number of said certificate,
fraction of a share, the corporation may, subject to the and the number of shares represented by such
 certificate, and that after the expiration of one (1) member for damages, and in addition, shall be guilty of an
year from the date of the last publication, if no offense which shall be punishable under Section 144 of this
contest has been presented to said corporation Code: Provided, That if such refusal is made pursuant to a
regarding said certificate of stock, the right to resolution or order of the board of directors or trustees, the
make such contest shall be barred and said liability under this section for such action shall be imposed
corporation shall cancel in its books the certificate upon the directors or trustees who voted for such refusal:
of stock which has been lost, stolen or destroyed and Provided, further, That it shall be a defense to any
and issue in lieu thereof new certificate of stock, action under this section that the person demanding to
unless the registered owner files a bond or other examine and copy excerpts from the corporation’s records
security in lieu thereof as may be required, and minutes has improperly used any information secured
effective for a period of one (1) year, for such through any prior examination of the records or minutes of
amount and in such form and with such sureties as such corporation or of any other corporation, or was not
may be satisfactory to the board of directors, in acting in good faith or for a legitimate purpose in making
which case a new certificate may be issued even his demand.
before the expiration of the one (1) year period
provided herein: Provided, That if a contest has Stock corporations must also keep a book to be known as
been presented to said corporation or if an action the "stock and transfer book", in which must be kept a
is pending in court regarding the ownership of said record of all stocks in the names of the stockholders
certificate of stock which has been lost, stolen or alphabetically arranged; the installments paid and unpaid
destroyed, the issuance of the new certificate of on all stock for which subscription has been made, and the
stock in lieu thereof shall be suspended until the date of payment of any installment; a statement of every
final decision by the court regarding the ownership alienation, sale or transfer of stock made, the date thereof,
of said certificate of stock which has been lost, and by and to whom made; and such other entries as the
stolen or destroyed. by-laws may prescribe. The stock and transfer book shall be
kept in the principal office of the corporation or in the
Except in case of fraud, bad faith, or negligence on the part office of its stock transfer agent and shall be open for
of the corporation and its officers, no action may be inspection by any director or stockholder of the corporation
brought against any corporation which shall have issued at reasonable hours on business days.
certificate of stock in lieu of those lost, stolen or destroyed
pursuant to the procedure above-described. (R.A. 201a) No stock transfer agent or one engaged principally in the
business of registering transfers of stocks in behalf of a
TITLE VIIICORPORATE BOOKS AND RECORDS stock corporation shall be allowed to operate in the
Philippines unless he secures a license from the Securities
Section 74. Books to be kept; stock transfer agent. – Every and Exchange Commission and pays a fee as may be fixed
corporation shall keep and carefully preserve at its principal by the Commission, which shall be renewable annually:
office a record of all business transactions and minutes of Provided, That a stock corporation is not precluded from
all meetings of stockholders or members, or of the board of performing or making transfer of its own stocks, in which
directors or trustees, in which shall be set forth in detail the case all the rules and regulations imposed on stock transfer
time and place of holding the meeting, how authorized, the agents, except the payment of a license fee herein
notice given, whether the meeting was regular or special, if provided, shall be applicable. (51a and 32a; P.B. No. 268.)
special its object, those present and absent, and every act
done or ordered done at the meeting. Upon the demand of Section 75. Right to financial statements. – Within ten (10)
any director, trustee, stockholder or member, the time days from receipt of a written request of any stockholder or
when any director, trustee, stockholder or member entered member, the corporation shall furnish to him its most
or left the meeting must be noted in the minutes; and on a recent financial statement, which shall include a balance
similar demand, the yeas and nays must be taken on any sheet as of the end of the last taxable year and a profit or
motion or proposition, and a record thereof carefully made. loss statement for said taxable year, showing in reasonable
The protest of any director, trustee, stockholder or member detail its assets and liabilities and the result of its
on any action or proposed action must be recorded in full operations.
on his demand.
At the regular meeting of stockholders or members, the
The records of all business transactions of the corporation board of directors or trustees shall present to such
and the minutes of any meetings shall be open to stockholders or members a financial report of the
inspection by any director, trustee, stockholder or member operations of the corporation for the preceding year, which
of the corporation at reasonable hours on business days shall include financial statements, duly signed and certified
and he may demand, in writing, for a copy of excerpts from by an independent certified public accountant.
said records or minutes, at his expense. However, if the paid-up capital of the corporation is less
than P50,000.00, the financial statements may be certified
Any officer or agent of the corporation who shall refuse to under oath by the treasurer or any responsible officer of
allow any director, trustees, stockholder or member of the the corporation. (n)
corporation to examine and copy excerpts from its records
or minutes, in accordance with the provisions of this Code, TITLE IXMERGER AND CONSOLIDATION
shall be liable to such director, trustee, stockholder or
Section 76. Plan or merger of consolidation. – Two or more corporations, to be signed by the president or vice-
corporations may merge into a single corporation which president and certified by the secretary or assistant
shall be one of the constituent corporations or may secretary of each corporation setting forth:
consolidate into a new single corporation which shall be the 1. The plan of the merger or the plan of
consolidated corporation. consolidation;
2. As to stock corporations, the number of shares
The board of directors or trustees of each corporation, outstanding, or in the case of non-stock
party to the merger or consolidation, shall approve a plan corporations, the number of members; and
of merger or consolidation setting forth the following: 3. As to each corporation, the number of shares or
1. The names of the corporations proposing to merge members voting for and against such plan,
or consolidate, hereinafter referred to as the respectively. (n)
constituent corporations;
2. The terms of the merger or consolidation and the Section 79. Effectivity of merger or consolidation. – The
mode of carrying the same into effect; articles of merger or of consolidation, signed and certified
3. A statement of the changes, if any, in the articles as herein above required, shall be submitted to the
of incorporation of the surviving corporation in Securities and Exchange Commission in quadruplicate for its
case of merger; and, with respect to the approval: Provided, That in the case of merger or
consolidated corporation in case of consolidation, consolidation of banks or banking institutions, building and
all the statements required to be set forth in the loan associations, trust companies, insurance companies,
articles of incorporation for corporations organized public utilities, educational institutions and other special
under this Code; and corporations governed by special laws, the favorable
4. Such other provisions with respect to the recommendation of the appropriate government agency
proposed merger or consolidation as are deemed shall first be obtained. If the Commission is satisfied that
necessary or desirable. (n) the merger or consolidation of the corporations concerned
is not inconsistent with the provisions of this Code and
Section 77. Stockholder’s or member’s approval. – Upon existing laws, it shall issue a certificate of merger or of
approval by majority vote of each of the board of directors consolidation, at which time the merger or consolidation
or trustees of the constituent corporations of the plan of shall be effective.
merger or consolidation, the same shall be submitted for
approval by the stockholders or members of each of such If, upon investigation, the Securities and Exchange
corporations at separate corporate meetings duly called for Commission has reason to believe that the proposed
the purpose. Notice of such meetings shall be given to all merger or consolidation is contrary to or inconsistent with
stockholders or members of the respective corporations, at the provisions of this Code or existing laws, it shall set a
least two (2) weeks prior to the date of the meeting, either hearing to give the corporations concerned the opportunity
personally or by registered mail. Said notice shall state the to be heard. Written notice of the date, time and place of
purpose of the meeting and shall include a copy or a hearing shall be given to each constituent corporation at
summary of the plan of merger or consolidation. The least two (2) weeks before said hearing. The Commission
affirmative vote of stockholders representing at least two- shall thereafter proceed as provided in this Code. (n)
thirds (2/3) of the outstanding capital stock of each
corporation in the case of stock corporations or at least Section 80. Effects of merger or consolidation. – The
two-thirds (2/3) of the members in the case of non-stock merger or consolidation shall have the following effects:
corporations shall be necessary for the approval of such 1. The constituent corporations shall become a single
plan. Any dissenting stockholder in stock corporations may corporation which, in case of merger, shall be the
exercise his appraisal right in accordance with the Code: surviving corporation designated in the plan of
Provided, That if after the approval by the stockholders of merger; and, in case of consolidation, shall be the
such plan, the board of directors decides to abandon the consolidated corporation designated in the plan of
plan, the appraisal right shall be extinguished. consolidation;
2. The separate existence of the constituent
Any amendment to the plan of merger or consolidation corporations shall cease, except that of the
may be made, provided such amendment is approved by surviving or the consolidated corporation;
majority vote of the respective boards of directors or 3. The surviving or the consolidated corporation shall
trustees of all the constituent corporations and ratified by possess all the rights, privileges, immunities and
the affirmative vote of stockholders representing at least powers and shall be subject to all the duties and
two-thirds (2/3) of the outstanding capital stock or of two- liabilities of a corporation organized under this
thirds (2/3) of the members of each of the constituent Code;
corporations. Such plan, together with any amendment, 4. The surviving or the consolidated corporation shall
shall be considered as the agreement of merger or thereupon and thereafter possess all the rights,
consolidation. (n) privileges, immunities and franchises of each of
the constituent corporations; and all property, real
Section 78. Articles of merger or consolidation. – After the or personal, and all receivables due on whatever
approval by the stockholders or members as required by account, including subscriptions to shares and
the preceding section, articles of merger or articles of other choses in action, and all and every other
consolidation shall be executed by each of the constituent interest of, or belonging to, or due to each
 constituent corporation, shall be deemed the corporation has unrestricted retained earnings in its
transferred to and vested in such surviving or books to cover such payment: and Provided, further, That
consolidated corporation without further act or upon payment by the corporation of the agreed or awarded
deed; and price, the stockholder shall forthwith transfer his shares to
5. The surviving or consolidated corporation shall be the corporation. (n)
responsible and liable for all the liabilities and
obligations of each of the constituent corporations Section 83. Effect of demand and termination of right. –
in the same manner as if such surviving or From the time of demand for payment of the fair value of a
consolidated corporation had itself incurred such stockholder’s shares until either the abandonment of the
liabilities or obligations; and any pending claim, corporate action involved or the purchase of the said shares
action or proceeding brought by or against any of by the corporation, all rights accruing to such shares,
such constituent corporations may be prosecuted including voting and dividend rights, shall be suspended in
by or against the surviving or consolidated accordance with the provisions of this Code, except the
corporation. The rights of creditors or liens upon right of such stockholder to receive payment of the fair
the property of any of such constituent value thereof: Provided, That if the dissenting stockholder
corporations shall not be impaired by such merger is not paid the value of his shares within 30 days after the
or consolidation. (n) award, his voting and dividend rights shall immediately be
restored. (n)
TITLE XAPPRAISAL RIGHT
Section 84. When right to payment ceases. – No demand
Section 81. Instances of appraisal right. – Any stockholder for payment under this Title may be withdrawn unless the
of a corporation shall have the right to dissent and demand corporation consents thereto. If, however, such demand for
payment of the fair value of his shares in the following payment is withdrawn with the consent of the corporation,
instances: or if the proposed corporate action is abandoned or
1. In case any amendment to the articles of rescinded by the corporation or disapproved by the
incorporation has the effect of changing or Securities and Exchange Commission where such approval
restricting the rights of any stockholder or class of is necessary, or if the Securities and Exchange Commission
shares, or of authorizing preferences in any determines that such stockholder is not entitled to the
respect superior to those of outstanding shares of appraisal right, then the right of said stockholder to be paid
any class, or of extending or shortening the term the fair value of his shares shall cease, his status as a
of corporate existence; stockholder shall thereupon be restored, and all dividend
2. In case of sale, lease, exchange, transfer, distributions which would have accrued on his shares shall
mortgage, pledge or other disposition of all or be paid to him. (n)
substantially all of the corporate property and
assets as provided in the Code; and Section 85. Who bears costs of appraisal. – The costs and
3. In case of merger or consolidation. (n) expenses of appraisal shall be borne by the corporation,
unless the fair value ascertained by the appraisers is
Section 82. How right is exercised. – The appraisal right may approximately the same as the price which the corporation
be exercised by any stockholder who shall have voted may have offered to pay the stockholder, in which case
against the proposed corporate action, by making a written they shall be borne by the latter. In the case of an action to
demand on the corporation within thirty (30) days after the recover such fair value, all costs and expenses shall be
date on which the vote was taken for payment of the fair assessed against the corporation, unless the refusal of the
value of his shares: Provided, That failure to make the stockholder to receive payment was unjustified. (n)
demand within such period shall be deemed a waiver of the
appraisal right. If the proposed corporate action is Section 86. Notation on certificates; rights of transferee. –
implemented or affected, the corporation shall pay to such Within ten (10) days after demanding payment for his
stockholder, upon surrender of the certificate or certificates shares, a dissenting stockholder shall submit the certificates
of stock representing his shares, the fair value thereof as of of stock representing his shares to the corporation for
the day prior to the date on which the vote was taken, notation thereon that such shares are dissenting shares. His
excluding any appreciation or depreciation in anticipation failure to do so shall, at the option of the corporation,
of such corporate action. terminate his rights under this Title. If shares represented
by the certificates bearing such notation are transferred,
If within a period of sixty (60) days from the date the and the certificates consequently cancelled, the rights of
corporate action was approved by the stockholders, the the transferor as a dissenting stockholder under this Title
withdrawing stockholder and the corporation cannot agree shall cease and the transferee shall have all the rights of a
on the fair value of the shares, it shall be determined and regular stockholder; and all dividend distributions which
appraised by three (3) disinterested persons, one of whom would have accrued on such shares shall be paid to the
shall be named by the stockholder, another by the transferee. (n)
corporation, and the third by the two thus chosen. The
findings of the majority of the appraisers shall be final, and TITLE XINON-STOCK CORPORATIONS
their award shall be paid by the corporation within thirty
(30) days after such award is made: Provided, That no Section 87. Definition. – For the purposes of this Code, a
payment shall be made to any dissenting stockholder unless non-stock corporation is one where no part of its income is
distributable as dividends to its members, trustees, or year; and subsequent elections of trustees comprising one-
officers, subject to the provisions of this Code on third (1/3) of the board of trustees shall be held annually
dissolution: Provided, That any profit which a non-stock and trustees so elected shall have a term of three (3) years.
corporation may obtain as an incident to its operations Trustees thereafter elected to fill vacancies occurring
shall, whenever necessary or proper, be used for the before the expiration of a particular term shall hold office
furtherance of the purpose or purposes for which the only for the unexpired period.
corporation was organized, subject to the provisions of this
Title. No person shall be elected as trustee unless he is a member
of the corporation.
The provisions governing stock corporation, when
pertinent, shall be applicable to non-stock corporations, Unless otherwise provided in the articles of incorporation
except as may be covered by specific provisions of this Title. or the by-laws, officers of a non-stock corporation may be
(n) directly elected by the members. (n)
Section 93. Place of meetings. – The by-laws may provide
Section 88. Purposes. – Non-stock corporations may be that the members of a non-stock corporation may hold
formed or organized for charitable, religious, educational, their regular or special meetings at any place even outside
professional, cultural, fraternal, literary, scientific, social, the place where the principal office of the corporation is
civic service, or similar purposes, like trade, industry, located: Provided, That proper notice is sent to all members
agricultural and like chambers, or any combination thereof, indicating the date, time and place of the meeting: and
subject to the special provisions of this Title governing Provided, further, That the place of meeting shall be within
particular classes of non-stock corporations. (n) the Philippines. (n)

CHAPTER IMEMBERS CHAPTER IIIDISTRIBUTION OF ASSETS IN NON-STOCK

CORPORATIONS
Section 89. Right to vote. – The right of the members of any
class or classes to vote may be limited, broadened or Section 94. Rules of distribution. – In case dissolution of a
denied to the extent specified in the articles of non-stock corporation in accordance with the provisions of
incorporation or the by-laws. Unless so limited, broadened this Code, its assets shall be applied and distributed as
or denied, each member, regardless of class, shall be follows:
entitled to one vote. 1. All liabilities and obligations of the corporation
shall be paid, satisfied and discharged, or adequate
Unless otherwise provided in the articles of incorporation provision shall be made therefore;
or the by-laws, a member may vote by proxy in accordance 2. Assets held by the corporation upon a condition
with the provisions of this Code. (n) requiring return, transfer or conveyance, and
Voting by mail or other similar means by members of non- which condition occurs by reason of the
stock corporations may be authorized by the by-laws of dissolution, shall be returned, transferred or
non-stock corporations with the approval of, and under conveyed in accordance with such requirements;
such conditions which may be prescribed by, the Securities 3. Assets received and held by the corporation
and Exchange Commission. subject to limitations permitting their use only for
charitable, religious, benevolent, educational or
Section 90. Non-transferability of membership. – similar purposes, but not held upon a condition
Membership in a non-stock corporation and all rights requiring return, transfer or conveyance by reason
arising therefrom are personal and non-transferable, unless of the dissolution, shall be transferred or conveyed
the articles of incorporation or the by-laws otherwise to one or more corporations, societies or
provide. (n) organizations engaged in activities in the
Philippines substantially similar to those of the
Section 91. Termination of membership. – Membership dissolving corporation according to a plan of
shall be terminated in the manner and for the causes distribution adopted pursuant to this Chapter;
provided in the articles of incorporation or the by-laws. 4. Assets other than those mentioned in the
Termination of membership shall have the effect of preceding paragraphs, if any, shall be distributed in
extinguishing all rights of a member in the corporation or in accordance with the provisions of the articles of
its property, unless otherwise provided in the articles of incorporation or the by-laws, to the extent that
incorporation or the by-laws. (n) the articles of incorporation or the by-laws,
determine the distributive rights of members, or
CHAPTER IITRUSTEES AND OFFICES any class or classes of members, or provide for
distribution; and
Section 92. Election and term of trustees. – Unless 5. In any other case, assets may be distributed to
otherwise provided in the articles of incorporation or the such persons, societies, organizations or
by-laws, the board of trustees of non-stock corporations, corporations, whether or not organized for profit,
which may be more than fifteen (15) in number as may be as may be specified in a plan of distribution
fixed in their articles of incorporation or by-laws, shall, as adopted pursuant to this Chapter. (n)
soon as organized, so classify themselves that the term of
office of one-third (1/3) of their number shall expire every Section 95. Plan of distribution of assets. – A plan providing
for the distribution of assets, not inconsistent with the provide that the business of the corporation shall be
provisions of this Title, may be adopted by a non-stock managed by the stockholders of the corporation rather
corporation in the process of dissolution in the following than by a board of directors. So long as this provision
manner: continues in effect:
1. No meeting of stockholders need be called to elect
The board of trustees shall, by majority vote, adopt a directors;
resolution recommending a plan of distribution and 2. Unless the context clearly requires otherwise, the
directing the submission thereof to a vote at a regular or stockholders of the corporation shall be deemed
special meeting of members having voting rights. Written to be directors for the purpose of applying the
notice setting forth the proposed plan of distribution or a provisions of this Code; and
summary thereof and the date, time and place of such 3. The stockholders of the corporation shall be
meeting shall be given to each member entitled to vote, subject to all liabilities of directors.
within the time and in the manner provided in this Code for The articles of incorporation may likewise provide that all
the giving of notice of meetings to members. Such plan of officers or employees or that specified officers or
distribution shall be adopted upon approval of at least two- employees shall be elected or appointed by the
thirds (2/3) of the members having voting rights present or stockholders, instead of by the board of directors.
represented by proxy at such meeting. (n)
Section 98. Validity of restrictions on transfer of shares. –
TITLE XIICLOSE CORPORATIONS Restrictions on the right to transfer shares must appear in
the articles of incorporation and in the by-laws as well as in
Section 96. Definition and applicability of Title. - A close the certificate of stock; otherwise, the same shall not be
corporation, within the meaning of this Code, is one whose binding on any purchaser thereof in good faith. Said
articles of incorporation provide that: (1) All the restrictions shall not be more onerous than granting the
corporation’s issued stock of all classes, exclusive of existing stockholders or the corporation the option to
treasury shares, shall be held of record by not more than a purchase the shares of the transferring stockholder with
specified number of persons, not exceeding twenty (20); (2) such reasonable terms, conditions or period stated therein.
all the issued stock of all classes shall be subject to one or If upon the expiration of said period, the existing
more specified restrictions on transfer permitted by this stockholders or the corporation fails to exercise the option
Title; and (3) The corporation shall not list in any stock to purchase, the transferring stockholder may sell his
exchange or make any public offering of any of its stock of shares to any third person.
any class. Notwithstanding the foregoing, a corporation
shall not be deemed a close corporation when at least two- Section 99. Effects of issuance or transfer of stock in breach
thirds (2/3) of its voting stock or voting rights is owned or of qualifying conditions. -
controlled by another corporation which is not a close 1. If stock of a close corporation is issued or
corporation within the meaning of this Code. transferred to any person who is not entitled
under any provision of the articles of incorporation
Any corporation may be incorporated as a close to be a holder of record of its stock, and if the
corporation, except mining or oil companies, stock certificate for such stock conspicuously shows the
exchanges, banks, insurance companies, public utilities, qualifications of the persons entitled to be holders
educational institutions and corporations declared to be of record thereof, such person is conclusively
vested with public interest in accordance with the presumed to have notice of the fact of his
provisions of this Code. ineligibility to be a stockholder.
2. If the articles of incorporation of a close
The provisions of this Title shall primarily govern close corporation states the number of persons, not
corporations: Provided, That the provisions of other Titles exceeding twenty (20), who are entitled to be
of this Code shall apply suppletorily except insofar as this holders of record of its stock, and if the certificate
Title otherwise provides. for such stock conspicuously states such number,
and if the issuance or transfer of stock to any
Section 97. Articles of incorporation. – The articles of person would cause the stock to be held by more
incorporation of a close corporation may provide: than such number of persons, the person to whom
1. For a classification of shares or rights and the such stock is issued or transferred is conclusively
qualifications for owning or holding the same and presumed to have notice of this fact.
restrictions on their transfers as may be stated 3. If a stock certificate of any close corporation
therein, subject to the provisions of the following conspicuously shows a restriction on transfer of
section; stock of the corporation, the transferee of the
2. For a classification of directors into one or more stock is conclusively presumed to have notice of
classes, each of whom may be voted for and the fact that he has acquired stock in violation of
elected solely by a particular class of stock; and the restriction, if such acquisition violates the
3. For a greater quorum or voting requirements in restriction.
meetings of stockholders or directors than those 4. Whenever any person to whom stock of a close
provided in this Code. corporation has been issued or transferred has, or
is conclusively presumed under this section to
The articles of incorporation of a close corporation may have, notice either (a) that he is a person not
 eligible to be a holder of stock of the corporation, corporate torts unless the corporation has
or (b) that transfer of stock to him would cause the obtained reasonably adequate liability insurance.
stock of the corporation to be held by more than
the number of persons permitted by its articles of Section 101. When board meeting is unnecessary or
incorporation to hold stock of the corporation, or improperly held. - Unless the by-laws provide otherwise,
(c) that the transfer of stock is in violation of a any action by the directors of a close corporation without a
restriction on transfer of stock, the corporation meeting shall nevertheless be deemed valid if:
may, at its option, refuse to register the transfer of 1. Before or after such action is taken, written
stock in the name of the transferee. consent thereto is signed by all the directors; or
5. The provisions of subsection (4) shall not be 2. All the stockholders have actual or implied
applicable if the transfer of stock, though contrary knowledge of the action and make no prompt
to subsections (1), (2) or (3), has been consented objection thereto in writing; or
to by all the stockholders of the close corporation, 3. The directors are accustomed to take informal
or if the close corporation has amended its articles action with the express or implied acquiescence of
of incorporation in accordance with this Title. all the stockholders; or
6. The term "transfer", as used in this section, is not 4. All the directors have express or implied
limited to a transfer for value. knowledge of the action in question and none of
7. The provisions of this section shall not impair any them makes prompt objection thereto in writing.
right which the transferee may have to rescind the
transfer or to recover under any applicable If a director’s meeting is held without proper call or notice,
warranty, express or implied. an action taken therein within the corporate powers is
deemed ratified by a director who failed to attend, unless
Section 100. Agreements by stockholders. - he promptly files his written objection with the secretary of
1. Agreements by and among stockholders executed the corporation after having knowledge thereof.
before the formation and organization of a close
corporation, signed by all stockholders, shall Section 102. Pre-emptive right in close corporations. – The
survive the incorporation of such corporation and pre-emptive right of stockholders in close corporations shall
shall continue to be valid and binding between and extend to all stock to be issued, including reissuance of
among such stockholders, if such be their intent, treasury shares, whether for money, property or personal
to the extent that such agreements are not services, or in payment of corporate debts, unless the
inconsistent with the articles of incorporation, articles of incorporation provide otherwise.
irrespective of where the provisions of such
agreements are contained, except those required Section 103. Amendment of articles of incorporation. – Any
by this Title to be embodied in said articles of amendment to the articles of incorporation which seeks to
incorporation. delete or remove any provision required by this Title to be
2. An agreement between two or more stockholders, contained in the articles of incorporation or to reduce a
if in writing and signed by the parties thereto, may quorum or voting requirement stated in said articles of
provide that in exercising any voting rights, the incorporation shall not be valid or effective unless approved
shares held by them shall be voted as therein by the affirmative vote of at least two-thirds (2/3) of the
provided, or as they may agree, or as determined outstanding capital stock, whether with or without voting
in accordance with a procedure agreed upon by rights, or of such greater proportion of shares as may be
them. specifically provided in the articles of incorporation for
3. No provision in any written agreement signed by amending, deleting or removing any of the aforesaid
the stockholders, relating to any phase of the provisions, at a meeting duly called for the purpose.
corporate affairs, shall be invalidated as between
the parties on the ground that its effect is to make Section 104. Deadlocks. – Notwithstanding any contrary
them partners among themselves. provision in the articles of incorporation or by-laws or
4. A written agreement among some or all of the agreement of stockholders of a close corporation, if the
stockholders in a close corporation shall not be directors or stockholders are so divided respecting the
invalidated on the ground that it so relates to the management of the corporation’s business and affairs that
conduct of the business and affairs of the the votes required for any corporate action cannot be
corporation as to restrict or interfere with the obtained, with the consequence that the business and
discretion or powers of the board of directors: affairs of the corporation can no longer be conducted to the
Provided, That such agreement shall impose on advantage of the stockholders generally, the Securities and
the stockholders who are parties thereto the Exchange Commission, upon written petition by any
liabilities for managerial acts imposed by this Code stockholder, shall have the power to arbitrate the dispute.
on directors. In the exercise of such power, the Commission shall have
5. To the extent that the stockholders are actively authority to make such order as it deems appropriate,
engaged in the management or operation of the including an order: (1) cancelling or altering any provision
business and affairs of a close corporation, the contained in the articles of incorporation, by-laws, or any
stockholders shall be held to strict fiduciary duties stockholder’s agreement; (2) cancelling, altering or
to each other and among themselves. Said enjoining any resolution or act of the corporation or its
stockholders shall be personally liable for 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 Unless otherwise provided in the articles of incorporation
the action; (4) requiring the purchase at their fair value of on the by-laws, the board of trustees of incorporated
shares of any stockholder, either by the corporation schools, colleges, or other institutions of learning shall, as
regardless of the availability of unrestricted retained soon as organized, so classify themselves that the term of
earnings in its books, or by the other stockholders; (5) office of one-fifth (1/5) of their number shall expire every
appointing a provisional director; (6) dissolving the year. Trustees thereafter elected to fill vacancies, occurring
corporation; or (7) granting such other relief as the before the expiration of a particular term, shall hold office
circumstances may warrant. only for the unexpired period. Trustees elected thereafter
to fill vacancies caused by expiration of term shall hold
A provisional director shall be an impartial person who is office for five (5) years. A majority of the trustees shall
neither a stockholder nor a creditor of the corporation or of constitute a quorum for the transaction of business. The
any subsidiary or affiliate of the corporation, and whose powers and authority of trustees shall be defined in the by-
further qualifications, if any, may be determined by the laws.
Commission. A provisional director is not a receiver of the
corporation and does not have the title and powers of a For institutions organized as stock corporations, the
custodian or receiver. A provisional director shall have all number and term of directors shall be governed by the
the rights and powers of a duly elected director of the provisions on stock corporations. (169a)
corporation, including the right to notice of and to vote at
meetings of directors, until such time as he shall be CHAPTER IIRELIGIOUS CORPORATIONS
removed by order of the Commission or by all the
stockholders. His compensation shall be determined by Section 109. Classes of religious corporations. – Religious
agreement between him and the corporation subject to corporations may be incorporated by one or more persons.
approval of the Commission, which may fix his Such corporations may be classified into corporations sole
compensation in the absence of agreement or in the event and religious societies.
of disagreement between the provisional director and the
corporation. Religious corporations shall be governed by this Chapter
and by the general provisions on non-stock corporations
Section 105. Withdrawal of stockholder or dissolution of insofar as they may be applicable. (n)
corporation. – In addition and without prejudice to other
rights and remedies available to a stockholder under this Section 110. Corporation sole. – For the purpose of
Title, any stockholder of a close corporation may, for any administering and managing, as trustee, the affairs,
reason, compel the said corporation to purchase his shares property and temporalities of any religious denomination,
at their fair value, which shall not be less than their par or sect or church, a corporation sole may be formed by the
issued value, when the corporation has sufficient assets in chief archbishop, bishop, priest, minister, rabbi or other
its books to cover its debts and liabilities exclusive of capital presiding elder of such religious denomination, sect or
stock: Provided, That any stockholder of a close corporation church. (154a)
may, by written petition to the Securities and Exchange
Commission, compel the dissolution of such corporation Section 111. Articles of incorporation. – In order to become
whenever any of acts of the directors, officers or those in a corporation sole, the chief archbishop, bishop, priest,
control of the corporation is illegal, or fraudulent, or minister, rabbi or presiding elder of any religious
dishonest, or oppressive or unfairly prejudicial to the denomination, sect or church must file with the Securities
corporation or any stockholder, or whenever corporate and Exchange Commission articles of incorporation setting
assets are being misapplied or wasted. forth the following:
1. That he is the chief archbishop, bishop, priest,
TITLE XIIISPECIAL CORPORATIONSCHAPTER I - minister, rabbi or presiding elder of his religious
EDUCATIONAL CORPORATIONS denomination, sect or church and that he desires
to become a corporation sole;
Section 106. Incorporation. – Educational corporations shall 2. That the rules, regulations and discipline of his
be governed by special laws and by the general provisions religious denomination, sect or church are not
of this Code. (n) inconsistent with his becoming a corporation sole
and do not forbid it;
Section 107. Pre-requisites to incorporation. – Except upon 3. That as such chief archbishop, bishop, priest,
favorable recommendation of the Ministry of Education minister, rabbi or presiding elder, he is charged
and Culture, the Securities and Exchange Commission shall with the administration of the temporalities and
not accept or approve the articles of incorporation and by- the management of the affairs, estate and
laws of any educational institution. (168a) properties of his religious denomination, sect or
church within his territorial jurisdiction, describing
Section 108. Board of trustees. – Trustees of educational such territorial jurisdiction;
institutions organized as non-stock corporations shall not 4. The manner in which any vacancy occurring in the
be less than five (5) nor more than fifteen (15): Provided, office of chief archbishop, bishop, priest, minister,
however, That the number of trustees shall be in multiples rabbi of presiding elder is required to be filled,
of five (5). according to the rules, regulations or discipline of
 the religious denomination, sect or church to corporation sole on their accession to office and shall be
which he belongs; and permitted to transact business as such on the filing with the
5. The place where the principal office of the Securities and Exchange Commission of a copy of their
corporation sole is to be established and located, commission, certificate of election, or letters of
which place must be within the Philippines. appointment, duly certified by any notary public.

The articles of incorporation may include any other During any vacancy in the office of chief archbishop, bishop,
provision not contrary to law for the regulation of the priest, minister, rabbi or presiding elder of any religious
affairs of the corporation. (n) denomination, sect or church incorporated as a corporation
Section 112. Submission of the articles of incorporation. – sole, the person or persons authorized and empowered by
The articles of incorporation must be verified, before filing, the rules, regulations or discipline of the religious
by affidavit or affirmation of the chief archbishop, bishop, denomination, sect or church represented by the
priest, minister, rabbi or presiding elder, as the case may corporation sole to administer the temporalities and
be, and accompanied by a copy of the commission, manage the affairs, estate and properties of the
certificate of election or letter of appointment of such chief corporation sole during the vacancy shall exercise all the
archbishop, bishop, priest, minister, rabbi or presiding powers and authority of the corporation sole during such
elder, duly certified to be correct by any notary public. vacancy. (158a)

From and after the filing with the Securities and Exchange Section 115. Dissolution. – A corporation sole may be
Commission of the said articles of incorporation, verified by dissolved and its affairs settled voluntarily by submitting to
affidavit or affirmation, and accompanied by the documents the Securities and Exchange Commission a verified
mentioned in the preceding paragraph, such chief declaration of dissolution.
archbishop, bishop, priest, minister, rabbi or presiding elder
shall become a corporation sole and all temporalities, The declaration of dissolution shall set forth:
estate and properties of the religious denomination, sect or 1. The name of the corporation;
church theretofore administered or managed by him as 2. The reason for dissolution and winding up;
such chief archbishop, bishop, priest, minister, rabbi or 3. The authorization for the dissolution of the
presiding elder shall be held in trust by him as a corporation corporation by the particular religious
sole, for the use, purpose, behalf and sole benefit of his denomination, sect or church;
religious denomination, sect or church, including hospitals, 4. The names and addresses of the persons who are
schools, colleges, orphan asylums, parsonages and to supervise the winding up of the affairs of the
cemeteries thereof. (n) corporation.

Section 113. Acquisition and alienation of property. – Any Upon approval of such declaration of dissolution by the
corporation sole may purchase and hold real estate and Securities and Exchange Commission, the corporation shall
personal property for its church, charitable, benevolent or cease to carry on its operations except for the purpose of
educational purposes, and may receive bequests or gifts for winding up its affairs. (n)
such purposes. Such corporation may sell or mortgage real
property held by it by obtaining an order for that purpose Section 116. Religious societies. – Any religious society or
from the Court of First Instance of the province where the religious order, or any diocese, synod, or district
property is situated upon proof made to the satisfaction of organization of any religious denomination, sect or church,
the court that notice of the application for leave to sell or unless forbidden by the constitution, rules, regulations, or
mortgage has been given by publication or otherwise in discipline of the religious denomination, sect or church of
such manner and for such time as said court may have which it is a part, or by competent authority, may, upon
directed, and that it is to the interest of the corporation written consent and/or by an affirmative vote at a meeting
that leave to sell or mortgage should be granted. The called for the purpose of at least two-thirds (2/3) of its
application for leave to sell or mortgage must be made by membership, incorporate for the administration of its
petition, duly verified, by the chief archbishop, bishop, temporalities or for the management of its affairs,
priest, minister, rabbi or presiding elder acting as properties and estate by filing with the Securities and
corporation sole, and may be opposed by any member of Exchange Commission, articles of incorporation verified by
the religious denomination, sect or church represented by the affidavit of the presiding elder, secretary, or clerk or
the corporation sole: Provided, That in cases where the other member of such religious society or religious order,
rules, regulations and discipline of the religious or diocese, synod, or district organization of the religious
denomination, sect or church, religious society or order denomination, sect or church, setting forth the following:
concerned represented by such corporation sole regulate 1. That the religious society or religious order, or
the method of acquiring, holding, selling and mortgaging diocese, synod, or district organization is a
real estate and personal property, such rules, regulations religious organization of a religious denomination,
and discipline shall control, and the intervention of the sect or church;
courts shall not be necessary. (159a) 2. That at least two-thirds (2/3) of its membership
have given their written consent or have voted to
Section 114. Filling of vacancies. – The successors in office incorporate, at a duly convened meeting of the
of any chief archbishop, bishop, priest, minister, rabbi or body;
presiding elder in a corporation sole shall become the 3. That the incorporation of the religious society or
 religious order, or diocese, synod, or district outstanding capital stock or by at least two-thirds (2/3) of
organization desiring to incorporate is not the members at a meeting of its stockholders or members
forbidden by competent authority or by the called for that purpose.
constitution, rules, regulations or discipline of the
religious denomination, sect, or church of which it If the petition is sufficient in form and substance, the
forms a part; Commission shall, by an order reciting the purpose of the
4. That the religious society or religious order, or petition, fix a date on or before which objections thereto
diocese, synod, or district organization desires to may be filed by any person, which date shall not be less
incorporate for the administration of its affairs, than thirty (30) days nor more than sixty (60) days after the
properties and estate; entry of the order. Before such date, a copy of the order
5. The place where the principal office of the shall be published at least once a week for three (3)
corporation is to be established and located, which consecutive weeks in a newspaper of general circulation
place must be within the Philippines; and published in the municipality or city where the principal
6. The names, nationalities, and residences of the office of the corporation is situated, or if there be no such
trustees elected by the religious society or newspaper, then in a newspaper of general circulation in
religious order, or the diocese, synod, or district the Philippines, and a similar copy shall be posted for three
organization to serve for the first year or such (3) consecutive weeks in three (3) public places in such
other period as may be prescribed by the laws of municipality or city.
the religious society or religious order, or of the
diocese, synod, or district organization, the board Upon five (5) day’s notice, given after the date on which the
of trustees to be not less than five (5) nor more right to file objections as fixed in the order has expired, the
than fifteen (15). (160a) Commission shall proceed to hear the petition and try any
issue made by the objections filed; and if no such objection
TITLE XIVDISSOLUTION is sufficient, and the material allegations of the petition are
true, it shall render judgment dissolving the corporation
Section 117. Methods of dissolution. – A corporation and directing such disposition of its assets as justice
formed or organized under the provisions of this Code may requires, and may appoint a receiver to collect such assets
be dissolved voluntarily or involuntarily. (n) and pay the debts of the corporation. (Rule 104, RCa)

Section 118. Voluntary dissolution where no creditors are Section 120. Dissolution by shortening corporate term. – A
affected. – If dissolution of a corporation does not prejudice voluntary dissolution may be effected by amending the
the rights of any creditor having a claim against it, the articles of incorporation to shorten the corporate term
dissolution may be effected by majority vote of the board pursuant to the provisions of this Code. A copy of the
of directors or trustees, and by a resolution duly adopted amended articles of incorporation shall be submitted to the
by the affirmative vote of the stockholders owning at least Securities and Exchange Commission in accordance with
two-thirds (2/3) of the outstanding capital stock or of at this Code. Upon approval of the amended articles of
least two-thirds (2/3) of the members of a meeting to be incorporation of the expiration of the shortened term, as
held upon call of the directors or trustees after publication the case may be, the corporation shall be deemed dissolved
of the notice of time, place and object of the meeting for without any further proceedings, subject to the provisions
three (3) consecutive weeks in a newspaper published in of this Code on liquidation. (n)
the place where the principal office of said corporation is
located; and if no newspaper is published in such place, Section 121. Involuntary dissolution. – A corporation may
then in a newspaper of general circulation in the be dissolved by the Securities and Exchange Commission
Philippines, after sending such notice to each stockholder upon filing of a verified complaint and after proper notice
or member either by registered mail or by personal delivery and hearing on the grounds provided by existing laws, rules
at least thirty (30) days prior to said meeting. A copy of the and regulations. (n)
resolution authorizing the dissolution shall be certified by a
majority of the board of directors or trustees and Section 122. Corporate liquidation. – Every corporation
countersigned by the secretary of the corporation. The whose charter expires by its own limitation or is annulled
Securities and Exchange Commission shall thereupon issue by forfeiture or otherwise, or whose corporate existence
the certificate of dissolution. (62a) for other purposes is terminated in any other manner, shall
nevertheless be continued as a body corporate for three (3)
Section 119. Voluntary dissolution where creditors are years after the time when it would have been so dissolved,
affected. – Where the dissolution of a corporation may for the purpose of prosecuting and defending suits by or
prejudice the rights of any creditor, the petition for against it and enabling it to settle and close its affairs, to
dissolution shall be filed with the Securities and Exchange dispose of and convey its property and to distribute its
Commission. The petition shall be signed by a majority of its assets, but not for the purpose of continuing the business
board of directors or trustees or other officers having the for which it was established.
management of its affairs, verified by its president or
secretary or one of its directors or trustees, and shall set At any time during said three (3) years, the corporation is
forth all claims and demands against it, and that its authorized and empowered to convey all of its property to
dissolution was resolved upon by the affirmative vote of the trustees for the benefit of stockholders, members,
stockholders representing at least two-thirds (2/3) of the creditors, and other persons in interest. From and after any
such conveyance by the corporation of its property in trust appropriate government agency;
for the benefit of its stockholders, members, creditors and 6. The names and addresses of the present directors
others in interest, all interest which the corporation had in and officers of the corporation;
the property terminates, the legal interest vests in the 7. A statement of its authorized capital stock and the
trustees, and the beneficial interest in the stockholders, aggregate number of shares which the corporation
members, creditors or other persons in interest. has authority to issue, itemized by classes, par
value of shares, shares without par value, and
Upon the winding up of the corporate affairs, any asset series, if any;
distributable to any creditor or stockholder or member who 8. A statement of its outstanding capital stock and
is unknown or cannot be found shall be escheated to the the aggregate number of shares which the
city or municipality where such assets are located. corporation has issued, itemized by classes, par
value of shares, shares without par value, and
Except by decrease of capital stock and as otherwise series, if any;
allowed by this Code, no corporation shall distribute any of 9. A statement of the amount actually paid in; and
its assets or property except upon lawful dissolution and 10. Such additional information as may be necessary
after payment of all its debts and liabilities. (77a, 89a, 16a) or appropriate in order to enable the Securities
and Exchange Commission to determine whether
TITLE XVFOREIGN CORPORATIONS such corporation is entitled to a license to transact
business in the Philippines, and to determine and
Section 123. Definition and rights of foreign corporations. – assess the fees payable.
For the purposes of this Code, a foreign corporation is one
formed, organized or existing under any laws other than Attached to the application for license shall be a duly
those of the Philippines and whose laws allow Filipino executed certificate under oath by the authorized official or
citizens and corporations to do business in its own country officials of the jurisdiction of its incorporation, attesting to
or state. It shall have the right to transact business in the the fact that the laws of the country or state of the
Philippines after it shall have obtained a license to transact applicant allow Filipino citizens and corporations to do
business in this country in accordance with this Code and a business therein, and that the applicant is an existing
certificate of authority from the appropriate government corporation in good standing. If such certificate is in a
agency. (n) foreign language, a translation thereof in English under
oath of the translator shall be attached thereto.
Section 124. Application to existing foreign corporations. –
Every foreign corporation which on the date of the The application for a license to transact business in the
effectivity of this Code is authorized to do business in the Philippines shall likewise be accompanied by a statement
Philippines under a license therefore issued to it, shall under oath of the president or any other person authorized
continue to have such authority under the terms and by the corporation, showing to the satisfaction of the
condition of its license, subject to the provisions of this Securities and Exchange Commission and other
Code and other special laws. (n) governmental agency in the proper cases that the applicant
is solvent and in sound financial condition, and setting forth
Section 125. Application for a license. – A foreign the assets and liabilities of the corporation as of the date
corporation applying for a license to transact business in not exceeding one (1) year immediately prior to the filing of
the Philippines shall submit to the Securities and Exchange the application.
Commission a copy of its articles of incorporation and by-
laws, certified in accordance with law, and their translation Foreign banking, financial and insurance corporations shall,
to an official language of the Philippines, if necessary. The in addition to the above requirements, comply with the
application shall be under oath and, unless already stated in provisions of existing laws applicable to them. In the case of
its articles of incorporation, shall specifically set forth the all other foreign corporations, no application for license to
following: transact business in the Philippines shall be accepted by the
1. The date and term of incorporation; Securities and Exchange Commission without previous
2. The address, including the street number, of the authority from the appropriate government agency,
principal office of the corporation in the country or whenever required by law. (68a)
state of incorporation;
3. The name and address of its resident agent Section 126. Issuance of a license. – If the Securities and
authorized to accept summons and process in all Exchange Commission is satisfied that the applicant has
legal proceedings and, pending the establishment complied with all the requirements of this Code and other
of a local office, all notices affecting the special laws, rules and regulations, the Commission shall
corporation; issue a license to the applicant to transact business in the
4. The place in the Philippines where the corporation Philippines for the purpose or purposes specified in such
intends to operate; license. Upon issuance of the license, such foreign
5. The specific purpose or purposes which the corporation may commence to transact business in the
corporation intends to pursue in the transaction of Philippines and continue to do so for as long as it retains its
its business in the Philippines: Provided, That said authority to act as a corporation under the laws of the
purpose or purposes are those specifically stated country or state of its incorporation, unless such license is
in the certificate of authority issued by the sooner surrendered, revoked, suspended or annulled in
accordance with this Code or other special laws. processes may be served in all actions or other legal
proceedings against such corporation, and consenting that
Within sixty (60) days after the issuance of the license to service upon such resident agent shall be admitted and held
transact business in the Philippines, the license, except as valid as if served upon the duly authorized officers of the
foreign banking or insurance corporation, shall deposit with foreign corporation at its home office. Any such foreign
the Securities and Exchange Commission for the benefit of corporation shall likewise execute and file with the
present and future creditors of the licensee in the Securities and Exchange Commission an agreement or
Philippines, securities satisfactory to the Securities and stipulation, executed by the proper authorities of said
Exchange Commission, consisting of bonds or other corporation, in form and substance as follows:
evidence of indebtedness of the Government of the
Philippines, its political subdivisions and instrumentalities, "The (name of foreign corporation) does hereby stipulate
or of government-owned or controlled corporations and and agree, in consideration of its being granted by the
entities, shares of stock in "registered enterprises" as this Securities and Exchange Commission a license to transact
term is defined in Republic Act No. 5186, shares of stock in business in the Philippines, that if at any time said
domestic corporations registered in the stock exchange, or corporation shall cease to transact business in the
shares of stock in domestic insurance companies and banks, Philippines, or shall be without any resident agent in the
or any combination of these kinds of securities, with an Philippines on whom any summons or other legal processes
actual market value of at least one hundred thousand may be served, then in any action or proceeding arising out
(P100,000.) pesos; Provided, however, That within six (6) of any business or transaction which occurred in the
months after each fiscal year of the licensee, the Securities Philippines, service of any summons or other legal process
and Exchange Commission shall require the licensee to may be made upon the Securities and Exchange
deposit additional securities equivalent in actual market Commission and that such service shall have the same force
value to two (2%) percent of the amount by which the and effect as if made upon the duly-authorized officers of
licensee’s gross income for that fiscal year exceeds five the corporation at its home office."
million (P5,000,000.00) pesos. The Securities and Exchange
Commission shall also require deposit of additional Whenever such service of summons or other process shall
securities if the actual market value of the securities on be made upon the Securities and Exchange Commission,
deposit has decreased by at least ten (10%) percent of their the Commission shall, within ten (10) days thereafter,
actual market value at the time they were deposited. The transmit by mail a copy of such summons or other legal
Securities and Exchange Commission may at its discretion process to the corporation at its home or principal office.
release part of the additional securities deposited with it if The sending of such copy by the Commission shall be
the gross income of the licensee has decreased, or if the necessary part of and shall complete such service. All
actual market value of the total securities on deposit has expenses incurred by the Commission for such service shall
increased, by more than ten (10%) percent of the actual be paid in advance by the party at whose instance the
market value of the securities at the time they were service is made.
deposited. The Securities and Exchange Commission may,
from time to time, allow the licensee to substitute other In case of a change of address of the resident agent, it shall
securities for those already on deposit as long as the be his or its duty to immediately notify in writing the
licensee is solvent. Such licensee shall be entitled to collect Securities and Exchange Commission of the new address.
the interest or dividends on the securities deposited. In the (72a; and n)
event the licensee ceases to do business in the Philippines,
the securities deposited as aforesaid shall be returned, Section 129. Law applicable. – Any foreign corporation
upon the licensee’s application therefor and upon proof to lawfully doing business in the Philippines shall be bound by
the satisfaction of the Securities and Exchange Commission all laws, rules and regulations applicable to domestic
that the licensee has no liability to Philippine residents, corporations of the same class, except such only as provide
including the Government of the Republic of the for the creation, formation, organization or dissolution of
Philippines. (n) corporations or those which fix the relations, liabilities,
responsibilities, or duties of stockholders, members, or
Section 127. Who may be a resident agent. – A resident officers of corporations to each other or to the corporation.
agent may be either an individual residing in the Philippines (73a)
or a domestic corporation lawfully transacting business in
the Philippines: Provided, That in the case of an individual, Section 130. Amendments to articles of incorporation or by-
he must be of good moral character and of sound financial laws of foreign corporations. – Whenever the articles of
standing. (n) incorporation or by-laws of a foreign corporation
authorized to transact business in the Philippines are
Section 128. Resident agent; service of process. – The amended, such foreign corporation shall, within sixty (60)
Securities and Exchange Commission shall require as a days after the amendment becomes effective, file with the
condition precedent to the issuance of the license to Securities and Exchange Commission, and in the proper
transact business in the Philippines by any foreign cases with the appropriate government agency, a duly
corporation that such corporation file with the Securities authenticated copy of the articles of incorporation or by-
and Exchange Commission a written power of attorney laws, as amended, indicating clearly in capital letters or by
designating some person who must be a resident of the underscoring the change or changes made, duly certified by
Philippines, on whom any summons and other legal the authorized official or officials of the country or state of
incorporation. The filing thereof shall not of itself enlarge or laws or of any articles of merger or consolidation
alter the purpose or purposes for which such corporation is within the time prescribed by this Title;
authorized to transact business in the Philippines. (n) 5. A misrepresentation of any material matter in any
application, report, affidavit or other document
Section 131. Amended license. – A foreign corporation submitted by such corporation pursuant to this
authorized to transact business in the Philippines shall Title;
obtain an amended license in the event it changes its 6. Failure to pay any and all taxes, imposts,
corporate name, or desires to pursue in the Philippines assessments or penalties, if any, lawfully due to
other or additional purposes, by submitting an application the Philippine Government or any of its agencies
therefor to the Securities and Exchange Commission, or political subdivisions;
favorably endorsed by the appropriate government agency 7. Transacting business in the Philippines outside of
in the proper cases. (n) the purpose or purposes for which such
corporation is authorized under its license;
Section 132. Merger or consolidation involving a foreign 8. Transacting business in the Philippines as agent of
corporation licensed in the Philippines. – One or more or acting for and in behalf of any foreign
foreign corporations authorized to transact business in the corporation or entity not duly licensed to do
Philippines may merge or consolidate with any domestic business in the Philippines; or
corporation or corporations if such is permitted under 9. Any other ground as would render it unfit to
Philippine laws and by the law of its incorporation: transact business in the Philippines. (n)
Provided, That the requirements on merger or
consolidation as provided in this Code are followed. Section 135. Issuance of certificate of revocation. – Upon
the revocation of any such license to transact business in
Whenever a foreign corporation authorized to transact the Philippines, the Securities and Exchange Commission
business in the Philippines shall be a party to a merger or shall issue a corresponding certificate of revocation,
consolidation in its home country or state as permitted by furnishing a copy thereof to the appropriate government
the law of its incorporation, such foreign corporation shall, agency in the proper cases.
within sixty (60) days after such merger or consolidation
becomes effective, file with the Securities and Exchange The Securities and Exchange Commission shall also mail to
Commission, and in proper cases with the appropriate the corporation at its registered office in the Philippines a
government agency, a copy of the articles of merger or notice of such revocation accompanied by a copy of the
consolidation duly authenticated by the proper official or certificate of revocation. (n)
officials of the country or state under the laws of which
merger or consolidation was effected: Provided, however, Section 136. Withdrawal of foreign corporations. – Subject
That if the absorbed corporation is the foreign corporation to existing laws and regulations, a foreign corporation
doing business in the Philippines, the latter shall at the licensed to transact business in the Philippines may be
same time file a petition for withdrawal of its license in allowed to withdraw from the Philippines by filing a petition
accordance with this Title. (n) for withdrawal of license. No certificate of withdrawal shall
be issued by the Securities and Exchange Commission
Section 133. Doing business without a license. – No foreign unless all the following requirements are met;
corporation transacting business in the Philippines without 1. All claims which have accrued in the Philippines
a license, or its successors or assigns, shall be permitted to have been paid, compromised or settled;
maintain or intervene in any action, suit or proceeding in 2. All taxes, imposts, assessments, and penalties, if
any court or administrative agency of the Philippines; but any, lawfully due to the Philippine Government or
such corporation may be sued or proceeded against before any of its agencies or political subdivisions have
Philippine courts or administrative tribunals on any valid been paid; and
cause of action recognized under Philippine laws. (69a) 3. The petition for withdrawal of license has been
published once a week for three (3) consecutive
Section 134. Revocation of license. – Without prejudice to weeks in a newspaper of general circulation in the
other grounds provided by special laws, the license of a Philippines.
foreign corporation to transact business in the Philippines
may be revoked or suspended by the Securities and TITLE XVIMISCELLANEOUS PROVISIONS
Exchange Commission upon any of the following grounds:
1. Failure to file its annual report or pay any fees as Section 137. Outstanding capital stock defined. – The term
required by this Code; "outstanding capital stock", as used in this Code, means the
2. Failure to appoint and maintain a resident agent in total shares of stock issued under binding subscription
the Philippines as required by this Title; agreements to subscribers or stockholders, whether or not
3. Failure, after change of its resident agent or of his fully or partially paid, except treasury shares. (n)
address, to submit to the Securities and Exchange
Commission a statement of such change as Section 138. Designation of governing boards. – The
required by this Title; provisions of specific provisions of this Code to the contrary
4. Failure to submit to the Securities and Exchange notwithstanding, non-stock or special corporations may,
Commission an authenticated copy of any through their articles of incorporation or their by-laws,
amendment to its articles of incorporation or by- designate their governing boards by any name other than
as board of trustees. (n)
Section 143. Rule-making power of the Securities and
Section 139. Incorporation and other fees. – The Securities Exchange Commission. – The Securities and Exchange
and Exchange Commission is hereby authorized to collect Commission shall have the power and authority to
and receive fees as authorized by law or by rules and implement the provisions of this Code, and to promulgate
regulations promulgated by the Commission.1âwphi1 (n) rules and regulations reasonably necessary to enable it to
perform its duties hereunder, particularly in the prevention
Section 140. Stock ownership in certain corporations. – of fraud and abuses on the part of the controlling
Pursuant to the duties specified by Article XIV of the stockholders, members, directors, trustees or officers. (n)
Constitution, the National Economic and Development
Authority shall, from time to time, make a determination of Section 144. Violations of the Code. – Violations of any of
whether the corporate vehicle has been used by any the provisions of this Code or its amendments not
corporation or by business or industry to frustrate the otherwise specifically penalized therein shall be punished
provisions thereof or of applicable laws, and shall submit to by a fine of not less than one thousand (P1,000.00) pesos
the Batasang Pambansa, whenever deemed necessary, a but not more than ten thousand (P10,000.00) pesos or by
report of its findings, including recommendations for their imprisonment for not less than thirty (30) days but not
prevention or correction. more than five (5) years, or both, in the discretion of the
court. If the violation is committed by a corporation, the
Maximum limits may be set by the Batasang Pambansa for same may, after notice and hearing, be dissolved in
stockholdings in corporations declared by it to be vested appropriate proceedings before the Securities and
with a public interest pursuant to the provisions of this Exchange Commission: Provided, That such dissolution shall
section, belonging to individuals or groups of individuals not preclude the institution of appropriate action against
related to each other by consanguinity or affinity or by the director, trustee or officer of the corporation
close business interests, or whenever it is necessary to responsible for said violation: Provided, further, That
achieve national objectives, prevent illegal monopolies or nothing in this section shall be construed to repeal the
combinations in restraint or trade, or to implement national other causes for dissolution of a corporation provided in
economic policies declared in laws, rules and regulations this Code. (190 1/2 a)
designed to promote the general welfare and foster
economic development. Section 145. Amendment or repeal. – No right or remedy in
favor of or against any corporation, its stockholders,
In recommending to the Batasang Pambansa corporations, members, directors, trustees, or officers, nor any liability
businesses or industries to be declared vested with a public incurred by any such corporation, stockholders, members,
interest and in formulating proposals for limitations on directors, trustees, or officers, shall be removed or
stock ownership, the National Economic and Development impaired either by the subsequent dissolution of said
Authority shall consider the type and nature of the industry, corporation or by any subsequent amendment or repeal of
the size of the enterprise, the economies of scale, the this Code or of any part thereof. (n)
geographic location, the extent of Filipino ownership, the
labor intensity of the activity, the export potential, as well Section 146. Repealing clause. – Except as expressly
as other factors which are germane to the realization and provided by this Code, all laws or parts thereof inconsistent
promotion of business and industry. with any provision of this Code shall be deemed repealed.
(n)
Section 141. Annual report or corporations. – Every
corporation, domestic or foreign, lawfully doing business in Section 147. Separability of provisions. – Should any
the Philippines shall submit to the Securities and Exchange provision of this Code or any part thereof be declared
Commission an annual report of its operations, together invalid or unconstitutional, the other provisions, so far as
with a financial statement of its assets and liabilities, they are separable, shall remain in force. (n)
certified by any independent certified public accountant in
appropriate cases, covering the preceding fiscal year and Section 148. Applicability to existing corporations. – All
such other requirements as the Securities and Exchange corporations lawfully existing and doing business in the
Commission may require. Such report shall be submitted Philippines on the date of the effectivity of this Code and
within such period as may be prescribed by the Securities heretofore authorized, licensed or registered by the
and Exchange Commission. (n) Securities and Exchange Commission, shall be deemed to
have been authorized, licensed or registered under the
Section 142. Confidential nature of examination results. – provisions of this Code, subject to the terms and conditions
All interrogatories propounded by the Securities and of its license, and shall be governed by the provisions
Exchange Commission and the answers thereto, as well as hereof: Provided, That if any such corporation is affected by
the results of any examination made by the Commission or the new requirements of this Code, said corporation shall,
by any other official authorized by law to make an unless otherwise herein provided, be given a period of not
examination of the operations, books and records of any more than two (2) years from the effectivity of this Code
corporation, shall be kept strictly confidential, except within which to comply with the same. (n)
insofar as the law may require the same to be made public
or where such interrogatories, answers or results are Section 149. Effectivity. – This Code shall take effect
necessary to be presented as evidence before any court. (n) immediately upon its approval.