1) True Quasi (by prescription/by estoppels) A corporation may, furthermore, classify its shares for the purpose of

2) Public Private insuring compliance with constitutional or legal requirements. .

Sec.4. Corporations created by special laws or charters Holders of nonvoting shares shall nevertheless be entitled to vote
on the following matters:
– Corporations created by special laws or charters shall be
governed primarily by the provisions of the special law or charter 1. Amendment of the articles of incorporation;
creating them or applicable to them, supplemented by the provisions 2. Adoption and amendment of by-laws;
of this Code, insofar as they are applicable. 3. Sale, lease, exchange, mortgage, pledge or other disposition of
all or substantially all of the corporate property;
Sec.5. Corporators and incorporators, stockholders and members 4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
– Corporators are those who compose a corporation, whether as 6. Merger or consolidation of the corporation with another
stockholders or as members. Incorporators are those stockholders or corporation or other corporations;
members mentioned in the articles of incorporation as originally 7. Investment of corporate funds in another corporation or
forming and composing the corporation and who are signatories business in accordance with this Code; and
thereof. 8. Dissolution of the corporation.

Components of a corporation Doctrine of Equality of Shares

1) Corporators – compose the corporation, whether stockholders The law provides that “Except as otherwise provided by the articles
or members. of incorporation and stated in the certificate of stock, each share shall
2) Incorporators – corporators originally forming and composing be in all respects equal to every other share”.
the corporation and who executed and signed the articles of
incorporation. When classification of shares may be made
3) Stockholders – owners of shares of stock in a stock
corporation. Shareholders. 1) By incorporators
4) Members – corporators which has no capital stock. 2) By the board of directors and the stockholders

Others Capital stock and capital

1) Promoters – bring about or cause to bring about the formation 1) Capital stock – amount fixed in the articles of incorporation, to
and organization of a corporation be subscribed and paid in by the shareholders of a corporation,
2) Subscribers – or persons who agreed to take and pay for either in money or property, labor or services, at the
original, unissued shares of a corporation formed or to be organization of the corporation or afterwards and upon which it
formed. is to conduct its operation.
3) Underwriter – usually an investment banker
a. Authorized capital stock – synonymous with capital
Sec. 6. Classification of shares stock where the shares of the corporation have par
value
– The classification of shares, their corresponding rights, privileges b. Subscribed capital stock – amount of capital stock
or restrictions as may be stated in the articles of incorporation. Each subscribed whether fully paid or not.
share shall be equal in all respects to every other share, except as c. Outstanding capital stock – portion of the capital stock
otherwise provided in the articles of incorporation and in the which is issued and held by persons other than the
certificate of stock. corporation itself.
d. Paid-up capital stock – portion of the subscribed or
The shares in stock corporation may be divided into classes or series outstanding capital stock that is paid.
of shares, or both. No share may be deprived of voting rights except e. Unissued capital stock – portion of the capital stock that
those classified and issued as "preferred" or "redeemable" shares, is not issued or subscribed.
unless otherwise provided in this Code: Provided, That there shall f. Legal capital – amount equal to the aggregate par value
always be a class or series of shares which have complete voting and/or issued value of the outstanding capital stock.
rights.
2) Capital – the entire property or assets of the corporation.
Except as provided in the immediately preceding paragraph, the vote Includes amount invested by the stockholders plus the
necessary to approve a particular corporate act as provided in this undistributed earnings less losses and expenses.
Code shall be deemed to refer only to stocks with voting rights.
Capital Capital Stock
The shares or series of shares may or may not have a par value:
Provided, however, That banks, trust companies, insurance - Actual corporate property - an amount
companies, public utilities, and building and loan associations shall - Concrete thing - abstract
not be permitted to issue no-par value shares of stock. - Fluctuates - amount fixed
- Affected by profits and losses - unaffected by P&L
Shares of capital stock issued without par value shall be deemed fully - Belongs to the corporation - to stockholders
paid and non-assessable and the holder of such shares shall not be
- Either real or personal property - always property
liable to the corporation or to its creditors in respect thereto:
Provided; That no par value shares may be issued for a consideration
Stock or share of stock – one of the units into which the capital
of at least five (P5.00) pesos per share: Provided, further, That the
stock is divided. It represents the interest or right which the owner
entire consideration received by the corporation for its no-par value
has in the management of the corporation, in a portion of the
shares shall be treated as capital and shall not be available for
corporate earnings, and upon its dissolution and winding up.
distribution as dividends.
Nature of share of stock
 - Represents a distinct undivided share or interest in the
common property of the corporation 2.) Investigating - involves an analysis of needs financial,
- Constitutes property distinction from the capital management, plant, material and labor and decision
- Do not constitute an indebtedness of the corporation to the whether the estimated earnings justify the effort.
shareholder
- Represents an undivided part of the corporation’s property
3.) Assemby- this sage must have assurance of control least
Certificate of stock – written acknowledgement by the corporation third parties deprive him of the fruits of his effort. Control
of the interest, right, and participation of a person in the management, may cover such items, for example, as patents, leases,
profits and assets of a corporation. It is a formal written evidence of options on property and contract for services.
ownership.
The distinction between Corporation and Incorporation
Nature of par value / book value/ market value 1. Corporation - is a legal or juridical institution.
2. Incorporation - is the act by which that
Par value – amount of money or property contributed by the institution created.
shareholder to the capital stock of the corporation.

Book value – true value Steps in incorporation

Market value – price a willing seller would sell and a willing buyer 1) Drafting and execution of the articles of incorporation
would buy.
2) Filing with SEC of the articles of incorporation together with:
Sec. 8. Redeemable Shares - Redeemable share may be issued by a. Treasurer’s affidavit
the corporation when expressly provided in the articles of b. Favourable recommendation of the appropriate
incorporations. They are shares which may be purchased by the government agency
corporation from the holders of such shares upon the expiration of
fixed period, regardless of the existence of unrestricted retained Qualifications (incorporators)
earnings in the books of the corporation, and upon such other terms
and conditions stated in the articles of incorporation and other 1) Natural persons – ( TAO)
certificate of stock representing the shares, subject to rules and 2) Incorporators must have the capacity to enter in to a valid
regulations issued by the Commission. contract,
3) Residents of the Philippines – majority of incorporators
Sec. 9. Treasury shares – Treasury shares are shares of stock which 4) Citizens of the Philippines (based on the required Pinoy
have been issued and fully paid for, but subsequently reacquired by ownership)
the issuing corporation by purchase, redemption, donation or through 5) Owners of or subscribers to at least one share
some other lawful means. Such shares may again be disposed of for a
reasonable price fixed by the board of directors. Sec.11. Corporate term – A corporation shall have perpetual
existence unless its articles of incorporation provides otherwise.
Sec. 10. Number and qualifications of incorporators – Any
person, partnership association or corporation , singly or jointly with
others but not more than fifteen (15)in number, may organize a Corporations with certificates of incorporation issued prior to the
corporation for any lawful purpose or purposes. Provided, That effectivity of this Code and which continue to exist shall have
natural persons who are licensed to practice a profession , and perpetual existence, unless the corporation, upon a vote of its
partnership or associations organized for the purpose of practicing a stockholders representing a majority of its articles of
profession , shall not allowed to organize as a corporation unless incorporation: Provided, That any change in the corporate right of
otherwise provided under special laws, Incorporators who are natural dissenting stockholders in accordance with the provisions of this
person must be of legal age. Code.

Each of the incorporators of a stock corporation must own or be a A corporate term for a specific period may be extended or shortened
subscriber to at least one (1) share of the capital stock of the by amending the articles of incorporation: Provided, That no
corporation. extension may be made earlier than three (3) years prior to the
original or subsequent expiry date(s) unless there are justifiable
A corporation with a single stockholder is considered a One Person reasons for an earlier extension as may be determined by the
Corporation as described in Title XIII of this Code. Commission: Provided, further, That such extension of the corporate
term shall take effect only on the day following the original or
Steps in the creation of a corporation subsequent expiry date(s).
1) Promotion- business operations peculiar to the business world
by which a company is generally brought into the existence. A corporation whose term has expired may apply for
revival of its corporate existence, together with all the rights and
2.) Promoters- the one who or with others takes it upon himself to privileges under its certificate of incorporation and subject to all of its
organized a corporation. duties, debts and liabilities existing prior to its revival. Upon approval
by the Commission, the corporation shall be deemed revived and a
3 ) Incorporation certificate of revival of corporate existence shall be issued, giving it
perpetual existence, unless its application for revival provides
4.) Formal organization and commencement of business operations. otherwise.

Stages in corporate promotion No application for revival of certificate of incorporation of