STOCK VS.

NON-STOCK
CORPORATIONS
STOCK NON-STOCK
Number of 0D[LPXPRI May be more than 15 as
Directors 15GLUHFWRUV the articles or the by-laws
provide
Term of office of 1 year until their  yearV until their
the successor is elected successor is elected and
directors/trustees and qualified qualified
STOCK VS. NON-STOCK
CORPORATIONS
STOCK NON-STOCK
Purpose For profit Primarily organized for
charitable, religious,
educational, professional,
cultural, scientific, social,
civic service, or similar
purposes, like trade,
industry, agricultural and
like chambers or any
combination thereof
Voting Cumulative Straight voting unless
authorized under the by-
laws or AOI
STOCK VS. NON-STOCK
CORPORATIONS
STOCK NON-STOCK
Manner of voting Either in person or (LWKHULQSHUVRQRUE\
by proxyRUUHPRWH SUR[\RUUHPRWH
FRPPXQLFDWLRQ FRPPXQLFDWLRQ
Distribution of Authorized Not authorized
dividend
Transferability of Transferable Membership is personal
interest and non-transferable,
unless the AOI or by-laws
provide otherwise
Ownership of director At least one share Member
Place of meeting of City or municipality $VSURYLGHGLQ%\ODZV
stockholders/member where the principal Dny place in the
s office is located Philippines
CLOSE VS. ORDINARY STOCK
CORPORATIONS
CLOSE CORPORATION ORDINARY STOCK
CORPORATION
The number of stockholders No limitation as to number of
cannot exceed 20 shareholder
To the extent that all Maximum number of directors is
stockholders can be deemed 15
directors, the number of
directors can effectively be
more than 15
Shares of stock are subject Generally no restriction on
to specified restrictions transfer of shares
Shares of stock are No prohibition
prohibited from being listed
in the stock exchange or
offered for sale to the public
CLOSE VS. ORDINARY STOCK
CORPORATIONS
CLOSE CORPORATION ORDINARY STOCK
CORPORATION
Stockholders may take an Management is lodged in the
active part in corporate Board of Directors
management by vesting
management to them rather
than a Board of Director
Those active in management Directors are liable for torts only
are personally liable for if they have acted negligently or
corporate torts unless the fraudulently
corporation has obtained an
adequate liability insurance
Directors can validly act even Directors must, as a rule, act as
without a meeting a body at a duly constituted
meeting
CLOSE VS. ORDINARY STOCK
CORPORATIONS
CLOSE CORPORATION ORDINARY STOCK
CORPORATION
Agreements between Not valid and binding since
stockholders regarding thestockholders’ agreement cannot
operations of the business can limit the discretion of the Board
validly be made to manage corporate affairs
To the extent that directors may Ordinarily, no such classification
be classified into one or more and no restrictions on cumulative
classes and to be voted solely byvoting
a particular class of stock,
cumulative voting may, in
effect, be restricted
The articles of incorporation Officers are elected by the Board
may provide that all officers of Directors
shall be elected or appointed by
the stockholders
CLOSE VS. ORDINARY STOCK
CORPORATIONS
CLOSE CORPORATION ORDINARY STOCK
CORPORATION
It may provide for greater Although the articles of
quorum and voting incorporation or by-laws may
requirements in meetings of provide for greater quorum and
stockholders and directors voting requirements in directors’
meeting, those for stockholders’
meeting cannot generally be
altered
Restriction on transfer of Valid and binding if indicated in the
shares should be indicated in articles of incorporation and stock
the articles of incorporation, certificates
by-laws and stock certificates
CLOSE VS. ORDINARY STOCK
CORPORATIONS
CLOSE CORPORATION ORDINARY STOCK
CORPORATION
Pre-emptive right of Pre-emptive rights may be denied
stockholders is broader as it asprovidedforinsection3
includes all issues without
exception
A stockholder may withdraw Unless he sells his shares, a
and compel the corporation to stockholder cannot get back his
purchase his shares for any investment nor compel the
reason with the limitation only corporation to buy his shares
that the corporation has except in the exercise of his
sufficient assets to cover its appraisalright6HF
liabilities exclusive of capital
stock
CLOSE VS. ORDINARY STOCK
CORPORATIONS
CLOSE CORPORATION ORDINARY STOCK
CORPORATION
The proper forum may Courts cannot interfere with the
interfere in the management business judgment of the
of a close corporation in case directors/stockholders “BUSINESS
of deadlocks under Section JUDGMENT RULE”
10, even of the
directors/stockholders are
acting in good faith
Any stockholder may petition Dissolutionmaybehadonlyonthe
the SEC for corporate grounds provided by the provisions
dissolution on grounds among of the 5HYLVHG Code on dissolution
others, provides for in section andP.D.902-A,asamended
10.
SPECIAL CORPORATIONS
EDUCATIONAL CORPORATIONS:
1. Trustees of educational institutions organized as non-stock
corporations shall not be less than five (5) nor more than fifteen
(15): Provided, however, That the number of trustees shall be in
multiples of five (5).
2. Unless otherwise provided in the articles of incorporation or the by-
laws, the board of trustees of incorporated schools, colleges, or
other institutions of learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of their number
shall expire every year. Trustees thereafter elected to fill vacancies,
occurring before the expiration of a particular term, shall hold office
only for the unexpired period. Trustees elected thereafter to fill
vacancies caused by expiration of term shall hold office for five (5)
years. A majority of the trustees shall constitute a quorum for the
transaction of business. The powers and authority of trustees shall
be defined in the by-laws.
SPECIAL CORPORATIONS
EDUCATIONAL CORPORATIONS:
1. Trustees of educational institutions organized as non-stock
corporations shall not be less than five (5) nor more than fifteen
(15): Provided, however, That the number of trustees shall be in
multiples of five (5).
2. Unless otherwise provided in the articles of incorporation or the by-
laws, the board of trustees of incorporated schools, colleges, or
other institutions of learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of their number
shall expire every year. Trustees thereafter elected to fill vacancies,
occurring before the expiration of a particular term, shall hold office
only for the unexpired period. Trustees elected thereafter to fill
vacancies caused by expiration of term shall hold office for five (5)
years. A majority of the trustees shall constitute a quorum for the
transaction of business. The powers and authority of trustees shall
be defined in the by-laws.
SPECIAL CORPORATIONS
EDUCATIONAL CORPORATIONS:
3. For institutions organized as stock corporations, the number
and term of directors shall be governed by the provisions on
stock corporations.
4. Educational institutions, other than those established by
religious groups and mission boards, shall be owned solely by
citizens of the Philippines or corporations or associations at
least sixty per centum of the capital of which is owned by
such citizens. The control and administration of educational
institutions shall be vested in citizens of the Philippines.
SPECIAL CORPORATIONS
RELIGIOUS CORPORATIONS:
1. Religious corporations may be incorporated by one or more persons.
Such corporations may be classified into corporations sole and
religious societies.
2. CORPORATION SOLE: consists of one person only and his
successor in some particular station, who are incorporated by law in
order to give them some legal capacities and advantages, particularly
that of perpetuity, which in their natural persons they could not have
had.
3. TERM OF EXISTENCE: the AOI of a corporation sole does not
require a provision for its term of existence. For obvious reasons,
since a corporation sole is supposed to exist in perpetuity. It may,
however,bedissolvedinaccordancewithSec.11oftheCode.
SPECIAL CORPORATIONS
RELIGIOUS CORPORATIONS:
4. BEGINNING OF CORPORATE EXISTENCE: is upon filing of the
verified AOI with the SEC and the documents required under Sec.
11. This serves as an exception to the rule that a corporation
acquires juridical personality only upon the issuance of a certificate
ofincorporationbythesaidgovernmentagency.
5. POWER TO ALIENATE PROPERTIES, LIMITATION: The extent
of the its power to mortgage or sell real properties is, however,
subject to certain restriction, that is, a proper court order must first
be secured for that purpose, which is not otherwise imposed in any
other corporation. Intervention of the court may dispensed with only
if the rules, regulations and discipline of the religious denomination,
sect or church concerned provide or regulate the manner or method
of holding or alienating properties
SPECIAL CORPORATIONS
RELIGIOUS CORPORATIONS:
6. Religious societies. - Any religious society or religious order, or
any diocese, synod, or district organization of any religious
denomination, sect or church, unless forbidden by the constitution,
rules, regulations, or discipline of the religious denomination, sect
or church of which it is a part, or by competent authority, may, upon
written consent and/or by an affirmative vote at a meeting called
for the purpose of at least two-thirds (2/3) of its membership,
incorporate for the administration of its temporalities or for the
management of its affairs, properties and estate by filing with the
Securities and Exchange Commission, articles of incorporation
verified by the affidavit of the presiding elder, secretary, or clerk or
other member of such religious society or religious order, or
diocese, synod, or district organization of the religious
denomination, sect or church.
DISSOLUTION
DISSOLUTION is the extinguishment of the corporate franchise
and the termination of corporate existence.

When a corporation is dissolved, it ceases to be a juridical entity

and can no longer pursue the business for which it was
incorporated. It will nevertheless continue as a body corporate
for another period of three years from the time it is dissolved but
only for the purpose of winding up its affairs and the liquidation
of its assets.
THREE WAYS TO DISOOLVE A
CORPORATION
1. Expiration of its corporate term

Extension: should be made before the expiration of the original
term, but not earlier than  years prior to such expiration,
otherwisethecorporationisdissolved,ipsofacto.

Dissolution by shortening the term of corporate existence: A

corporation may exist SHUSHWXDOO\, but there is no law which
prevents the shareholders thereof to shorten that period and
effect a dissolution of the corporation. This, however, requires
thevoteofthestockholderstobecastinameetingtherefor,not
only“writtenassent” as forgeneralamendments.Moreover, this
requires theapproval ofthe SECandits inaction isnot deemed
anapprovaltherefor
THREE WAYS TO DISOOLVE A
CORPORATION
2. Voluntary surrender of its primary franchise
(voluntary dissolution); and
Formal and Procedural Requirements:
a. Majority vote of the board of directors or trustees;
b. Sending of notice of each stockholders or member either by
registered mail or personal delivery at least thirty (30) days
prior to the meeting (scheduled by the board for the purpose
of submitting the board action to dissolve the corporation for
approval of the stockholder or members.);
c. Publication of the notice of time, place and subject of the
meeting in a newspaper published in the place where
the principal office of said corporation is located or in a
newspaperofgeneralcirculationinthePhilippines;
THREE WAYS TO DISSOLVE A
CORPORATION
d. Resolution adopted by the affirmative vote of the
stockholders owning at least PDMRULW\ RI WKH RXWVWDQGLQJ
FDSLWDO VWRFN LI GLVVROXWLRQ RI D FRUSRUDWLRQ GRHV QRW
SUHMXGLFH WKH ULJKWV RI DQ\ FUHGLWRU KDYLQJ D FODLP DJDLQVW
LW RWKHUZLVH 2/3 of the outstanding capitalstock or 2/3 of
the members at the meeting duly called forthepurpose;
e. A copy of the resolution authorizing the dissolution must be
certified by a majority of the board of directors or trustees
and countersigned by the corporate secretary;
f. Issuance of a certificate of dissolution by the SEC.
THREE WAYS TO DISSOLVE A
CORPORATION
3. The revocation of its corporate franchise (involuntary
dissolution)

Grounds:
a. Fraud in procuring its certificate of registration;
b. Serious misrepresentation as to what the corporation can
do or is doing to the great prejudice of or damage to the
general public;
c. Refusal to comply or defiance of any lawful order of
the Commission restraining commission of acts which would
amount to a grave violation of its franchise;
d. Continuous inoperation for a period of at least five (5)
years;
e. Failure to file by-laws within the required period;
f. Failure to file required reports in appropriate forms as
determined by the Commission within the prescribed period.
THREE WAYS TO DISSOLVE A
CORPORATION
Other grounds provided under the Corporation Code:
a. Violationofanyprovisionofthe5HYLVHGCodeundersection14;
b. Incaseofdeadlockinaclosecorporationasprovidedforin
section10;
c. In a close corporation, any acts of directors, officers or
those in control of the corporation which is illegal or
fraudulent or dishonest or oppressive or unfairly prejudicial
tothecorporationoranystockholderorwhenevercorporate
assetsarebeingmisappliedorwastedundersection10.
EFFECTS OF DISSOLUTION
Dissolution terminates its power to enter into contracts or to
continue the business as a going concern.

Despite its dissolution, a corporation nonetheless, continues to

be a body corporate for a period of 3 years for purposes of
liquidationandwindingupitsaffairs(Sec. 1).Uponexpiration
of the 3-year period to wind up its affairs, the juridical
personalityofthecorporationceasesforallintentandpurposes,
andasageneralrule,itcannolongersueandbesued
LIQUIDATION AND WINDING-UP
1. The assets are collected and sold;
2. The rights and claims of creditors are settled;
3. The remaining assets, if any, are distributed to the
stockholders

It may be done by:

1. By the corporation itself through the BOD
2. By a trustee appointed by the corporation
3. By appointment of a receiver
FOREIGN CORPORATIONS
A FOREIGN CORPORATION is one formed, organized or
existing under any laws other than those of the Philippines.

Incorporation Test: is applied in determining whether a

corporation is domestic or foreign. If it is incorporated in another
state, it is a foreign corporation, while if it is registered under
Philippine laws, it is deemed a Filipino or domestic corporation
irrespective of the nationality of its stockholders.

Control Test: on the other hand, is used to determine corporate

nationality for purposes of applying laws, e.g., prohibition to
acquire lands applicable to corporations more than 40% of which
is owned by non-Filipinos.
FOREIGN CORPORATIONS
A FOREIGN CORPORATION is one formed, organized or
existing under any laws other than those of the Philippines.

Incorporation Test: is applied in determining whether a

corporation is domestic or foreign. If it is incorporated in another
state, it is a foreign corporation, while if it is registered under
Philippine laws, it is deemed a Filipino or domestic corporation
irrespective of the nationality of its stockholders.

Control Test: on the other hand, is used to determine corporate

nationality for purposes of applying laws, e.g., prohibition to
acquire lands applicable to corporations more than 40% of which
is owned by non-Filipinos.
FOREIGN CORPORATIONS
RESIDENT AGENT: As a condition precedent to the grant of
license to do or transact business in the Philippines, the foreign
corporation is required to designate its resident agent on whom
summons and other legal processes may be served in all actions
or legal proceedings against such corporation.
FOREIGN CORPORATIONS
LICENSE REQUIREMENT AND DOING BUSINESS
WITHOUT ONE: A foreign corporation must secure the
necessary license before it can transact or do business in the
Philippines.

Without a license: a foreign corporation shall NOT be permitted

to maintain or intervene in any action, suit or proceeding in any
court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine
courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.